Is a Wall of Oil Heading for the Market?

[editor's note, by Super G] This is a guest post by Cry Wolf.

Those few of you who may have read some of my earlier posts will know that I like technical analysis, but prefer to look at the technical position in conjunction with what is going on in the real world. In particular, Stuart's excellent plateau posts provide a short-term view of world oil production struggling to rise above 85 million bpd.

What has concerned me was the knowledge that a number of large new oil fields are due on stream during 2006 (and beyond) and I was left wondering how many of those were already on production, and would be included in EIA, IEA data and therefore included in Stuart's charts? And how many have yet to come on stream later this year? Was it possible that a wall of new oil was heading for the market that would see production rising towards 86 or 87 million bpd?

Chris Skrebowski's megaprojects database (pdf warning) formed the basis of this research. I have basically trawled company web sites and the internet for status reports on the 29 new 50,000 bpd+ projects that were due on during 2006.

The results fall into three categories:

  1. Projects with recent data reporting that they are on stream
  2. Projects with recent data indicating that they will be on stream by the end of 2006
  3. Projects with no recent or confident data whose status is unknown. These are mainly ME OPEC projects.

So here's the results (the numbering system is from my spreadsheet which is available on request at the email at the bottom of this post):

Projects that are on production with indicated max flow rates
1 AOR-E delta, 110,000 bpd new production capacity came on July 06
7 Erha, 150,000 bpd, March 06
9 In Amenas, 50,000 bpd, May 06
13 Azeri-Chirag, 300,000 bpd, June 06
14 Albacore Leste, 180,000 bpd, June 06
16 Benguela Belize, 110,000 bpd, July 06
19 Chinguetti, 75,000 bpd, Feb 06
21 Enfield, 100,000 bpd, July 06
23 Golfinho, 100,000 bpd, June 06
26 Syncrude ph3, 100,000 bpd, May 06
29 Upper Salym, 60,000 bpd, June 06
30 Yoho, 160,000 bpd, Feb 06*

12 projects: 1,485,000 bpd new capacity already introduced
* not on the "Megaprojects" list.

Projects not on production yet but with reported probability that production will start 2006
15 Atlantis, 150,000 bpd, end 06
17 Buzzard, 100,000 bpd, late 06
20 Dalia, 240,000 bpd, no recent news
22 Foster Creek, 115,000 bpd, SAGD tar sand
24 Jubarte, 60,000 bpd, 2H 06
25 Surmont, 100,000 bpd, SAGD tar sand
28 Thunderhorse, 250,000 bpd, ¾ 06

7 projects: 1,015,000 bpd new capacity going to come on

Projects with uncertain status
2 Asab upgrading, 100,000 bpd
3 Bu Hasa, 180,000 bpd
4 Darquain, 105,000 bpd
5 Dolphin, 100,000 bpd
6 EA, 50,000 bpd
8 Ghawar Haradh, 300,000 bpd
10 NEB, 100,000 bpd
11 South Pars 6 & 8, 120,000 bpd
12 South Pars 9 & 10, 250,000 bpd
27 Tengiz, 150,000 bpd

10 projects: 1,455,000 bpd that may or may not be already on production

Note that Cachalote in Brazil is on the Megaprojects list but I can find no reference to it being an actual project for 2006. This is replaced by a large Nigerian Field, Yoho, that is not on the Megaprojects list but which came on in February this year.

Looking at the fields with confident reported data, 12 are on production representing 1,485,000 bpd new production capacity whilst 7 fields are still expected on stream by the end of the year representing 1,015,000 bpd new production capacity. This is split exactly 7:5 indicating that new production has come on stream proportionally throughout the year and is neither biased towards the beginning or the end. It therefore seems reasonable to assume that 2006 production from the 10 projects with no data may be distributed similarly (although some of those such as South Pars 6&8 have been delayed to next year).

The main conclusion to draw from this is that capacity erosion has been balanced by new capacity for the first 5 months reported on Stuart's most recent plateau chart. Equally, it is worth noting that 7 of the projects already on, came on stream during June and July and are not yet included in Stuart's data, these are, however, included in the current oil price. It would not surprise me if we see June and July production creeping up, to be knocked back in August by supply disruption at Prudhoe Bay.

There does not seem to be a wall of new oil heading for the market that would substantially alter the emerging production plateau. The main areas of new production are the Caspian, Angola, Brazil and the US GOM. The Tbilisi-Baku-Ceyhan pipeline opened on June 4th and since then 8 consignments of oil from the Azeri-Chirag fields have been lifted at Ceyhan (just up the Med. form Lebanon) representing an average 120,000 bpd. This is projected to build to 1 million bpd over the next three years.

Note that all production data are for maximum capacity that will not yet have been reached in most cases. Production from those fields will build in the months ahead - just as production from fields brought on last year will have been building during the first half of this year.

I have a spreadsheet summarising all this data with links to sources. If you want a copy then mail me at:
euan dot mearns at btinternet dot com
aka Cry Wolf

Are the planned megaprojects unusual?  Don't new wells pop up every year, or are these substantially different than in recent history?  With the recent declines we've seen (Cantarell, Kuwait, Burgan, Prudhoe, etc.), I don't see the new planned projects offsetting those losses by any great amount.
No, nothing unusual here, new projects come on every year.  The main new project is the Baku Tbilisi Ceyhan pipeline pumping new oil from the Azeri-Chirag-Gunashli (ACG) Field in Azerbaijan that just opened in June and will be ramping up over 1 million bpd over the next two years.  My feeling is that this new oil, along with other projects has been keeping a lid on the oil price.  Perhaps combined with demand destruction. The balance between new capacity, capacity erosion and demand destruction is key to the future direction of the oil price.  This week so far we've had 400,000 bpd production knocked off in Alaska and probably more than that in demand knocked off the jet fuel market today.  I think the market underestimates the capacity erosion side of the equation and would point TODers at OIL CEO's table over on the pilot Canadian Oil Drum Site.
That Brings up an interesting idea.

Was this latest "Terrorist Alert/Airline Passenger crackdown" a response to the the Prudhoe shutdown? An overt attempt at rapid demand destruction? Subject the passengers to ridiculous conditions, and people will stop flying, airlines will cut schedules, just in time for the Prudhoe "Oil Cut."

Rajiv -

Good point. It looks much like hysteria-pumping excercise aimed exactly at demand destruction. However, Prudhoe may not be the primary reason - there must be something bigger. If this theory is right, the UK and US governments will use this "failed terrorist plot" as an excuse for some vile atrocities (a war against Duka-Dukastan?)

to me yesterday's madness in the UK reminds of George Orwell's 1984 (see last sentence of the quote):

""Winston found that the one area of his interest in which Julia could not share was the idea of organized rebellion against the Party. She was not affected by the story of Jones, Aaronson and Rutherford. She did not mind as he did about the fact that history was being falsified daily. As for Goldstein and the Brotherhood, she went to sleep when Winston tried to discuss them. It did not matter to her whether they were fighting Eurasia or Eastasia, in fact she doubted whether there was a war at all, the Party probably dropped the bombs itself to control the people.""

Even giving the UK government the benefit of the doubt - assume actual terrorists with a credible threat - the government admits this situation has been under observation for months, so the public disclosure date was elective and the degree of hysteria entirely by choice and inappropriate for a well neutralized threat.  I suspect this incident served several agendas:
  1. "Leverage the xenophobia" as the pentagon said in its internal documents re: Zarqawi.  As the dictator screamed in the movie V, "REMIND THE PEOPLE WHY THEY NEED US!!!
  2. Get Lamont defeats Lieberman out of the news cycle
  3. Get dead Lebanese children out of the news cycle
  4. build momentum towards UK ID cards
  5. Get people accustomed to martial law
Maybe oil demand destruction is a peripheral motive also
Weren't you touting your credentials as a surgeon and an investor quite recently? Now you're gonna be our head radical? Chief Conspiracy Theorist? Spot's already taken. Savinar's effectively given up the Alpha-Male position, I suppose you could apply for that.
Much of my recent success as a peak oil investor has been based on the assumption that all governments and all media outlets have their own agendas and lie constantly.  Just like drug addicts lie to hospitals to try to get their fix, this is merely human nature.  No theory involved or needed.  Good thing that I wasn't so trusting as to believe the public "cheap oil in 2005-2006" lies of Daniel Yergin, Michael Lynch, and Steve Forbes.
Don't bother paying attention to the nitwit. School's out, so annoying kids like ceo are underfoot.
"Now you're gonna be our head radical? Chief Conspiracy Theorist?"

Where can I send my application for this position?


You've got my vote, Chimp.
So, therefore, the government was endangering its people for months by not checking for liquids.
I'd expect to see another attack close before the election... think about it; The Republicans are behind in the poles. A terrorist attack (or a thwarted one) is just what they to need to rally behind. After all, they are the party for security! On top of that, as you mentioned, a terrorist attack (depending on the type) would cause demand destruction, lowering energy prices (a weakpoint in the Republican platform). Finally, it would remind a few people "why" we are fighting the war in Iraq (or at least be able to be spinned as an attempt to justify the needless bloodshed).
Was this latest "Terrorist Alert/Airline Passenger crackdown" a response to the the Prudhoe shutdown? An overt attempt at rapid demand destruction?

I think it it tragic to see this list degenerate into a posting place for conspiracy theory nitwits.

The kind of manipulation of the media that MicroHydro talked about is well known, well understood, and plain to see. Timing press releases is taught to public relations people in school. My employer is small enough, and I'm sufficiently senior,  that I get to eat lunch with the folk that plan these sorts of things. It happens.

Given that, it doesn't seem like much of a stretch to see other factors affect the timing of press releases. And at least this is a peak oil related theory.

But I agree that it would be nice if The Oil Drum didn't go to far down this road.

Point taken. I shouldn't have replied to that Coincidence Theory guy on the old news about the WTC.
Hey, Capone said "Once is happenstance, twice is coincidence, three times is enemy action", but that doesn't mean he was right. Sometimes things just happen.
Stop your crying Ron.  You need to expand your thought process a tad...

 "The man who never alters his opinion is like standing water, and breeds reptiles of the mind."
~William Blake


It could work the other way. It could remember people who put them in this war. You do not get more secure by killing people wantonly. People are not born terrorists. Check what happened in Madrid. We could have fallen into fear and bomb someone off the planet (or at least get Bush to do it). But we remained calm and sent Aznar packing, as we all wanted to do.

