Saudi Arabia - opening the tap?
Posted by Heading Out on June 20, 2008 - 10:00am
One wonders, sometimes, why folk would want to get into political office these days, given the pervasive problems starting to arise from the end of cheap and easy to produce oil and natural gas. The rising costs of providing fuel for everything from school buses to emergency responders eats away at one end of a budget. The demands for wage increases to help employees cope with rising fuel and food prices nibbles away both at another part of the budget, but also at public and labor relations. And then there is the cost to repair and maintain the existing infrastructure, let alone make provision for future alternate choices for power and transportation. Sectors of the population, such as truckers, are becoming less shy in complaining about their problems, as unemployment bites into their numbers.
Fortunately there are legislators and candidates for office that do understand both the problems and the complexity in finding answers where options are not immediately responsive or popular. For the rest it often becomes easier to try and unify a constituency by invoking an enemy –someone who can, by their actions, be blamed for constituents’ problems. Sadly the world’s history has been filled with stories of such scapegoats, as an easy way of switching attention. Today it is possible that as oil prices rise, both OPEC and Saudi Arabia may become the villain in articles and political slogans. Given the possible outcomes of such positioning, it is perhaps not surprising that, as another American election swings into the beginning of the end game, that oil suppliers, perhaps sensing this, are indicating the chance of a greater flexibility in supply.
Categorizing the response of Saudi Arabia and OPEC to market pressures is not an easy undertaking, and has been the subject of considerable debate here and elsewhere. To begin there are the different grades of crude that are available. And while the initial impression of the latest Saudi offer is that this will be sweet, light crude (i.e. easy to refine) that has been the historic quality Saudi product, this is not necessarily the case. Bear in mind that the Kingdom also produces a heavier crude, that is frequently sour (i.e. having a high sulfur content) and this has not been easy to market .
Asian refiners want increased supplies of the lighter grades of crude to produce more expensive cleaner-burning fuels while Saudi Arabia is offering more of the heavy, high-sulphur grades. . . . . Saudi Aramco is understood to have only more of the heavier grades at its disposal.
Iran’s state-owned National Iranian Oil Co has been unable to offload about 25mn barrels of crude stored in tankers in the Arabian Gulf, mostly of heavy sour Soroosh and Norooz, despite steep OSP cuts.
The question therefore that needs to be resolved is as to whether the Saudi’s are going to make more of the lighter oil available (which is suggested by the reference to the new production from Khursaniyah which is Arabian light.)
The problem is compounded by reducing levels of production from existing fields, which, in large measure, have been also the lighter crudes, and which decline must be made up either by increased production from within those fields, or by adding new production from fields such as Khursaniyah, if the overall mix that is offered for sale is not to start to swing heavily towards the heavier and sourer crudes that are less popular in the marketplace.
We have been fortunate here at TOD to have had quite detailed analyses from folks such as Euan Mearns , Stuart Staniford , Khebab, Ace and JoulesBurn , to name but a few. Much of the recent discussion has been focused on the state of Saudi reserves, rather than the amount that can be produced at one time (the size of the tap). Yet it is in the short term size of that tap that allows the potential increase in Saudi production, and a possible consequent drop in the price of oil (Not that such a drop is a certainty).
Back when Matt Simmons debated Mahmoud Baqi and Nansen Saleri of Aramco at CSIS in 2004, one of the solutions that Aramco put forward was the increasing use that they were making of horizontal wells, particularly in new fields, and also of the introduction of the Maximum Reservoir Contact (MRC) wells where the initial horizontal well is supplemented by secondary laterals that are offshoots from the main initial drive. Further, with the introduction of down-hole valves that allowed segments of the well to be closed down, while segments on either side continued to produce, as a way of overcoming localized water breakthrough, smart wells were developed that would allow production to continue from wells that historically would have closed. In 2004, however, this was a technique that was being widely used in new fields, but not yet used exclusively in older ones. The difference is fairly significant, since a horizontal well can produce thousands of barrels a day, over the hundreds that can come from a vertical well in the same place. (The reason is that the length of the well in the productive rock that holds the oil controls how much oil can flow into a well at a given time, and the horizontal wells can run kilometers through oil-bearing rock, while vertical wells rarely run even a hundred meters.)
The consequence of change from one to the other is therefore the equivalent of opening a larger tap into the field, and one of the issues that we have debated at this site has been the limitation on tap size that goes along with the other debate we have on the absolute size of the resources. Leaving aside that latter debate at the moment, I would suggest that, in the short term the increasing use of horizontal and MRC wells in the older fields will give some little leeway to Aramco to potentially reduce the drop in production by changing to the MRC wells (Saleri quoted a gain from 3,000 bd to 10,000 bd with the change from horizontal to Maximum Reservoir Contact, since in the latter case the use of a number of side horizontals or laterals running out from the main horizontal well, can increase the exposure of the well to the rock to more than 12 kilometers).
The first horizontal wells were drilled in 1991 in the KSA, and. by 1993 there had been a total of 21 completed. It was then anticipated that horizontal drilling would take half the Aramco drilling budget for the next ten years. (But it should also be noted, as was commented in the post on shales, that such wells can cost ten times the price of a conventional vertical well – and Aramco were not drilling that many new wells a year (only around a couple of hundred – almost sounds like a puzzle from Car Talk!)
When the debate over Saudi production began, probably with the CSIS presentations, there may have been a tendency to over estimate the relative number of these wells. Horizontal wells installed in new field developments, such as Shaybah, Harradh III and Kursiniyah and integrated into sophisticated water flooding programs, were needed to obtain the high individual well production numbers that the program called for in these new areas. At the same time these wells minimized the problems of water cut in the oil produced. There was, however, perhaps too much of an assumption that this also applied to the existing production from existing fields and that they too had switched to the same technology. This is not likely to have been true however. As demand rose, and existing well production declined, Saudi Arabia realized that it could no longer get by with the 30 – 40 rigs that it had, historically, been using. It was willing to competitively invest so as to get the number of rigs, for both exploration and development, up to about 120. Now initially not all of these would drill horizontal wells, in fact for some purposes such wells are both unnecessary and not desired (water injection for example). And in the historic plan for in-field development the initial means for holding production declines to target levels had called for vertical wells.
What I would like to suggest is that as production demands have continued to rise, so what we are now seeing is a greater switch from vertical wells in the old fields to the use of horizontal ones. As the switch is made one can anticipate not only that individual well production rates will, at least initially, substantially increase over vertical, particularly as Aramco learn to drill longer wells. One should also expect that the water cut in the older fields should also decline somewhat as the overall percentage of vertical wells declined, and horizontal becomes paramount in all fields.
Changing from vertical dominant to horizontal well dominance in older fields has short term benefits – a gain in the amount of oil that can be recovered from a given number of wells in a shorter time interval, and a longer term down-side in that declines (as we have seen in the North Sea, Oman and other places where horizontal wells now have become common) which come earlier and at faster rates.
My concern therefore, as Saudi now has made a sufficient number of well changes to give the greater percentage of horizontal wells in the their historic fields, that it will meet the short-term need for higher production, but that this will, concurrently mean that when their production does peak, that the decline will be much faster than the 4 -5% that folk now talk of, and instead will exceed 10%.
It has been some time, for example, since Aramco admitted that their decline rate from existing wells was at a level of around 800,000 bd/year, and increasing the size of the tap will have an impact on that value also – making the target production increase each year increasingly higher (and thereby more difficult to attain) . Thus I worry a little that should there now be an acceleration in the production from the older fields that this will in turn shorten their productive lives and steepen the decline curve later - but then that gets me into a discussion on reserves and resources and that is the other debate we have.
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Good morning America and this message board as the first to post! Isn't it amazing how the more they extract, the greater their reserve count becomes? Almost as if the gooey nougat people are right - the Earth giveth ever more oil. However, the reality is the descent has to come sometime for the Saudi's. Seems like their living the last of their great position as the supplier capable of filling increase world demand. Ahh, but the ego must give way to inevitable declines. Enjoy the world's attention while you can Saudia Arabia. The clock is ticking...
The expectations of oil producers are critical, when it comes to evaluating incentives. If I expect oil prices to keep rising, it may make sense for me to pump less. After all, I can earn more per barrel for it later. All the oil that got pumped at $10 a barrel a few years ago could have contributed a lot more to consumption and investment at today’s prices. Conversely, if I expect this to be a short-term shock, my interest is to pump as much as I can and sell it for sky-high prices.
Producer incentives thus create both a positive and a negative feedback. In situations where oil is running short (and producers know it), the incentive is to cut supply even further to take advantage of higher future prices. In situations where producers consider present prices to be an aberration, the incentive is to glut the market and thus depress prices even more when they do start to fall.
Another aspect of expectations would be access to the field. This is not a criteria for KSA, but for IOCs exploiting a lease. If they don't expect to be able to renew a lease before a field is drained, or perhaps even risk having their finally-profitable installation "renegotiated" away (as in Venezuela), their rational plan would be to exploit a field as rapidly as possible, regardless of the current market price, expectations of future price, or even long-term recovery rates.
This would be another way in which above-ground factors will keep us from realizing the geologic limits.
