Why use a 5-year window?

In discussing the rate at which projects become productive fields, the discussion has usually just looked at new projects out to 2010.  It is illustrative in explaining why this 5-year window is chosen to look at the case of Cepu, an oilfield in Indonesia, to be developed by Exxon Mobil.  In terms of a help toward future supply this block holds some promise.
Jakarta estimates Cepu block on Java island could hold more than 500 million barrels of oil and could boost Indonesia's production by as much as 180,000 barrel-per-day (bpd) -- equivalent to about 19 percent of the country's current output.
But the story notes that it has taken four years to get this far - to the signing of a development contract, and that oil may begin to flow by 2008.  With a normal ramp up in production, one might therefore anticipate that the field would be unlikely to be in full production before 2010.  It is because there are many examples of this type, where both negotiation and development times are significant, that it is likely overly optimistic to look much  beyond the currently planned projects to anticipate supply capabilities up to 2010.

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This is why I have a problem with the CERA forecast.  I suspect it was put together without Murphy's law in mind - no hurricanes, no strikes in Nigeria, no wars, etc.  Plus there is (in my mind at least) a 95% chance that any of these mega projects will be delayed - usually by years.  The Bonga Project in Nigeria was intitiated, at least from an exploration standpoint, in 1993.  Oil may start flowing from there in late 2005.  Then again, it might be 2006.
They do have a "delay and disruption" scenario intended to account for that. It estimates 11mbpd extra supply by 2010, instead of the 16mbpd under the normal scenario.
David Yergin actually said that problems with oil production are not below ground but above ground. I guess it's a way to cover his ass.
From the past productions, does somebody know the probability of a new project to be accurate (on time with the right numbers)? the problem is that you don't really know your field output before a few months into production.
Almost all mega-projects, and essentially all offshore projects are designed for a specific capacity and flat production for specific period of time.  Usually they are designed to have a comfortable cushion to be able to achieve the plateau rate.  However, there are usually big uncertainties as to how long the project can stay on plateau or whether or not other wells will be needed to maintain the plateau rate.  Also, there are always major uncertainties about schedule and cost for these projects.  As a rule 90% will be over budget and behind schedule.  The higher the oil price, the more likely that this will be true, as the projects are planned under certain assumptions about costs and availabilty of resources.  As the world oil price rises, costs increase dramatically and resources dwindle( rigs, engineers, trained construction laborers, steel, wellheads, undersea pipeline layers, etc.).

Thank you for this insight into your industry.  I questioned (in a very poor way in another session!) how costs change with respect to production rate.  It sounds like upgrading, improving, expanding withdrawel rate WHEN prices are rising is often a money losing proposition.  

This is due to higher cost for everything related to extraction and IS NOT offset by the additional oil brought to the surface.  Huge costs for an incremental increase in production.

Did I understand this correctly?

Also, and I think you and J. have touched on this before, does this mean raw material costs are rising faster than energy (oil & NG) prices?

Don't get me wrong here.  When the price of oil rises producing companies make out like bandits.  However, for mega-projects that take 6-10 years to bring on, the conditions that these projects are planned under rarely if ever exist when the projects actually come to fruition.  When commodity prices rise, costs rise, and inefficiencies show up everywhere. Consequently, projects universally come in late and over budget.  But in the end the projects make much more money than they would have if they had been executed efficiently in a low-commodity-price environment.
Look at Oil & Liquids Capacity to Outstrip Demand Until At Least 2010: New CERA Report for information about the CERA "delay & disruption" scenario that Stuart pointed out above.

There's not much there, unfortunately, nor was there much in the multimedia presentation we got access to lately from the CERA analysts. However, making an elementary point here, overall depletion in existing conventional crude oil sources is inexorable and never delayed while new projects are subject to the exigencies of investment, market price, technology, geology and politics. This must have been part of why Jean Laherrere thought that all new projects should come with an associated "probability of successful [projected] production [by the target date]" calculation.
Insurance adjustors have tools like mortality tables to figure out whether someone is a good risk or not. Based on age they can figure out the probability that you will live long enough to pay enough into your policy.

Now, I realize oil projects are different beasts. However, I would think that we could come up with a way to obtain a probability estimate for a project's: a) chance of starting on schedule b) hitting peak production.

We have a lot of historical data for this sort of thing.

The problem is that if you are doing mortality of people, that you will have a large enough sample you can be pretty sure that actual mortality will be pretty close to the actuarial tables.

If you had thousands of oil projects, the hurricanes and wars could be dealt with in terms of probabilities, but there are just a handful of projects - not enough that one can rely upon statistics like this.  

It is because there are many examples of this type, where both negotiation and development times are significant, that it is likely overly optimistic to look much  beyond the currently planned projects to anticipate supply capabilities up to 2010.

True enough for major projects - but what about smaller projects?  Are there enough that in aggregate, they might provide a not-insiginificant percentage of additional production?

And does this also apply to extensions or infill of existing fields?  That sort of work does a lot to maintain output beyond forecasts, but does not always show up in the press releases.  I doubt tbat, however long the list of planned major projects is, it accounts for more than 75% of rig activity.

Unfortunately as you go after smaller fields and new wells related to existing fields, then the risks of the venture become greater, and the production times become shorter.  I seem to remember reading somewhere that the average well in the US now starts at an average 50 bd and the overall field average is now around 11 bd.