For that, you would need to educate people to actually get informed and think and not just swallow headlines whole.

¡Think, organize, and fight!
But if you cannot think... ¡Organize and fight!
But if you cannot organize... ¡Fight!
  -- Anarchist slogan

A series of if-then-else statements that defaults to 'fight'?  

That's mayhem, not anarchy.

Sorry.  I have anarchic moments.  But the default state is not one of violence.

Seriously, see if you can help convince your anarchic brethren to use the alternate algorithm below:

while (! $goodEnoughSituation)
 if ($Brain->thinking){
  return createConstructiveSolution($Brain,$Community);
 } else{

Here's another take on how (not) to form governments:

DENNIS: Listen, strange women lying in ponds distributing swords is no basis for a system of government. Supreme executive power derives from a mandate from the masses, not from some farcical aquatic ceremony.
ARTHUR: Be quiet!
DENNIS: Well you can't expect to wield supreme executive power just because some watery tart threw a sword at you!
ARTHUR: Shut up!
DENNIS: I mean, if I went around saying, "I was an emperor just because some moistened bink had lobbed a scimitar at me" they'd put me away!

Anybody recall how long airline traffic was reduced after 9/11? (ie, how much demand destruction for airline fuel consumption is their really going to be.  Especially if the result of increasing paranoia is a support for even more war...
Well... Iraq may be off-line again soon.

"Meanwhile, a constitutional crisis. Prime Minister Nuri al-Maliki had announced that he was stripping the provincial governing council of Basra of its security portfolio. Security is collapsing in the southern port city, oil exports through which account for the only income the Iraqi government has.  The governing council has declared that it will not relinquish the security portfolio.

The stage is set for a contest between the central government's armed forces, including the 10th Division of the army, and the Shiite militias that support the provincial government." - Juan Cole

For those that can translate:

voices overheard :-)

Lebanon not going to good in the Media,  What can we do to saturate the news with? I want a 24/7 wall to wall MSM event. What do we have on the burner?

Well we got a group planning to blow up an airline.

We'll go with that.

A little dark humor this morning.  

I watched "V is for Venditta" last night.

I would HIGHLY recommend it.


Was this latest "Terrorist Alert/Airline Passenger crackdown" a response to the the Prudhoe shutdown?

No. It happened now because they intercepted a message from Pakistan basically saying "Go do it now".

What is your source for this?

Sorry Mike, if this is true it clearly violates the Cheney 1% rule. Cheney has stated publicly and categoricly if there is a 1% chance a threat exisits there should be no delay in countering that threat. If a message came through to "do it now," the situation had gone well past the 1%.

I would like to know why "months" had passed before action was taken. Why was the 1% rule ignored? Why was action delayed until the 11th hour?

Feel free to elaborate. I hope the answers you find are to your liking.

But this was a Brit operation and it appears that they told us about it and perhaps had us help with electronic ops.

I don't think that this is any different than any other type of op where you really want to get the maximun amount of intel before shutting it down. Maybe the Brits don't prescribe to Cheneyism's (hope not).

My sources have informed me that al Qaida has planned a "massive gas attack" intended to circumvent airport security.

Before taking to the skys the Jihadis gorge on refried beans at Taco Bell. They board their flights wearing wool. Once in the air, they commence with "death by flatus". Then they rub against each other and create a few static sparks. You get the picture.

Once word gets out, all passengers will have to travel nude and have a high-colonic before boarding.

and where is this Canadian Oil Drum web site? Google can't find it.
A badly kept secret:

Heaven help us
As I have stated before, IMO the (probable) Ghawar decline and the (confirmed) Cantarell decline--the two largest producing fields in the world, accounting for up to 10% of world crude + condensate production--should have been much bigger stories than the corrosion related problems in the Prudhoe Bay Field (accounting for one half of one percent of world crude + condensate production).
i feel the same way, MSM seems to focus on what someone tells them to say. Obviously BP informed the MSM about this. It ain't like a news reporter trolls here, muchless comprehend whats being mentioned here.
They seem to be in need of being "spoonfed" information.

I can just see Wolf Blitzer talking about it on "The Situation Room"!

Gradual decline in major fields is less appealing to the newspapers than sudden closing of a region. There's not much long term perspective there, I suppose that's why it's called "news" :-)
Imagine loosing your job because a natural disaster strikes your company, and the state is suing you over its lost income tax revenue. Is that the alaskan reaction ?  Very revealing indeed.
I'd like to see a comparison between the losses coming down from the older fields versus new production. It all revolves around rather the increases will be enough to offset the declines. If so, more oil. If not, we're in deep water without a paddle.

I have a plane to catch, assuming they let me on. I'm out of here and I'll see  you on the 21st.

Does not look good. Thanks for all the work.

One correction. It looks like Thunder Horse will be delayed until 2007. With all of BP's problems they may not be able to get going till 08.

"BP also announced a further delay at its Thunder Horse platform in the U.S. Gulf of Mexico - one of the company's largest new projects - after workers discovered leaks.

Subject to weather, BP now hopes the platform will start up in early 2007. The company said last month it was aiming for a startup in the second half of 2006, while the platform was originally planned to come on stream in 2005." _latest

Since seeing Thunderhorse listing at 20 degrees I thought 2006 production looked a bit Crazy.  Any storms this year may set things back even more.  Thunderhorse got done in By Dennis - what ever happened to Chris?

Any news on Atlantis?

From BP's intranet site...


BP's 58,700 Metric Tonne semisubmersible Atlantis platform has set sail for its permanent location in the deepwater Gulf of Mexico. Designed to process 200,000 barrels of oil and 180 million cubic feet of gas per day, Atlantis will be the deepest moored floating production facility in the world in 7,074 ft of water.
Atlantis Field
Discovered in 1998, the Atlantis Field development is designed to utilize the deepest moored semi submersible platform in the world. The water depth at the semi (PQ) location is 7,074 ft (2,156 m). It is designed to process 200,000 b/d and 180 mmcf/d. First oil is expected in 2007. Oil and gas will be transported to existing shelf and onshore interconnections via the Mardi Gras Transportation System.

BP operates the development (56% interest), with co-venturer BHP Billiton owning the balance.
Field will be developed via semi-submersible Production / Quarters facility, supported by a network of wet-tree subsea wells.
Development drilling and well completions will be conducted using a long-term development Unit (LTDU), the Global Santa Fe Development Driller 2.
Export is via separately funded and approved Mardi Gras export pipelines.
Project is in the execution phase currently, with the hull having been built in Okpo, Korea, and the topsides modules being built in Morgan City, Louisiana. The integration of the hull and topsides will occur in Ingleside, Texas.
BP in the Deepwater Gulf of Mexico
BP began deepwater Gulf of Mexico operations in the mid 1980s. BP produces in excess of 350,000 boe/d (barrels of oil equivalent per day) from nearly two dozen fields, including BP operated facilities at Na Kika, Pompano, Marlin, Horn Mountain, Mad Dog and Holstein. BP also operates a number of subsea tie-backs in the Gulf.

Execution of our exploration strategy has delivered excellent results, yielding a strong portfolio of large, high quality development projects. Focused exploration will continue across our portfolio.

BP undertook an unprecedented simultaneous development of five major projects in the Gulf of Mexico. Two have been completed. The remaining three -- Thunder Horse, Atlantis and the pipelines within the Mardi Gras Transportation System -- will be complete in 2007.

For more information please visit:

I remember a couple of years ago, the projection was that there would be these large projects coming on line in 2006 and 2007 from which we could expect a boost in production but then after that we would be screwed because there was nothing big in the works after that.  The prediction seemed pretty iron clad because of the long lead time for these projects.

So, now here we are, and at least in 2006 so far it seems like all we are getting is this lousy plateau.  Not good.  The fact that depletion is accelerating (see Saudi and Cantrell) right around the time when we get past where this boost was supposed to occur (2007) seems pretty scary to me.  Am I missing something here?  Sand and corn gonna save us?  Guess we'll find out soon enough.

Skrebowski's data base  has new projects that deliver over 3 million bpd up to 2010.  My guess would be that these (+myriad smaller projects) struggle to match capacity erosion resulting in the production squeeze.  Main wild card right now is demand - fear of flying plus pending recession may result in surplus capacity rising, providing a breathing space for everyone to continue as normal (apart from flying that is).  Will capacity erosion + new capacity = change in demand?

The other main uncertainty is the status of discovered undeveloped resources on the books of the super majors.  Fields discovered 2 decades ago that were considered sub-commercial then and have never been booked.

I would think that the main wild card is the rate of decline of the elephant fields. Lack of data for Ghawar makes it a real wildcard. Cantarell has some public data and official pronouncements, but nobody seems to know the real story, if indeed it is knowable.
Actually rate of decline in general there is good technical reasons to consider individual well declines are about 14% or higher in field drilling helps but I think a better understanding of the mechanics of depletion are needed. What I see is that advanced methods seems to generally lead to far steeper decline rates the we have had from historical data. And I've not seen that there is any evidence to contradict that we won't be seeing decline rates overal closer to 10% or higher. The numbers I have seen published are 4-5 and 8% for overall declines but surprisingly there seems to be little evidence to justify any particular decline rate.
Why do I get the feeling that after we spend about a billion person-hours on calculations the actual "all liquids" peak will come in 2010, just as the ASPO has been predicting for some time?
Well, back of the envelope is only good to ten percent, and if you have skin in the game, ten percent is more than your turnover profit for the month. Would you have bought your present residence in your present locality if you had known when you bought it that the price of gasoline was going to be this high?
He also underestimates type 3 depletion going forward by what I consider a basic error of math. He estimated the depletion rates by taking the net increase in production from 2004 to 2005, then subtracting the new project production that came online during that time. However, he neglected to account for spare capacity utilization which I believe was 400,000-500,000 bpd in that period. As this is not reflected in new production numbers but also doesn't reflect an increase in production capacity, it erroneously reduces the depletion estimate, which he then carries forward with annual increases to estimate supply over the next few years.
BP = Better Prepare ?

BP = Big Profits ?

BP = Bomb Power ?

BP = Butt paper ?

BP = Bad pollution ?