I don't think if rising price is expected, that "the incentive is to cut supply," if by this you mean to not open the spigots further. That only serves to create the emerging recriminations and invites trouble. Rather, the best way to take advantage of rising price is to slow down current decline mitigation by slowing down the pace of bringing new discoveries online and causing an early peak but with a less precipitous decline rate. Something very much like the Oil Depletion Protocol. I actually think this might get proposed, which is why the Saudi's wanted heads-of-state to attend. Consider the advanatage to OPEC for them to announce Peak and simultaneously as a solution to the problem suggest the Protocol. Think about it good. It puts the game into a whole new perspective. Think how the users response must be Yes. What else can they say? Abdullah simply states that T. Boone Pickens is correct, that 85Mbpd is tops, and its going to slowly subside. He should further say that in order to keep the price from spiraling out-of-control, it should be made permanent at $150/bbl, and adjusted bi-annualy to the inflation rate of a basket of currencies, commencing at the start of 2009. It would sound like a proposal instead of an edict. It would be the most important act of Statesmanship of the 21st Century.
Freezing the price is, in my opinion, a very logical solution. I'm sure the Saudi's are concerned that if the price goes into a prolonged superspike the impact won't be a slide into global recession it will be global economic collapse and the demand on oil will plummet. I'd expect the Saudi's objective is to take advice from Goldilocks and not let the price get too hot or too cold. Make it just right and maximise profit for as long as possible. Locking in a price would keep the economies going a bit longer but I'm not sure how that would be achieve other than by rationing and then who would get to decide who should have oil and how much.
How would you freeze the price? Without excess supply there is no mechanism to do it, and is west texas's ELM is halfway correct it will simply be blown out of the water.
You don't get a 4-5% reduction is export capacity for a very valuable resource and have anything other than rapidly escalating prices.
You might transfer some of the profits to a middleman, or otherwise have minor marginal effects, but the basic conditions for stability do not apply.
Even the modest aim of a regular escalation f prices, by, say a couple of percent every six months to counteract a 2% fall would not hold, partly due to inelasticity of demand and partly because the decline would not be smooth - a sudden outage, say a strike at a Nigerian platform, would destroy it.
How would you freeze the price? Without excess supply there is no mechanism to do it,
Coupons - you, as a citizen with X needs, gets these many coupons for Y gallons of gas at Z price.
So long as you do not leave the coupon system the price will be fixed.
I'm refering to the price of oil on the international market being capped thorugh treaty. The price of transport fuels in individual countries would vary due to their tax/subsidy regime, having their own resorces to add to imports, and their refining capacity. Setting the price is easy; establishing an allocation agreement will be harder, but the Protocol as proposed sofar states that importing countries will have their import allocation reduced by the rate of decline. This would allow for a managed decline rate that arrives at a soft landing for the global economy, and would be far more equitible to the poor and poor countries. Those unfamiliar with the Protocol can read it here.
A simple way to look at the Protocol is to see it as Sane, while the opposite can be seen in the Neocon strategy as Insane.
Fixing the oil price brings us peak oil sooner.
If you fix the oil price, then either the oil producers make losses on the difficult fields like Brazil's Tupi, or else they decide they don't want to give charity to the West and just stop producing.
So then you have a fixed price with a declining supply. Every day becomes a race to the pump to use your coupons before the pump goes dry.
Fixing the oil price means many fields will never be developed, and the peak comes sooner. Since I'm concerned about climate change, I'm fine with that - but you might not be.
I fail to see where oil production becomes uneconomic when the price is $150/bbl and indexed to inflation. There only "becomes a race to the pump" if efficiency gains combined with lessened demand lag the declining supply. Fundamentaly, the idea of the Protocol is to provide a cushion to economies over-reliant on oil and others from becoming completely priced out of the market. I don't think it will do much to mitigate Climate Change, as all the fossil fuels there are to burn will be burned, perhaps spread over a few more decades.
Fixing the price acknowledges that there is no point in producing stupid oil such as tar sands. Given the EROEI of renewable aleternatives, any oil that costs more than about $15/barrel to produce is stupid oil.
In order to fix the price, we pretty much have to control demand. That means that issuing more coupons than supply makes no sense. Thus, gas pumps will have gas. They will just be used less.
Chris
You mean a few more incidents like this?
It would be folly to assume that everything goes smoothly, that there's no insurgency, and that equipment never breaks down.
Since my recent post on the Drumbeat thread seems pertinent, a version of it follows:
We have had a fair amount "inside baseball" discussions of monthly production data and peaks versus annual average, which of course is pretty much irrelevant in the grand scheme of things, but a lot of cornucopians want to use monthly data to show that the Peak Oilers are wrong about a near term peak. BTW, as a near term peaker, who supports Deffeyes' logistic (HL) estimate, I have been accused of "Killing the Peak Oil Movement" all by myself. Who knew I wielded such vast power?
In any case, one point that is easy to overlook is that the HL method is best used to estimate the area under a production rate versus time curve, i.e., the URR for a region--and not the production rate for a given year. For example In the following article (linked below), I showed how the HL method was quite accurate in predicting the respective post-1970 and post-1984 cumulative production for the Lower 48 and Russia, despite wildly different looking curves, but the point is that the models accurately predicted the areas under the respective curves (using data through 1970 and 1984 respectively to generate the models). The Lower 48 was relatively smooth, Russia had a sharp decline, followed by a rebound, and now their cumulative production has "caught up" to where is should have been, and their production decline has resumed (and exports are falling at a pretty brisk rate).
So, what about Saudi Arabia?
I don't have the projected HL based C+C decline rate for Saudi Arabia, but the P/Q intercept suggests that the decline rate will be less than Texas (-4%/year). Khebab shows a middle case of -2.7%/year for C+C+ NGL, so let's assume -3%/year.
The observed versus predicted C+C rates (assuming -3%/year) are as follows:
2005: 9.6 mbpd
2006: 9.2; 9.31 (predicted)
2007: 8.7; 9.03 (predicted)
2008: 9.2 (to date, EIA); 8.75 (predicted)
Through 2008, the cumulative difference between 9.6 mbpd and the predicted annual production rate for each year should be about 621 mb. The actual shortfall at the end of 2007 was 475 mb, which suggests that the 2008 shortfall (between 9.6 mbpd and actual) should be about 400,000 bpd, which suggests an annual production rate of about 9.2 mbpd. We shall see what happens in the second half of the year, but I expect to see annual average Saudi production in 2008 come in below their 2005 rate, and then resume a production decline in 2009.
BTW, this is not an ex post facto argument. In March, 2007, in response to a comment by Stuart that the Saudi production decline was below what the HL model predicted, I responded that I had been speculating about a rebound in production for that very reason (and I did say a sharp decline followed by a rebound to a level "well below the 2005 rate").
Finally, the monthly versus annual record keeping needs to be put in some kind of economic perspective. Let's assume a country that does 10 mbpd in January, and then 5 mbpd for the rest of the year. From the point of view of the oil consumers in the country, which number is more meaningful, the monthly peak of 10 mbpd or the annual average of 5.4 mbpd?
In Defense of the Hubbert Linearization Method (June, 2007)
http://graphoilogy.blogspot.com/2007/06/in-defense-of-hubbert-linearizat...
Westexas:
I think that the problem one always has in defining curves comes in the short term when there is some indication that the producer is holding back some supplies. In this particular case we know that the Saudi's have some problem in the short term in selling their heavier, sour crude, because of refining problems. This may well go away in the intermediate term (say around 2013) as they build their own refineries (for dealing with the oil from Manifa) and work with others to build other capable refineries elsewhere. There are thus some artificial factors that play into the game, and make accurate models of short-term capabilities difficult.
No argument from me (although I would argue that "difficult" is not the same as "impossible"), but we can also say that it is a near certainty that Saudi Arabia will show three straight years of annual production below their 2005 annual rate, at about the same stage of depletion that the prior swing producer, Texas, started declining.
Meanwhile, their consumption is currently going to "infinity and beyond," on track to double to 4 mbpd in 2015, from 2 mbpd in 2005, against a recent total liquids production rate of about 10 to 11 mbpd.
How much of the ~9 mbpd do you think is allocated to maintain the income of the Saudi upper class? Can they actually let the internal consumption go to 4 mbpd?
I have suggested Phase One and Phase Two declines. In Phase One, cash flow from export sales increases, because oil prices go up faster than net oil exports decline. In Phase Two, oil price increases can't offset the export declines. We would expect to see a positive feedback loop in Phase One.
Perhaps "Phase Two" should be split:
Phase 1: Revenues increase as prices rise faster than export declines.
Phase 2: Revenues decrease causing rate of domestic consumption increase to slow, but overall domestic consumption still increases; net exports decline at faster rate than geologically-driven decline.
Phase 3: Revenues decrease rapidly enough to cause overall domestic consumption to decline; net exports decline at a slower rate than geologically-driven decline.
I think that Phase Three would be the point at which a lot of remaining world trade consists of net energy exporters trading energy for food and other essential goods.
At what point do we think the UK will get to Phase 3?
The UK still has oil for a while, we could export again if we stopped consuming so much.
Maybe food is more important than oil - we might have to export oil just to get enough to eat if other countries won't loan us the money?
