Tech Talk - Lower second tier oil producers - Norway, Brazil, Iraq and Algeria

This current series of posts is aimed at an overview of the top oil producing nations, seeking to establish how the ranking of the countries is changing from the original table that EIA put out in 2008. After looking at the conditions governing the top six, this was followed last week when I looked at the condition of the following three (Mexico, UAE and Kuwait) in a little detail, but having spent four posts on Veneuela in the recent past forebore going back there again.

Source EIA

It is worth recapping, however, that the initial order has changed, and that Russia is currently at the head of the League, slightly ahead of Saudi Arabia, with both producing somewhere around 10.2 mbd. I’ll go more into that detail as the posts focus in on the individual countries later. The United States' production, if one includes ethanol, is around 8.2 mbd, and this is in third place. China has moved into fourth place, slightly ahead of Iran which is followed by Canada. At present these six appear to be the only countries producing over 3 mbd.

In the next tier down I have already mentioned the United Arab Emirates, which have moved into 7th place, with a production of around 2.81 mbd, now ahead of Mexico, albeit perhaps barely (based on the addition of NGLs etc). As with the UAE Kuwait has been limiting production in line with OPEC requests, but while only producting at around 2.35 mbd at the moment, is looking to increase this to up to 3.5 mdb by 2015, which would move it into the top tier. Venezuela, although it too has some grandiose plans, based on the potential increases in production from their tar sands, is currently producing at down around 2.26 mbd. As I have mentioned Venezuela does have plans to raise production to 4 mbd by 2015. However recent commitments to China of up to 1 mbd and problems that Venezuela continues to have in meeting current obligations leaves a large question mark on those predictions.

And so we come to the lower half of the second tier.

In order to create the current ranking we have to first work out what the current levels of production are, and the future potential. So let’s start with Norway, since that country did rank 11th in 2008. Statoil has noted that their equity liquids production fell to 1.945 mbdoe in the fourth quarter of 2010. Statoil anticipate that there will be little change in production this year, but that there may be a slight rise thereafter. Statoil is not, however, Norway, being responsible for about 80% of the countries production (with properties abroad as well) but I mention it as indicative of the trends. One hopeful sign of which being the agreement with Russia that defines who owns what in the Barents Sea. However when we look at the long-term Norwegian trend is is recognizably downwards, with the Norwegian Petroleum Directorate predicting a 1.7 mbd average production in 2011. The Directorate is predicting that oil production will fall to 1.54 mbd by 2015. This does not consider other liquids and if these are included, while the overall total still lies below 2 mbd, it is currently a lot closer to that, though that is not expected to last.

Norwegian oil production in 2011 (Norwegian Petroleum Directorate)

In January this total, was made up of 1.836 mbd of crude oil, 256 kbd of NGLs and 69 kbd of condensate. Most of Norwegian production is exported, and the percentage can be seen from the EIA Country Analysis. The relatively flat domestic consumption is (as we have discussed with the Export Land Model) not typical.

Declining production, and thus exports of petroleum from Norway (EIA )

Natural gas production, on the other hand, is continuing to rise, though it depends on finding and developing new fields, and 95% of this is exported.

Norway produced 3.65 Tcf in 2009, with the majority of production coming from the Troll, Oman Lange and Asgard fields.

The next country down the 2008 list was Brazil, and here there is a change in order since Brazil is now rising past 2.12 mbd of crude production in December, moving ahead of Norway. Offshore production in the Tupi field, which may hold 6.5 billion barrels of oil, will be followed by that from the Jupiter field, possibly of similar size. The fields fall deep offshore in the Santos and Campos Basins, which will deserve a couple of posts on their own, down the road.

Location of the Santos and Campos Basins off Brazil

Development has now started.

The Tupi field is being developed as a pilot project in two phases. In the first phase tests will be conducted to gather information about the future production systems. This phase is expected to end in 2012.

The second phase is expected to start from 2012 and will include two parts. In the first part (2012-17) ten production units will be installed at the field with 20 producing wells and injectors expected to be drilled during this time.

In the second part of phase two (after 2017), new technologies such as dry completion units will be employed to recover oil and natural gas from the field.

Brazil plans to double crude production from the current 2 mbd to 4 mbd by 2020, reaching 3 mbd by around 2014. However overall liquids production is already at 2.7 mbd and the EIA anticipates that this will rise over 3 mbd by next year. With the cumulative liquid totals Brazil has also passed Venezuelan production and may soon be competing with Kuwait as they both move into the top tier.

Brazil also produces ethanol, mainly from sugar cane, with production at around 450 kbd However, with a growing economy, the country does not, as yet, have much of its production available for export. (The BP figures are a little more pessimistic than those of the EIA).

Brazilian oil information (Energy Export Databrowser)

Brazil continues to find oil onshore, most recently in the Amazon Basin and this bodes well for the targets that it now envisages.

Brazil gets most of its electric power from hydro-electric power plants, but is able to use the natural gas that is recovered during oil production to meet about half of the national need for gas, the rest being imported.

The next country on the original list was Iraq. And this poses a problem of prediction since we have to decide who to believe in the tales of competing numbers that have been used, among other places by BP in predicting the sources of future oil supply. The problems in this case are as much geo-political and locally ethnic and religious as they have to do with the capabilities of producing oil. At the moment Iraq has finally got back up to a production level of 2.6 mbd not that this will necessarily help Western imports that much:

The rising output will boost Iraq’s oil exports by 5 percent to 2 million barrels a day next month, Falah al-Amri, head of the country’s State Oil Marketing Organization, said today in an interview in Baghdad. The nation sells about 60 percent of supplies to India, China and other Asian countries where demand is increasing, he said

In January, OPEC reports, Iraq produced a total of 2.7 mbd, which was 300 kbd up on production in the last quarter of 2010. To put this in context in February 2003, just before the conflict began, Iraq was producing 2.8 mbd. At the moment production is centered on the North and South Ramalla fields and that of Kirkuk in the North. The problems of Iraq are not so much, in the short term those of most of the rest of the world, i.e. in finding more oil. In the immediate short term the information on fields that have been known for some time (and in some cases were previously producing) already exists. What is needed is some way of ensuring that the infrastructure is repaired and, if necessary, new pipelines laid. Those plans are now advancing although it is now going to be more difficult to foresee their short-term success, given the developing turmoil in the region. The EIA has posted a table showing the potential from the different regions.

Estimate of oil availability in Iraq

Consumption in Iraq has been fairly stable until about 2007 where it started to climb, and, given a little more stability in the country, it is reasonable to expect that it will surge as it has in much of the Middle East. On the other hand it is a little difficult for me to see production rising to the 12 mbd figures that are now discussed as being possible for Iraq by 2017.

Until recently Iraq was flaring more than 60% of the natural gas that it was producing (perhaps as much as 1 bcf/day) One option that is open is to pipeline some of the gas up to Turkey and then feed it into the Nabucco pipeline. There is a hope that this can lead to exports of up to 2.5 bcf/day but new legal hurdles are continuing to delay progress. Apart from resurrecting the pipelines there is also the possibility of installing an LNG train or two.

And when one is considering the growing instability of the region, the next country down the list is Algeria, and that has now started to be mentioned among the countries feeling the fallout from the initial protests in Tunisia. The Algerian Foreign Minister is denying the risk of a “domino” effect. Possibly this could be because, as it is reported the income from oil and gas sales can, in this case help.

Unrest in Algeria could have implications on the world economy since it is a major oil and gas exporter, but analysts say an Egypt-style revolt is unlikely because the government can use its energy wealth to placate most grievances.

There are, however, other opinions.

Algeria is a member of OPEC, which reports the January 2011 production of oil at 1.28 mbd, which has been relatively stable for some time. The EIA consider that the crude is some of the finest in the world. Production is supplemented by condensate (450 kbd in 2008) and NGL (357 kbd) for a total liquid fuels production of over 2 mbd. It is the largest oil-liquids producer in the African continent.