BP = _____  ?


Bad Pipeline???
BP = Burning Planet?
Bad Producer
Baked Potato

(with the potato being a metaphor for Gaia)

Big (f-ing) Problem.

Better Pray?
Be a Peak-oiler
Beyond Pathetic. Their motto after all is that BP=Beyond Petroleum, and they claim to be enviromentally responsible, despite what appears to be a totally crappy maintainence and saftey program.
Butchering Production.
Bungling Pooch-Screwers
Become a Patriot (join the army)
Bloody Poms
Bloody Poor (environmental record, despite their zillions in ads claiming they are green...if only they spent that money on preventive maintenance.)
Minor etymological note: The slang word 'Bloody' originated as a contraction of the phrase 'By our Lady' (not a reference to a female menstrual cycle, as one might assume)
Never knew that.  Always wondered.  Thanks.
broken pipes
Beyond Plateau
Beyond Peak
Beyond Prudhoe
BP: Begin Pedalling
I'm not even sure why they are doing this, but yours is definitely the best one so far.

I'll just act as kind of a judge. All the words I'm thinking of are way to dirty to print here.

Plus I like BP. If it weren't for BP and all the other oil companies how would we do anything? We'd be living in caves. Entertaining ourselves by drawing pictures on the wall with our own shit on sticks. Just like they used to do. Doesn't that sound like fun?

Now we get to slap a keyboard making witty little two-word whatevers about our drug-dealers.


Carry on. Don't let me ruin your fun. Prof. Goose started it, so it must be OK.

You're right of course, CEO. The more I study PO, the more in awe I am of the oil extraction industry. I can't over state how fascinated I am with this business.

What it comes down to, though, is this: they didn't plan properly and now they're driving us into a brick wall.

Fabulous! You're the winner.
I'm sorry, jeezlouise.

I just had to vent, and my anger landed on your post. I really meant what I had to say. It had nothing to do with you. Yours really is the best so far. Because if we really mean it, Begin Pedalling is all we can say.

Be Patient.

It's ok. You can calm down. I'm fully aware of the hypocrisy of making fun of an oil company that has selflessly given me so much and asked so little in return. Funny, I think I won this "contest" over at, too, with "Begging for Petroleum." The new one's better though.

Hey, as far as drug dealers go, I like BP too. The station near my house has solar panels atop the island.

Selflessly given? Please tell me that is sarcasm.
Well, that's just it. You can't tell. That's why it's funny.
"The station near my house has solar panels atop the island."

You're new here. Stick around. We like people with an advanced sense of humor. You made my day. Thanks again.

Hey, my pleasure. Sheesh, if we can't laugh at the collapse of civilization and the extinction of mankind, what can we laugh at??
Has ASPO adjusted their projection for the timing of PO?  Last I checked they were predicting PO in 2010.
 1st strategic (Chinese) oil reserve to begin operation

Apparently, they plan to store about 33 million barrels of oil, at least in Phase One.

I did a double take when I read a newspaper headline today, "International Oil Companies Prepare to 'Raid Iraq.'"  It turned out that my eyes were playing tricks on me. They're preparing to "Aid Iraq."
Yeah, on yesterday's nuke post I thought the Aussies had called their site
Speaking of infernos, I was driving home from work yesterday when I saw a bumpersticker depicting bright orange and red flames.  Below, it said, "On Fire for Jesus!"  Wouldn't, "On Fire for Satan!" be more appropriate?
I found this link to work better:

Keep in mind that China plans to fill its SPRs with 1 billion barrels over the next five years - that's more than 500,000 bpd.

What are these "oil reserve bases"?  Are they military bases?  Is the storage above ground or below ground?  I had gotten a sense that these are above ground storage tanks.  The article says the first base will only hold 38 million barrels.  That would mean they are building 26+ bases if the sizes are similar costing $12 billion total.  And then there is the cost of oil.  Oil consumption in China has dropped almost 4% this past year or about 400,000 bpd.  A distributed oil reserve sounds much more flexible than the US reserve.  There reserves would provide them with 400 days of float if they could not import oil for some reason.

You guys have a good catch here. Let's work on this. Lay out the numbers.
more information...

The largest of the first four sites will have 52 tanks with a combined volume of 5.2 million meters squared.  The smallest will only have 16 tanks.

This next article says that the 5.2 million mm volume is actually only 33 million barrels.

The following article seems to indicate that they haven't decided on the total reserve volume but that the initial reserve would only provide 35 days of cushion.

Also they only dropped 100,000 bpd this year... not 400,000.

This is extremely interesting. Can we do the math on this? How big is a tank? How many barrels is 5.2 million cubic meters? Do you guys have Google Earth? We can compare this to the tanks at Ras Tanura.

An extra 500,000 bpd off the world market for the next five years to fill these tanks would be significant.


5.2 million m^3 = 32.8 million Bbl
Each tank holds 630,000 Bbl
Each tank is 335 Ft in diameter


All tanks are identical.  Not likely, but it's a start.
Tanks are 40 ft high.  That's typical here for a variety of technical and ergonomic reasons.

Calculations: has a convenient interface.  According to them:
1 m^3 = 6.289 Bbl.

Checking their math shows:
1 m^3 * ((35.3 Ft^3/m^3 * 7.5 gal/Ft^3) / 42 Bbl/gal) = 6.3 Bbl/m^3
5.2 x 10^6 m^3 * 6.3 Bbl/m^3 = 32.8 x 10^6 Bbl

To calculate tank dimensions, assume a 40 ft height, cylindrical tank.

V_T = 5.2 x 10^6 m^3 * 35.3 Ft^3/m^3 = 184.0 x 10^6 Ft^3
V_t = 184.0 x 10^6 Ft^3 / 52 = 3.53 x 10^6 Ft^3 / tank
A_t = V_t / 40 = 88,250 Ft^2
d = (A_t / π )^0.5 * 2 = 335 Ft

V_T = Total Volume
V_t = Volume per tank
A_t = cross-sectional area per tank
d = diameter
π = 3.1415926535897932384626433832795028841971693


The biggest tank that I had personal experience with was a 600,000 Bbl monster in LC.  So in precise technical terms, their tanks are pretty darn big.

Between pipeline upgrades and
tank farms for strategic reserves ..
going long a few steel producers
might not be a bad play .....

Triff ..

rblist talks about the extreme oligopoly profits in the iron ore industry. It's by a guy trying to start an iron ore mine in Canada. Steel mills might not be where you would make the max profit.
If I was going to invest in steel mills, I would not look for plate or strip mills, I would look for mills that made materials for coal to liquids plants. Big honking tubes.
Wow! I would never have even hoped for a reponse like that.  I'll post Ras Tanura stuff soon concerning this issue. You saved me a whole bunch of time. Thanks, man. And, yes, I read your other posts, and will hopefully email you soon. Your family is blessed. They got a peak-oil dad with math and computer skills (not to mention the other ones).It doesn't get any better than that. It may take awhile for some people to appreciate you. But they will. Keep on keepin' on.
Nice post. Don't forget that the maximum flow rates won't be reached at the same time after the different project have started. Chris Skrebowski has introduced a spead factor to take into account this fact. The application of a Monte-Carlo simulation could also be interesting.
typo: spead= spread
Also, I understand Chinguetti production is infact already depleting. They have had real problem. Production has recently dropped from 52,000 to 37,000 bpd. The number quoted in the piece above is 75,000. In the real world things don't always work out as planned.
Chinguetti has gone as low as 35,000 apparently and they are looking at changing the total reserve estimate.

Hardman shares have been hammered and Woodisde have been slumping lately too (much to my dismay)... html?from=rss

I'm aware of the problems at Chinguetti - these are noted on my spread sheet - email me at euan dot mearns at btinternet dot com if you want a copy.
Absolutely.  Another example: syncrude which the Skrebowski chart shows as 100kbpd coming in April is still not in production.   It is expected to start up in late August, but nobody will be surprised if it is delayed some more.
The market moves day to day, quite often, for reasons that have absolutely nothing to do with supply or demand. Unleaded Gasoline fell more today than any day in history that I can remember. Why? Well, here is the reason:

Goldman Sachs, meanwhile, said it would end its participation in the New York Harbor unleaded gasoline futures contract, as expected, but wouldn't roll its money into another contact.  So gasoline futures prices fell 9 percent to a four-month low, as big funds bailed out of the contract.

And, in my opinion, this drop in gasoline prices bled over to crude oil. That, not the terrorist plot, was the major reason for the over two dollar drop.

On a more serious note, interesting batch of information, Cry Wolf.

I can't really comment too much since I tend to agree with the Saudis that, "current high oil prices do not reflect supply and demand."

I would like to comment on Prudhoe Bay.  I think this is a big negative for the American economy more than anything else.  As I've made clear before, i'm expecting oil prices to continue to drop.  The economy can't take too many more hits at this point.  Prudhoe Bay problems mean less income for big US oil majors, worse trade deficits down the line, good news for SA and the other exporters though.  Not that Prudhoe Bay is overly important in the big picture.  I would keep watching the housing market, treasury inflows, falling stock markets, declining GDP, etc.

Is BP a "US major"?  How does it mean less money for the US majors?
ExxonMobile and ConnocoPhilips are the other two big owners of the field.
That would be ExxonMobil and ConocoPhillips.  
These are honest questions, by the way.

How does the BP pipe problems affect them?  I thought it was just the side pipes leading to the main pipe (as you can tell, I am not in the industry).

BP, ConocoPhillips, and ExxonMobil are the three stakeholders in the field.  From what I gather, they will all be affected.  ConocoPhillips today, for example, informed its Alaskan crude oil customers that it could no longer guarantee supplies.
I don't think the plot had much to do with it either... Is the jetfuel thats going to be saved (couple hundred flights / day maybe) really that big of a part of the picture? I am actually curious if anyone happens to know.


I wonder about that too. Here in Canada the amount of aviation fuel used amounts to about 16% of gasoline use.  
Not sure where you got your flight numbers from, but yesterday there were over 1000 flights cancelled (including my own) at Heathrow.  Many of those flights were long haul.  There are already many cancellations again today.

Heathrow is one of the busiest airports in the world and virtually no planes took off from there yesterday (I should know as I spent most of the day there!).