WT,
Howmuch of that 2MBD goes inot industrial production rather than consumption. I assume they produce most of there eelctricty with oil and have some sizables desal plants but aren't they also ramping up aluminimum production to value add to the oil? Is the expected exapansion of KSA consumption more to do with industrial growth rather than private consumption?
I would suggest that much of the KSA internal consumption that is for industrial purposes fuels economic growth in the Middle East and Asia. Therefore, the oil taken off the export market largely does not displace oil used elsewhere like OECD. US's problem caused by ELM is fueling the auto/truck/airplane based transportation system which consumes 3/4 of all oil and liquid fuels.
HO
This leads me to the most compelling reason for the oil price rise - the decline of light sweet. This is oft wrongly expressed in the MSM as a shortage of refinery capacity (It defies logic that the shortage of the ability to process a commodity would drive up the price of that commodity), so it is the shortage is of the "right" type of refining capacity.
Which then raises the question, how fast can "they" build/convert heavy sour capable refineries?
Because this in the medium term is going to be the driver of price, how fast the refining industry can adapt to the sweet/sour product mix. Of course this raises another issue, ie the refiners are not making any money as they are squeezed between supply misinformed govt/public, so why invest?
If as I suspect its will be an ongoing race and as the overall production cannot significantly rise (it will decline IMHO) one could characterize this behavior as "riding the submarine all the way to the bottom"
Neven
Different countries and companies have different regulations and permitting processes. But in most cases the lead time is several years, and then you have to be sure that there will be enough supply for a sufficient number of years to give you an acceptable return on the investment. For example if countries in the Middle East are building their own refineries to ship final product, rather than crude, then there is less economic incentive to build new refineries to handle lower quality crude in, say, the United States.
Also you have to be convinced that the spread between light and heavy will be large enough, long enough, to justify the investment.
You could at least use your vast powers to heal Ghawar. Or to give George Bush boils. Whichever is more convenient.
Well, since I--singlehandedly--have the power to kill entire movements, I was thinking of earning a living as a hired gun, a latter day Internet Paladin, so to speak, hired to kill Internet "movements."
Great!!! Could you kill PETA? I love munching on our furry friends.
"On December 14, 2001, Bush had four noncancerous skin lesions removed from his face. The Press learned of this only when Bush appeared before cameras with dark red spots on his face.
Commment: These are most likely actinic keratoses, as were the lesions removed from his face in August 2001, or perhaps basal cell carcinomas. Bush's father, George H. W. Bush, had a similar procedure 8 months later." http://www.lilith-ezine.com/articles/bushpads.html
http://en.rian.ru/business/20080620/111460751.html
Russian oil export falls 4.2% in Jan.-April, to 81.4 mln tons
Updated Saudi HL annual and monthly plots are both predicting Saudi Arabia URR of 185 Gb (Crude oil and lease condensate, excluding NGL; includes half of Neutral Zone). Saudi C&C production to Jun 2008 is estimated to be about 115 Gb, 62% URR depletion, and 70 Gb remaining.
Saudi Arabia (incl half of Neutral Zone) Annual HL Plot click to enlarge
Saudi Arabia (incl half of Neutral Zone) Monthly HL Plot click to enlarge
The URR prediction of 185 Gb is almost the same as the URR prediction of 186 Gb, made by Westexas and Khebab in March 2007.
source http://graphoilogy.blogspot.com/2007/03/could-saudi-arabia-be-more-than-...
Hubbert Linearization on Saudi Arabia (Crude oil + condensate) click to enlarge
For more info
http://www.theoildrum.com/node/4159/365498
http://www.theoildrum.com/node/4153/362113
Hello Ace,
Huge thnxs for all your work!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aMTWS1Pzs0Jc&refer=home
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Saudi to Raise Oil Output 2% in July, Al-Naimi Says (Update1)
June 21 (Bloomberg) -- Saudi Arabia, which convenes a meeting of government and business leaders tomorrow to discuss world energy markets, will raise its oil output by 2 percent in July, the country's oil minister said.
The kingdom will add 200,000 barrels of oil to its daily production next month, taking its total to 9.7 million barrels a day, Ali al-Naimi told reporters in Jeddah, Saudi Arabia today. State-owned Saudi Aramco will soon add 500,000 barrels, or 4.6 percent, to the kingdom's total production capacity with its Khursaniyah field.
Saudi Proposal
A Saudi proposal, to be discussed at the meeting in Jeddah tomorrow, will seek measures against market speculators, Prince Abdulaziz Bin Salman, the kingdom's deputy oil minister, said in an interview published today in the Saudi newspaper Asharq al-Awsat.
``The governments have a role to play in regulating and restructuring the markets so that the speculators are forbidden from actions that caused oil prices to reach the current level,'' bin Salman said.
Saudi Arabia will present at the meeting a work document that outlines the reasons for the surge in oil prices, prepared in cooperation with the Organization of Petroleum Exporting Countries and the International Energy Agency, the Saudi official said. ``It will be the only document that will be discussed.''
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I sure hope this document will be released to the general public! Could we be in for some shattering news?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I just don't see what kind of measures they can take against the supposed 'speculators'.
How would OPEC punish them? What can they threaten to do? Will OPEC counter-intuitively cut their export output to a country where it feels speculators are too dominant, then not restore the flow until these 'speculators' are publicly identified and/or criminalized [alluded to by Westexas's earlier postings]? Or is this just another convenient cover for OPEC to hide declining production?
They are saying that governments around the world need to "temporarily" freeze capitalism on a product that has historically been allowed to be traded freely. That is what they will ask. In my opinion, if part of what causing escalating prices of crude is due to "speculators" (my opinion is perhaps 5-10%) then those "speculators" (who are smart, rich people) are making a pretty decent bet and are just speeding up the inevitable.
For KSA and other government leaders, they were somewhat blind-sided and unprepared for how fast the price jumped recently and want to slow down the escalation in price.
This post is for Carolus: You debunked my idea for solar arrays deployed in Nevada and Arizona connected to the grid. Well this link is for you:
http://news.yahoo.com/s/livescience/20080619/sc_livescience/inventorssol...
It's ok, you can admit you were wrong.
Who ever Carolus was, he/she must be chewing his or her fingers in shame now...
A few facts:
1. Peak oil won't be solved by generating more electricity.
2. The world runs on OIL not electricity.
3. The demand for electricity is going to slow down as we are hit by an economic downturn caused by inflating oil prices. At the same time all alt.energy solutions will climb in price as their resources, transportation and manufacturing will get ever more expensive.
4. Most solar company stocks are hyped to the roof now. And rightly so with the enormous investments they need for their feeble sub-gigawatt projects, and with the technologies and projects which they base their projected profits way behind schedules... for example we have been waiting for these for how long now - since 2005?: http://stirlingenergy.com/projects/default.asp
If you can come up with something more interesting then a couple of spotty MIT students hacking up a parabola of mirrors at their back yard, producing a small quantity of steam, please let us know. And that thing can't even support the weight of a stirling engine. Better designs have existed for decades now. Where's the hype in this? Sorry for debunking your hype but you really have to try harder than that at TOD...
I feel I must disagree with ransu here.
1.) Yes, peak oil won't be solved by generating more electricity.
BUT
2.) The world runs on oil AND electricity. Our developed economies are now managed by computers. Computers for finance, for running business, for government, for all the background stuff you seem to be taking for granted. Perhaps things could go back to paper ledgers, but I don't think so.
3.) Hence, the demand for electricity is going to go up as oil sputters down. Sure, transportation and manufacturing will get ever more expensive, but computers won't. The hafnium for fancy fast chips may run out, but silicon is here to stay, and so are computers, as long as the electrons are available to run them. Even if manufacturing computers does get more expensive, this one area has defied logic by becoming more and more powerful every year while getting cheaper to consume. Even if computing power becomes more expensive to make and run, it will, in all likelihood, still be damn cheap and as such, will be wrung out for all it's worth.
But this will only lead to increased electricity demand, as more people trade in information to make more and more educated buying decisions (efficiency), manage bank accounts without driving to the bank to pay their bills, rent movies, learn, etc., all biased toward increased electron consumption. Hopefully more electricity will be generated to fill the need. There are plausible means of increasing electron supply besides solar, (at the cost of further environmental damage), if not crude supply. Thus, I am hopeful we maintain a modicum of servility as our transportation options dwindle.
I agree with you Chrysippus, that it's a combination of oil and electricity from various sources.
Wow, I mean.. Wow! On another thread I was just saying that people don't think in numbers, have no sense of proportion...
Here are some simple tasks for you to get started:
I happen to work in 'electricity' and know 'computers' inside out and I have to correct you on a few points:
Computers aren't getting more power hungry. They are getting more power efficient. It is true that from a top gamers point of view computers and especially graphics cards have been consuming ever more power, but lately this trend has peaked and has actually come down a little. Fan noise has limited their power use and now most gamers prefer slightly slower but more efficient models with low enough power to use passive cooling. The few gamers who insist on 1000W PSU's to power their latest GC's are a niche market.
