Cigar Now?

We discussed a little while ago that the IEA had corrected December 2005 production to be slightly below May 2005 production. Now, Lou Grinzo alerts us that the EIA has come out with their initial December 2005 numbers, and they show December higher than May. So which is it? Here's the updated plateau graph with the IEA and EIA numbers. You can see that while of late the EIA has been running a bit below the IEA, in December they estimated a little higher.

Average daily oil production, by month, from various estimates. Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: IEA, and EIA. The IEA raw line is what they initially state each month. The IEA corrected line is calculated from the month-on-month production change quoted the following month.

Clearly, the two months are a statistical tie - any reasonable estimate of uncertainty in the numbers would have to be larger than the difference between them. One way to nominally separate them is to average the EIA and IEA numbers together. This next graph shows that series, together with a nine month centered moving average of it.

Average daily oil production, by month, EIA and IEA (corrected) estimate averaged. Also a nine month centered moving average of the monthly series. Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: IEA, and EIA.

This combined series shows December 2005 to be the new champion. The difference is about 20,000 barrels a day (ie a handful of good wells' worth of production). I don't think this changes anything much about the overall bumpy plateau pattern (particularly not given that the IEA's initial estimate for January is down).

My view is that the leading threat to the "peak oil is about now" hypothesis would be if either Saudi Arabia or Russia can significantly increase production in the next year or two. Checking the EIA country estimates, we see that Saudi Arabia continued flat, but part of the reason for the strength of December global production, besides US hurricane recovery, was that the Russians had a very good month. (I speculate that this may also be why January looks like it might be off a little - Russia had production problems with cold weather). The two countries are now tied for being the world's leading producer.

Average daily oil production, by month, for Saudi Arabia and Russia. Believed to be all liquids. Graph is not zero-scaled. Source: EIA.

Update [2006-3-3 22:40:43 by Stuart Staniford]:

For comparison with that last graph, here's the same thing except sourced from the Joint Oil Data Initiative.

Average daily oil production, by month, for Saudi Arabia and Russia. Believed to be all liquids. Graph is not zero-scaled. Source: Joint Oil Data Initiative.

In this version of events, Russian production has been increasing more steadily, Saudi production is more realistic looking but dropped in December, and Russia has been the world's largest producer for several months.

Deffeyes did say Dec. 16...

Over at, Russian Cowboy said the Feb. numbers for Russia showed a 0.2% increase over January.  9.52 mln bpd.  He also said the production cost per barrel is increasing 20% a year.  He seems to think Russian production could start going downhill very soon.

If so why does Russia plan to spend tens of billions of dollars on construction of new gigantic trans-Siberian pipeline?
East Siberia and Far East (the size of Canada) are practically not developed. Judge by leery eyes of Russian president when he speaks about oil reserves in public I think there are large eastern oilfields or at least he believes in that.

Andrei, 3500 km east of Moscow.

I don't know.  He posts here sometimes; maybe he'll answer your question.  

Or you can go over there.  The thread in question is Russian production discussion.

I think that would be China beckoning. If they pay the price, the pipeline will get built.
Why would anyone spend huge money on pipes if there won't be enough stuff to pump trough?
There may still be some gain to be had from Western technology, since, as is noted here Halliburton and Schlumberger are using horizontal drilling, hydrofracing and other EOR techniques to improve old field production and this potential is also addressed in references to Dave's excellent review of the current Russian situation, by field.  
Russia is railing large amounts of oil into China now (and China rails them further into their refineries).

Pipelines are MUCH cheaper (and more energy efficient) ways to move oil in quantity.  In the US very little oil is railed, almost all is either pipelined or shipped via water (also more efficient than rail).

Since Russia will be producing large (if some what smaller) quantities of oil for many years to come, the capital investment in a pipeline may well make sense.

Chinese rail lines are well (and sometimes over) used today.  Taking oil off of them would free up space for goods that are trucked today, reducing Chinese oil consumption.  The Chinese seem to be quite serious about not growing their oil consumption too much.

IMHO, China wants the pipeline more than Russia does.

In 2004 Russian oil exports to china was about 6.5m tonnes, or 140,000 boepd. This is doable by rail.

IMO China would want to source more from Russia. And if Russia could up its production in the East, why not sell it to China. On the other hand it might be easier to ship it by sea form Eastern Russia...

Note that the Russian Minister of Industry and Energy is concerned about a "a real collapse in oil production" if they don't immediately start encouraging frontier exploration.