Algeria, which operates the oil and gas through the company Sonatrach exports most of its natural gas, through pipelines to Europe and through LNG terminals, with a new one that is to be completed in 2012. Total exports are around 2 TCF making it the fourth largest exporter. (CIA 2011 World Factbook). Gazprom has recently become involved in field development. It also provides a useful fuel for the processing of fertilizer in Morocco, as Jeff Vail noted, back in 2008. As one of the world’s largest exporters of natural gas, Algeria supplies Southern Europe.

The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

Algerian natural gas delivery network

The Algerian reserves are found in the Sahara

  • 67% of oil and gas reserves contained in the Oued Mya and HassiMessaoud areas, where the two giant fields Of Hassi Rmel (Gas) and Hassi Messaoud (Oil) are located.
  • The Illizi basin comes third with 14% of initial reserves;
  • Then come the basins of Rhourd Nouss (9%), Ahnet Timimoun (4%), and the Berkine basin.

Algeria is hoping to increase exports by 50% by 2015, using a new pipeline into Spain to help develop the European market.

But the current turmoil may make some of these plans moot.

Thanks again, HO, for your great and informative posts.

I'm still having a problem with the inclusion of ethanol in total liquids production because of it's much lower net contribution. Are the petroleum products required to produce ethanol deducted from the total? As with all liquids production, net available energy to do post-production work seems to be the most relevant. I'm not sure how to fix this, but it skews the numbers somewhat when discussing where we are on the liquids curve.

Thanks for the kind words. I am going to revisit each country in turn later in the series and deconstruct some of these numbers. What I am just trying to do at this stage is more the broad brush outline to establish what the general picture looks like. It is difficult to reconcile numbers from different sources, but by using the variety, at this stage, it helps me to create the context.

Ghung - I agree with you but on a more basic point: why would anyone care to study any charted data? I'll assume to draw some historical meaning or perhaps projecting into the future. The past and future production profiles of oil are completely independent of ethanol. Whether eth production increase 1% or 5% per year it will have no bearing on the decline of existing oil fields nor the discovery of new reserves IMHO. OTOH changes in oil prices could have some impact on eth production but there's anything but a direct correlation IMHO. It's makes as much sense including coal production on a BTU basis as a bbl equivalent. A bbl of oil can be turned into 0.X bbl of gasoline, 0.Y bbl of diesel, 0.Z bbl of resid, etc. What is a bbl of eth turned into? Maybe we can say 1 bbl of gasoline. So maybe we should 2X the bbls of eth to the chart since a typical bbl of oil yields 0.5 bbl of gasoline. And if we did what would that mean? Maybe we should add the bbls of eth to the bbls of oil X 2. So what information are we trying to impart by adding the two values together...I've gotten lost.

Or how about this charting: the day comes when we're increasing eth production at the same rate oil is declining. So the projecion of this data would imply that when oil eventually runs out there won't be a problem: we'll have completely replaced oil with eth. Huh???


I was down at our local electric utility delivering a presentation to Senator Franken on some power plant improvements we're doing here and while talking afterward a thought occurred to me concerning ethanol, that ethanol might be worth the blender's credit (from a consumer's point of view) because it exerts a marginal price influence on gasoline. Would you say that ethanol exerts a 45 cent influence?

Hey Minnesota, I was going to send some info to Mr. Franken and his staffers. Drop me a note at so that I can reference you favorably. He's my Senator too.
BTW, I gave a presentation to his predecessor Mr. Wellstone and I have never seen a politician that honest before.

minnie - I've never devoted time to study the issue in enough detail top answer. Perhaps some more knowledgeable folks will chime in.

What is important now is to develop a table of oil exporting countries from North Africa and the Middle East and how unrest there impacts on oil production in each country.

After regime change there will be calls for a fairer distribution of oil revenue which will require re-negotiating oil & gas contracts. How will that be done?

I don't see why oil and gas contracts will have to be re-negotiated. These deals are made to have the revenue from oil split between the government and the foreign investor. A government change can lead to changes in how the government share is distributed within the country, this doesn't impact the foreign investor's share.

You should watch Aljazeera and listen to the demands of the demonstrators. They complain about corruption. Many of the oil & gas deals will have some other (secret) business included which will not have benefited e.g. the low income group in the population. As we are entering the 2nd half of oil and job creation is another big problem the whole game will change. If the jobs are not created, these revolutions may become permanent. That will guarantee oil supply disruptions. Here is an example:

Iraq moves to head off protests as teen is killed
Around $40 billion "missing" from Iraq accounts

I have a residence in Europe, I am in it right now, and I watch al Jazeera english most of the time - it's a pity the powers that be have cut the US population off a quality international news feed like we see in Europe.

The corruption they complain about is an internal issue - meaning the corruption takes place within the government. If any of them are complaining about corruption regarding the deals between the government and the oil companies, it sure has escaped me, and I think I'm on top of it. I guess I should mention I am in the oil business.

The contracts don't have "secret" business involved. They are fairly straightforward. Governments in North Africa know they have a lot of oil, so they tend to squeeze the oil companies, and the deals aren't that profitable, they do provide volume.

I think you're confusing the oil company versus host country relationship with issues and problems within the host country legal and operational structure. Corruption and theft are endemic within the host country structures. Also, some countries do neglect the development of local labor so it can function in the oil sector.

When I saw the figures for Lybia, I concluded the government must have made it a practice to keep locals off the oil payrolls so they could not sabotage the oil facilities in the event of a rebellion. Expats are a lot easier to control and they are like sheep, they do exactly as they are told by the government, or they run when things get sticky (I know because I've been there done that most of my life).

I have noticed there's a tendency by people within the broad political spectrum to use the Arab revolts to grind their particular axe. Glenn Beck is going off into some pretty surreal areas, and his leftist opponents are doing the same thing in the left wing blogs. Don't fall in the trap, and try to be objective.

fd - I agree to the extent that the oil companies aren't cheating the GOVT's of these countries. In fact many companies are at a great disadvantage. OTOH I'm sure you agree the companies do indirectly support the abuse of the people by their govt. When someone buys a TV at a bargain price out of someone's car trunk they're probably pretty sure it was stolen. But the buyer didn't steal it so you can't blame him for the theft, right?

As far as I knew at one time you're correct about the oil fields: long ago expats told me how they were set up: the oil field was ringed by the expats who were ringed by govt troops. Outside the last defense ring it was described as the Wild West. I was planning on taking a contract in Libya at that time but when the company began talking about getting me a false Canadian passport and paying me through an offshore bank under a false name I lost my nerve. I could handle the Wild West. The State dept and IRS...not so much. LOL

Rockman, of course we indirectly support those regimes. But people who buy Nikes made in Myanmar are also supporting them indirectly. I have developed a pretty simple rule, if the local regime is too nasty, or I see other companies behaving in ways which may splatter our way, I recommend we avoid the area. For example, I recommended my company avoid working in Ecuador in the early 80's because I felt Texaco's operations were creating a pretty bad climate for the local natives, and eventually the doodoo was going to splatter our way. I also recommended to management we avoid Myanmar - the oil there wasn't worth the human rights violations. They listened both times. But other companies did go in feet first.

I also believe the US government is a pretty serious human rights violator, and yet I continue to pay my taxes and I have homes there. Sometimes we got to be pragmatic about these things.

fd - Tough to blend personal feelings with the reality of such an integrated world, eh? Unless you're in a cave living off spiders it's difficult to not be supporting to even some small extent some butthead. Heck, to be honest I've occasionally wonder if I should supporting anything you say. LOL.

It's easy to look at current events and see the hypocrisy: The U.S. now thinks Q, the Master of Libya, should be removed. For 40 years we didn't have too much of a problem with him. But then it looked like he was losing control of the oil fields and...Poof!...under the bus he goes. Thought Mubarak was a good enough guy for decades to send him billions...but not now...get rid of the bastard. Sadam was a pain but we didn't do anything after the first Gulf war to remove: we had Kuwait flowing again and Iraq was still supplying its share. But a few years we went after him when even his cheating on the embargo still didn't deliver enough oil to the world market.