Of course you know that the largest number of computers are used in offices which have for a long time now been getting more and more energy efficient. Data centers too prefer more efficient servers on their racks for reduced cooling requirements and better reliability because of less heat.
Electronics generally are getting more power efficient with switched power supplies replacing old regulator based ones, or entire uCs devoted to power management in them with quiescent currents measured in uAs. Embedded CPU's running automation systems use much less power than old analog control circuits. Just by replacing BJT's with FETs any electronics becomes an order of magnitude more efficient (except of course if the main power is meant to be used for something, like heating or actuation). Lighting will be dominated by LED's and telecommunications with fiber-optics, all using an order of magnitude less power.
And finally computers have already proliferated all aspects of the society through the 90's and 00' and growth is no longer as fast as it used to be. With the coming economic downturn we will see a peak in computer/electronics/telecommunications sales as with everything else.
Oil is the blood and ambrosia of our civilization. Cheap, abundant, versatile, mobile, liquid... It is in many aspects irreplaceable. Unlike electricity which can be generator into existence from a number of sources: coal, gas, nuclear .. and yes, even solar.
Therefore I must disagree with your proposition that we have an urgency to increase our electricity production (for fear of computers or anything else). We might have had to if we had started to electrify our infrastructure and manufacturing sector 20 years ago. Wake me up when you've put half of the nation's transport onto electric rails for example.
Hi ransu,
I find the intersection between the current (BAU) requirements for LTFs v. electricity to be a critical point. Likewise, any kind of thinking about the future involves different mixes of these two factors.
Could you possibly write this up, with the references and numbers you feel are appropriate and see if the TOD editors would run it?
For one thing, to pursue the question a bit further (though, like I said, I think an entire article devoted to this is best):
re: "Therefore I must disagree with your proposition that we have an urgency to increase our electricity production (for fear of computers or anything else). We might have had to if we had started to electrify our infrastructure and manufacturing sector 20 years ago. Wake me up when you've put half of the nation's transport onto electric rails for example."
In sentence one you talk about no need to increase electrical production.
In sentence three, you talk (mild sarcanol) about the lack of transportation infrastructure that could (in theory) make use of increased electrical production.
Some questions:
1) Is it the case that there is no point in pursuing any renewable energy supplies because the manufacturing and upkeep of same is so FF and LTF (Now, I don't even want to think about CTL right now....darn) dependent, so to speak, that the infrastructure cannot be maintained once we are into the decline (Say, Bakhtiari's Phase 2 or...2 and 1/2 or...).?
2) If you take your last sentence...Assume we begin a crash program, as per WT and Alan Drake, to use oil to put in place an (ideal, best case) electric rail system.
Then, how would this change your assessment.
Or, would it?
3) Also, I'm not clear I understand what you are saying in point 4 above.
Could you possibly expand on this and explain it a little further?
I think I just don't know how to read it.
Also, when you (in point 4) compare electricity demand for manufacturing v. demand for current load of already-manufactured devices...
i.e., is this what you're saying?
Also, are you taking into account the manufacture of computers (and related equipment) themselves?
Alternative energy could be generated for low-density, non-industrial needs.
In my opinion, we are going to have to find an efficient way to convert electricity into stored chemical energy (think hydrogen) in order to provide for high-intensity industrial applications.
Oil isn't the only chemical that burns, releasing energy.
Think "Difficult to liberate, store, transport, and handle".
Anhydrous Ammonia is a better bet (but not for private transport, which should be discouraged anyway).
Cslater8,
I'm having some technical difficulties in posting a more detailed reply, more later.
Cslater8,
I think you misunderstood me -- or perhaps I didn't explain myself well enough. I did not debunk your idea -- I simply expressed my doubt about the economics behind it.
You had written:
I replied:
Put it like this: some alternative energy billionaire gives you 100 billion dollars to invest in the renewables of your choice (anywhere in the US, say). His condition is that you generate as much electric energy as possible with that amount. I think most knowledgeable people would still invest every penny in wind farms.
Perhaps the picture will change in the future, but that's the way things stand at present. Thanks for the reference, BTW, though it concerns a prototype rather than a marketable product. Apologies for any offence caused by suggesting that you 'do your homework'. But numbers do matter.
Solar is a competitor for natural gas for peaking power. Wind is not a peaking power substitute because it is random. Wind is a natural gas and hydroelectricity complement, not a competitor.
If you are looking at what a kilowatt hour sells for, remember that peaking power is ten to one hundred times as valuable as baseload power. If power price was all we cared about, we'd just build minesite coal and riverside nuclear power.
They all have their place. And we are short of all kinds of power in America. Cheap baseload power, cheap peaking power, and liquid fuels. We need them all, and we need them now.
Concentrating solar photovoltaic is just the one you can build up fastest and the one with the highest value returned because it's peaking and because it's a gas competitor/substitute.
Gas has the problem with the collapsing dollar and the resulting decrease in supply from Canada and LNG imports, and the increase in demand caused by inability to import natural gas dependent imports like nitrate fertilisers.
Thanks for your comment, wkwillis. I suppose I'm viewing matters more from a Northern European perspective, where solar is almost as random as wind. Still, I reckon gas will have to triple in price before solar becomes truly competitive. Coming soon, perhaps.
I suppose I'm viewing matters more from a Northern European perspective, where solar is almost as random as wind.
Damn, that must suck never knowing when the sun is going to turn night into day.
If somebody gave me that kind of money, I'd start with run of river hydro and micro-hydro.
Like this...
Giant turbines submerged in the choppy waters below the Golden Gate Bridge might one day generate enough alternative energy to provide power to nearly 40,000 San Francisco homes, city officials said Monday.
I marked down every post in this subthread because of the blatant thread hijacking. This thread is not DrumBeat, it's about Saudi Arabian production.
Iraq is estimated to have 1.5 times the oil reserves as Saudi Arabia. Any truth to that? I know Iraq has plenty of untapped reserves and the bidding is going on to define who will bring them in.
The notion of peak oil is silly. I first heard of this when Jimmy Carter during one of his fireside chats said the world would be out of oil by the year 2000 -- With a straight face. And some believed him and put on a sweater.
Coal to liquids is 75 year old technology. The USA has plenty of coal, why not just use it instead of biofuels, windmills and solar, all of which will never supply enough energy to even be self sustaining. Burning food is a bad idea.
The current USA shortage is contrived by the no-drill Democrats.
Drill here, drill now, pay less -- Change you can believe in.
It is absolutely imperative that major oil companies be given unrestricted access to drillsites worldwide, so that they can replicate their success in Texas and the North Sea, which were developed by private companies, using the best available technology, with virtually no restrictions on drilling.
Petroleum Resources Of The Western Desert of Iraq
By Moujahed Al-Husseini and Sadad Al-Husseini
Didn't the reports of large oil reserves in that area crop up at the time the Iraqi oil law was being proposed? That is the Sunni area, and without any reserves they would have ended up at a disadvantage under the oil law. At least, that was my understanding at the time.
WT, with all due respect, when you write:
you are completely ignoring both the climate change problem and the fact that all FF's would run out eventually if production continues. Adding more oil for a boost is just a temporary "fix" to the longer term problem that all fossil fuels are finite. Sooner or later, the people left on the Earth will only be able to use renewable energy sources. If the short term "fix" delays the transition to the long term solutions, then it may not be possible for civilized society to make a successful transition to renewables.
E. Swanson
I believe he was being ironical
I believe WT was being satirical or ironic. He has a very dry sense of humor which is made even more effective by his West Texas drawl.
I beg to differ. I believe it was sarcasm.:)
"Coal to Liquids is 75 year old technology..." Posted by Grey Horse
In a nutshell, it will never scale.
Antoinetta III
What's your thoughts on Geothermal -same?
Nick.
There is large scale geothermal - such as the Geysers area of California - which has a growing potential for such energy sources as exemplified by the "Hot, Dry, Rock" program of the 1970's, and then there is the smaller scale geothermal epitomized by the ground source heat pump. Depending on the nature of the heat exchange coils in the ground, the latter potential could be considerably enhanced if a much cheaper method of drilling the vertical holes could be put in place.
Let me answer that one, since I have previously invested in the one of the most advanced Hot Rocks companies (Geodynamics) and a CTL project that "should" go live in 2011 (Linc Energy).
Generating electricity from Fractured Hot Rocks is a great idea in theory. You drill two 5km deep wells a few hundred metres apart, use steam fracturing techniques to create a connected reservoir between them, then create a water loop that uses the ground heat in hot rocks to superheat water for a steam turbine.
Basicly you create your own hot spring. The surface electricity generation is the easy part.
If only it didn't cost $5 million per hole.
Twenty years from now when drilling techniques have improved out of sight and we are basicly using down-hole robots, we may be able to drill a 5km hole cheaply enough to make this an economical source of power. But at then end of the day it produces electricity, not liquid fuel, and there are lots of easier ways to produce electricity.
Geodynamics may well get lucky and find they have an economical setup, but they happen to be sitting on top of one of the worlds hottest patches of granite. And again, they will produce electricity. There are lots of ways to produce electricity.
As far as CTL goes - Linq are planning to have a 20,000 bpd plant running by mid 20011. It's actually GTL using Underground Coal Gasification - you create your own gas in situ, then do GTL. It produces diesel only.