I expect the fear of flying to be short - nobody was hurt, so the main thing is just more inconvenience (cavity search, fly in [provided] underwear, etc) as you wait to board.  Few will cancel their vacation plans.  Back to normal in a week.

Recession probably avoided because interest rate hikes have stopped, at least thru the election.  <6% long term rates are low enough to bring buyers back into real estate. Unemployment did rise, but (officially) is under 5% - move along, nothing to see here.  Higher prices and volumes increase the US trade deficit, but higher prices also increase the need for other importers to acquire $ to pay for their own fix, so $ crash unlikely.

The world is getting used to a plateau in oil production, and the associated $1.80/month (100/b mid 2007) price increase.  We are paying half what Europeans are paying now - although we do drive more - so payments may be painful but still bearable.  It is often said that, in today's dollars, we still pay less than we did a quarter century ago.  BUt, we all agree inflation is understated, so we are probably in fact paying far less than then.  If, as I think, we get to 100 mid-07, it will still be cheap vs 1982.  Just remember how good we (still) have it, how cheap it is to fill up, and press on.  

My guess is that nothing much happens until an actual production decline, aspo thinks post 2010. (Freddy loves to point out that aspo now shows peak delayed until 2010, but fails to mention that the aspo curve shows Colin is in pretty good agreement with Stuart's plateau until then.) Imo, delays in major projects look likely to prevent both a production increase in 2007 and a decline in 2008/9.  

Still five years to go before looking for the panic button providing, of course, that nothing too interesting happens around the persian gulf.

Which airlines are providing, "fly in underwear?"
New advertising slogans will be needed. May I suggest:

"Fly Often.  Fly Safe.  Fly Naked."

Are there others?

Regarding the approaching wall of oil: maybe.  I'll believe it when I see it, like a great tsunami of petroleum, bathing us all in its cheap and easy GW fumes as we slowly turn on this giant planetary rotisserie.

"Please pass the catch-up," say the Chinese and the Indians, "We would like our share in this infernal barbeque."

How long will it take us to burn through any wall of oil that might be approaching, again?  What will the consequences of burning through such oil be?

And will we decide to sequester the human species in the earth and to just let the GW gasses have the atmosphere and the oceans after all?

Sequestered Suburbia.  Now there's another idea in need of advertising slogans.  "Ye Olde Mineshaft Condominiums" -- no, that just doesn't pop at all.

J, i hate to shatter your premise but ASPO shows no such tentative plateau and never has.  Reconciled for all liquids, we see his 2006 Depletion Model reflects:
2007 - 88.2-mbd
2008 - 91.5-mbd
2009 - 92.2-mbd
2010 - 93.5-mbd

This includes an adjustment of 4.4-mbd for processing gains.

Freddy is right on this one.  All ASPO oil-peaking charts for a few years have shown a SHARP peak, not a plateau, with a steep decline setting in within a year or two.  This has been the case even as they have moved the date of predicted peak from 2006 to 2010 with corresponding increase in peak production.  I don't know how much account they take of political rather than geological aspects.  Maybe it is these factors which would give us a plateau of a few years and breathing space before a decline.
Well, my mistake.  This was how I read the aspo curve shown on your site.

$100/barrel would probably be a record high in 2007.

With all due respect - this is "not Chart of the Day"

Everybody here knows what the price of oil is, where it has been, and why. If we didn't, or don't, we would have asked. Thanks for your trouble, but please, we might be just slightly  more informed than you apparently thought.

Stick around, you might learn something.

Chart-of-the-Day was the one Steven Colbert was holding(which Dave showed us) with "Peak Oilers" in the middle.

Are you having a bad day?
No, it's been decent so far. Must suck for those Hezbollah guys, though.

I agree with you that it is not the "Chart of the Day", but I keep a copy of one similiar on my desktop for long term perspective.

I also keep a photo of one of one of my favorite vehicles a Volkswagen Rabbit Diesel Pickup truck, the true model T of an oil crisis age.  My father who commuted 20 miles per day to work as a Diesel mechanic for the military switched from an Oldsmobile 98 that got about 10 or 11 miles per gallon, to the Rabbit Pickup, which got 51 or 52 miles per gallon right about at that spike you see in the chart, a 5 FOLD INCREASE IN FUEL MILEAGE (!!!)  yeah, it's important to remember where we've been...

"Everybody here knows what the price of oil is, where it has been, and why. If we didn't, or don't, we would have asked.", with all due respect, I beg to differ.   I will speak for myself here...I CERTAINLY DO NOT know "why" the price of oil is what it is, and certainly am not at all certain how it got here.  If I was, I would have no interest in charts, stats, Ghawar and the rest of what we trade in here.  To me, it is still very much an open question.  Let me put it this way:
If you had told me in say 1997, and I had accepted that in the next decade:
#There would have been two of the most horrendous hurricane seasons in history back to back strike the Gulf of Mexico
#There would have been a major mass murder terror attack against the United States, Britain, Spain and Russia, all with Saudi Arabian connections
#There would have been the outbreak of a war in Iraq of massive scale, and it would have degraded into a bloodbath and quigmire from which the United States could not extricate ourselves
#That the British North Sea would begin declining in oil/gas production, and the drop would soon be near or at double digit drops per year
#That the story would break that Bergen, the biggest field in Kuwait would peak, and that Kuwaits reserves were in extreme jeopardy
#That a major investment banker in the energy industry would begin giving speeches and presentations and write and sell an involved book that Saudi Arabia is beyond peak, or soon will be, and will begin declining very soon, and possibly much faster than predicted.
#That the Alaska Prudhoe Bay would be pulled off the market due to pipeline corrosion for an unknown length of time.
#That our own Federal Reserve Chairman would go before Congress and warn in very dire terms that the United States faced a possible economic recession due to lack of one precious resource we had always taken for granted, natural gas, and the NPC (National Petroleum Council) in a special report to the Secretary of Energy would pronounce a shortfall on natural gas supply for the foreseeable future.....

o.k., I will call it off, that's point is, if you had told me that this would be the news in the decade from 1997-2007, I WOULD HAVE BET ALL I HAD AND ALL I COULD BORROW THAT CRUDE OIL WOULD BE EASY OVER $100 A BARREL FOR MONTHS, AND NATURAL GAS WOULD NOT BE ABLE TO HOLD BELOW $20 A MM/BTU IN WINTERS.

I would have also bet that the Untited States and the world economy would be in shambles.  

And it may still happen.  But, it's running very, very, very late.  Given the nature of the news, given the hammer blow after hammer blow the oil and gas sector has taken, given the known interruptions, declines, political issues....something went wrong on the way to the catastrophic wreck.

I became a bit suspicious after 9/11.  That should have been MUCH worse for the economy than it was.  To pile the Iraq invasion on, madness!, that would wreck us, and give out tax cuts at the same time!!
Then, the hurricanes.  The catastrophe long expected, came, at the worst possible time!  That must be a blow that will bring us to our knees, at least for a while!  Not enough yet though!  And right in it all, the MTBE switch, the Ultra Low Sulfer Diesel switch!!  Is there a limit to what we will pile on?  The North Sea still dropping, surely the crash would come with the announcement of Alaska being pulled off the market....if we are cutting it close (and by now WE MUST BE), then this is IT.  The straw that broke the camels back has to be IN THERE SOMEWHERE!  

Prices went up, the newspapers, the TV SCREAMED!  My local station was talking about $5.00 gasoline in KENTUCKY!!  The week went on.  Crude oil went to $77 a barrel plus, and then....fell back into it's trading range of the last half year, mid $70's....then, just over $74.   (!!!!!!)

Folks, VERDICT TIME.  This market may COME UNDONE tomorrow, this economy might do a 1929 and CRASH in a day, but today, let's admit it:
Since the birth of the new century, more has been thrown at it than anyone, ANYONE, could have imagined, more has happened to completely dismantle the oil and gas markets than the WORST PESSIMIST could have dreamed off, this economy, and this energy supply market has been SLAMMED by blow after blow.  And despite EVERY DOOMER jumping on the "$100, maybe even $150 a barrel" bandwagon, despite predictions of these rocketing prices by July 4th, despite the sad predictions of people freezing in their home in winter due to lack of natural gas, THIS MARKET HAS DONE WHAT IT HAD TO DO.  I read the articles, the books, that say, this energy market is OBVOUSLY not fit for todays world, it is CLEARLY long past it's ability to do the job.  I have to be careful not to sneer.  Before we take this one apart, let's see what those guys have to replace it.  After watching this one for a decade, against every bet weather the storm, against every doubter, take BLOW AFTER BLOW, RUMOR AFTER RUMOR, SLANDER AFTER SLANDER, and still DELIVER THE PRODUCT AT A PRICE LESS THAN PREDICTED BY THOSE DOING THE RUMOR AND SLANDER, anything intended to replace this system HAD BETTER BE DAMM GOOD.  I ain't seen the guys proposing it show they can walk the walk.

There must be a limit to what this world energy market and system can take, but I sure don't know what it is.  But we know this:  The world will keep pouring on the test.

So, with all due respect, you "might be just slightly  more informed than you apparently thought.", but I for one am willing to admit it:  I don't know how oil is this cheap, and how this market has delivered.  It has baffled me, and left me astounded and awed.  I have "stuck around" and in some cases "learned something".  But, I have to admit, I have learned as much about what I and others don't know as what they think they do.

That alone is a lesson worth the stay.  :-)

Roger Conner  known to you as ThatsItImout

I just said that last part to get you to respond. I knew you would. I missed you. Now stop using the capital letters. Learn how to use italics. When are you going to write a book? Remember when I used to tell you that you didn't know shit? Well, I was wrong. You obviously learned something in the meantime.

We obviously have a serious communist infiltration going on right now in this country. What the hell are we going to do? Are you with me or what, brother? Let's git'um.

I'm sick of this online, blog crap. I'm gonna write you an email. But I'm serious. People hate capital letters. Do you know who Martin Peretz is? He used all CAPS to respond to something a reader wrote "to-the-editor" the other day. He got shredded. No mercy. Martin Peretz. They didn't care. They called him a troll. Just cuzza the caps. I'm tellin' ya.

You ever read any P.D.James? Who is this person?