Seems like a simple bottom line: the U.S. will support, or at least accept, any ass as long as the oil flows. But if there's a possibility he might not keep it flowing we'll throw him under the bus. One of the richest countries per capita in the world (Equatorial Guinea) is ruled by a homicidal maniac denying almost the entire population of any benefit from their oil exports. And we have nothing to say about El Presidente. Oh..wait...I forgot: One of the State Dept buttheads made the comment a couple of weeks ago that El President was "one of the good guys". Unfortunately there no chance at all for the local to rise up against the govt. For one thing El Presidente amended the constitution to allow him to execute anyone he chooses without a trial. As it is now the oil is readily flowing to the EU and the U.S. But I'm sure if by some bizarre circumstance El President is unable to keep it going we'll denounce him for the killer he is and fully support the next butthead there who can keep it flowing.

JOHANNESBURG: The son of a notorious African dictator commissioned plans for a yacht costing $US380 million - nearly three times his country's health and education budgets, a corruption watchdog claims.

Teodorin Obiang, the eldest son of Teodoro Obiang, the President of Equatorial Guinea, wanted to build the world's second most expensive yacht behind the Russian Roman Abramovich's $US1.2 billion Eclipse, the campaign group Global Witness said.

It condemned the plan as ''outrageous extravagance'' in a country where 20 per cent of children die before they turn five and few people live beyond 50.

He gets a salary of about $7,000 / month as agriculture minister. He claims to have "earned" his money "legally" according to his own testimony,

officials in his country were allowed to join foreign companies to bid for government contracts and this meant a minister 'ends up with a sizeable part of the contract price in his bank account'.

How the heck do we impose ethics on multi-national corporations to halt this sort of crap. The only way Khadaffi stayed on for 40 years was because foreign companies dealt with him (I don't care how tightly they claimed to have to hold their noses). There needs to be an international corruption court which can prosecute these amoral creeps.

I've said for years war is a perfectly moral and ethical way to deal with a**holes like these. Invade more contries. Eritrea. Burma. North Korea if they didn't have nukes. I would support those wars. I'd volonteer to hold a gun to. Ormy tax money towards the problem. But now, we send everybody around to unsolvable problems in oil rich countries instead.

Well, I certainly think that for any one country or group (NATO) to do it is also immoral (far too open to special interest influence). What's needed is a legitimate world authority representing each person equally. Ideally making decisions through direct voting, not representatives.

What's needed is a legitimate world authority representing each person equally. Ideally making decisions through direct voting, not representatives.

close as we are likely to get to that would with be a Max Headroom type scenario--not at all the ideal you are envisioning.

And what an "ideal" it would be for us minority upper level OECD residents, with all wealth immediately redistributed equally by the vast majority's vote. We'd all get to have several third world families move in and subdivide our homes--kind of like what Yuri Zhivago came home to after Russia dropped out of WWI. Hey but many would be great gardeners, it might not be all bad.

One downside you may not have thought about with legitimate world authority representing each person equally--there would be every incentive to increase your own group's population to get more influence. Anyone for 15 billion humans?

I didn't say it would make any sense while the world remains full of troglodytes. And who knows, you might actually find you like a world with a modicum of egalitarianism. Save the OECD's citizens from all that time and mental effort trying to figure out a justification for why they live so much better than everyone else. LOL.

Save the OECD's citizens from all that time and mental effort trying to figure out a justification for why they live so much better than everyone else. LOL.

It is exhausting...

But yeah those ideal things are tricky--they can run right smack dab into hundreds of millions of years of naturally selected hard wiring--best hopes for rewiring ourselves to get through this bottleneck (more or less in one piece) and to our finding something both sustainable and more equitable on the other side.

lenny - I understand your position but do you honestly believe such a world authority has any chance of developing? If anything the current state of affairs in the world makes it seem rather impossible IMHO.

I've worked in Equatorial Guinea. I have no way of knowing but I wouldn't believe the country's health budget they tossed out either. Not only don't they take care of the citizen's health the govt has taken a variety of actions to drive the quality of life even further down.

And bear in mind that on a per capita basis EG is one of the wealthiest countries on the planet thanks to their oil exports. Given that this export is split between the U.S. and the EU neither seem to have much of a problem with how the locals are abused. And presumably these two would have to be a major driving force behind the development of some world authority to save the oppressed? Color me a tad skeptical. Neither appears to have a problem with sending billions to EG's homicidal president.

Agreed, EG is a mess. A good first step would be to have a world authority which would enforce strict no-trade rules on such governments.

BTW, Rockman, perhaps you might have experience enough to answer a question that's been nagging me about the revolution in Libya. Why did a country like Libya, with something like 30% to 40% youth unemployment need to host (apparently) over a million foreign workers, most seemingly unskilled from places like Bangaledesh, Niger, etc. etc.? Did oil companies demand English speaking employees? Did they simply follow the rigs around as a unit? It seems clear the oil companies take no responsibility for their welfare.

Well Jedi, I got the feeling many of you don't know what it feels like to get shot at, or to see somebody you know very well turn into cold meat because he raised his head to see what was going on. And maybe you think all that money we use bombing and invading grows on trees. I sure hope you plan on doing all that invadin' on your dime. I wouldn't suppport any of it.

I also want to point out a lot of the dictator supporting we do isn't just associated with oil or mineral resources. Sometimes it's done for "geopolitical reasons" - meaning they leverage our imperial forces. And sometimes these geopolitical reasons are associated with our unquestioning devotion for Israel. Which is something I don't support, seeing that we don't have a mutual defense treaty with the Israelis, and last time I checked an Israeli soldier wasn't fighting alongside our guys anywhere in the Solar System.

You should watch Aljazeera and listen

Maybe you should try reading it. It adds balance to the overall MSM stream. must read the editorial pieces once in a while to catch the overall slant--which can be significant, comparable to that of FOX NEWS--with which I avoid direct contact as the its background radiation permeates all.

The other day I was reading a fairly well written Aljazeera piece on how democracy wasn't a panacea for all ills in the region. Then out of the middle of the article jumped a phrase that blew me away 'the former democracy of Iraq.' Now Iraq pretty much went from colonial rule to a monarchy to a bunch govts run by whomever ran the last coup, which culminated in Sadam's coopting whatever sort of vote that followed the coup that put his Baath party in. Nowhere in that sequence would I describe Iraq as having been a democracy. Much less a democratic republic--which is a far more accurate way to describe countries the article named as democracies. Aljazeera is a useful news source but it has its own ax to grind.

US State Dept. website - Background Note: Iraq

At the end of World War I, Ottoman control ended and Iraq came under the authority of a British mandate. When it was declared independent in 1932, the Hashemite family, a branch of which also ruled Jordan, ruled as a constitutional monarchy. In 1945, Iraq joined the United Nations and became a founding member of the Arab League.

Britain did take some steps to establishing a parliamentary democracy / constitutional monarchy in Iraq, and the democracy did operate quite well until 1958, when a series of military-based coup upset it all. Perhaps if Britain had had another 100 years to bring the population along a bit...

Further hints of interference can be found in this document from Global Security - Iraqi Revolution and Coups - Republican Iraq

Qasim's domestic problems were compounded by a number of foreign policy crises, the foremost of which was an escalating conflict with the shah of Iran. Although he had reined in the communists, Qasim's leftist sympathies aroused fears in the West and in neighboring Gulf states of an imminent communist takeover of Iraq. In April 1959, Allen Dulles, the director of the United States Central Intelligence Agency, described the situation in Iraq "as the most dangerous in the world." The pro-Western shah found Qasim's communist sympathies and his claims on Iranian Khuzestan (an area that stretched from Dezful to Ahvaz in Iran and that contained a majority of Iranians of Arab descent) to be anathema. In December 1959, Iraqi-Iranian relations rapidly deteriorated when Qasim, reacting to Iran's reopening of the Shatt al Arab dispute, nullified the 1937 agreement and claimed sovereignty over the anchorage area near Abadan. In July 1961, Qasim further alienated the West and pro-Western regional states by laying claim to the newly independent state of Kuwait.