Linq have a super-ambitious rollout plan which would see the initial 20,000 bpd plant followed by at least 20 larger capacity plants with an eventual goal of producing 1 million bpd. Cost: at least $1 billion per plant.
Given that it takes 2 years to contruct a plant, and financial backers will want to see each wave of plants running before funding the next, it would likely take until 2020 to get all those plants up and running, even if they grow like the blazes and find backers willing to fund 2/3/5 plants at a time as they expand.
So if the dreams of the slightly meglomanical chairman, "Mr Bond", are realised, they will produce 1 million bpd in 2020. This will make Mr Bond one of the richest men in the world, and Linq about as big as BHP, but it won't do squat to address the oil supply situation.
1 million bpd 12 years from now. And these guys are the world leaders - they bought up the Russian company that had all the UCG expertise, and there's lots of Chinese money going into Aussie resource companies at the moment. FMG managed to borrow $2 billion just on the basis of blueprints. Nobody else in the world(including SASOL) is anywhere near as ambitious. And even that 1 million bpd is a best case scenario - 'wildest dreams' indeed. So don't expect many copycats - til much later.
So no, CTL won't scale. It will work, it will be insanely profitable when oil is $300 per barrel, but it won't make any difference to the outcome. At best it gives you a bit of extra diesel for tractors.
Just to be clear - don't blame me if you lose all your money betting on one of these ponies.
Thanks for your post, I've wondered about the viability of geothermal in particular.
I do have a question for you, how much energy can be gotten from one of those 10 million dollar loops?
I've always been fascinated by the potential for geothermal power, especially for local usage (city/personal etc).
The US congress just passed a $162 billion dollar spending supplemental for the Iraq bloodbath. It seems, from your post, that 16,200 of those 10 million dollar geothermal loops could be produced with such money, in an entirely ideal situation (hot rock accessibility etc).
There was a recent study done at MIT that said 10% of our energy needs could be met by geothermal power.
Anyhow, just throwing this out there.
Just a view of the scale of CTL plants. The existing South African CTL plants (SASOL 2 & 3) built in the 1980s are 80,000bpd each and use about 40m tons of coal per annum. There is talk of a SASOL 4 on the Waterberg coal field of a similar size. The original basis for the SASOL plants was that they broke even at ~$20/barrel, but that was in the 1980s. I understand that the new plants would be profitable at ~$50/bbl. There is a JV between a Chinese company and SASOL to build CTL plants (of similar size IIRC) in China.
Geothermal electric production equipment was in place at the Geysers in California, and on the big island of Hawaii. Iceland used steam for home heating. The geothermal technology worked best where there were near surface remnants of heat from past or present volcanic activity. There were numerous areas in the Rockies and Alaska where hot springs existed.
An old article posted in TOD indicated problems with losing heat years after the hot rock wells were drilled. The hot rocks cooled after years of continuous water circulation. The operators needed to drill wells in untapped areas to make up for lost productivity in the original wells.
Some of the water pumped into the ground was lost and not recovered by recycling. In areas where there are water shortages, this type of power might not be as practical. The Geysers geothermal project in California has been operational since 1960.
You might be interested in this link on global gasification projects:
Zeus Energy Library
There are a suprising number of coal-to-gas projects in the USA, a few coal-to-methanol in China. As far as I know Linq are the only company trying UCG to GTL.
Sasol is running feasibility studies in China, India and the USA, but with the exceptions of small pilots they won't have much production before 2015.
Sasol faces competition in CTL
"the project could become the first commercial CTL facility in the US by 2010 at a cost of $1 billion (R7 billion)....Rentech expects the Illinois plant to produce 1250 barrels of day, much less than Sasol's benchmark for an international CTL plant of 80 000 barrels a day"
Sasol in China
"The Shenhua Group, China’s largest coal company, will establish two joint projects with South Africa’s Sasol to produce fuels from coal beginning in 2016....Feasibility studies ...expected to be completed by the end of 2009.... The two projects.....will each be able to produce 80,000 barrels per day"
There are plenty of pilot studies going, but the big players are taking it slow and being cautious. Linq are small but have much bigger plans.
So like I said, 1 million bpd extra by 2020. Won't change the game.
Since it is a catalyst technology it will of course scale. We aren't going to run out of copper oxide, we aren't going to run out of coal, and we aren't going to run out of demand for gasoline.
It's just pebbles in a tube, and some gas pumps. Digging up the coal is harder and burning it is messier. It's almost as clear a technology as turning money into gasoline, mediated through steel mills and iron ore mines.
“Complex problems have simple, easy to understand, wrong answers.”
Henry Louis Mencken
Seen on a Hooker's T-shirt
Since Peak Oil is silly:
1) could you take my buddy's Tahoe off his hands? - he can't find a buyer
2) would you buy up some of the housing in the LA exurbs, they are really driving prices down, and according to recent articles the price of gasoline is one of the drivers (pun intended).
3)Why are you here wasting your time on The Oil Drum when this is just all contrived by "no-drill Democrats" and Peak Oil is "silly"? - and could you explain how Republican majorities in congress (during Clinton years), and Republican control of the White House (during Bush II years), were not able to overcome "no-drill Dems" and drill away off the coasts and in Alaska?
Well, I was hoping that Grey ("The notion of peak oil is silly") Horse would agree with me.
The Texas & North Sea case histories (1972 Texas peak lined up with 1999 North Sea peak):
So, what happens when the successor swing producer, Saudi Arabia, arrives at about the same stage of depletion at which the prior swing producer, Texas, peaked?
Westex...
Seen this graph here and there. Good story.
Can you add a third line for Saudi Arabia? Show where they fit in here? Think it would make a great story (I know the axes will get messed up, but if you could give it a try...)
Thanks... -GL
The following graph was largely inspired as a result of my conversations with my good friend, Bob Cousins, and I have named it The Bob Cousins Graph, in his honor.
The original graph, posted in early 2005 using production data through 2005, was in our (Khebab/Brown) Texas/Lower 48 article, and it is shown updated with annual production data through 2007.
Of course, as we all know, and as referenced above, the Saudis have shown a rebound in production. Since I doubt that they will exceed the 2005 annual rate in 2008, we will probably have to wait until at least 2009 to see if the 2005 production rate is the final peak. As I have previously acknowledged, if 2005 is the final peak, there was of course an element of luck involved posting the original graph in 2006.
Actually I like this graph, it makes a vague but testable prediction. If we are alive in 2015, we'll see how your simplistic curve fitting matches reality. We'll also see how often you have to adjust the axes to keep the peaks lined up.
This is a game we play. Bob just pretends to disagree with me. He is actually a huge fan of the quantitative modeling approach.
Almost true. But I really hate bad methodology, even if I agree with the conclusion.
Hello Greyhorse,
I see you are a new 2-week member--welcome! But I would recommend you read and study the many introductory TOD tutorials and/or books now available before responding with another post so that you can be a valued member.
All the solutions that can make a difference are either here already or in the labs. The real issue is the vast effort required to transition/substiture with 50-60 years and tens of trillions invested. All the alternatives -and no one disputes there are aternatives- will require huge amounts of increasingly expensive energy as inputs to create and transition to.
Examples:
Wind: Steel, copper
Solar: Silicon
All the easy to get oil is being exploited and many of the new finds are coming in at very high $/b amounts to develop. We will never see cheap oil again. The next two decades is going to be a lesson in how wrong certain economists can be when it comes to energy. The Black Swan cometh...
Nick.
Concentrating solar photovotaic doesn't use enough silicon to be a line item cost. Cement, aluminum, steel, labor, glass, even leveling the CSP site costs more than the silicon and wafer fab cost. Silicon cost falls under 'other' in the budget.
The ratings on Grey Horse's comment destroy the idea of the ratings system.
He is clearly not breaking any site guidelines, merely presenting an unpopular idea, so how has he got negative ratings?
Should these ratings be continued in their present for, it appears that they will just serve to act as a normative influence - conformity will be all.
That would seem a shame to me.
merely presenting an unpopular idea,
Unpopular or bad idea? (Please, go ahead and show how the ideas presented were good)
I'll leave it to the rating system to comment. Unpopular - upvote. Bad idea - downvote.
I'm curious as to where in the write up as to what the system is for there is any mention of voting because an idea is not liked.
It was utterly clear that the purpose was to discriminate only against posts outside of the guidelines, and since as you say it is clearly not being used that way it is so abused as to be useless.
As it stands it is an invitation to mediocrity, and to stifle debate.
I guess you didn't read the reader guidelines. Nowhere does it say bad ideas should be downrated.
"Bad" is obviously a subjective opinion. It's just another way of saying "popular".
However, I predict that when the "trial" is over, the regular TODders will conclude the system is a great way to enforce TOD groupthink, and vote to keep the system.
Well, I think any rating system is pretty flawed, even if they may have their place.
Sad to see it being implemented here, though.
As for groupthink - no way to stop that. It is part of the broad definition of belonging to a group, after all.
What would be nice is a way to increase the signal to noise ratio, which a rating system generally doesn't do, even if Slashdot did probably make the best stab at it - 5 and 4 rated comments do tend to be worth the time, generally being at least well written, or stemming from people involved in the issue being commented on.