Awww, that's sweet...why are the caps so annoying though....I'm an old man, they are easy for me to see....and I am saying nothing that can be viewed as shouting in them, that would be insulting....I wouldn't do ya' thataway! :-)

But if you can tell me how to get the italics to take to a post on a Mac, I would do that, I like those too....and how to insert pictures in posts, on a Mac mind you....I promise I would keep them clean!

Martin Peretz?  If I google him will I come up with anything?  I will give it a try....and P.D. James  (I've heard of Henry James, and P.G. Wodehouse (isn't that it, you know, Wooster and Jeeves, funny stuff :-)

On writing a book, I like the idea, but I never stay on the same topic long enough....and on not knowing shiit, I live by the words of the great Yogi Berra,
"It ain't what I don't know that keeps getting me in trouble, it's what I know for sure that just plain ain't so..." :-)

Good to hear from you, I enjoyed the banter, and look, no caps! (well, except at the start of sentences and names), I told ya', send me how to do the italics on a Mac.....caps got nothin' on me....:-)

Roger Conner  known to you as ThatsItImout  (some caps there, o.k., that's my trademark signature though....poetic license and all that....:-)

P.D. James is one of my favorite authors.

Her prose is unsurpassed.

Read her books.

Now, you have something big to look forward to.

Children Of Men. Soon to be a "Major Motion Picture." To be released in late September, I think.

The next great thing. The first real, post-apocalyptic film since Mad Max and Soylent Green. Hopefully the best "Peak Oil" film since Syriana.

Bear with me, Don. We're almost there.

"Children of Men" is not the best of P.D. James IMO. For one thing it seems to lack the brilliant and biting wit of her other books. Also, it is a downer.

Her best novels, in my opinion, feature Adam Dalgliesh or Cordelia Grey. Both are fascinating characters.

Nobody, but nobody can do descriptions better than P.D. James; you could do a fabulous tour of Britain just by visiting the places she brings to life with words.

The BBC TV series based on P.D. James novels are excellent, among the best crime dramas (or any kind of dramas) they have ever done. Available now, I think, both on videotape and DVD.

I don't know how oil is this cheap, and how this market has delivered.  It has baffled me, and left me astounded and awed.

Human societies, as Joseph Tainter is fond of reminding us, are fundamentally problem-solving organizations.

It often seems to me that pessimists, whether peak oilers or Y2Kers of yore, substantially underestimate the degree to which 'the system' is forced to handle challenges, stresses, strains every day of its life.  And so, in order to thrive, it has acquired redundancy and robustness and, dare I say, subtlety and cleverness.

Many pessimists do not respect the fantastic subtlety and complexity of what they criticize.  They treat society as though it were a machine that was designed (and is about to break down because of design flaws) when in actual fact it is more like a life-form that evolved and adapted.

Not immortal, of course.

Living Systems and Evolution

The system is a complex, dynamic, living system that learns and evolves as it is challenged.

And the system includes complex, dynamic organizations - governments and instittions - that are in more or less alignment with the real system - reality. Though I would not presume to know reality in a concrete, conceptual manner I have a deep sense - based on a wide range of data and information - that the human systems (our organization and institutions) are substantially altering the geobiochemical systems upon which the whole community of life depends.

It's a big experiment in the self-regulation and self-governing of complex, adapative, living systems.

Given the clarity, kindness and intention of our political, corporate, cultural and social leadership I wonder if our current large man-made organizations are up to the task of dealing with complex and abrupt changes.

Yet the internet provides a unqique opportunity for global leadership to emerge at local, regional and trans-national scales. This forum is a wonderful pietri dish for evolution.

Interesting that the 1980 peak price of $95/bbl preceded the worst recession since the 1930s.
That had a lot to do with a change of strategy at the Federal Reserve.  Before Carter appointed Paul Volcker the Fed had been very accomodating, and inflation rose over 15 years.

After Volcker the Fed made low inflation it's primary goal and raised interest rates to 18% to stop the economy cold and "wring out" inflation.  It succeeded at the cost of a deep recession and the ruination of Carter's presidency and long-term reputation.

The rise of oil prices was one of the causes of inflation, but only one of them.  

That is if you accept the inflation assumptions that the chart is based on.  imo, inflation is higher than the gov calculates, particularly over the past decade.
(Freddy loves to point out that aspo now shows peak delayed until 2010, but fails to mention that the aspo curve shows Colin is in pretty good agreement with Stuart's plateau until then.)

Two pseudo-icons' pseudo-theories are in stellar-conjunction, so we should take note? WTF is this? "Pretty Good Agreement"? Is this some term I missed in Eco 101?

Could you point out why this is relevent to anything we discuss here? Please.

"Stuart's plateau"? Now it has a name? Stuart's plateau is a JPEG image behind his chart. Even he will acknowledge this.

Stuart also continues a discussion/debate/conversation with Freddy. He doesn't dismiss him.

Why are you talking about Freddy in the first place? Why not concentrate your fire on Yergin or Lynch? Maybe Freddy is a tougher opponent? You attack him because you can? What?

Freddy has never run and he is still here because none of you have beat him. I've been watching this for 10 months. When I first started here I used to like to beat up on Freddy, too. Every guy who walks in the door likes to beat up on Freddy. Y'know what else I've seen? A lot of people who thought we were going to be overwhelmed by hurricanes this year. Well?...I'm waiting. Think about that.

The other thing I've seen is that through thick and thin, with a few minor lapses, but nothing to write home about, Freddy has always remained a true gentleman - something that almost none of his detractors can claim.

Say what you want. I like people that actually look at the numbers. Freddy is one of us.

"If I ever kill you you'll be awake. You'll be facing me. And you'll be armed." -Malcolm Reynolds

An open opponent, unlike some.

I mentioned Freddy because I (wrongly, it seems) thought that his info on Colin's projections showed a plateau.

But, speaking of Freddy and cera...
As far as I can see, Freddy posts everybody else's predictions, never his own - how is it possible to beat him? He routinely pokes at colin's past misses.  While agreeing that cera should change some specific country projections, he speaks of cera as having the best track record.  But, cera in 01 predicted ng prices would crash, and in 03 guessed that 06 oil prices would be a little lower than 75/b. What did cera say, in mid-2004, we would be producing in mid-06?  Freddy does not mention these misses, so I do not see him as an unbiased observor.

In my view, Colin has done more work for po than anybody on this site. I hardly agree with his socialist solutions, but he has toiled tirelessly, and for decades, to bring the world to an understanding that the sooner we change our ways, the less pain we will suffer.  Freddy makes it sound as if his pokes are all in good fun, but few like to be continuously criticized, and I suspect Colin does not, either - he does not publish his past too-early predictions, and why should he?  

Colin's past misses are, I guess, in large part because of deep and ultra-deep water successes, so score one for technology. But technology has its down side - large fields will crash much faster than in the good old days, when secondary came after primary. We would all be better off if high tech was (much) slower to develop.  imo, westexas/simmons might be pretty close guessing coming major field declines, and aspo might be a little optimistic (thrice burned, etc).

I came to this site as an investor. Colin has been premature regarding the peak itself, but the po prediction quadrupled my ira in 05.  Sure glad I wasn't investing based on cera's predictions - my golden years would be pretty leaden.  Just imagine, for a moment, shorting ng and oil over the past five years.

Great post - but I have a few questions that I think we need to answer in order to put this data into perspective:

  1. Approximately how long from going online will these new sites reach maximum production?

  2. What is the estimated lifespan and capacity for these new sites?

  3. What quality is the oil at these sites?

  4. How expensive were these projects to bring online?

More important for long-term implications:

  1. While this data is brilliant, we need to see it mapped against current and projected depletion rates for existing fields in order to see if we have a net gain or loss with this production;

  2. What other projects are planned to come online within the next five years? What is their current+projected cost and again, let's map that against the other data.

If we can piece these items together it will show very clearly what extra forces the price of oil will be up against in the next five years.  We can draw a lot of inferences from such a comparison, such as potential bottlenecks, the quality of the oil that will be pumped, the cost to extract that oil, etc.
  1.  How long ...  This varies from project to project.  It is often the case now with deep water fields produced through floaters that most production wells are drilled before the FPSO gets on station.  So once everything is linked up the field may get up to plateau in a matter of months.

  2.  Lifespan ...  The ACG fields in Azerbaijan are Giant / Super Giant status and will be in operation for decades.  The big deep water fields off Angola, Brazil and the US will have a much shorter life - I'd guess 10 to 15 years.  Much of this time will be spent on decline.

  3.  Oil quality .. don't know but I'd guess most are light sweet.

  4.  Cost ...  very expensive.  Angola, Brazil and US Gulf coast are all deep water, hostile environments.  You just need to recall what Thunderhorse looked like after Dennis to get a feel for costs.  bp and partners had to build a pretty long pipe to get the oil from Caspian to Mediterranean via a politically safe route - Azerbaijan - Georgia - Turkey!

I think it is quite straight forward to model this production data in a more realistic volume v time framework which I'll do and pass on to Kehbab and Stuart to play with as they see fit.
Assuming a 4% decline rate in actual oil flows this year, a reasonable assumption given what we know about Cantarell, Daqing, Greater Burgan, Skrebowski's Type III depletion in other countries (US, Norway, UK, Indonesia) and finally thinking there may be additional shut-ins due to disruption (eg. Nigeria), that would be about 3.4/mbd (all liquids). Assuming all the 2006 projects are good to go and produced all year long, which is not the case, of course, that would be 2.5/mbd = -0.9/mbd. If we assume a 3% decline rate, it's still negative.

Re: There does not seem to be a wall of new oil heading for the market that would substantially alter the emerging production plateau

I agree. In fact, not a plateau at all if I read things correctly. I expect things to get worse before they get better, if they ever do.

In a new article on the main ASPO website by Kjell Aleklett  titled  "CERA's  Report is Over Optimist" he states that both CERA and ASPO agree that  "production from existing oil fields is declining  at about 5% per annum. "  That makes it a even worse.
If we are able to determine sometime in 2007 what the production numbers are for 2006, separated into 1) new production flows and 2) all the rest -- then we should be able to figure out a roughly accurate decline rate for existing production in that year given the annual average. We would have to use a standard data set from the EIA or BP. Unfortunately, this data is not as reliable as we would like.