It was the above coup which put Saddam Hussein into the vice-presidency, from which he rapidly migrated via another coup into full control.

It's safe to say that conditions in the region, plus sectarian divisions within Iraq, made the first constitutional monarchy impossible for any long term. No doubt the Kurds, shia and suni should have been provided independent states immediately following the breakup of the Ottoman empire, e.g. after WW1. It's also highly likely that the overthrow of the quite popular though authoritarian president, Qasim (was primarily a centrist in outlook) though with "too tight" ties to Russia for the west's tastes, in 1958, was engineered by the west, resulting in Saddam.

I also find Aljazeera to be a quite reliable news channel with only one host who exhibits any tendancy to "over-examine" right-wing guests from the US. It's CLEARLY more neutral than FOX. must read the editorial pieces once in a while to catch the overall slant--which can be significant, comparable to that of FOX NEWS--with which I avoid direct contact as the its background radiation permeates all.

I should have added the emphasis first time--no doubt you are absolutely correct It's CLEARLY more neutral than FOX when the overall content of both are compared side by side.

I only read Aljazeera. Its a decent mesh with MSNBC and the NY Times for regular MSM. Get to read between the lines a little more that way.

FOX hounds would call all those publications commie left at best though.

Fortunately the last time I was subjected to FOX news regularly was when Sarah Palin was running for VP. I was on the North Slope and FOX blared none stop in the hotel dining hall. Many of the regular hands up there seemed to love it. The cheers for her acceptance speech were huge.

Heck it's bad enough getting hammered with worthless snippets of CNN in doctor's waiting room. Then again, I won't listen to any news broadcast in the morning--I don't want the carefully crafted nuance of the broadcasters' voices shaping my day. In the evening I can handle it better. I'm clearly not the audience at which most of the stuff is aimed.

I like al Jazeera as well. I mustly stick to it and BBC News, have stopped watching US networks.

Regarding British rule in Iraq, there's a minor point I want to make: It's very difficult to instill good practices on conquered people when control is exercised using brute force. After all, the British did use poison gas on civilians in Iraq - Saddam was just doing what the British taught him. Like Ghandi said, "I'll believe in Western Civilization when I see it".

and the democracy did operate quite well until 1958, when a series of military-based coup upset it all.

quite well is an interesting interpretation of the facts on the ground...but you have a point, that Iraq was at least trying to be democracy

In 1936 Iraq experienced its first military coup d'etat--the first coup d'etat in the modern Arab world. The agents of the coup, General Bakr Sidqi and two politicians (Hikmat Sulayman and Abu Timman, who were Turkoman and Shia respectively), represented a minority response to the pan-Arab Sunni government of Yasin al Hashimi. The eighteen-month Hashimi government was the most successful and the longest lived of the eight governments that came and went during the reign of King Ghazi.

from this section Iraq - IRAQ AS AN INDEPENDENT MONARCHY

...and King Ghazi's reign lasted only until near the beginning of WWII...then in 1941 another coup-countered by a British invasion which reseated the regent 1948 a major 1952 martial law...we are getting pretty close to 1958 and still no evidence of the democracy doing quite well. As matter of fact, during the constitutional monarchy period all political activity was prohibited for years at a time .

No doubt the borders Britain gave the place made the country quite unmanageable--the presumed intent.

Guaranteed Aljazeera would never be a proponent of keeping a colonial power around a little longer to bring the people along--can't say I'd blame them--but newly independent countries are rarely in an enviable position.

Canada is not producing 3.350 Mbpd. The correct number is 2.722: Canadian Association of Petroleum Producers: and Includes pentanes and condensate, does not include NGL, but we know that ethane and butane have always been petrochemical feedstocks and propane ain't no oil.

How can a meaningful discussion be had if the numbers for the most transparent countries are wrong, by some 20% in Canada's case. I

Bureaucrats like to play with numbers. The US "oil" production figure of 8.5 million bpd in 2008 is bogus as well. It must include ethanol and any other sh*te they can cram in there. Oil+condensate production by the US in 2008 was 4.95 million bpd and for Canada it was 2.58 million bpd according to the EIA. Maybe the US and Canadian "oil" production is being counted in the same way, but I doubt that the others on the list are. Using the EIA metric Russia and Saudi Arabia had 9.36 and 9.26 million bpd production in 2008, respectively.

The numbers that I used came from the Canadian National Energy Board.

My point was that the numbers vary, depending where one takes them from. It is even more messy for exports and imports, as I pointed to EIA data in my previously linked post.

Did you take them from here:? and then Excel spreadsheet for 2008? This one show 430,155 m^3/day which is 2.705 Mbpd which is close enough to 2.722.

Edit sorry 2.722 is for 2009, for 2008 is it 2,709. An then EIA finds 2.58.

Everybody focuses on Alberta and export to US, but I think more interesting aspect for us (Canadians) are the imports on the East Coast, because the are affected by what's going on. Any arbitrage opportunity for someone to buy Alberta oil and sell it in Ontario, pumping south of Great Lakes?

Any arbitrage opportunity for someone to buy Alberta oil and sell it in Ontario, pumping south of Great Lakes?

No, all the space on that pipeline (and all of the others) is sold out.

Enbridge Allocates Space on Parts of Mainline for March

Enbridge Inc. will allocate space on five pipelines for March because demand for crude shipments exceeds capacity, according to an e-mail from the company.

Line 5, which runs from Superior, Wisconsin, to Sarnia, Ontario, and has a capacity of 490,000 barrels a day, will be able to meet 81 percent of next month’s orders to move oil

Line 6B, which has a capacity of 290,000 barrels a day and runs between Griffith, Indiana, and Sarnia, Ontario, can meet 86 percent of shipper requests for February.

However, that's not too bad compared to the new Spearhead pipeline to Cushing, Oklahoma, which is very badly overcommitted.

Enbridge Spearhead pipeline apportioned for March

Enbridge Inc (ENB.TO) will ration space on its Spearhead pipeline in March, allowing just 16.6 percent of nominated volumes onto the line.

Just imagine how full those tanks would get if Canadian oil producers could physically get their oil there.

The US EIA uses a rather expansive definition of "oil" in its production numbers, which the Canadian NEB does not use. The difference I think is in gas plant liquids. If you look at the EIA data, the Canadian production of Crude + Condensate was 2,579 barrels per day in 2008.

The difference of 771,000 bpd must be gas plant liquids. The NEB doesn't count them because they don't go into the same market as crude oil - you can't refine them into gasoline and diesel fuel. However, the NEB does include pentanes plus in its oil totals, which IS generally fed into refineries to produce gasoline.

According to the NEB, in 2008 Canadian production of crude + condensate + pentanes plus was 430,155 m3/d, which works out to 2.706 million barrels per day. The difference between that and the EIA crude + condensate numbers must be ethane + propane + butane + ethanol. The NEB probably considers ethanol to be a gasoline additive rather than calling it oil. The EIA inclusion in the oil total is rather political in nature, I would think.

Including ethane in the "oil" total is highly misleading because in the US it is generally sold as natural gas. In Canada there are some huge straddle plants sitting on the gas pipelines which strip off the ethane and sell it to the petrochemical industry to make polyethylene plastic. It's a very lucrative sideline. The natural gas the consumers get is nearly pure methane.

Bottom line: The EIA numbers are deliberately inflated.

Now it makes sense. Let's keep going at them. Is Canada really making 771,000 bpd of these liquids?

Well, looking at the Canadian Association of Petroleum Producers (CAPP) Statisical Handbook, and converting from m3/d to bpd, in 2008 Canada produced 243,000 bpd of ethane, 126,000 bpd of propane, 92,000 bpd of butane, and 165,000 bpd of pentanes+ for a total of 625,000 bpd of NGLs.

That's getting close to 771,000 bpd, but there's still 146,000 bpd missing somewhere.

