Timely delivery is a critical part of a useful fuel supply

The weather in Moscow appears to be getting worse and the Washington Post reports:
Over the previous day, electricity consumption nationwide hit 146,000 megawatts _ a record high since the Soviet collapse 15 years ago, the head of national electricity monopoly RAO Unified Energy Systems, Anatoly Chubais, said in televised comments.
Electricity consumption in Moscow, where a construction boom is in full swing and the gray streets of the Soviet era have turned into glitzy thoroughfares festooned with bright lights, reached a record of more than 15,300 megawatts, RAO UES said in a statement.
Such demand is leading to some restrictions on power use. However they, in turn, are passing the blame:
Chubais, who faced criticism over a massive Moscow power outage last June, suggested that the state-controlled natural gas monopoly Gazprom could be partly to blame for any energy shortage during cold spell since it cut supplies.
Gazprom spokesman Sergei Kupriyanov said the company was fulfilling all its obligations but that some industrial facilities would have to use reserves.
The cold snapped power cables for some trolley bus lines and forced authorities in the region surrounding Moscow to replace them with gas-powered buses.
There is, however, an additional  "knock on" effect from the bad weather.  In order to supply their own domestic market Russia is reported to have cut supplies to parts of Europe by 20%. Bear in mind that the EU is supplied with about 40% of its gas from Russia at present.  

The Russians are now denying the charge, but Italy, on the far end of the pipeline has seen a drop in supply, sufficient that it is dipping into reserves.

Gas differs from oil in that it is not stored domestically in the same way that oil can be, but instead comes through pipelines with only limited storage capacity.  In times where demand is high the pipelines can only effectively supply a given amount, regardless of the size of the ultimate reserve.  Thus the present crisis is underlying the fragility of the pipeline networks and storage capabilities.

Moving to LNG supplies is not really going to change that in any beneficial way.  The end consumers are still going to depend on the pipeline, and, as in Russia, industrial users will be the first to take a hit in a supply crunch.  (Clothing markets are apparently being closed in Moscow for example).  And supplies will be even less flexible, in terms of being able to cope with sudden winter demands.  It is this type of situation that has already seen companies in the US either switch fuel sources, or move abroad.

This same issue about getting the oil to the consumer is also potentially going to be a more immediate concern to consumers for oil, as the situation in Nigeria. Shell is now reported to be losing 200,000 bd of production, and Exxon Mobil is reported to be closing their 600,000 bd terminal.  This does not appear to be a situation that will be fixed soon, and the impact could be more immediately significant, than any potential oil disruption from Iran.

I was sent a copy of the latest Newsweek story on Saudi oil production (about which the same comment about the difference between reserves and production rates also holds).  It initially tempted me to go back and start pulling data from a number of earlier posts that we have had on this topic. However, one paragraph in particular, got my attention.

The skeptics take for granted that big oil states are thoroughly explored, which is not the case. From 1995 to 2004, fewer than 30 new wildcat [exploration] wells were drilled in Saudi Arabia, compared with more than 15,700 in the United States. The numbers are similar throughout the Persian Gulf.
 Without further comment, here is the data on the nature of the Saudi wells that were drilled in that time frame  from Table 36 of the OPEC statistics report for 2004 that I have referred to in the past. The top line in the table is tthe number of wells that were drilled in that country, starting in the year 2000, and the last column gives the percentage change from 2003 to 2004.  A dry hole is one that produces neither commercial quantities of gas nor oil.

From the Newsweek article on SA:

"This state makes plausible the recent Saudi response to its accusers: Oil Minister Ali Al-Naimi said estimates of Saudi "original oil"--the broadest definition of reserves, including proven, probable and possible future reserves--could rise in coming decades to 900 billion barrels, up from 200 billion, due largely to improving recovery technology. And the U.S. Geological Survey's estimate of Saudi Arabia's unexplored reserves is higher than Riyadh's. If anything, the Saudis may be underestimating their reserves. But releasing more detailed numbers won't clarify the reality, or end the controversy."

Talk about a divergence of estimates.  The P/Q versus Q method gives Saudi Arabia 80 Gb of remaining recoverable oil reserves.  Let's see, 900 Gb is over 1,000% higher than the Hubbert/Deffeyes estimate.  