The opportunity exists, however, to do this kind of simple analysis because the Megaprojects database (Skrebowski) and the CERA database (Yergin, et. al) actually exist and new projects can be followed more accurately than before. Data transparency is slowly becoming the norm since everything now depends on it.

== Dave

Could not the same analysis be carried back say 5-10 years giving us real decline rates in fields and removing the effects of new production ? So for each year we get the natural decline then in a sense all production added at the end rinse and repeat.
Data transparency is slowly becoming the norm since everything now depends on it.

Y'know, these are the type of thoughts that come to me in dreams, and I'm never sure whether they are real or just the opposite. Regardless of my state of consciousness.

Isn't there the equal possibility that since everything depends on it, things will tend toward the less transparent? I can completely go to the darkside. In a heartbeat. Cherenkov's recent referral to "The Dark Side" came from me. He forgets.

I get scared when I see you this optimistic about something - especially something like transparency. And I mean no disrespect by that. I use certain people as paranoia-meters. Why so positive? Error - does not compute!

Cheers, my friend.

You don't like the new quasi-optimism?  

Re: does not compute

I take your point.

-- Dave

As I always take yours. By the way, when exactly did you change your name? I just figured it out yesterday. I hope I haven't said anything inappropriate to Mr. Cohen. I have a tendency to do that with people I don't "know." The excellent photos of World Leaders with hilarious sarcastic remarks tipped me off. Maybe smekhovo is right. Maybe I am a nitwit. I have no idea what quasi-optimism is. But it sounds cool. I like paranoia. At least that's what the box in the corner keeps barking at me.
I saw this bumper sticker on a car recently:

"Come to the Dark Side - we have cookies!"

Dave, you need to remember the myriad smaller projects that are coming on stream as well.  My guess would be that they contribute at least as much as the 50.000+ bbl projects.  But for the first 5 months at least these have not resulted in production growing.

The more I think about this though I'm left wondering if we are looking at capacity erosion or capacity withheld (Russia and KSA)?  Could the plateau = demand flattening owing to demand destruction?  Indian consumption, for example, fell last year.

CERA includes fields at 10/kbd. Skrebowski's floor is still 50/kbd.

Concerning production capacity withheld, I have not seen any convincing evidence for it yet. Concerning demand flattening, I haven't seen any persuasive evidence for that yet either although some poor countries are being priced out of the market. I haven't looked into what's happening in India but perhaps I should.

I think that's exactly what it is.
¿And who would not be selling at $75 per barrel? If you have some petroleum, now is the time to sell it, ¿did not the Saudis say that? After all, there is a $20 fear premium on it, and you do not know how much that is going to last. Production will rise soon.

Yeah right.
This is an article about world spare capacity and saudi production over the last year
Pretty much sums it up.
Yes, succinct and brilliant statement in that piece.
Looking at the fields with confident reported data, 12 are on production representing 1,485,000 bpd new production capacity

The main conclusion to draw from this is that capacity erosion has been balanced by new capacity for the first 5 months

Why are you assuming the online = producing at capacity? Half of those you list only came online in the last couple of months. Surely they aren't ramping up production to capacity in one month.

Alan, I have to admit that the more I think about this the less certain I am that the plateau is supply driven and wonder if Russia and KSA may be withholding capacity.  The vast majority of companies and countries are I believe pumping flat out - with the exceptions of those where civil unreast results in involuntary capacity constraints.  Could the 2006 plateau = demand?

WRT new projects ramping up in the future this is of course the case, especially with the ACG fields in Caspian.  However, you have to assume that new projects that came on last year were ramping up during the first half of this year and this is included in the supply figures - a kind of quid pro quo.

I think that there is a strong possibility of a world-wide deep downturn. This primarily because of the housing market. I see panic creeping into some articles in MSM. This could confuse the peaking picture. There are other geopolitical scenarios that could also confuse the picture. Spiralling oil prices might be pre-empted by one or more of these items. Therefore, the underlying reality might not be obvious right away.

There's an advantage to the powers-that-be in this being obscured: dealing with peak can be delayed.

Highly recommend today's (audio or transcript) for an interview with a guy who;s been watchdogging BP at Prudoe -  so they turned the spooks on him - but failed to discredit him.  He's been blowing the whistle on their corrosion problems for years.  Bottom line:  Managers have to meet a budget.  If they come in under, then they get a bonus.  Hence, delayed maintenance.  Don't you just love capitalism?  BP is already being investigated for a history of spills and environmental crimes.

Amy's 2nd story is the horrendous and under-reported oil spill in Lebanon thanks to Israeli missiles destroying a power plant.  Nobody is doing anything to clean it up!   It's moving along the coast to Syria and may yet hit Syria - even Turkey and Greece.  The official interviewed stated that if there were no war, this spill would alone would be the biggest disaster to ever hit the Mediterraneum.  

And then today's LA Times covers China's unprecedented publishing of the vast numbers of protests throughout the country.  About what?  Land grabs, horrible pollution, undrinkab le water, unbreathable air, and exploited workers.  etc. etc.  AS the world turns.

Can someone please explain why with an across the board drop in inventories , BP shutting down the largest oil field in the US, and with ~700,000 bpd off-line in Nigeria oil prices fall?  We have seen much more upward pressure on crude prices with much lesser news!!


Oil prices fall more than $2 a barrel
By MADLEN READ, AP Business Writer2 hours, 13 minutes ago


Several explainations occur to me.

I think a very important aspect is that emotions of traders have an impact on price, and not so much the weighting in of rationals like supply & demand concerns. For example a possible UN resolution calling for a cease-fire in Lebanon may affect oil prices, even though this has no direct impact on supply, as it has impact on the stability of the entire ME and thus on possible future oil production.

Further it can be a classic of westexas' assumption that we will see cycles of prices going up and down, but gradualy upward, as oil importers outbid others for net export capacity, destroying some demand, causing the price to drop a bit again, and this over and over. The price is still well over US $ 70.


Oil is a commodity, and commodities go through bull and bear markets.  Right now, we are in a longterm bull market for commodities, which will probably last at least another 10 years.  We are in a longterm bear market for equities, which began in 2000 and will probably run its course by around 2010.  Within the equity bear market, we are about to witness a major collapse, with the Nasdaq reaching 1600 by the end of October.  It currently trades around 2060.  Two great leading indicators, SMH and QQQ have already collapsed below key support levels and are both down 15-20% over the last few months.  The markets will soon follow.  So equities are about to experience a pronounced downturn within the context of a bear market.  Commodities, on the other hand, are about to experience a pullback within the context of a bull market.  In fact, they are already experiencing it.  HUI (gold shares) peaked near 400, is currently near 340, and will probably bottom out around 250.  OIH (oil shares) peaked around 168, is currently at 140, and will probably bottom out around 110.  Commodities themselves have fared better, but this is typical, since the shares tend to lead the commodities lower.  Oil, as you know, peaked at $78 and is now at $74.  Watch for the following trends in commodities: commodities shares leading commodities lower (this is already happening, the shares have already declined significantly, soon the declines will accelerate, the commodities themselves are poised for collapse), equities and commodities moving down in tandem (contrary to popular belief, equities and commodities, even gold, often collapse together, just look at the Nasdaq collapse of 2000 and 2001, gold experienced even worse declines during this period, in other words, commodities are no safe haven during an equity collapse), huge amounts of money flowing into treasuries (keep an eye on TLT, as bond prices rise and money continues to flow into treasuries, remember, the treasury market is 5 times larger than the equity market, money will flow out of equities and commodities).  Also, keep in mind that more people have poured their money into metals and energies mutual funds in the past 2 or 3 years than in the previous 20 combined.  Commodities mutual funds and hedge funds currently play a historically disproportionate role in the the pricing of the underlying commodities.  Expect abrupt movements.  These people tend to make moves in mass.  

None of this has anything to do with peak oil, of course, and as WestTexas pointed out, the stock market is a side issue.  This is absolutely true and I agree with him 100%.  I'm just trying to give an explanation of why I think oil and other commodities will fall in the coming months.      

"This is absolutely true and I agree with him 100%.  I'm just trying to give an explanation of why I think oil and other commodities will fall in the coming months."

Thanks for your input.  Can you offer a "rough" estimate of how far we can expect to see oil fall in he coming months?


I'm going with $57 a barrel by mid-November.  
You heard it here first!  I'm going to be looking for you in mid November SelfAggrandizedTrader.  ;-)


"None of this has anything to do with peak oil, of course, and as WestTexas pointed out, the stock market is a side issue.  This is absolutely true and I agree with him 100%."

I agree with that statement also.  I just find "news" does move the price of oil, like PaulusP said about the "emotions of traders", and it is odd which news moves it.   I notice that oil will sometimes move up more with general bad news than with news that directly effects supply.  For example news of Israel attacking Lebanon may tack $3-$4 on the price of crude and a shut down of a major oil field and the loss of production in Nigeria take a few $s off.  It's an odd conundrum...



Well that's interesting. Let's see :
I've sold my equities, I'm ahead of the curve there
Mustn't buy gold or silver or oil futures, they are going to tank
Let's not talk about real estate...
Perhaps I should just sit on the cash?
No wait, inflation or currency collapse are just around the corner.

Gee, I'm lucky I haven't got much money. I really wouldn't know what to do with it.


The odds do seem stacked against us average folk.

  1.  Energy and Precious Metals - if you haven't bought any, possibly think about dollar cost averaging in over the next 6-12 months.  Trying to time a top or bottom is VERY difficult.

  2.  Real Estate - There's nothing wrong with buying a home to live in.  I wouldn't be in a rush, but if you can find something you really like and afford a fixed 30yr mortgage, owning something feels really good.  I wouldn't buy investment property right now though, and I wouldn't touch any sort of sub prime or interest only mortgage ever.

  3.  A cash reserve will be really nice if we get caught in a deflationary period.
"Real Estate - There's nothing wrong with buying a home to live in.  I wouldn't be in a rush, but if you can find something you really like and afford a fixed 30yr mortgage, owning something feels really good.  I wouldn't buy investment property right now though, and I wouldn't touch any sort of sub prime or interest only mortgage ever."

Do you mean borrowing something feels really good?   Paying an unbelievable inflated 30 year note and in many cases sky-high property taxes is like paying homage to the debt lord...



You gotta live somewhere.