If you look at what CAPP considers to be "crude oil and equivalent, in 2008 it was 884,000 bpd of light crude, 465,000 bpd of heavy crude, 524,000 bpd of synthetic crude, 685,000 bpd of crude bitumen, and 165,000 bpd of pentanes+ for a total of 2,723,000 bpd of oil and equivalent.

I don't know what happened to condensate. They probably included it in pentanes+ because it's chemically the same stuff.

The CAPP doesn't track ethanol at all. I guess from their perspective its not petroleum.

It apears to that to safely increase Iraqi oil production, one must create stability in the country. If so happens, domstic oil consumption will increase to. Wich will take from exports.

Another issue:

The relatively flat domestic production is (as we have discussed with the Export Land Model) not typical.

"production" seems to be a typo.

Sorry, should have written "consumption." I have changed the text to make the correction.

Amazing what kind of predictions that you can get from a country with honest reporting practices and meticulous data collection. That country of course is Norway. The following is an Oil Shock Model that I did in Jan 2006 based on 2004 data.

The thin blue line is the latest data pulled from HO's graph above. It fits tucked inside the red model curve. I have claimed no mystery exists behind modeling the extraction process as it follows elementary flow principles; the only thing mysterious is how to get good discovery data and honest historical production numbers from the various nations and corporations keeping this data hidden.

Apart from the recent data, this is described in The Oil ConunDrum.

So you predicted Norway production decline 10 years after the event, WELL DONE

Excusing the implied condescension, no reason this couldn't have been done long before this point. The discovery volume in Norway was declining by 1985 and that would have given plenty of information to do a decent extrapolation. The point I want to make is that no one ever attempted to do something like the Oil Shock Model before, and so don't blame me for being born a few years late. Look, I have no special expertise in the geology or petroleum business and if weren't for me starting to blog in 2004, this would still be a big heuristic exercise for others to muddle around in. Maybe? Maybe not?

Like all mathematical analysis discoveries, they eventually get made by someone, sometimes earlier, sometimes later. It's a stochastic process; it just takes someone to come along and make it. Incidentally, that is the rationale behind the model of the dispersive discovery process :)

If I am condescending to you it's because you are to many others, as I said before in order to know, really know what SA will produce you have to know what they got left and I do not think even the Saudi's know, so the best we can do is a higher and lower estimate. This applies to many countries so I think 2012 to 2017 is reasonable considering how little we know and the political uncertainty in many countries, if you want to take the rise out of that great. go ahead.

You are illustrating the problem. For too many years, all we have is people shooting from the hip and just throwing out the numbers as if they have superior intuition. Sorry to say but this is not how the best engineering or science is done. Doing methodical science is humbling yourself to the data and the physical world. Working it intuitively can not be done reliably and independently reproduced by someone else. We need a reproducible model that others can improve on. Eventually, we can infer quite a bit but we need the equivalent of Ohm's law for evaluating the particular situation. That is where the Oil Shock Model or its equivalent comes in.

So I guess I am taking the rise out of it because you are not doing anything any more credibly than those who came before you.

Web - Forgive me but you can be rather condesending at times. OTOH that doesn't make your analysis less valid IMHO. As you've irratatingly pointed out more times than I care to remember, you present a model we geologists can't began to offer. Give me all the KSA maps and production data and I'll give you a fair a couple of years, of course. Fortunatly, after being a petroleum geologist for 36 years, being told I'm wrong rolls off me like water off a duck. LOL

There was a two piece mini-series on BBC in 2008, titled "Burn Up", dealing with Peak Oil and AGW. Nice, quite watchable movie, ith PO and AGW details sort of right. KSA oil reserves were an important element of the plot. I do not want to put a spoiler here, if someone wants to watch. It is on (at your own risk; in Canada download is 100% legit). Two 90-minute segments.

edit: The post does not make the sense without the punch line, so here comes the spoiler. There is no oil in Western Desert :-)

Oh sure, I can be condescending to big oil, politicians catering to big oil, Wall Street, and the academic mainstream of economics and extending into geology just by frustration. Basically I am condescending to people that hold all the power. Those same people also hold all the data, BTW. Everyone on this site shows some level of condescension; we all kind of think that we are smarter and superior to the BAU politician that gets elected time and again.

Yet have you ever heard the dripping condescension on the right-wing talk stations?
They solute each other as "great Americans", or they call themselves "America's Mr. Right", or claim they have "talent on loan from God". Cripes, if I had the balls to do that, I probably would, seeing as it works so well.

My favorite condescending line of all time has to be the one attributed to Murray Gell-Mann who supposedly said: "If I have seen farther than others, it is because I am surrounded by dwarves". I doubt he said that but his reputation preceded him.

Fortunatly, after being a petroleum geologist for 36 years, being told I'm wrong rolls off me like water off a duck.

I don't understand that at all. The greatest weatherman of all time is probably wrong for a majority of his predictions. Yet if that same guy claimed that elevated temperatures were caused by underground dragons, he would be drummed out for being wrong awfully fast. The point being is that you can't be wrong very often on fundamental concepts, otherwise you get fired. And all I talk about are fundamental concepts in probability and physical processes. Any predictions I make are just offshoots of these concepts. The predictions are "most likely" but the concepts are on the mark, otherwise you get your head chopped off.

That's why I post here; I want someone to chop my head off. I would rather have it done now rather than later.

I will give you another example. The statistician G.E.P. Box said that "all models are wrong, but some are useful". And everyone uses this to mock any kind of mathematical analysis (which is all a model is BTW). But if you look at the context of Box's quote, the preceding line is "The fact that the polynomial is an approximation does not detract from its usefulness because all models are approximations." Whoop-de-do, Box basically is saying that models don't always do these things accurately enough, but it has nothing to do if the model is necessarily wrong conceptually! And all the people with "talent on loan from God" use this to criticize those of us that just want to fundamentally understand what is happening. That is basically why the frustration level rises.

Web - "you can't be wrong very often on fundamental concepts, otherwise you get fired". I don't like to trash my cohorts but you might be surprised how often your statement is wrong. In fact, I've seen many hands who did grasp some details of their small part of the process but were completely ignorant of the fundamentals. I've known geophysicists who could run cirlces around blindfolded with regards to computer processing and modeling, But did have a clue why sand accumulates as point bars ina river. Not a clue. My own experience has shown that probably no more than 25% of all petroleum geologist can be consistently successful. And that doesn't mean not drilling dry holes. And many of the most ignorant folks with regards to fundamental concepts were in management calling the shots. And sometimes at the highest level of management. I could go on for gigabits with very specific examples of very ignorant oil fields hands (especially geotechnical management) that you probably wouldn't believe. I could tell you the story of the profound ignorance of one CEO of a rather large independent oil that I'm sure would send you into a rage. Your logic system would refuse to accept my tales. About the only excuse I might offer for so many of my cohorts is that it is, and has always been, very difficult to find oil/NG at a profit. And much harder when you don't have a very good sense of how Mother Earth has set out the playing field.

Where treasures are to be had, people will go to great lengths. Sunken treasure hunters don't have great odds either. So I agree that they may not have great success, but believe that they will. Professional gamblers probably fit the same profile.

My take though is that many scientists and engineers are in the profession they are in because they are nerds and perfectionists and have this drive to be correct. We aren't going to change human nature so that we accept this and let them do their thing as math professors and lab scientists. If they decide to go in the wrong profession where their bosses are also perfectionists, they run the risk of being fired. Consider this happening in a medical products company. On the other hand, if acceptable risk is OK where all the danger is in squandering play money, the bosses may accept risky behavior as a strategy of doing business.

Risk is usually quantifiable and I have written extensively about reliability and safety in my regular work.

My favorite condescending line of all time has to be the one attributed to Murray Gell-Mann who supposedly said: "If I have seen farther than others, it is because I am surrounded by dwarves". I doubt he said that but his reputation preceded him.

Interesting aside to that--Gell-Mann was supposed to have laughed in Leonard Susskind's face when the young physicist told him what he was pursuing one time when the two of them were in the same lift.

Susskind has the gift of being able to describe some of the most mathematically complex concepts with very few equations and almost no hint of condescension. The Black Hole War was incredibly readable.