Assuming there are no secret giant oil fields in SA, Ghawar must be on the order of 500 billion barrels.  This is just nonsense since Ghawar's size can be reasonably constrained by the initial assessments of the oil majors that developed it.  These sorts of claims are an indicator that things are getting bad.  Also, "could rise in the coming decades" is hardly proof of reserves or a plausible estimate of the undiscovered oil.
This quote from Maugari is very strange. Original oil has got to refer to "Original Oil in Place" - OOIP. The Saudi's have a graph in their "Response to Simmons" presentation showing it growing steadily and linearly since the Saudi takeover to about 700gb IIRC. Add on another 200gb of al-Naimi handwaving and you have 900gb of OOIP. But there is no way this could possibly be considered reserves - that implies 100% recovery rate. Even the most optimistic projections are not claiming more than 60%-70% recover from Saudi Arabia (which would be double the industry average). Is Maugari confused, or deliberately misleading?

How could you possibly recover 100%?  Dig shafts into Ghawar and mine the stuff?
Mike Lynch floated that idea once. Oil mines were common in the early days of oil. That was Colonel Drake's original plan too. He was going to mine the oil, but then he decided to drill for it instead.
There was a thought to do this with some of the shallow oil sands around Bakersfield.  The problem comes from the volatiles that would escape and have a quite negative environmental impact.
As I understand it, Saudi Arabian official reserves have always run about 2 times what they have numbers on at any given minute.
The thesis of this post is "off the mark".  Tinely delivery is NOT a big deal.

"Dipping into reserves" for natural gas in winter SHOULD be a normal part of business.  The US transports NG all year long, stockpiling it during seasonal slack demand (spring & fall) for later use during periods of high demand.  An entirely porper use of resources (why drill more wells than needed, build bigger pipelines than needed, when it is cheaper to build storage facilities).

I could imagine that Russia once had such a massibe supply/demand imbalance that they could supply dead of winter (a Russian winter at that !) demand with production straight from the well and avoid the cost of building storage facilities.  But they have found new markets (at market prices) for that massive surplus and they need to enlarge their storage facilities.

BTW: I am pessimistic about medium & long term convential oil supplies, but much less so about natural gas.  The use of NG for liquid transportation fuel will, however, soak up much of the worldwide NG production within a decade, IMO.

Occasionally it could be more cost effective to build a larger diameter gas pipeline with a higher allowed operating pressure to gain some storage capacity (line pack) within the pipeline itself, but generally this storage capacity results only from the difference between the line pack of the pipeline at the  flowrate needed to satisfy the current average demand vs. the line pack you could get if the pipeline was at maximum allowed pipeline pressure.  Of course this type of storage volume is usually only able to supply enough to get you through a 1 week cold snap or so.  A lot of gas storage is also done very economically by using previously depleted gas fields in the US NE areas, where the gas is transported in and injected into the depleted wells during summer and taken out during the winter.
HO: Your numbers are all wells, right? They don't per-se tell us anything about wildcats.
Ah, well - if you get 31 dry holes in 3 years and you say you are only drilling 30 wildcats in 10 years I get a little puzzled.  It depends on the definition, I guess.  Though I note that, over on the peak oil debate on this, rockdoc says that they only put 2 - 2.5% of their wells into wildcats.  But yes this gives the numbers for all wells.
Saudi are speaking to several audiences and probably seeking to confuse them all, probably succeeding, too. The odds on there being as much as a new Ghawar as yet undeclared are pretty low (though, if it happened we should probably rejoice and get on with reshaping ready for peak oil a couple of years delayed).

Think about their audiences and what effect such comments are intended to work on them. Think about their objectives: survival until their emperor's clothes are revealed, secure futures thereafter, protection meanwhile. Until Saudi reserves are given proper public scrutiny I would treat all their utterences as intentional obfuscation. That may help explain your puzzlement, HO.

I have seen no detailed attempt to refute Matt Simmon's analysis, just vague and inconsequential mutterings, so I would say that Matt is most likely correct until convincingly shown otherwise.

You must have missed the refutation by the petroleum engineer, Jim Jarrell:
Another  Day in the Desert: A Response to the Book, Twilight in the Desert

Simmons himself admitted recently in Barron's that Jarrell's analysis is excellent, but said that Jarrell made one critical mistake: Simmons says he never claimed that Saudi Arabian production is facing imminent collapse.

Has anyone actually seen his report?  I tried emailing him and calling him, but no reply.  After the whole CERA thing, I'm pretty dubious about analysts and consultants who make a big fuss in the press but won't submit their methodology to any realistic public scrutiny or answer questions about any potential conflicts of interest they might have.  My main reaction to the public coverage was that it sounds like he's assuming that everything the Saudis say is true.   Of course, if you assume that going in, then you're not going to find any problem...  But it would be interesting to be proven wrong.
Tim Wood from Resource Investor told me that the report is only available to paying customers. Lynch and Simmons have both seen it. Simmons' comments on the report are also behind a paid subscription wall at Barron's, although I saw the quote before it was removed at peakoil.com.
I'd seen brief mentions of Jarrell's refutation but no proper detail. The article you cite, JD, is the most detailed I found online and that is little more than hearsay IMO.