The argument in favor of Russia boosting production seems to be "they still have a lot of unexplored areas."  Russian Cowboy doesn't seem to be as optimistic:

Also, the promised polar oil may never be found in reality. The only major oilfield that Russia has in the Arctic Ocean is Prirazlomnoye with about 1.5 Gba of oil. Russian oil companies have been looking for coastal shelf oil, but failed to come up with any major finds in the last 10 years except for the 500 Mba field in the Caspian sea found a month ago by Lukoil. Also, the average cost of producing oil in Russia is climbing fast. It was only $6.7/ba in 2001, $10/ba in 2003, and $15/ba in 2005. In the near future, Kremlin may be kissing goodbye to the fabulous oil royalties it is enjoying now.
I'm wondering if the bumpy plateau might have bumps with a longer period occilation than the current bumps your 9 month average smooths.  I'm not sure what that periodicity would be...


Stuart, this is off subject somewhat, but recently I read that the Chinese graduate 10 engineering students for every one that we do here in the US. I would assume that India's numbers are similar.  With our country's supply side approach to energy, our resistance to improve fuel economy, our resistance to conserve, our unmitigating belief in the non-negotiability of the "American way of Life", aren't we in a sense tacitly forcing the Chinese, etc., to outperform us technologically; afterall, they can't step back now?  Consider that Japan importants 98% of it's oil.  That austerity motivated the country to R&D and produce hybrid vehicles.  Japan took PNGV to heart.  Can we afford to finish second in automotive and energy technologies? Is cheap oil like cheap perfume?  
I am sceptical of these claims as it is hard to count and compare engineers like eggs or oranges. A chemical engineer with a master's degree from a top university is not the same as a structural enegineer from a Chinese two year associate-type program, especially when the issue is technology development. This link explains this well:

Further, I am not sure that the number of enegineers, even if comparable, has much to do with the creation of technology. India and Russia have probably always had more engineers that the US has had. But the US has led technology development because the country has a system that fosters and rewards it. This remains true.

There is a backdrop at TOD where engineers ridicule economists and economists keep quiet and roll their eyes. I am neither, but I do think the engineer worship here is misplaced.

I have news.

Only reason U.S. stays on top is because of VSA (Very Smart Asians).

Thirty-five years ago I noticed this, and my background is in economics, astronomy and some other disciplines.

Yes, the U.S. is #1.

And why?

Because we recruit Very Smart Asians.

That is it, in a nutshell.

BTW, have you looked at the percentage of our engineers who were born in the U.S.?????

Certainly this is true in Silicon Valley. Not just Asians - Europeans, Middle Easterners, Russians, ... But certainly lots of folks from both China and the subcontinent. And generally they are the brightest of their respective countries.

Wild speculation: the US high-tech industry recruits like this, but the US auto industry doesn't...

There are a substantial number of Asians working in the Tier 1 suppliers, some in the US and some offsite.
I think this line of discussion supports my point. The US has a favorable environment for technology development and hence attracts those that have the right skills. Asian (and even European) engineers come to Silicon valley (for example) because they have access to ideas, financing and a business environment that allows them to enjoy the fruits of their success.
Interestingly, I heard on T.V. the other day that a radio station in India posed the question, "If you had the means to choose to live in America, or stay in India, which would you choose?" I forget the exact percent, but the reason this made the MSM is because the majority of Indians decided they would rather stay. As standards of living rise in other countries, people are less likely to give up their homeland for a chance at sucess in a strange place. Also it does not help when the majority of the world does not have a favorable view of America or its leadership...
In other words, don't expect any German scientists comming to America to build the energy solution that will end the next world war, we already owe them for the last time...
In the interests of historical accuracy, we have Adolph Hitler to thank for the physicists who built the atomic bomb for us: Many of the top physicists were Jewish refugees.

Indeed, one big reason Nazi Germany never put much in the way of resources into developing an atomic bomb is that its development would have had to have been based on "Jewish physics." Thus, any project based on those politically incorrect physics was impossible or practially impossible to fund.

Talk about irony.

BTW, yes, I am aware of some of the fictions published as histories that explain how it was the sweet humanitarian instincts of certain German physicists that suppressed development of the bomb under Hitler. If you choose to believe those accounts, I have a bridge in Brooklyn that is available at a bargain price . . . .

I don't doubt that improving economic conditions in India are helping a larger percentage of its population see better opportunities at home - or that Asian countries in general are competitive at a level far beyond that of the past.

The Indian radio station survey story is interesting, but allegorical and not statistically significant. Your claim "it does not help when the majority of the world does not have a favorable view of America or its leadership." is pure opinion.

The fact remains that the US has hosted the world best incubator for innovation over the last few decades. I don't believe that this has changed, but am willing to listen to actual evidence to the contrary.