That is where we disagree about models, I understand the need to have some sort of model like the one you put forward, but there are certain things in the real world you cannot model for.

Let us take KSA, let us assume for a minute that it has spare capacity 1 to 3 million per day. Now you can run models for varing spare capacity but; What if the rulers say to themselves, all our spare capacity will be gone in couple of years, so we will hold back, release this slowly, allow prices to rise to help curb demand.

Remember KSA cut production by 2mbd when prices fell, you cannot model for a cut as in order to do so you have to know how far prices would have fallen in 2008 and also know how all OPEC countries would respond and if they would stick to the agreed cuts.

So all this comes down to assesing a very fluid situation and yes a certain amount of intuition is required.

Therefore my intuition is KSA are doing exactly what I said, the production cuts they made two years ago are spare capacity which they will release slowly, but they hope high prices will slow demand growth. Spur on purchase of smaller cars and give time for Iraq to invest in the infrastucture and grow production.

Fact remains total liquids production 2010 will be higher than 2005 and 2008 and I am sure 2011 C&C will be higher than 2005 and 2008.

That is where we disagree about models, I understand the need to have some sort of model like the one you put forward, but there are certain things in the real world you cannot model for.

I don't think you have looked at the Oil Shock Model very closely.

The significant feature in this model is that I allow perturbations or "shocks" that are simply sudden increases or decreases in the extraction rate.

All that "excess capacity" implies is an extraction rate below that what is possible. The excess may not be stored anywhere necessarily but can be modeled as a reduced extraction rate. Therefore, to show a positive shock, the rate is simply increased.

To show a negative shock, such as demand destruction, the extraction rate is decreased at some point in time.

You won't find a model like this anywhere else and it can model exactly what you are talking about.

That is essentially why the word "shock" is in the name of the model. This was the obvious selling feature from the minute I cooked it up several years ago. Everyone can see the shocks from the 70's and 80's in the data, but no one ever took the initiative to try to model these effects. SA is no different today.

Having the ability to model the effects of a shock – if we could know in advance the onset, magnitude and duration of the shock – seems like a great tool for projecting forward the effects of the shock, or even conducting “what-if” exercises, where we identify a whole range of possible shocks that might or might not happen and evaluate the effects on supply in each scenario. But in terms of any given model’s usefulness as a tool of prediction, it seems that you’ll only ever know the onset, magnitude and duration of a shock by looking at production data in hindsight. Even official pronouncements from oil suppliers about their future production intentions can’t really be accepted at face value. Official production figures from tracking organizations get revised after initial release. So it seems that what the earlier poster was saying is that because the model isn’t predicting the shock itself, you can't discount the value of people in the industry who have the intuition gained through experience to make informed judgments about the conditions that influence whether a given shock will occur in the first place. That doesn't mean there is no value in having a model that mathematically establishes the effect of the shock, once you know what it is, only that experince and intuition also have value in assessing future scenarios.

That doesn't mean there is no value in having a model that mathematically establishes the effect of the shock, once you know what it is, only that experince and intuition also have value in assessing future scenarios.

Which is the actual issue. No one as far as I know has even able to get to the point of modeling an unshocked production profile. No analyst has this sophisticated a model, all they have is Hubbert Linearization. It looks like the fact that I have essentially leap-frogged the analysis to include perturbations has people confused that I am neglecting something.

So please tell me a model that does shocked or unshocked analysis. I doubt you will find anything in the literature. I contend it is a huge hole in the layman's understanding. Sure some industry expert may understand that, but notice how they aren't telling anyone about their techniques. Hint: they might not want you to know.

WHT, when you get this kind of agreement between simple physical model and unbiased data it is as good as it gets, isn't it?

CC, Certainly. Yet, I should add that the model is based on probabilities and mean values, and the probabilities can only give one an idea of the most likely outcome. Like the weather service predicting the probability of rain on any given day, it will all average out over a large ensemble of measurements. Some will be short, some will be long, but the prediction will converge if the biases are random.
So do this with Norway, USA, UK, etc and as you start accumulating the data, I contend that the predictions will get better and better -- and you can at least reason about the uncertainties of places like Iraq and SA.

In Norway's case where data seem to be very smooth, how far past the peak of discoveries does one have to wait to get data that will generate a meaningful peak on production? Is it clear? If peak of discoveries was in 1986, how much data past 1986 do you need to go to get the correct looking production curve? Is it a bit of a see-saw between k and Dd in equation 8-3 in TOC?

The key is to plot the discoveries as a cumulative and look for an inflection point. The k gives the general shape while the inflection point helps define the Dd (which is the discovery URR). It is tough but if people had started thinking about it this way back then, the better the predictions would have gotten.

Inflection point on a cumulative of the fat(ish) tail function like that will be not even half way up total discovery. Did you play with fitting the model to truncated data (truncating from the right) and at which moment would fit for Norway data blow up?

That is absolutely true. The smaller the discovery area, the more likely we will see a large increase early and then a fat-tail. This assumes that technology is strong initially. When technology accelerates then that inflection point moves up the curve. You can see that with the following set of curves, showing increasing acceleration giving a sharper peak and the inflection point moving toward an asymptotic point:

The other problem with smaller areas is that it is more susceptible to discovery size fluctuations.

For Norway, I actually didn't even have to use the dispersive discovery model, mostly because I hadn't developed it yet and mainly because the majority of the discoveries had already happened so I ended up using the actual discovery data from Laherrere. That's why I said at the top that if you have good data, everything works out very smoothly. If the data is spotty then of course we have a lot of work to get the tails and the ultimate correct.

I have a feeling that Hubbert was doing this via a lot of manual charting techniques. I just switched over to a model with a mathematical basis.

Gjøa, discovered in 1989, has reserves estimated at 82 million bbl of oil and condensate and 40 billion cu m of gas. The gas overlies thin oil pay in several tilted fault segments of Jurassic Viking, Brent, and Dunlin sands at an average depth of about 2,200 m.

Gjøa just come on line and it is small and discovered more than 20 years ago.

Web - "When technology accelerates then that inflection point moves up the curve". If I'm understanding you correctly technology improvements might not skew your model greatly. The capital invested in oil field technology is driven by the increasing difficulty to find reserves profitably. Billions have been spent developing 3d seismic technology. It's difficult to express the orders of magnitude this data has improved over the last 40 years. But this improvement was driven by the increasingly smaller reserves left to find. About 30 years ago I was drilling 12,000' holes to test 1,500 acre potential traps. Now I'm drilling 17,000' holes (costing twice that of a 12,000' well) to test 150 acre traps. We are much more efficient at finding smaller oil/NG fields today. In the mature Gulf Coast we are finding fields that are typically only 10% the size of the fields we were discovering decades ago with what might be describe as very primitive tech. In fact in many cases with no tech at all. Basicly 3d seis is allowing us to fill in your skinny tale and not so much generating a fat tale IMHO.

The one exception are the DW plays. Had not seismic tech developed as it did in the pursuit of small fields we would not have found these huge offshore accumulations. A very nice side effect, if you will. Unfortunately the time and expense to develop these new plays tends to mute their value somewhat to the overall system.

What can I say but that I have it mathematically modeled exactly as you describe it. A significant accelerating search mapped against a diminishing return. Any fat tails are due to the dispersion in accelerations and in areas not yet reached.

If I say anymore I may get accused of excessive technospeak.

So, as far as the predictive power of the model, it has a "built-in, mathematical" capability of predicting production profile soon after the inflection point is passed on the discovery curve. .Obviously it is not practical because of noise and backdating, and even for smooth data there are problems with numerical stability, but the profile of the discovery is "determined" already by the points after inflection, but possibly even before peak?

Intuitively it makes sense (if intuition can make sense). Paraphrasing needles in the haystack, as soon as one starts to find fewer needles and fewer large needles in the haystack, one has an idea how many needles will there be in the haystack. This is pretty intuitive. It just happens that formula here includes exponent and 6th power of time (and is not graphed as you "second guessed" how Hubbert found his).