I'm quite disappointed myself, but so it goes.
Since I feel greater safety in numbers what I want are better mechanisms for enforcing group think.
Who else agrees with me? I would feel much better about my position if many people agreed with it. Otherwise I'm going to have to change my mind in order to feel more safe.
I come here mainly for informed, considered opinions to learn from - not simplistic nonsense or bumper sticker sloganeering. The informed and considered posts that conflict most with my opinion-of-the-time are the ones I most appreciate.
[edit: I am withholding judgement on the scores, to see what the effect is - it could improve TOD quality, or turn it into worthless groupthink. I've often thought having SEPARATE grading systems for agree/disagree and worthy/wasteful would force folk to think about which applies, it is too easy (and I have caught myself doing it here already) to downmark a post that is not wasteful, but simply disagreeable.]
Heading Out-
I think your hypothesis as to what may be happening, and what the future effect of this change may be, makes good sense.
When I was visiting BP's tight gas facility in Wamsutter WY last month, I was struck by how much technology had changed, but also by the fact that most of the wells used the old drilling layout (spaced out, rather than multiple wells on a pad). Once a well had been drilled, it was left the way it was (with perhaps new monitoring equipment), even though the old drilling approach would make servicing difficult for the next forty years. The example there was tight gas, rather than oil, but I can see the same principle could be at work in Saudi Arabia. Once a vertical well was drilled, management would be unlikely to replace it with a horizontal or MRC well.
I can see too that adding more horizontal and MRC wells increases the possibility of quicker decline later.
What I would like to hear more about is how your analysis integrates with the work that others have done relating to relative depletion of wells, for instance Depletion Levels in Ghawar or Joules Burns view of Abqaiq. Where specifically do you think that the additional production is likely coming from? Is it drawing down what remains in Ghawar more quickly, or is it more in other fields? It seems like the horizontal and MRC wells might work best where there are the most problems with high water cut--wells that are probably well past their prime.
Regarding the type of wells Saudi Aramco is choosing to put in, it depends very much on the geology and relative economics for a particular situation.
In Ghawar (excluding Haradh III) and Abqaiq, several MRC wells have been put in. But single-lateral horizontals have also been drilled (into 30 ft. thick oil columns in north Uthmaniyah, for example). Re-drilling existing verticals with short side track horizontals is more cost effective than putting in a new well. With the waterflood having transversed most of the field, there is no place left to put a vertical well. Initially, they could easily get 10,000 bpd from a vertical drilled into a 200 ft. thick column. You can't do that now with a vertical with access to only 30 ft. of oil, so a horizontal drilled along the seam is a better choice.
The limitation of existing water production capacity plays a big role. If this were not a problem, they could just keep producing from all the existing vertical wells at over 50% water cut. Instead, they have no choice but to either re-drill existing wells or put in new ones -- or just abandon the oil left behind.
Khurais is somewhat more curious, as they are putting in single-lateral horizontals with downhole electric pumps -- supposedly in lieu of additional water production capacity.
One correction on HO's comments above: Horizontal wells are most certainly used for water injectors, both in Khurais and in Ghawar.
Thanks for the correction.
Have you hit the share this button today? :) Danke.
The oil and gas companies have received a record number of permits to drill here in Colorado and other western states, but little new drilling has occured. I wonder if the oil companies securing all of the new drilling permits that they can aquire, and then waiting for oil prices to hit news highs prior to drilling and developing the new wells, leaving us for suckers again?
Or the drilling industry is operating pretty much at 100% of capacity.
Perhaps we need a "you snooze, you lose" policy. But then I think more drilling is a rather futile effort at avoiding the inevitable,anyway. In the mean time, the U.S. congress cannot even pass a modest incentive package for renewables. It is possible, of course, that renewables are not the answer. In which case, we need to change the question. One thing is certain; fossil fuels will not be used in large quantities by our grandchildren. And blaming the Democrats will not get us more oil even though it might be successful in electing a few more Republicans.
I am not interested in satisfying my current needs for oil although I have an interest in satisfying half my needs for oil or something that would substitute. I am starting by spending $2500 on more insulation next week. My house is heated with propane. Best hopes for less need for propane.
I drove through on I-70 last year and there were a LOT of rigs drilling. It looks like they are pretty busy to me.
Gail,
Actually a company might replace a vertical oil well with a horizontal completion. This is exactly what Saudi did in the 90's at Ghwar. As most know Ghwar Fld is depleted by a water drive. Saudi long ago began pumping billions of barrels of water back into the field to help maintain this pressure. But eventually the percentage of oil decreases as the water cut increases. The original fld wells had very long (hundreds of feet) perferated intervals. As the water level reached the lowest sections of the perfs the water cut increased. To minimixe the incoming water an operator will often reduce the flow rate of the well. In the 90's Saudi started replacing many of the vertical wells with horizontal completions. The horz's were drilled as high above the water level as possible to minimize water cut. I think I recall Saudi spent $10 billion in the effort.
The new horz wells could be produced at much higher rates (perhaps 5 to 10 times) as the vertical wells. But now you have to picture the water eventually reaching the level of the horz well. Unlike a vertical well where the water gradually rises up the perferation interval over an extended period of time, in a horz completion the perfed interval is at the same depth and the water hits it at one time. This is why a high rate horz oil well can go to a very low rate oil well in the matters of months.
And this is why it's impossible, IMHO, for anyone to accurately project a decline rate for Ghwar Fld. Anyone but the Saudis. They have the data but no one else does. It cannot be done by taking a production graph and making a projection (I do this sort of analysis for a living, btw). You have to have a very accurate and field wide data base. It's something like bending a stick. It will do so until you reach that critcal point and then it snaps in a heart beat. If you know the strength of the stick and the rate of increase of the stress you can calculate the breaking point. But you can't do it watching the stick or measuring its movement. I don't know how much of Ghwar current production is from horz wells but if it's a significant number than a huge drop in production could happen in just a few years.
A very silly analogy would be comparing it to childbirth. A woman may carry a baby for 9 months but when delivery time comes it doesn't take 9 months. That little critter is ready to pop out right now. In my biz if you have a great horz oil well that suddenly starts producing a little water (a woman's water breaking, to contimue the dumb analogy) you immediate order a big oil/water seperation unit. The well will still make a nice profit but instead of flowing 1000 bopd it can quickly swing to 950 bwpd and 50 bopd.
Perhaps you could comment on how your analysis would tie in with west texas's and other presentation here? I appreciate that a variety of different approaches are possible.
I would like point out one other factor that seems to be overlooked in many of the discussions here on TOD. With horizontial wells and MRC wells in particular the ultimate recoverable resource is increased over that of vertical wells only. The figure of 37 percent is often used here as the economical cutoff point for many fields.
Water wells when pumped beyond recharge rate develop a somewhat circular depression of the pheratic zone. The opposite effect is seen in oil wells where the water/oil interface rises faster near the well. If MRC wells can be steered at or very near the top of the oil bearing strata, the URR will increase. As pointed out in the above comment, only Saudi Aramco has the data that shows how close to the top the well bores are and the URR increase. If the MRC wells produce even a 2 - 3 percent recovery increase, the effect would mean billions of barrels of "extra" oil from Ghawar. The result could be a significant lengthening of the Saudi oil plateau.
And it could also produce the illusion of robust remaining reserves, e.g., the Yibal Field. Also, a lot depends on the production rate for vertical wells versus MRC wells.
Thanks. If the replacement of vertical wells with horizontal completions was actually made in the 1990s at Ghawar, there would be little impact now. Even if a producer couldn't replace every vertical well, it seems like a company would work on the ones with the biggest cost benefit ratio first.
I noticed a comment I thought a little strange in a recent news article:
Presumably the withdrawal of the notice has no particular significance, but it raises at least a few questions.
Hmm! That is an odd quote. This whole - will they, won't they is raising more questions than it answers. I suspect the the KSA has not been used to having as many educated guesses as to what is going on, given the very few folk that historically had been interested in the subject and the willingness of folk such as CERA in the past just to accept what is pronounced without question.
One of the things that motivated the post was remembering a paper that we have used in discussing the reserve levels in either Ghawar or Abqaiq that commented that at the time (2004) how few horizontal and MRC wells they had drilled in that area, and that production remained predominantly from vertical wells, which surprised me - unfortunately since I am still on vacation I can't get access to the files to provide that reference right now.
Here is data on horizontal wells through the 90s:
The big increase in the late 90s is Shaybah. Additions to Shaybah, Haradh II (40+ producers), and Qatif (130+, completed in 2004) account for most of those through 2004. In their 2006 review, they stated that 80% of new wells were either MRC or horizontal.
Thanks!
Moved.
Does anyone know how confident we can be that all the oil exported from Saudi Arabia actually comes from Saudi Arabia? Or is it possible to game the numbers somewhat, with one Persian Gulf country exporting to the Saudis, then the Saudis re-exporting it? Is it possible that this oil could be double-counted? I doubt this is going on now, but if at some time a country was inclined to lie about its actual exports, could they fool us? I know Venezuela has been putting out incorrect figures about their production for some time, but this is apparently well known, and I'm not sure if anyone else is trying to do so.