Whether or not the fact that the majority of the world has an unfavourable view of America hinders America's technical progress may be a matter of opinion but the fact of this unfavourable view exists has been borne out by many polls such as the Pew global attitudes project. India does still have a positive view of America and although there has been some recovery since the depths of international unpopularity in 2003 the overall view is still strongly negative and extremely negative in Islamic countries.
In the UK the percentage with a favourable attitude has dropped from 83% in 2000 to 55% now behind China viewed favourably by 65%.
Here's your evidence.  Me.  American engineer, living in Europe and working when and where I want for ample amounts of Euros or GB Pounds.  No US Dollars please.  Let all the Patels at Brown and Root have all of those they want.  I know PLEANTY of engineers that will not work in the USA.  I know PLEANTY of people that will not live in the USA.  It ain't what it used to be.  Most of "us" think its pretty much degenerated into an antiterrorist paranoid police state anyway.  Who needs passing the suitcases into 3 X-ray machines in the same terminal?  Wake up man.  

Oil companies have been well into brain drain since 1985.  Most of all their best engineers have retired a long time ago.  Last of the good ones were on the way out when I started 30 years ago.  Most now can't even write a specification, never mind get anything designed and built.  I left the USA in 1986.  I know another American chemical engineer that left in 1991.  Worked in Saudi up to 3 years ago.  He went back to the USA.  NOW he just left the States last week for Qatar.  You've lost the best and can't even hold on to them when they do try to go back.  We say, "Let the tax accounts rip up your railroads."

Don, I think its more like the story that came out a week ago or so.  Remember the one about tearing up the railroad tracks?  When the US starts tearing up railroad tracks because some tax guy says they'll save money, what hope do you really think there is for engineers to work in the USA?  The large corps basically decided to pay those guys a lot of money for that advice instead of making better more economical trains.  The last engineer I hired in the US couldn't speak english.  Now everybody's wondering why their pipelines and platforms are busted from Tampa to Brownsville.  Coincidence?  Do you like all the "engineering" that goes into the cheap crap you're buying from China?  I have to make 1 to 5 modifications in everything I buy from China to get it to a useable condition or to keep it working for more than 2 weeks.  Basically, because the USA would rather pay accountants and tax guys to tell them they can't afford to build anything anymore.  And what's the point if USA project managers to ignore O-ring and insulation tile and leeve failure warnings.  Rule of Economics 101.  When you lower the price you pay for engineers, you get what you get.  If they're American or foreign makes little difference.
Agreed. I have found it is not only a matter of pay but of respect. Engineers--among whom are quite a few people whom I admire and like and sail with--get little or no respect. Who gets the girls? Lawyers. Tax accountants. Brokers. Casino owners.

Who keeps the boats sailing and the fuel moving? Engineers, obviously. Perhaps it is time for a mutiny: The ONLY way the Titanic could have been saved is if the Chief Engineer had led a mutiny against the deranged captain, who was ruining magnificent brand-new steam engines by running them flat out for a speed record instead of breaking them in properly.

I rarely advocate mutiny. Most mutinies fail. And engineers do not know how to organize, but when the leadership is deranged and the life boats are too few, you are out of good choices.

(O.K., personally, I'm building a raft and encouraging my friends to do likewise.)

Ever see 'The Sand Pebbles' with Steve McQueen? Now there was an engineer.
I love that movie!
I've seen "The Sand Pebbles" about twelve times, and high on my list of toys to get is a BAR like the one Steve McQueen used.

BTW, I've never known either a mad scientist or a mad engineer; both types are generally sane. However, Ted Kacicinski (the Unabomber) was one of my math TAs at UC, Berkeley. He sucked as a teacher--but then so did all of my math teachers until I finally got lucky with one guy vistiting from Annapolis and another one from some Swiss university. Mathematicians for various reasons are way more likely to flip out than engineers or scientists.

One thing I truly enjoy about being around engineers is that they can show me how to fix things. Mending is better than ending.

You'd like me.  My ONLY problem is I fix things that ain't broke.  Actually, I'm doing destructive prototyping to find out how the bugger works.

The most absolute nuttiest professor I had was for (seems appropriate to mention it here, and this is really true)...  exploration geophysics.  I actually took one course in this.  He beat my relativistic modern physics prof by 7 lengths.  This guy was 73 years old (must be 103 now) with the wild white hair, square beard and everything and would ware the same  searsucker blue and white pin-striped suit every day.  He slept in his office for a good six months straight.  When he would come in to class, he'd start writing equations on the blackboard, the bell would ring and we'd leave, but he'd keep going for 3 days running.  On the 3rd day, he'd find a mistake and start rewritting all over again.  The math guys were pretty much normal, except one made me memorize all the derivative and integral formulas, of which now I only remember about 6.  Unfortunately, everything I learned about geophysics was in my soil mechanics and foundation classes (taught by civil engineering dept.).  I still dream about setting up an oscilliscope and an array of microphones to the PC and hitting an iron plate with a sledge hammer.  Supposedly it'll work if you can hit the plate hard enough to "raise the ball" to -88.  I've got the PC oscilliscope program, but can't get serious about the mic array.  Needs a sound board with too many channels.  Guess I'm not the 100% stereotypical engineer, the BAR was pretty good, but my toy of choice would have been Candice Bergen;.. OK!.. I'd take the gunboat.  