Via Jarrell's company site ( http://www.rseg.com/ ) I found a link to this pdf of a newspaper article:
but the most informative info in that was:

He [Jarrell] reviewed several of the key papers that Mr Simmons relied on heavily to come to his conclusionsbut Mr Jarrell arrived at a very different finding.

"I got a comfortable feeling that [Saudi Arabia has] an unprecedented record of reservoir operationsand management ... reserves are not overstated, that production is unlikely to collapse ... "

So that's alright then, we can all go back to sleep for a couple more decades.

The best detailed Saudi info I could find to refute Matt Simmons was this presentation from February 2004:
Specifically this talk:
and its slides pdf:

I must admit I am still somewhat confused by what exactly they mean by 'contingent reserves' and I am very wary of Saudi fields actually producing 75% of OIIP. I do note that they are very leery of producing more than 12mbpd (from 2016) and, as we all know, that won't be enough even before 2016 unless massive demand destruction takes place.

A few other sites about Saudi you might find useful:
http://www.saudiaramco.com/bvsm/JSP/home.jsp  (Saudi Aramco, though I found nothing useful there)
http://www.sgs.org.sa/index.cfm?sec=1&page=home.cfm  (Saudi Geological Survey, much more interesting)
http://home.entouch.net/dmd/Oilcrisis.htm  (Glenn Morton's oil crisis site)

I'll stand by my comment above until I see proper, independent, data and analysis to the contrary.

Since I'm in Italy, I delurk if you promise to forgive my english.
This whole thing, as seen from here, smells strange. Today we had these big news about Russia cutting gas, then no, Gazprom said they didn't, then yes, ENI said they did since there was a cut of 5,4%.
But the strange thing was an article appeared on AdnKronos on 17 January (here http://www.adnkronos.com/3Level.php?cat=Economia&loid=1.0.276303911  ): they said our govt had an emergency meeting about gas, and they took emergency measures like cutting energy to "interrumpible" (dunno eng) customers and planning to cut electricity where possible. The govt said the measures were due because the demand was too high and we were thrown into emergence.
All this the day BEFORE the Russia cut.
This thing smells strange, but I don't know how to explain what's happened. Maybe blaming Russia for an internal problem? Maybe they knew of the gas cut before it was announced? or what?
Obviously western governments think Russians are suckers who will do anything to stay in their good graces.  Some more of these games and Russian gas will be heading elsewhere.  Then the EU will have its gas "independence" from Russia.  LOL
Let someone explain me something:
When I look here  I see that before the gas gets to Italy the main gas pipeline goes from Russia through Ukraine, Slovakia, Chech Republic and Austria. From Austria there is a branch going south to supply Italy, and then the main pipeline goes West to Germany and France.

Question is: how can you possibly cut supplies for Italy only? Centrally from Russia? Do these guys have remote control or people on the gas distributing station in Austria? I don't exclude entirely the latter but in this case during the Ukranian-Russian dispute the same guys were obviously drunk since they allowed Ukraine to divert gas from the supplies for Europe (which was a well measured fact).

No, the Ukrainians only took their standard 15%. The Russians told the Ukrainians that they were going to only allow the Ukrainians to take 5% as a cut for transporting the gas, and the Ukrainians said it was 15%, period.
The Ukrainians could have taken more, but they held to their contract because they knew that a long term reputation for honesty was more important that a short term profit.
It was probably agreed by ENI that it was preferable to decrease gas to the warmer average temperatured Italy, than decrease deliveries to the colder noththern areas of Germany and France.

All branches (big and small) have block valves at the take off points and anywhere from 2 to 30 miles apart after that.  Many major valves today can be remotely controlled from one central and/or several minor satellite control and monitoring command centers located along the pipeline.

Most all major pipeline operations are set up several days in advance based on pretty sophisticated predictor programs, using combinations of traditional, neural network, genetic algorithm optimization methods combined with operator experience based on weather forecasts, current pipeline maintenance state and equipment operability status and the pattern of demands in various service areas that they have experienced in the past during similar weather conditions.  Most of the time they get it right.  Electric generation utilities have similar systems and make their gas suppliers aware of their predicted delivery needs, which are updated if any changes are expected.

Predicted shortages are usually delt with by curtailment according to priority of need based on criticality of service.  Private residences and hospitals, etc. have #1 priority and rarely get any rationing, with most industrial users being second tier where they can expect rationing if needed, as they can close and send everyone home if things get too bad.  