The easiest way for the Saudis to fudge the gross export number is to curtail their domestic refinery runs, thus boosting crude exports, but increasing petroleum imports, which aren't widely reported, at least in the short run.
Most of the Saudi oil comes out of just a couple of terminals and there are folk who monitor tanker movements, so that I think that it would be hard, and not really worth the candle, to game the system this way. Plus I am not sure that the different countries of the region get along that well, so as to enable this short of shenanigan.
Folk have been calling Venezuela on their numbers for some years.
Hello NASAguy,
From feeble memory: that was detailed in the earlier debate over the IPSO-1 pipeline from Iraq to KSA. I believe it was explained that if this happened the change in biochemical assay crude samples would have revealed this move.
soccerj,
I drill in Texas so I'm not up on activity out west but it's probably similar. There are several reasons for delays. A big one right now is waiting on a drilling rig. Depending on the size rig needed the wait in Texas is 6 to 18 months. Also, not all companies are sitting around with pockets full of drilling dollars. Many have to put leases together, file permits and then go out and try to sell the idea to someone who has the money to drill. We call these folks promoters. I don't know what percentage of the action they have but I'll make a wild guess that 15 to 20% of onshore wells drilled in the US right now are put together by promoters. This is also one reason you see some permits/leases expire w/o being drilled: the promoters couldn't find a buyer. A lot of these drilling deals are crap and don't deserve to get drilled. And I'll make a side point to all out there: if someone approaches you to invest in a drilling well I would advise you to run like hell. While there are promoters, there are also companies that specialize in buying deals "off the street". They would rather pay the promote than pay for overhead to put their own deals together. Thus if the pros don't want a piece of a deal then you definately don't. There may be a very few exceptions around but they're as scarce as hens teeth.
There's also a newly developed hitch in the process. Even if you have the drilling capital and the rig you still might have to wait months to drill. The steel pipe used to complete wells is more difficult to acquire. I consult for a very large operator and even with the buying power ($100+ million per year) we're on an allowance system: only X thousand feet per month. You can imagine the situation faced by a small company that drills only a handdful of wells each year. I've just started seeing a few small operators start cutting back on their efforts for this very reason. In fact it will probably surprise you but when we order pipe from the mill there is no price tag on it. When the mill produces the pipe they tell us what it will cost that day. If we don't pay there are 5 companies behind us that will.
I can only refer to my experiences but every player I know is driving themselves as hard as possible. The profit potential/available capital is tremendous. If a company has a prospect, a drilling rig and the money they are punching that hole in the ground ASAP. Same goes for producing wells...with $100+ per bbl only a maniac would hold back for more money.
"Approaches" is the key word. Virtually every company with a track record is going to be funded from existing cash flow and/or current investors.
For small investors, Matt Simmons probably has the best advice. He owns stock in smaller independents and service companies.
Thank you Rockman and Westexas,
I enjoy reading your informative posts.
DaveMart,
I actually don't pay much attention to westexas...he's another smarty pants like me just showing off.
In truth I have snot slinging arguments with my coworkers on a regular basis. There are so many variables and so many bits of missing data and so many different engineering and geologic theories. It's so much easier to speculate on the big picture than details.
But there are occasional statements made on sights like this that are so far off the mark (both intentional and well meaning) that I'm compelled to jump in and show how brillent I am.
:-)
Actually, that is precisely my point, and it is a point that I made to various parties that were all tied up in knots debating recovery factors versus OOIP. For starters, they were taking average OOIP estimates for a group of fields and then arguing average recovery factors--when we really don't have access to the hard data.
I prefer go with a simple way to estimate URR for a region (i.e., HL), using the two parameters that we (as outsiders) have the most confidence in, annual production and cumulative production to date.
My intuition is that, in many different arenas, predictions made by stepping away from the detail, and taking a somewhat 'holistic' perspective, often turn out more accurate that predictions that are derived from a reductionist approach.
Not to invalidate either, because the approaches cross-inform and often trigger each other to occur or be refined. But predictions from getting too close have an unfortunate habit of being blind-sided by the details that were missed, or assumed to be somewhat irrelevant.
It's worth pointing out that WT's graphs are of Saudi NATIONAL production, whereas RockMan's upthread post about 'accurate projections' and water influx was discussing holes in the (extremely significant) Ghawar FIELD [presumably not all the horizontal wells will be hit at exactly the same time].
Some folks are reductionist detail folks, some folks are holistic overview types. The best value is realised from realising the importance of both perspectives, and the least value from battles over which is more 'correct'.
See Dave...I told you he was a smarty pants. In a good way, of course. I'm glad he expends his energies here. After more than 30 years of cooking reserves numbers it's lost any aspect of satisfaction. I figure in another few years I'll just go off the deep end and start making up the most ridiculous projections ever seen here. But, with luck, the short term memory will about the same time and I'll quickly forget what I said.
That might not be true Gail the Actuary. I hate to hang to much on anecdotal evidence but since the KSA won't provide the data it's all we have to go on.
It's difficult for many folks in the oil biz to really appreciate the unique nature of Ghwar. The scale is so far beyond the experience level of most (including me) that it's hard to grasp. I cannot backup my next statements. I wouldn't accept them myself as anything closely resembling fact. But I'm well versed in horizontal completions (did my first 14 years ago). And I'm not an expert on Ghwar.
But I can slap the two pieces together and offer a possibility (not a likehood or even a qualified guess). But a very significant volume of KSA oil may be coming from those LATE 1990's wells. A horizonat well in Ghwar, even this late in it's life, could have a high rate life of many years beyond which many would expect. But regardless of that time span they would drop like a rock just like so many other horz wells. And if (a very big "if") that's true the decline could take a drastic drop. I won't even try to speculate on the time frame....2 yrs...8 yrs...???
But even as an unlikely possibility it is a frightful thought. I'm far from a gloomer...just not my nature. But if Ghwar were to suddenly slip anytime soon into a decline similar to what we're seeing into Mexico's Catarell Fld the gloomers out there may have the day yet.
A suggestion: please reply to comments using either the "Reply" or "Reply in new window" links. That way we don't have to chase down what you are replying to.
Even 400 times 10 kbpd per would be 4 Mbpd, and then add in 900k for Haradh. The only other scenario would be them putting in new wells and getting squat out of them -- or else keeping them shut off. Add to this the number of older wells which have been re-drilled into horizontals, and it suggests a rather dynamic situation which contrasts with their calm pronouncements. Beyond this, though, all we can do is hang on their words.
JB
Satellite o'er the Desert: Drilling Ghawar in the 21st CenturyThanks, Joules, I was hoping you'd put that up. When you look at where they are, and their relative likely length (the world record at the moment is 10 km) it seems to define the beginning of the end game for the North end of the field.
I have always been amazed by your work Joules, essentially using over the counter technology to see what the Saudi oil fields are up to. GWB has sent over his DOE Chief Bodman for this weekends meeting. I have wondered, looking at your work, what his outfit has been able to determine with the technology that must be available to them and if they have come to the same conclusion as you have.
I've been reading the oildrum on a daily basis for about 6 months now. There are a lot of people with excellent knowledge of KSA and oil, good insight into geo-politics, etc.
This is my first post, because I'm curious about something that hasn't been discussed here to my knowledge: does anyone think a conspiracy theory such as found here:
http://www.paulchefurka.ca/Iraq%20and%20Saudi%20Arabia.html
is possible? Could this be pulled off without some information leaking out about it?
Cheers,
A.K.
I sometimes wonder if we will ever really know the real reason for the Invasion of Iraq. I suspect that it will be more than one reason: a 'basket' of favourable outcomes in the minds of those in charge.
Some possible items in the basket:
1. Reduction of Iraq internal consumption (ELM) -more for Export
2. Access to Iraq oil by Western companies via a more favourable regime
3. Ridding the area of 'a tyrant' / stabilisation against future threats to ME neighbours
4. Prevention of WMD attacks on Israel and Europe
...so far it has succeded in all the above areas whether they where initially true reasons or not...
Nick.
Numero Uno?
Saddam Hussain made a grievous error. He convinced politicians of the left and right that he had and was willing to use WMD.
http://www.cnn.com/2008/US/01/27/saddam.cbs/index.html
what I really would like to hear is an opinion on the possibility of the existance of a secret pipeline from Iraq to Saudi Arabia, to make it look like the Saudis are producing much more than they really are... Anyone?
Anyone?
Why would one need a pipeline when history shows that embargos like oil for food can be broken and therefore any oil can just seemingly be re-jiggered?
"the possibility of the existance of a secret pipeline from Iraq to Saudi Arabia"
Remember the Meteorologist who noticed the string of light from
Rumallah into Kuwait?
The Invasion of Kuwait occurred because Kuwait was slant drilling Rumallah.
The KSA isn't getting the pipeline but Kuwait has.
Hmmm, my recollection is that it was the US and UK administrations who achieved that particular objective. Saddam was busy telling everyone and everyone he didn't have any.