Damn, I'm speaking Spanish so long now, I think I can spell english words just like they sounds.  Spanish is so easy.
Thanks Don.  In all honesty, all us engineers appreciate that... really.  But don't confuse us with the Mad Professor(s).  Far from that.  Organization is also a great big part of engineering.  Its not just doing strange looking calculations at a desk all day. (but even calculations need to be organized) Its not the lawyers and accounts that get these petroleum projects organized and built out there in 0-8000 ft of water.  Its the Project Engineers that organize the exploration (except for the geophysicisit stuff), drilling and construction equipment selection, drilling program, FPSOs, platform construction, well testing, production equipment design and installation, the roads and drill pads onshore, control & instrumentation, communications, well control and production equipment, production engineers do the production planning and well treating (not geologists), pipeline design, pipeline installation, production and pipeline operations and refining design & construction.

I've just finished orgainzing a start-up company for production and harvesting of 500,000 Hectares of paper pulp plants, paper company administration org, paper plant conceptual design, international proj mgmt engineering dept, paper plant detailed design, company operations & maintenance org for the next 6 years for a company to be located somewhere in South America.

Having both visited Chinese Universities and talked with engineers in the field, I think you are falling into the habit of thinking that because things were a certain way, that they remain so.  I am aware of field experiments in wells in China that are ahead of the same development of the technology here, even though the technology was initially invented in the US.  It very much depends on which technology you are discussing, and with students around the world I suspect that the Chinese are already cherry-picking the technologies to invest in and are moving forward with them.

I have lived in Asia for most of my adult life, so I am familiar with the issues at hand.  I disagree with the idea that China's centralized system can "cherry pick" technology winners better then the private sector. This article in Foreign Policy sheds some light on the governmnet involvement in decision-making:

"But China's tentacles are even more securely wrapped around the economy than these figures suggest. First, Beijing continues to own the bulk of capital. In 2003, the state controlled $1.2 trillion worth of capital stock, or 56 percent of the country's fixed industrial assets. Second, the state remains, as befits a quintessentially Leninist regime, securely in control of the "commanding heights" of the economy: It is either a monopolist or a dominant player in the most important sectors, including financial services, banking, telecommunications, energy, steel, automobiles, natural resources, and transportation. It protects its monopoly profits in these sectors by blocking private domestic firms and foreign companies from entering the market (although in a few sectors, such as steel, telecom, and automobiles, there is competition among state firms). Third, the government maintains tight control over most investment projects through the power to issue long-term bank credit and grant land-use rights."

Thanks Jack.  Don't get out too much do you?  If it wasn't for us, you'd still be running around with a club in your hands.  WTH, maybe you are.  Get serious.  When was the last time you flew a magic carpet?  Ever drove on a interstate highway, took a train, turned on the electricity, crossed a bridge, or went up to the 12 th floor?  Do you think Don designs all this stuff?
I also walk across clean floors and am grateful for the janitor that mops them. That doesn't mean they should run the world.

I didn't say engineers aren't good or important. I just think there are more important things in the world than engineering. Look at history, we remember great leaders who create things and make changes - not the mechanics who implement them. I think a good political and economic system will produce good engineering. Good engineering can't produce good poltics or economics.

Well, I could just start off with this challange,

"Engineers have made changes in the world that have outlasted (many for centuries) just about any political leader's changes that YOU can name."

I don't mean to be insulting, its just that I really don't understand.  Maybe you just need to broaden your view of history, or is it just that you don't actually have knowledge about this subject.  

For every George Washing you can name, I can name a Ben Franklin, but (you know) I can't name any like Hitler and I will say Henry Ford and the Wrights changed the world more than Hitler and Ceaser put together. IMO.

Include some engineers.  Ever heard of ARCHIMEDES?  Ben Franklin?  Maybe the problem is that engineering (as we know it) just hasn't been around as long as Ceaser, so we haven't got your attention??.  Is this just because we can't tell you who invented the suspension bridge?  I view engineers as anyone who takes science and mathematics and applies the principles towards constructing practicle devices.  So, maybe you never really studied history, or only the history of political figures.. or what form of history have you ever studied?  Or just maybe you're memory's not so good.  I seem to remember for instance, Da Vinci, Galleio, Cassegrain, A. Volta, Anders Celsius, Montgolfier, Guillotin (there's one you've probably heard of), Eli Whitney, James Watt, Michael Faraday, Cyrus Hall McCormick, Bernoulli, Sir Sandford Fleming (time zones), Wright Brothers, Bell, Thomas Edison, Howard Hughes, John Stevens, Sikorski, Henry Ford, Goddard, without even trying very hard.