Don't get me wrong - if you can pay cash so much the better, but for most of us that's just not reality.  I suppose I could have bought a shack in the Maine woods for $30,000, but I still happen to like civilization.  Coffee shops, concerts, dating, work....

Real inflation is running at 5-7%.  A 30 year fixed mortgage is around 6.5% right now.  Most people get around 30% of that back in tax writeoffs making the effective interest rate 4.5%, which is well below inflation.

And what pray tell am I supposed to do about property taxes?  Everyone pays those irregardless.  Either directly as a home owner, or else they are factored into what you are charged for rent.

I don't think we will see a deflation any time soon.

The last global deflation occured in 1929 with the Great Depression, when the FED reduced the money supply by 30%. In Germany, chancellor Brüning deflated the currency willingly, mainly because he could not risk inflation after the hyperinflation in 1923, and he wanted to get rid of the reparations Germany had to pay.

Both FDR in the US and Schacht in Germany fixed the deflation remarkably fast, FDR with the New Deal and Schacht with the "Mefo" promissory notes, which could be used to get cash from the central bank.

The deflation in Japan after their real-estate bubble burst was not fixed because unlike FDR, the Japanese government failed to restructure the banks.

I am quite convinced that the FED and ECB will not allow deflation to happen, because that would increase the debts of the governments.

It's plain as day.  As i said three weeks ago, the IEA medium term outlook has been well desseminated and it is one of four reports that shows major production capacity and refining capacity coming on stream from 2010 to 2015.  Everyone in the business knows that the present disruptions and bottlenecks are temporary.
Thanks goodness!!!  I was beginning to think we were in trouble for awhile there...


I think your real point is that the current level of production is limited to a certain extent by many factors not related to basic production capacity in the world. Without these, current production would be significantly higher. Can't argue with that.

I can't believe that anyone within or without the business can really "know" that the dispruptions are temporary within the time frame we are talking about. Do they have access to knowledge that the unrest & war in Iraq or Nigeria will soon be over? That the hurricanes won't wreak their havoc again this year or next few years? The best forecasters in the world can't say. It is also possible more disruptions will occur than we have now - who knows?

I do appreciate the frank, straightforward tone of your recent contributions, devoid of personal attacks. It works better that way. If others follow suit, the world of TOD will be a better place.

It is also important to understand that part of the supply chain constraints relate to a misjudging of economic growth.  While several nations were in Recession or near zero growth a short while ago, we have a globe today that is firing on all cylinders.  It is rare that all economic regions are in harmony.  But we see Europe, Japan, Asia, NorAmer, Central/South American all humming.  This is resulting in 4.9% Real GDP growth in 2006. An incredible feat stemming from globalization.  Lowered tariffs.  More trade pacts.  WTO proactivism.  And there's more to come if the USA ever backs off their moronic agri subsidies.

Until some zone goes soft, the marketplace will continue to sop up every extra barrel; the rest going to new SPR vaults in China and India.

IEA announced an 85.5-mbd extraction rate today for July. And revised June to 84.9-mbd (from 85.2) of which 30.0 (revised up from 29.8) is the OPEC component.

Q3 pricing reflects bulging demand ... not scarcity, and certainly no decline in production.

I got to thinking about this "wall of oil" last night. And it occurred to me that I heard the exact same story in 2004. There was supposed to be a wall of oil hitting the market in 2005, driving prices back down to $20 a barrel. Then the same in 2005, and now the same in 2006. In truth, this oil has came on the market, and is coming on the market all the time.

I know that Haradh has been on line for over a year. Yet Saudi is still in decline. I suspect that many of the other fields are you lis are also on line, and we are either in decline or on the plateau. We are trying to go up a down esculator and we are louising the battle.

"Most recent news from Aramco is that Haradh GOSP-3 is due on stream by mid 2006. Haradh GOSP-1 came on March 96, Haradh GOSP-2 came on April 03.  Each GOSP (gas oil separation plant) is designed to deliver 330,000 bpd.  No reliable data on how the GOSP-1 and GOSP-2 areas have performed." - from my spread sheet where I have recorded more detail.

Are you saying that Haradh GOSP 3 came on in 2005?  It would be pretty significant if the whole of this flagship project was on stream and Saudi capacity was actually falling.

Sorry, my mistake. Haradh-3 went on line in February, 2006, about the time Saudi started to decline. Now seven months later, Gosp-3 should be up and running full steam. But that is just not enough to make up for the decline in all its giant fields. (Of which Haradh is part of, it is the lower part of Ghawar.)

Actually Haradh Gosp-3, according to Oil and Gas Middle East, went "fully on-stream" in the second quarter.

Production: When fully on-stream in second quarter of 2006, the plant will produce 300,000 barrels of Arabian Light crude oil per day and 140 million standard cubic feet per day of associated gas. A total of 520,000 bpd of treated seawater will be required for injection to maintain oil reservoir pressure.

Same URL as above.

Thanks Darwinian.  So do you think KSA is pumping flat out?

With Haradh fully commissioned, South Pars delayed until next year - and maybe beyond, Tengiz delayed unitil next year (email correspondence) that doesn't leave a whole lot in the pipe.

It will be interesting to watch events unfold.

I thought that when the Saudis finally admitted Ghawar was declining at 8%, they used infill wells, increased water, and new projects like Haradh-3 coming on line to argue they could hold actual production decline to 1-2% (which was a huge admission by them considering the rosy pictures they had painted in the past).
TODers - thanks for helpful input.

To sum up some comments:

Ricko pointed out that Thunderhorse is probably delayed to 2007.
Flankp pointed out that the Atlantis floater has just left the dock and production is now scheduled for 2007
I received an email confirming that Dalia will come on later this year
Another email pointed out that Yoho actually came on in 2003 and there was only a small incremental rise in 2006
Hongkong trader pointed out production problems at Chinguetti
Oilaholic pointed out problems at Syncrude

In fact the tar sands projects ramp up very slowly:

Foster Creek - "SAGD tar sand project. Produced 29,019 bpd in 2005.  Planned to increase this to 41,000 bpd by end 2006.  Inclusion in Megaprojects seems to be based on incremental increases in production that will continue to 2015."

Surmont - "Heavy oil by SAGD. Phase 1, scheduled for 2006 has a target of 27,000 bpd rising to 100,000 bpd by 2012.  No recent news from ConocoPhillips or Total on progress."

Taking all this into account the list for the reaminder of 2006 looks like this:

17 Buzzard, 100,000 bpd, late 06
20 Dalia, 240,000 bpd
22 Foster Creek, 11,981 bpd, SAGD tar sand
24 Jubarte, 60,000 bpd, 2H 06
25 Surmont, 27,000 bpd, SAGD tar sand

5 big projects: 438,981 bpd new capacity going to come on for the remainder of 2006

So it looks like this will just about cover for Prudhoe.

Another email pointed out smaller projects may account for a further 300 to 400,000 bpd

Thanks to Rembrandt for providing good back up information.

Petro Canada (PCZ) has some current oil sands production that may be relevant to your discussion.
 They have a 12% interest in a Syncrude project and this 100% ownnership at MacKay River.

MacKay River Highlights

Located 60 km northwest of Fort McMurray, Alta., Canada
2005 production forecast is 24,000 barrels per day of high-quality bitumen
Plateau production of 27,000 to 30,000 b/d is expected in 2006
Estimated lifespan of 25 to 30 years after accounting for well maturity, turnarounds and unplanned events

Some info on the steam assisted gravity drainage system they are using to pull the oil from the tar sands.

Cry Wolf,

Just wondering  (BTW I'm a relative newby here, so please forgive me if I've made some awful four-function math error here).

Skrebowski's estimate of net capacity increase as published in the April 2006 edition of Petroleum Review (the one you cite) is 9.15 mb/d for 2006 through 2010 (1.985 + 2.140 + 1.456 + 2.150 + 1.420).

CERA's estimate of the `potential capacity growth' for the same period, as published in its press release of 8 August 2006, is 13.3 mb/d for the same period (source:,2318,8274,00.html).

That's a big difference but it's not a huge difference (though that depends on what you mean by `huge', I suppose).

So how come Yergin is considered by many members of the peak oil community to be the devil incarnate while Chris Skrebowski is still a shining angel?

Yeargin makes a pretty big disclaimer.
"This capacity growth would accommodate rising world oil demand so long as there are no major disruptions in the actual flow of oil, for political or other reasons," said CERA Chairman Daniel Yergin in releasing the study

So as long as:
 The Iranians aren't pissed
 Pipelines don't corrode
 The Jews and Arabs love each other
 Misc others let Iraqi oil flow
 The Russians, Kuwaitis don't hold back production
 The Chinese don't buy too much
 The Nigerians quit blowing up pipelines

we'll be okay

Gunga2006, Cry Wolf, PaulusP,

Thanks for your replies.

Both Yergin and Skrebowski make disclaimers - i.e. both distinguish between capacity and de facto demand. As Skrebowski states "It is virtually impossible to predict demand growth", which seems pretty obvious.

But BTW note that all the possible calamities you mention won't destroy the oil in the ground - in fact if they occur (which is pretty likely), they will postpone the peak for another couple of years. The MORE disasters there are today, the GREATER future capacity will be, given the SLOWER depletion rate. So if, like me, you're dying for the peak to occur pretty soon so as to be able to say "I told you so!", watch out - those disasters you predict could actually delay TEOTWAWKI!

Cry Wolf,
The CERA figures are certainly net - they can't be so dumb as to omit depletion.
You write that "the key difference between Yergin and Skrebowski is that the latter sees a peak around 2010 while Yergin sees production growing forever". That's a bit unfair on the diabolic  Yergin - between now and the year 2030 (or whatever his peak year is) isn't `forever'. And AFAIK Skrebowski doesn't really commit himself as to peak year - he just stops predicting at 2010, which isn't the same as saying that 2010 is the peak. Why should net new capacity in 2010 (which Skrebowski puts at 1.85 mb/d) suddenly drop below zero in 2011?

You quote Aleklett as saying that "it is obvious that [the Cera report] is not worth $2,500." Clearly, it IS worth that price for at least one client, since otherwise CERA would be bankrupt. Indeed, there must be quite a lot of investors for whom $2500 is peanuts.

My basic point was not whether Yergin is right or wrong. My basic point is that the gap between CERA's predictions and those of Petroleum  Review doesn't seem all that great - so why the `dual morality?'