If instead of modeling the search acceleration as the 6th power of time, we use an exponential, then we can recover the Hubbert Logistic exactly. I think that is an additional vindication of the approach. Yet, I still use the power-law because like we are finding with Moore's law, the exponential can't sustain itself forever. The 6th power comes from a square law which is cubed to take into account a 3D search volume. It starts fading with time, while the exponential keeps growing, giving the power-law model a fatter tail.

Hubberts prediction of the world peak of year 2000 was made in 1956. That was before the peak of world discoveries (1964). He was only wrong by 5 years, and that for above ground reasons. So either he was lucky, or it is enough to watch for when the discovery increase stop accelerate.

Probably right. Hubbert was just using graph paper as well. All I am doing (I think since I can't read his mind) is to put the discovery model on a firmer mathematical footing.

EIA points out that the Brazilian National Petroleum Agency (ANP) has renamed the Tupi and Iracema fields Lula and Cernambi, respectively. Make a note. The Tupi people were one of the indigenous tribes in Brazil; Lula is the popular name for now ex-Pres da Silva.

The Baiji refinery, Iraq's biggest, was attacked by insurgents and will be shut down for months, which won't help them in their expansion plans, to say the least.

The Baiji refinery is mainly for domestic use and the erratic electricity availability that many iraqis already complain about will not be helped by this, to say the least. I don't see the incident as dangerous for the outside world in a direct sense, the amount refined is too small and insignicant, and as already noted, mainly used for the domestic area. Still, the danger would rather be that the event will cut exports slighly as oil needs to be siphoned off towards pleasing the increasingly unpleased masses and who, on even worse living conditions, might just take a run for a complete(and forced) regime change, and in effect derailing the country and any oil exports in large quantities for a long time.

And good luck replacing Iraq's oil. I doubt the Saudis have more than 3 mb/d in spare capacity assuming the best case scenario, and I've read reports claiming a genuine spare capacity of between 2.25-3.25 mb/d(I don't have the link but I can give the source, if given time, since it was credible). Over 1.2 mb/d needs to be replaced already. Most West African nations cannot go much higher and the Saudis 700,000 bdp won't be calming the markets for more than a mere few weeks.

They had less than 2 mb/d in 2008 which they were unwilling to move much, since it would've exposed them as the hoaxes they are. With Iraq's 2.7 mb/d cut, and Libya's 1.2-1.6 already down, the spare capacity would be more than overused. We would go for the oil reserves that many nations around the world keep for genuine emergencies(wars, mass famines etc), lasting perhaps 50-60 days. And what then?

Back to Iraq: there's so many ethnic, secterian and religious tensions that the whole country is a tinderbox. It's likely to be far worse than we've seen in Libya as there are more people and more sections that the society can be divided into. Not just clans but whole groups of peoples(the Kurds etc) as well as the Shiite/Sunni divide. Not to mention the country is still war-torn and the wounds are fresh - as are the memories and grudges.

I don't see the Saudis falling, Iraq is a much more realistic place for unrest.
We're so close to the margins now that we don't need major supply disruptions for genuine global depression, and following that, chaos.
Oil will continue to climb even if Libya remains an isolated case, since it takes time to replace what they are not exporting.

If Algeria or Iraq joins the fray, however, say hello to the new megacrash. This time without a gullible public ready to accept all sorts of bailouts from Very Concerned Men and central bankers with their spenderpants on with a smile.

Honestly, if Iraq or Algeria tumbles down I don't think we'll move up again but instead face the steep post-Peak Oil phase very, very quickly. Probably under a year, depending how long we can pretend that our economies are actually remotely sound in their financial health(and considering the con men's recent successes, we shouldn't underestimate their calming and hypnotical abilities).

But if even the illusionists fail and Iraq and/or Algeria doesn't come out of the bloodshed and chaos in a miraculous way, then I sincerely doubt we won't be propelled into the post-Peak phase faster than we would otherwise during 'normal' circumstances, rather than being forced by unpredictable upheavals, speeding up the decline far faster than most predicted.

But, of course, perhaps I'm very mistaken and Saudi Arabia does indeed have 5 mb/d in spare capacity and Iraq will be a Light Unto the Nations and get 13.5 mb/d in 2017 and the party goes on unabated in spite of the delusional conspiracy theorists and deeply anti-Freedom crowd(as the Financial post recently branded us) such as I, and many others on here.

Edit: The post is long and a tad rambling, it's past midnight and I begin school after 9 AM(and I live quite closely) so I took the liberty of wasting a few hours on the internet, but the late hour is revealing. I've edited it a bit but I just don't have more time or energy, before going to sleep. One final thing though, since the text is not very clear in it's paragraphs. I'm essentially worried about Iraq and speculating what would happen if the country goes down in flames, a prospect I deem more than likely. And/or if Algeria follows or joins Libya alone. I don't see much difference. I hope this came through and sorry for the long post and slightly rambling on a bit. I'm simply tired. G'night.

Aren't riots and chaos and hungry mobs exactly what we expect to see as oil volumes decline? Isn't this actually normal near-peak behavior? Abnormal may be a calm transition in fact if we could replay history 20x times.

It is amazing to me that folks think we are far away from the peak. We are on it and the tidal wave is building all over the world.

I see Iraq the way you do. No way to stabilize it and if it is stabilized then it will use the oil it produces for itself. The obvious outcome is reduced output when OPEC begins to need further output to replace Libya.

As an aside, whether the ruins are man-made or natural, how will they get rebuilt during this time of expensive oil and chaos?

Look at what happened to New Zealand with an earthquake. Horrific sights. Imagine rebuilding with post-peak oil volumes. Would it get rebuilt? Not in the same way.

We are nearing the times when cities may become ruins.

Now I understand why ruins look like they were hit by many earthquakes.

"Imagine rebuilding with post-peak oil volumes. Would it get rebuilt? Not in the same way."

The cathedral was built before oil was widely used. Most cathedral's were built pre-oil. Most cities not in the western US were built pre-oil. Post-oil cities will likely have a different configuration, but most of them will still be there.

I don't know man. Are you saying people will build cathedrals with their bare hands again? For what purpose?

People are going to be building farming capacity not cathedrals IMHO.

Something tells me our idea of religion is going to be challenged by the chaos that looms ahead.

Chaos has "challenged" religion several times in history. The most common consequence is that chaos only reinforce the religious people.

Of course, now it may be different. If by no other factor, because we have science, secular schooling and a hight literacy. Well, after saying that it is clear, now it will be different, the only question is how so.

Our species is naturally spiritual. However, comfort and security as brought to us via the western civilisation tends to blanket that aspect of our nature. When we lose that comfort and security, we begin thinking those thoughts agai, wich we forgot in the past. PO and CC will remove alot of this comfort and security, so just guess what will happen to religions.

People seem to do a lot of irrational things in the name of religion. I don't see why building another cathedral will be any different.

The big cathedrals in France were built by / for Bishops as tourist attractions, so the Bishops could variously tax and otherwise profit from the tourists. No different than big business today.

True. And also as a boasting project. Back in those days you could not raise fund money unless your plans were bigger than the current cathedrals/projects in existense. It just had to be the biggest.

The good news is they builtthem well so they lasts for milennias. Modulo earth quakes. Long lived buildings produce more taxable services for each bucket of butter invested, so thats a good thing.

Thank you, HO, for this educational post including Brazil and for, as always, provoking another sharp and lively discussion at TOD.


Sorry - a bit off topic, but ... in recent days various talking heads have stated that to ameliorate the current price spike, the Saudis have plenty of capacity to increase production. Is this true? Do any of the top 10 have much spare capacity to know $ 10/bbl off spot prices?

Well I am not an expert, but this is the $64k question. Many on here think KSA is lying, since they declined in exports since 2005 or so in the face of high oil prices. They were supposed to be a swing producer and a force to stabilize the price with excess capacity coming to market as needed.

Some say Russia is maxed out too. I guess Kuwait may have something. I am not sure. But this article series may clue us all in soon.