Oh ya.  Do you think Alan Greenspan is a brilliant economist and will be remembered in 200 years?  (God, I hope not.  If that'll be true, its going to be for something very very very bad.)

As a matter of curiosity, just who is on your list?

Re: "I speculate that this may also be why January looks like it might be off a little - Russia had production problems with cold weather"

Yes they did. From here.

Russia increased oil and gas condensate production 2% year-on-year to 39.89 million tonnes or 9.37 million barrels a day in January, the Fuel and Energy Central Dispatch Department said.

Average daily oil production in Russia in January 2006 fell 2.3% compared with December 2005. Last year daily oil production increased every month (by 0.3%-1% on the previous month) with the exception of January 2005, when production fell 0.5% from December 2004 (2% in January 2004 compared with December 2003).

What the hell is this nonsense?
It is curious that Russia is choosing to
increase its oil extraction at a time when oil
prices are only moderately high, when it could
sit on production and make more money later on
in the game. Presumably the Russians are banking
on natural gas maintaining their income flow in
the medium term (I don't believe there will be
along term unless global warming is halted).

Clearly major disruption to oil flow from Africa,
the high probability of declining extraction in
Mexico, declining extraction from the North Sea
etc. hold the key to the shape of the graph over
the coming year.

I personally won't be placing any bets till the
GOM hurricane season is over.

They need the money now.
They want to increase their "influence" on Europe and China.  IE.  G8 Energy Summit.  North Europe Gas Pipeline.  West to East Pipeline.  Why did they "take back" Yukos?  Tax bills???  Why is Gasprom buying up everyone in sight?      

He that controls the future world's fuel distribution system controls the USA... by the short hairs.

Have a look on page 17

Now, how eager do you think EU governments will want to get on the USA's war path coalitions when Russia has the fuel valve control in their hands?  You're running out of allies now.

I think russian policymakers do believe in possibility of fast technological shift out of oil, especially in auto industry, if price of stuff goes further north. That is why they have decided to extract at maximum rate. Who do want to seat on reserves that nobody needs?

Andrei, 3500 east of Moscow.

They might think that but it seems crazy to me.  There are few substitutions and oil is always going to be needed for petro chemicals.  Seems very short sighted.
I've posted on this before, but you might still find it interesting. Regarding the question of why "Russia is choosing to increase its oil extraction at a time when oil prices are only moderately high, when it could sit on production and make more money later on in the game," economists have worked out a theory and a model for what you should do if you own an exhaustible resource and want to maximize your profits. Surprisingly, the answer is that owners should produce at a rate such that the price will rise moderately into the future, at about the same as the rate of interest. That means an oil price increase of about 5-6% per year.

If a producer thinks the price will increase faster than that, he should do as kevinM says, sit on his resource and wait to produce it when the price is higher. If he thinks the price will rise slower than that (or will fall), then he does better to produce as much as he can today, to take advantage of relatively high prices. Both of these responses, if applied by most producers, will tend to put the price back onto the nominal curve where it rises at the rate of interest.

So all you have to do is to guess what future prices will be, and you know what production schedule to apply to maximize your profits. Of course, that's easier said than done, as nobody knows the future course of prices. The best available method is to use the futures markets as a guide. Generally, oil futures are rising slower than the rate of interest, in fact after a few years the prices are falling. This implies, per the theory above, that oil producers should be producing at a maximal rate today, on the expectation that today's high prices may not be maintained. This is at least roughly consistent with what is happening in the world, but is perhaps not what one would expect from a Peak Oil Now perspective.

Sitting on their assets is a luxury of the rich. You still need other productive assets to allow you that luxury. The Russians and Saudis don't have that luxury yet. They need oil money to diversify their assets and to keep their populations fed. Mostly they feed their people.
I am transfixed by the graph of Saudi Arabia's production. Something looks a little fishy about that data, or a bit opaque perhaps.  Prior to June 2004, the amount swing around month to month in what I assume reflected the variable production that results from a complex system, and all its attendant myriad details causing minor (and sometimes major) fluctuations in the number. But after June 2004 the number stagnates, unchanging from exactly 9.5 mbd, has a six-month uptick, and returns again to the magic 9.5 mbd.  One might argue that they have a finely tuned machine and they're running along at quota. But after reading Simmons, I'm inclined to say that we need an outside auditor to scrutinize what is reported.
Yeah - I agree it looks fishy.

One interpretation is the production level is being set by policy. The other is that only the reporting is set by policy.

However, the degree to which the overall numbers are off is presumably limited by the extent of the missing barrels.