Maybe this has been discussed already, but with the world's third largest known reserves in Iraq, why wouldn't being able to extract more oil from a stabilized (yes this is wishful thinking but...) Iraq go towards mitigating the impact of increasing demand and dwindeling supply? Is it because stability in Iraq is a big question mark? Is it because Iraq is already producing close to maximum capacity? I guess the crux of my confusion comes down to why Iraq doesn't factor into the discussions analyzing future supply?
For the same reason not many here believe that electric transport is going to be a complete game changer starting in about 18 months. You can't be a doom and gloom type predicting economic chaos and collapse unless you are willing to overlook obvious answers or dream up silly ideas like peak uranium.
There are a number of answers to the question - part of the problem is having a good idea of the actual amount of reserves, this is followed by the current condition of the existing hardware and the difficulties in maintaining existing plant and well structures, let alone trying to put new wells into areas that are disputed. The regularity with which pipelines have been blown up over the past few years then makes it difficult to ensure delivery out of country. That is compounded by the "acquisition" of oil volumes by different parties that then sell it independent of the government.
One thing, though: that "acquired" oil does show up on the market somewhere -- it just doesn't get credited to Iraq.
If Iraq was producing an extra, say, 4 million barrels per day right now, oil prices would be much lower. And demand for that cheap oil would be ... higher. And all that money flowing into the Iraqi economy would stimulate demand there, eating into net exports. The world's peak would be a little higher, and would be a couple of years further out. And not much else would be different.
One of the early things that convinced me about PO was an essay which showed how adding a huge amount to the world's URR only shifted the date of the peak out by a few years.
Even that much oil isn't really a game changer.
GreenMan said,
"One of the early things that convinced me about PO was an essay which showed how adding a huge amount to the world's URR only shifted the date of the peak out by a few years.
Even that much oil isn't really a game changer."
Of course what that means is that the peak oil problem then becomes essentailly a demand side problem, not a supply side one.
I have been doing some rethinking on this issue too. I was once a believer in the idea that we could greatly impact the peak oil issue by efficiency gains (large ones) in our automobile fleet for example.
I now know this not to be true. Of total world oil production only about 10% goes into American gasoline for automobiles for example.
This means that if you accept some depletion scenarios seen here on TOD and at ASPO, and the ELM model, that you could remove every gasoline car from service in the U.S. and the oil depletion downslope would still outrun the reduction in consumption. And that is removing every gasoline powered car!
I have been accused of being "anti-conservation" for pointing this up. But that is not the case. Conservation is a good thing for a number of reasons including economics, national balance of trade, carbon reduction, etc. But the numbers seem to show that conservation, even if you conserve down to the point of 0% gasoline automobile use has absolutely no real impact on peak oil IF you accept depletion of 10% plus and the ELM as many folks here do.
What this tells us is that the future is alternatives to fossil fuel. There is no other choice. There is absolutely no future in combustion (i.e. burning it and sending out the exhaust pipe) applications of fossil fuel. None.
The alternatives must be radical.
RC
In the long term, the chart below indicates that the Saudi crude and condensate production decline rate will be 4.5%/year.
click to enlarge
However, the short term production decline rate could be much higher than 4.5%/yr. This high decline rate might only last for a year or two, followed by adjustment to the long term decline rate of 4.5%/year.
The dashed green line, in the chart below, shows a 4.4%/yr average depletion rate, of remaining reserves, from Jan 2005 to Dec 2007. This depletion rate has risen to 5.0%/yr now.
The production forecast below assumes that this depletion rate will be constant at about 5%/yr until 2020, which implies that the production decline rate will also be 5%/yr. This assumption could be false, as Saudi Arabia has said that it wants to preserve some oil for the future. In this case, the depletion rate could drop, by 10%, from the current 5.0%/yr to 4.5%/yr, just above its recent average of 4.4%/yr.
The timing of this possible decrease in depletion rate to 4.5%/yr could be after the November US elections, say in about Mar 2009. A 10% fall in the depletion rate requires a 10% fall in the production rate, ceteris paribus. In the worst case scenario, this fall in production rate could occur in a short time period, say one month. If the decline occurred in Mar 2009, this would imply that the production rate could fall by 10% in one month from an estimated 9.0 mbd to 8.1 mbd.
If the depletion rate of 5.0%/yr adjusted to 4.5%/yr over all 12 months of 2009, the C&C production decline rate from Jan 2009 to Dec 2009 could be as high as 14% (1-(1-10%)*(1-4.5%)). The production decline rate for 2010 and the following years would then stabilise at 4.5%/yr assuming that the depletion rate stays constant at 4.5%/yr.
click to enlarge
For more info
http://www.theoildrum.com/node/4153/362113
http://www.theoildrum.com/node/4153/362192
http://www.theoildrum.com/node/4153
Your projections are why I made my suggestion to admit peak in the thread above. This would be even more important to the Saudis if the decline rate does jump as you suggest. It would also allow them to slow down and pump to maximize URR and csah flow.
It's no accident that socio economic political events mirror
the KSA production "heartbeat", from 1970 to today.
And from today 'til collapse.
Wow, indeed.
Unfortunately, we aren't on the same page. I was illustrating the importance of electricity, as you are inclined to dismiss it, using just one example: computers. So, I want you to go home today and unplug your refrigerator. Your television. Microwave. Toaster. Air conditioner. Water heater. Computer. Alarm clock. Unscrew your lights. Rip out your baseboard heaters. In fact, just flip off all the circuit breakers in your house, as rangu feels we don't need to increase our electricity supply.
I simply wanted to point out that we will need to increase supply of electricity as people will want more electricity, not less, as we pass over the hump and past the slippery slope of peak. To heck with electric cars. Electrified rail, electric scooters. In all probability, we aren't going to electrify our transportation outside public transit in major cities anywhere soon enough to make up for oil depletion. We will, however, want to watch our MTV as we're not going to be going anywhere. I want us masses to have our circuses (and hopefully bread) as long as possible.
Electricity is just as important to maintaining a "civilized" lifestyle, especially for the masses in large cities. New Yorkers may get around without owning a car, but see how much they like life when there's no electricity because natural gas is short, plutonium is short and even coal gets short. Where are we going to make up the difference? Slam solar all you like, find me ignorant of numbers if you wish, but spare me the oil ambrosia argument if you think it's the end all be all of our way of life, even American life.
By the way, so what if computers are getting more efficient? I said they're the one example that breaks the mold, which is why I was so keen to use them. Offices are finally figuring out they don't need all those cycles to run windows and Microsoft office - hence, the current trend towards less computer electricity demand. Unfortunately, they are more and more of them every year. How much electricity usage was needed to run computers during the 1979 oil crisis? I'll bet you it the number is only a small fraction of what it is going to be in 2009.
Well, I didn't unplug all those things, but we conserve electricity reasonably well in our household. The average Aussie household consumption is 14kWh/day, ours is 5kWh/day. So basically we've saved 60%. If everyone, residential, commerce and industry did this, well... a 60% saving is like having 180% more supply.
An increase in electricity consumption is not inevitable. Consider that the USA uses about 12,000kWh per person annually, Germany 8,000kWh, and Sweden 25,000kWh. In each case, household consumption is about 1/3 of the total. And yet all of these are civilised and decent lifestyles. It stands to reason, then, that Sweden could reduce its consumption from 25,000kWh to 12,000kWh without horrible suffering or misery, and both they and the US could reduce it to 8,000kWh.
But do we even need 8,000kWh? Could we get by with less? Well, how do we measure quality of life? A useful measure is the UN's Human Development Index, which is based on three indicators: longevity, as measured by life expectancy at birth; educational attainment, as measured by a combination of adult literacy (two-thirds weight) and the combined gross primary, secondary and tertiary enrolment ratio (one-third weight); and standard of living, as measured by real GDP per capita.
When looking at the HDI and seeing how it matches overall energy and electricity consumption, it was found that HDI correlates well with electricity use, but not as well with overall energy use, and reaches a maximum at 4,000kWh per person annually (Alan D. Pasternak, Global Energy Futures and Human Development: A Framework for Analysis), and a real per capita GDP of $15-20,000. That is, having electricity improves your life substantially, but having lots of oil and coal and natural gas doesn't necessarily. Incomes rise as electricity consumption passes 4,000kWh, but measures of overall human well-being don't.
When considering the problems of fossil fuel depletion and climate change, I think it fair to say that we have a right to a decent standard of living, but no right to endlessly increasing incomes.
Anyway, if we can supply 4,000kWh per person - again, about a third for domestic use - then that should be plenty.
It's important to note this because it shows us the scale of the problem we face in building up alternatives to fossil fuels. Going for Pasternak's maximum is six times easy than going for the Swedish model, three times easy than the US one, and twice as easy as for Germany.
Without massive changes in infrastructure, a 8 MWh/yr Swede will be a cold Swede. One has to look at the uses and climate before making these blanket determinations.
I hope to use 3 MWh in New Orleans this year, but this involves almost no heat (borrow from common walls) and a bit of indoor sweat now.
Alan
It's just a quibble, but the sources I have indicate much better efficiency for Sweden:
https://www.cia.gov/library/publications/the-world-factbook/print/sw.html
This is around 14,000Kwh a year.
Since Sweden makes major efforts to conserve energy, including specifying ground-source heating for all new builds, this sounds more realistic.