I am with the idea that KSA is lying and see this as the big truth test. The results are likely to be a market crash again.

Oct - Another way to express the situation is that the KSA is being overly optimistic about their reserves. This could be said of every U.S. public company I've ever dealt with. Sometimes so optimistic they ran the chance of being prosecuted by the SEC. The KSA doesn't have the potential to be prosecuted by anyone. Perhaps that fact allows them a tad more optimism.

Russia is maxed out in the sense that they produce as much as they can when they can. They may be able to hold plateau for a while, but I worked in Russia, and many of those fields were infilled, and are now being infilled again with horizontals. Additional technology - fracturing comes to mind - also helps, as does common sense operational practices. This last one is important, the Russians had terrible practices and they have some kinks left to iron out. But they don't have really big fields, easy to tap, left to develop (note I say easy to tap). What they have is in logistically handicapped areas (say Timan Pechora, East Siberia), I doubt they'll ever get to 11 million barrels per day, and are likely to start declining fast within 5 years.

What matters is their export capabilities, because that's what the world cares about.
But if you look at production the former chief geologist of Saudi Aramco(their NCO) stated in classified Wikileaks documents that they won't be able to get over 10.5 mb/d in production in the near term. They might get to 12.5 but only in 2020.

In their all liquids production, they are close to 10 mb/d. And they increased their production to 700,000 bp/d already to alleviate the Libyan decline. Their C+C(that's convential crude and condensate, in other words, 'pure' oil) production is slightly above 9 mb/d with the recent increase, but that's not counting the increasing domestic consumption which is picking up steam. So net exports is still below their peak in 2005 and will likely to stay that way. And net exports is what the rest of the world cares about. They can produce 20 mb/d, if they consume 19.99 mb/d for themselves it matters little to the rest of us.

In 2008 they had less than 2 mb/d in spare capacity, the Great Recession gave them about 2-3 mb/d more, artificially, in a temporary boost in capacity due to lower demand(or demand destruction).
That is now disappearing quickly as the world is once again hungry for growth and that means hungry for oil.

Since they 'failed' to increase output significantly, and Geroge W. Bush himself stated that it's hard to ask them to raise production if they 'just don't have any more to give', it would be quite ridicolous to assume they can go over 4 mb/d in extra production in a short while this year, if events would mandate such a necessity.

And add to this the fact of depletion(which is about 3.5-4 mb/d each year) as well as the notoriously underestimated global demand for oil. OPEC (or was it IEA?) increased their initial prediction for global demand three times last year - a record. They've already updated their predictions for this year, and it's still february. It's more than likely IEA, OPEC et al will revise their numbers on more occassions this year as demand grows stronger than initially predicted.

Safe to say, the 'experts' usually know nothing or they know very well what's going on, as in the case of Saudi Aramco's chief geologist, but choose to mislead when confronted about the facts(or in his case, flat-out deny what he has said, even if he has said the same things to ASPO in 2009).

Rune Likvern, one of this site's regulars, has concluded that by 2012 supply and demand will be break-even, and that assumed ideal conditions.

With the Middle-East unrest it's very likely that will come sooner, probably this year, and before this year is ended. And what then?
If Saudi Arabia does indeed have 5(or even 4) mb/d in spare capacity, we're safe. But it's very unlikely that they do.

Remember, they stated that they were committed to the "22-28 dollar band" in 2004. They failed to keep it. Last year, they stated that "a price between 70 and 80 is fair for both consumers and producers". They've failed to keep it with their production. One might say that they are simply greedy, fair enough, but they're not fools(or so I would assume). They know triple-digit oil prices are unsustainable in the longer run, so they will either cushion the prices or they won't.

My guess is that they won't, as they failed in 2008, and that's because they are liars. They won't increase production significantly to cover the demand and lower the prices to 70-80 dollars per barrel not because they are not willing(they did so on numerous occassions before 2005, when their net exports peaked) to, but because they simply can't in their post-Net Export phase which started in 2005. And as it becomes increasingly clear they are simply not up to the job everyone, including themselves, are insisting that they indeed are, they will probably continue to claim it's "the speculators" or, bizarrely, that there's "demand destruction" when oil prices are at record highs, as they did in 2008. They also used the Israel-Iran tensions in 2008 to cover up their shortfall and they will blame the MENA revolutions now(perhaps more credibly), but the revolutions merely hasted the inevitable which would come irregardless, but perhaps a tad slower.

Don't expect things to be different now. Saudi Arabia is a fairy tale, a fable and a fantasy.
If Algera/Iraq(or perhaps even Oman) suffers, then we will see they won't be able to cut it. (And doubtless they will have a zillion excuses for their inability to do their alleged job of swing producer and price controller).

I think it may be fairer all round to take the position that SA "has" the excess capacity claimed, "but no infrastructure in place". In other words, they know how to implement a 4 mmbpd increase in their production, and could do it "in a given time frame" with e.g. a $100 billion investment, but not just by pressing a button on an existing control console.

The problem is, you spoilt brats who insist they must maintain a $100 billion investment in rarely-if-ever-used equipment and infrastructure in place simply so you don't need to manage your demand and give them guaranteed contracts or interest-free investment funds or whatever, are the real problem.

Is it accurate to lump ethanol and NGL production in these counts along with crude oil production, given the lower BTU content, and subsequent need for greater consumption, of each relative to crude oil? I'm not sure all these different liquid fuels, or even different qualities of crude oil, are fungible from one to another given the differences in energy contents, refining needs, and capital investment required for exploitation. Oil sands, for example, are very much dependent on the price of natural gas, and would still be quit high per barrel if not for the recent natural gas glut.

My point is that you can have an increase in liquid fuel production, a stable rate of consumption, and still experience price increases if the new resources require more energy or capital investment to harness.

Interesting ... presumed (and condescended) rates of production meet reality somewhere in a dark alley.

Nobody can predict the future except in the most general sense. One sense is 'less' of everything because there are more people making claims against a declining base of finite resources. Demand in the general sense increases along with population (and advertising).

The uprisings around the world represent a strategic challenge. Government change will not bring one new drop of oil into production but instead represents suppressed demand leaping out of the closet. The millions in Northern Africa and the Middle East (and elsewhere to come) want to live like Americans with all the energy- guzzling gadgets and interesting, non- labor jobs. They don't realize there isn't enough energy to support interesting, non- labor jobs in the USA, the place where the consumption concept was invented then perfected.

All this excess demand is ripe for destruction in the economic sense. Demand cannot be productive even if the institutional barriers were to evaporate tomorrow. There simply isn't enough 'value' to redistribute, even when the loot of the autocrats is tossed onto the scale. Having more consumers does not magically add to supply; to believe this is to believe in unicorns or supply- side economics.

Modern democracy without consumerism is an empty shell. There is no conceptual underpinning able to steer the putative post- modern USA wannabes toward zero- (energy) growth societies. The theoretical framework simply does not exist. Heck, we don't have a grip on steady- state or zero- growth economics here in the US where there is the intellectual room (and horsepower) for such ideas to flower! Instead, it's every man for himself and devil take the hindmost glossed over with magical thinking about 'endless growth' or doomsteads.

That these concepts have currency illustrates our culture's intellectual bankruptcy.

What will create zero- energy growth societies will be the force of events, helped by OECD militaries and 'agencies' bent on first creating Islamist states. Should these fail to materialize failed states will emerge, surrounding energy production 'islands' as in Nigeria, Equatorial Guinea and Mexico (where the failed state process is well underway.)

This is the 'Dark Side' of net exports. Anti- modern Islamist states have reduced domestic demand. Failed states have even less. Even non- producing failed states represent 'virtual' supply as their demand can be exported to the West.

The big idea here is to quash demand by any means necessary. Against this strategic backdrop is the vulnerability of Western consumption- or waste- based economies to increased input prices. These economies are rigid, have too much sunk capital costs that are stranded by the high prices.

The waste- based economies are likely to fail first crushing demand and driving prices to a level that does not support increased extraction. We are @ that inflection point now.