Yes, I have a feeling that the reporting is being set by policy (i.e., it's not "reporting" at all).
To check this out, I went over to to see what they have to say. I added the graph in an update to the post. Pretty different story...
Where does the JODI data come from?  Are they relying on Saudi Arabia's own reporting?
The JODI apparently use a questionaire.

The EIA say of their sources:

Crude Oil Production, Natural Gas Liquids Production, Other Liquids, and Refinery Gain United States: Energy Information Administration (EIA), Petroleum Supply Annual 2004 and Petroleum Supply Monthly, January 2006.

Other Countries: Annual data -- EIA, International Energy Annual, various issues. Monthly data -- Energy Intelligence Group, Inc., Petroleum Intelligence Weekly, various issues. PennWell Corporation, Oil & Gas Journal, various issues. International Energy Agency (IEA), Monthly Oil Data Service, February 10, 2006.

So it looks like both data series are probably made up, but different people do the data invention in each case, hence the discrepancy :-)

I was afraid of that.  ;-)

Well, these individual country data agree to within 10% or so. The IEA and EIA global data agree to within about 1%. Law of large numbers? Or they look over each others shoulders?
Its called MAXED OUT.  Foot on the Floor.  Pedel to the Metal.  Balls to the Wall.  Engine fire.  Water ingress.  Wells cannot be continuously produced at maximum rate.  Wells must be produced at optimum rate.  Oil only moves through a formation according to the permability and pressure diffferential, but a lot of people think, "just open the taps as much as you want" and it all just comes out as fast as it can from some big  vacant space in the ground down there.
Yes, I have wondered about this awfully flat production in SA.  Is it a "coup de force", a lie, or a reality?
Evidence of the "tank farm" system Matthew Simmons talks about?
could be some S.A. leased Tanks

What is a "tank farm"?
It's a type of plant in America that grows clothes - i.e. "tank tops" that teenage girls wear.
A huge system of tanks for storing oil.  Simmons claims the Saudis have something like 70 million barrels' worth of oil storage tanks.  He argues that they use these tank farms to disguise their true capacity.  

The only times there is clear evidence of a Saudi surge was during the Iraq war where it jumped by about 800,000 barrels a day for about 45 days. I bet you they were just emptying the tank farms.

So, maybe they are holding their production steady by drawing from their tanks.  Or by filling the tanks with any surplus, rather than selling it.  

It could be that are running at capacity - the pipelines and systems are supplying flat-out.  
As I have said before, the margin of error is at least 1% and so this discussion is rather like how many angels fit on the head of a pin.

All we can say is that 2005 may have contained the peak month - we don't know yet and we may never really know.

I find the Oil Drum a very good source indeed of technical analysis but when considering the world total the real figures of all liquids must be ± half a million barrels a day.

Since Russia is probably expanding and SA probably has spare capacity, we could still have some 85+mbd months in 2006 or 2007. On the other hand the end of the cold weather in Siberia could coincide with the first 2006 hurricane! Of course, if a war is started with Iran, the actual peak month will be of only mild interest.

Only when we are clearly past the peak, can we call it. This discussion is premature.

I agree to a point, although I think it is too facinating to avoid. However what I think can be seen, which is important, is that there is vanishing evidence of any ability for production to track ever higher to meet the predicted 100 / 120mbbl/day demand which is driving the medium and long term economic forecasts around the world. If the discussion here starts to ring any alarm bells leading to a revisit of those predictions and the consequences then it is worthwhile.
...there is vanishing evidence ... (will) meet the predicted 100 / 120mbbl/day demand ... If the discussion ... ring(s) any alarm bells ... then it is worthwhile.

Thanks for putting it this way, J.


It's true that events spaced apart by mere weeks and months may not be perfectly predictive of next year's trends, and the next.  But to the extent that current realities diverge from official, published forecasts, I lose faith in the official prognosticators.  If they are wrong in such a crucial domain, how much credibility should I assign to other official versions of the truth in this and other domains?

An even more puzzling and potentially troubling question is, "Why is there such a divergence"?  Do (or, Are) "they":

  • not believe the data

  • not believe the interpretation of the data

  • playing the endgame to the hilt

  • asleep at the switch

  • all of the above

  • none of the above

  • pick 'n choose from the above

Or maybe, PO is in fact a myth, there are 7 trillion barrels left, and I can go back to partying!!! Wooo hoooo!!!! (Oh yeah, there is that GW thing. pooey)

My nature and background predispose me to trust in authority, but the engineer in me is swayed by the data. And yes, I recognize that we are measuring inherently long-term functions and analyzing them in a exceedingly short time frames relative to their wavelength.

So although the 2006 production may indeed eclipse that of 2005, my impression from the data is that we are starting to bump our heads on the ceiling.  Why isn't offialdom at least explaining away the discrepancies between this data and their versions of the future?  Convincingly explain to me that PO is not unfolding as we speak.