Thank you, very interesting information.
My impression is that this system of just-in-time delivery is too vulnerable in all ways. Maybe the future will require more NG storage facilities as such disruptions start to happen more and more often. And maybe it is also time to get rid of those NG fired power plants - NG will become too precious to be wasted with less than 40% efiiciency (as opposed to close to 100% for heating).
You can get close to 100% in countries with cold winters by first adding a steam boiler to the turbine exhaust to boil steam for electricity generation and then adding a hot water "boiler" for district heating. You can perhaps even chill the gases further with a heat pump to realy maximise the district heating output. And you can of course condence the steam after the turbine with the district heating return water.

If you then use the electricity to run heat pumps you can get a total gas to heating efficiency of about 150%. (It is of course less then 100% if you include the free low grade heat used by the heat pumps. )

I do not know of any combined heat and power gas fired plant that uses a heat pump. I know about the idea since the latest garbage incinerator in my home town has a heat pump for condensing the water out of the smoke to get an extra 7 MW for district heating.  It produces a maximum of 19 MW electricity and 83 MW of district heating. Garbage incineration is of course a special case since the fuel is wet.

Don't encourage me, but if you're really interested...

What's worse about the storage situation is that they usually come as a complete afterthought, well after the pipelines are already maxed out.  Pipelines are initially designed to basically run in a tight band of flowrates around a prime optimal flowrate, which was chosen based on a balance between somebody's enveloping their best demand projections (Wild assed guess) for some time(s) in the future versus the economic conditions at the time of construction for building a pipeline with various capacities inside the target demand envelop.  

Then the line is designed for some median demand, however various design choices for commercially available pipe wall thicknesses and the incremental sizes available from compressor manufacturers, minimum compressor size, power cost, min size available, etc. often give the line a higher absolute maximum flow capacity.  The difference between the maximum and minimum capactiy of the pipeline during winter (for ex.)  can temporarily duplicate the function of a storage system in that, if they're at normal winter flow and load becomes high, the operators can simply rev up to maximum flow, but as the service area matures and normal flows approach maximums, the storage function is lost.  This tends to happen just as it also becomes more difficult to increase capactiy by modifications to the system.  Widening the right-of-way to add another line or adding another compressor to an existing station, which might have formed part of the pipeline's incremental development plan, are now not possible because of new development having been added alongside the right-of-way, imposition of noise constraints, visual "pollution", NIMBY issues, etc. So.. somebody starts taking a look at the difference between winter and summer conditions and figures out that, if they flow at maximum all year and they could figure out how to store it during the summer, they could sell a lot more gas in the winter.  Its not until then that they start hoping to find some storage possibilities.  Well, when there arn't any options available, it usually results in expensive solutions and some inappropriate decisions are made at times, ranging from construction of LNG plants for storage use only and even reopening depleted gas fields near residential subdivisions and injecting gas back into the old wells.  In more than one case, gas leaking back up to the surface has entered houses and exploded resulting in deaths and considerable damages.  Mount Bellville, east of Houston and another to the northwest; to recall a couple of the incidents I am familiar with.  Not the ideal scenario.  Oil companies are slightly more atuned to the storage situation, as their product is less compressible and thus harder to manage the frequent transportation disruptions they experience without tankage, but they still tend to do the same thing.  Gas companies usually depend on the source wells as their storage, simply turning on and off the wellhead valves to suit them, although.  One clear rule is, "you usually need storage the most a long before it's built."  Saudi Arabia is well ahead of the rest of us in building dequate storage capactiy for refined diesel, gasoline and jet fuels; initially planned only for strategic military use, but for which now they are beginning to allocate a certain percentage of that capacity towards balancing their yoy variations in domestic supply and demand.

Do not worry about your English.  Your English is very easy to understand.


Just another day in Iraq: Jan. 17 Reuters:

http://today.reuters.com/tv/videoStory.aspx?isSummitStory=false&storyId=cd6d6a9ef17afdcb9944635e ae35dcb571c87437

Near Samarra, saboteurs blew up an oil pipeline early on Tuesday, the latest in a series of attacks on oil pipelines in Iraq.

Witnesses said that a bomb went off under a pipeline in an area called al-Mafraq about 15 km south of Samarra.

The U.S.-backed government has been struggling to supply fuel and electricity to the population in face of sabotage against energy facilities, mostly in Sunni regions in the centre and north of the country.

According to the BBC it is down to -57°C (-71°F) in Tomsk
and in parts of Siberia the oil is freezing causing a loss in production of 200,000 bpd.
I'd think they'd put oil heaters on the well connections in Siberia?  We had gas heaters on our lines in south Texas, as without them we'd get a pretty good hydrate build up that was more than enough to plug up the gathering pipelines running to the liquid extraction plants if the temps only got down into the upper 30's (F).  Bet they'll be looking around for some of those soon.