My point is that the data is very fuzzy and so we can only make fuzzy predictions and statements

I agree that there seems to be zero evidence that 120mbd is achievable, or even 100 mbd. It appears to me that these predictions are increasingly regarded as null and void.

However, my objections are to treating the IEA production figures as though they are accurate to a few thousand tons a day when, at least for most oil producers, they are not.

It reminds me of the newspapers that translate a remark that some one is about 6 feet tall by putting in brackets (1.82880meters).  Or as tee shirt I saw once saw a computer programmer wearing, which read "Garbage in, Gospel out!"

Who is doing this? My words were "Clearly, the two months are a statistical tie - any reasonable estimate of uncertainty in the numbers would have to be larger than the difference between them. "
If I'm not mistaken, you can lose 0.02 to 0.25 of 1% just hauling it around in VLCCs.

You might consider plotting Texas Oil production, from 1962 to 1972 and Saudi oil production from 1995 to 2005 with different vertical scales.  Texas peaked in 1972 at about 54% of Qt, based on the Hubbert Linearization (HL) analysis that I did.  Saudi Arabia was at about 55% of Qt in 2005, so lining 1972 up with 2005 makes sense based HL.  

There have only been two significant swing producers, Texas, from 1935 to about 1970, and Saudi Arabia from about 1970 to 2005.  The new "swing producer" appears to be oil and refined products from emergency reserves, which of course presents some long term problems with replenishment.

Texas oil production in 1972 was anchored by one large oil field, the East Texas Field, the largest oil field in the Lower 48.  Of course, Saudi Arabia is anchored by the Ghawar Field.  The Texas peak matched the final peak of production from the East Texas Field.  

Following is a link to the Texas RRC website:

Unfortunately, the link to historical production seems to be down, but I'm sure the data are readily available elsewhere.

I wonder if we might start classifying regions and the world in terms of "half-lives."  In physics, this term applies to how long it takes for a radioactive element to decay to the point where the original element has been reduced (to its daughter products) by 50%.  

I use the term to predict how long it will take for a region's production to fall by 50%.   For Texas, production fell by half in 20 years.  Note that SA and Texas have very similar P/Q intercepts on their respective HL plots.

Based on Khebab's HL plots, my guess is that predicted half-life for SA is about 20 years.  For Russia, at least from existing fields, it may be only six or seven years.

As an interesting aside, the EIA in their latest projection continues to project (if I'm reading it correctly)US oil production to increase over 2006 and into 2007.  Can't tell where this is going to materialize.  
westexas, you wrote...

> The new "swing producer" appears to be oil and
> refined products from emergency reserves, which
> of course presents some long term problems
> with replenishment.

That's an interesting perspective, and very scary if true. Would you care to provide a bit more evidential depth?

Cigar. Maybe.

All that's missing is the perennial zero-based plot:

Zero based plot

right, looking at the big picture it's clear there were bumpy plateaus or peaks in the past, but then production shot up again. even the small picture (back to 2002) shows wild gryations where production changes by 3 - 5 mbd in the span of a few weeks. so all these attempts to call the peak seem kind of pointless. just settle back and do your laundry, take care of your kids, grade your papers or whatever. check back in a year or two or three (or five) when the peak will be crystal clear in our rear view mirrors.

Exactly the problem.  We won't all collectively know about and begin mitigating for PO until it's already a done deal.  The Hirsch report was my coffee-spitting moment, and the thought of waiting until PO is in the rear-view mirror...brrr....

Could you please provide a link to the raw data used to create this graph? Thanks!
The graph just comes from Stuart's previous article.

Finally, to keep Halfin off my back, I note that all these graphs concern only the very recent history of oil production: the period in the little yellow box in this graph of production since the beginning of the oil era.

(graph: average annual oil production estimate)


Average annual oil production from various estimates.  Click to enlarge.  Believed to be all liquids, except for API line which is crude only.  EIA line includes refinery gains, others do not.  Sources: American Petroleum Institute, ASPO, BP, and EIA.

I could have done a better job of framing it with attribution.

I still think the shrinkage of seasonal variations is evidence we are at or very near peak extraction. If it weren't for extreme weather disrupting out put the changes from quarter to quarter would be to small to be significantly measured.
Tom, I think you've got a very good line of thought there.  That should be the first thing to dissapear.
The Dept. of Energy says CO2 injection could quadruple our oil reserves.  
The immediate question that occurred to me was ask how it has worked in Texas.  One item I saw in an article indicated that more than half of the CO2 floods in the world have taken place in Texas.  

I know CO2 floods have been profitable, but the harsh reality is that total oil production in Texas has nevertheless fallen for 33 straight years.  We have not shown a single year over year increase in production since we peaked in 1972.   It appears that CO2 floods are just slowing the rate of decline.

In response to the "high tech will save us" crowd, I always ask:  name me one high tech oil patch innovation that has not been tried in Texas.  

My company has screened all the world's fields for their CO2 flood potential. The list of good candidates is small.  Their first has to be a cheap, reliable source of high pressure, high volume CO2. Then the reservoir and reservoir fluids have to exist in the right pressure and temperature conditions and have the right composition. The reservoir needs to be susceptible to pattern flooding (i.e. a good waterflood candidate usually makes a good CO2 flood candidate).  Lastly the fiscal conditions have to be such that companies would be willing to invest very large sums of money with the prospect of making a profit many years in the future.
Is CO2 increasing recovery compared to water injection? And if so by how much (approximately)?
Thanks for the info! despite being highly publicised, CO2 flooding is far from being able to make a difference in the real world!
Well, if you're an oil company, and you have a partly-waterflooded field with moderate to high reservoir pressure, and scope to modify your production system, and a certain rather broad set set of geological conditions, and (as Bubba pointed out) a good source of CO2, then it can make a HUGE, and hugely profitable difference, and has done in many fields. But these conditions are quite rare.

To answer LevinK's question (how much extra oil from CO2 injection), "it depends", as does everything in the subsurface, but in hand-waving terms a competent waterflood might eventually recover 35-45% of the stock-tank oil in initially in place (STOIIP), and adding a CO2-based flood might increase that to 50% or even 55% in extremely favorable conditions. Normally you would combine the waterflood and CO2 flood into one phased scheme rather than running them sequentially. And the oil that you got from CO2 injection might cost 50% more per barrel to produce than the oil that you got from the waterflood. All these numbers are VERY approximate.

The problem with using CO2 injection to counteract the greenhouse effect is nothing to do with gas leaking out again - that simply isn't an issue. The real problem is that the CO2 in flue gas is hot, dilute and impure - all the things you don't want in a chemical feedstock. Once you get it underground it might work just fine, but the cost of stripping it out of the flue gas stream will usually kill you, commercially.

Hot, dilute, impure, AND in the wrong place, I should have added. Most anthropogenic CO2 comes out of power stations in coal basins, or the tailpipes of cars, or jet engines, or marine engines, or domestic heating systems. Imagine collecting that lot for purification, transport to the oilfields, compression, and re-injection. THAT is why CO2 sequestration isn't going to make any difference to global warming.
ASPO-USA takes on Exxon.
Hmmm - they ought to credit the source of those graphs :-)
They should.  I was wondering if you had both gotten them from Exxon's site or something.
I made those graphs - in the first case from Exxon's annual report, and in the second case from data published in Petroleum Review (cited at the time).
Stuart - Sorry for the lack of reference in the first version.  Can you provide the url for the original stories and your references and so we can more accurately update the post?
My stories were: and my sources are referenced therein. Thanks for fixing this (though note that I wasn't offended - only mildly amused).
Absolutely right they should.  They should also take out a back page ad in the New York Times (with the propertly attributed and cited graphs) to counter ExxonMobil dishonesty. That would turn a few heads.
I can't believe they didn't mention your name! Obviously they missed that sign:

The production profiles for the majors allegedly plagiarized from Stuart by ASPO are interesting. The obvious downtrend is for Chevron, and they are perhaps the most vocal about the likelihood that we're at or near PO. Coincidence? (Assumes Jerry Seinfeld face...) I don't think so!
A modest proposal for identifying the occurance of PO:  
  1. The government actually has good information on things about which we can only speculate (e.g. what SA is doing with their tank farms and production reports).
  2. GWB always lies.   No matter what he says, you can count on the fact that the opposite is true.
  3. We simply have to wait for Bush to opine on PO, and we will know the answer.   If he comes out in support of XOM, it's time to load up the truck with oil futures.
But perhaps this has already happened: when Sec'y Bodman last fall appointed the NPC, an industry organization headed by XOM's CEO, to investigate Peak Oil.

I always look forward to reading your accounts of the monthly data.

I used to work in equity research for ten year and I always had the same problem that you do, sales in one period is affected by the prior period. Using a twelve months average was the way to solve this. It also takes away seasonal effects of course.

You should be commenting monthly figures but use the 12 m average as the main figure.

In a market like the global crude market (with a large share of the market participants trying to maximize cash flows and they are able to do it at high prices), when 12m figures decline we can be very certain that we have reached a peak! If they somehow found a new Ghawar close to petroleum infrastructure with spare capacity and we'd have a year withouth hurricanes, peace in Iraq and Nigeria then, the first peak might turn out to slightly premature (bumpy plateau), not likely though, right?

So focus on the 12m figure. It is key!

Thanks for your terrific work, Stuart!