Copelch, if you look at Skrebowski's projection here

You'll see that it peaks at around 92 million bpd around 2010 and if you look at the CERA projection here

you'll see forecast capacity running at around 100 million bpd at 2010 and rising thereafter.  Notably the CERA forecast has capacity way above consumption.  These are two very different outcomes for the world economy and society as we know it.

I am a geologist and investor.  I have followed peak oil from a distance for many years but only began to take a really close interest since May this year - so as I said I'm pretty new to this.

If you look at Oil CEOs table here

you'll see that the vast majority of countries are past peak (most likely irreversible decline) and that only a handful of countries have the potential to grow production in the years ahead - UAE, Kazakhstan, Algeria, Angola, Qatar, Libya, Azerbaijan, Brazil, maybe Russia and KSA.  These countries need to cover for declining production everywhere else.  If KSA goes into decline then I think it becomes an impossible task - this is Simmon's main message.  When the country that has bailed you out for the last 30 years becomes part of the problem then it is game over.

Furthermore, I feel that EOR techniques are giving the world one last production rush but this is like a marathon runner going off on a sprint mid race, when she runs out of energy she will then collapse.  My bets - 30% that we peak this year, 60% by 2010/12 and 10% that production continues to grow beyond 2012.

I don't feel I have an axe to grind on this one and will follow events closely and act accordingly.  

Cry Wolf,

Thanks for the information -- much appreciated.

You write that "the CERA forecast has capacity way above consumption.  ".

That seems quite justified -- incidentally ASPO's eminence grise Laherrere 2006 does the same, since effective demand/consumption is downwardly (though not upwardly) unpredictable. Laherrere puts 2015 as the earliest peak year for precisely this reason -- he points out that peak could be a lot later in the event of demand constraints. And CERA's earliest year lies in 'the third decade' of this century, i.e. 2021 -- so there is in fact an overlap between the angelic pessimists and the diabolic optimists, at least as regards peak year if not peak demand in that year!

Like you, I don't have any axe to grind -- I'm just trying to follow the data wherever it goes.

If you look at Kehbabs plots a bit further down the page you will see CERA running with around 5 million bpd surplus capacity right now.  I don't know anyone who believes that - but it sounds like you may.  Even the hardened peak oil cynic Lord Browne has conceded that world spare capacity is very tight - probably around 1 million bpd.  If it were running at 5 million then there really would be no sweat over Prudhoe, Iraq, Iran, Nigeria etc. Cos you would just go fetch the oil somewhere else.  Back in the 80s they did just that - North Sea and North Slope.

Time will tell.

He said "as long as there are no major disruptions in the actual flow of oil, for political or other reasons."
 All the things I noted are current or very possible disruptions to the flow of oil and I don't think it is reasonable to believe that these disruptions will be reduced in frequency or severity in the future. Nor is it an all inclusive list of potential problems.
 He might as well have said, supply will meet demand unless it doesn't. IMHO
 I agree with you about the slower depletion rates .
 Also re TEOTWOWKI,, I would love to log in one day and see a note from the AMPOD saying he gathered his lieutenants and after much analysis they determined the world does have a creamy center full of light sweet crude after all.
 The peak is not something I wish for. It's going to be the start of a long hard grind when it takes hold.
Hi all - another newbie, so please excuse me if these are well-understood questions and subjects.

Regarding the 2006 megaprojects report, it has been mentioned that the numbers drop off in 2010.  What is the 'standard' lead-time for new projects to go from capital approval to production?  Is it likely that capital will be deployed at this stage will result in production in those years?


Copelch, I'm pretty new to this too and others here are better qualified to answer your question - so TODers please wade in.

First point would be that Skrebowski figures you quote are for net capacity increases (after capacity erosion is deducted).  The gross capacity increase figures are:

2006 3385
2007 3740
2008 3206
2009 3950
2010 3270

Total = 17551

I'm not sure whether the CERA figures are net or gross.

I think the key difference between Yergin and Skrebowski is that the latter sees a peak around 2010 while Yergin sees production growing forever.

I think it is the case that the megaprojects recognised by Yergin and Skrebowski are getting close to the bottom of the barrel.  The rate of major new discoveries has tailed way off over the last 20 years, so there just isn't a pipeline of new megaprojects that will go on for ever. I think it is the failure of Yergin to recognise this point that has led to his Devil status.  Much depends on the status of ME opec reserves. These are clearly just made up - but that is not to pre-judge whether they are over or underestimated.  See comments above from Darwinian on Ghawar and decide for yourself whether you believe that the Saudis could ramp production to 12 million bpd.

You will like this one from Prof. Aleklett

"More things can be said about the report, but it is obvious that it is not worth $2,500. Part of the report is based on data not open for the public and the obvious reason for this is that CERA seek to make money from this hidden information. Oil production figures and data on reserves are of greatest importance for the global future and these should be available in the public domain as is the case in Norway and the UK."

There is a post by Stuart about the 2006 megaproject report:

Critiquing the 2006 Megaprojects report

Srebowski's projection (in black and magenta) follows closely the IEA demand projection (in green):

The last monthly data (in black) are already below forecast.

Kehbab, a picture says a thousand words.  With all the new production capacity that has just come on I would see the EIA data getting back to the net net new black line before falling back again towards the end of the year as the shortage of new projects and Prodhoe kick in.

The other possibility is that we are seeing demand destruction in the developing countries and capacity withheld - which to my mind may fit the oil price.  In 1929 recession started several months before the crash.

Third option is demand destruction in equilibrium with capacity erosion, i.e. the EIA production data = supply and demand, suggesting that demand is now well below the EIA forecast.

I'm looking at a 2 year chart for Brent front month and wonder if I can see a trend of exponentailly rising bottoms.

Once some of the developing world gets burned off then the OECD may resume their bidding war.

It's possible that supply will increase in Q3 and Q4 2006. Looking at previous years, it seems that production is lower in Q1 and Q2 (except for 2005).
I want to clarify something since I often refer to Skrebowsky's Megaprojects report. I appreciate the availability of the database. I disagree with Skrebowsky's analysis of increased supply out to about the fall of 2010. His view is that we will be at 92 - 94/mbd at that point (remarks at the recent ASPO conference in Italy). I can't see how the world could possibly add about 2/mbd of production for each of the next four years. His latest Megaprojects update is less optimistic. I don't why he is revising upward. It must the allure of having a database--if I add all these numbers together, here's the grand total! The world doesn't work like that.

I agree by and large with Stuart's analysis of the latest Megaprojects update. Depeletion rates are not known with enough precision. The tar sands are in trouble. More giant fields (eg. Cantarell, Daqing, Greater Burgan) are entering their death throes. Many projects (eg. some Brazilian deepwater projects) are delayed. Delays are now routine as production takes place in more challenging physical environments. Remember, projects get delayed but depletion never sleeps.

For the fun of it, I added the last forecast from CERA:

Note that CERA is talking about "productive capacity" (supply + spare capacity?):

Two pictures say ten thousand words.  CERA's thesis must be that the world is paying $74 / bbl just for fun.  Do they say where the 5 million bbls surplus capacity resides?

"Just for fun."  That's right!

Think about it.  Why is the world paying 3 times more for gold now than we were three years ago?  We're not at peak gold.  No one is claiming that.  Supply is way up.  Demand is down, except for demand from investors, which is what really counts.  The bottom line is, we have entered a longterm commodities bull market and commodities prices are going to tend to rise.  Investors will tend to pay greater and greater amounts of money for commodities and the shares of their producers.  I'm using the case of gold to illustrate how little price fluctuations in commodities sometimes have to do with supply and demand.  Gold is up 300%, "just for fun."

As for oil, I'm sure supply and demand is a far more important part of the equation, but as I've noted in previous posts, I haven't seen much evidence over the last 4 or 5 years that oil isn't behaving, "just like any other commodity."  If you look at the price charts for oil and the price charts for gold over the last 4 or 5 years, they look remarkably similar.  The Saudis claim that, "the current high prices of oil have nothing to do with supply and demand."  Is there an element of truth to that?  Yes, there is.  Investors have been pouring money into mutual funds and hedge funds which invest in all types of commodities.  This has led to across the board increases in the prices of energies and metals.  Is the Saudi explanation the whole story?  It may not be.  But until I see oil begin to behave as anything other than, "just another commodity," I will continue to treat it as such.    


Hello SAT.  A couple of things to bear in mind.  First up nearly all the gold ever mined still exists, hardly any of the oil ever produced still exists.  The cost of mining Au has been escalating with higher energy costs, lower grades and the shortage of all things - tyres.  Personally I think Au mining is one of the greatest wastes of time and energy on the planet.  However, I believe that owing to lower grades and higher energy costs that Au mining ozs are falling - i.e. peak gold.  At some point Au mining will be forbidden because of CO2 and lack of liquid fuel - so you'd better get out there and buy some now while it is still available.

About oil behaving like any other commodity I would have to agree - it seems to be the surplus capacity that is driving price.  When this is tight, supply concerns arise and the price goes up.  The main questions right now is what is happening to surplus capacity.  Is demand (hence production) falling, whilst new capacity is coming on line?  Or is the world at productive maximum, i.e. no spare capacity, which would result in stocks being drawn down?  To be honest I don't know the answer but I guess you believe the former whilst I am leaning quite strongly towards the latter.

Looking forward to 15 Nov.

Cry wolf,
Saudi spare capacity is right here.
Thanks Fireangel.  The lingering concern I have is that in the past KSA have withheld production - especially at times when new production has come to market - that has been their historic role for 40 years.  US inventories falling with oil price rising is my litmus test - that happened last Autumn and I'm waiting to see it happen again.
The markets react in the short term to changes in US stocks, but long term oecd stocks are probably a better predictor.  US stocks are high, but oecd stocks are at a ten year low, and down one day's cover from a year ago. So, oecd has been drawing down stocks as prices rise.

I think the rest of the oecd is drawing stocks because they are waiting for the dollar to fall. Might be a bad bet becauae oil importers need a lot of dollars to pay for their imports.

Thanks, fireangel, for your link to Saif Lalani at financialsense.dom. Saif writes:

"Let's look at the production profile of Saudi Arabia who most analysts believe holds this elixir of camel dung which cannot be used by any refinery. We had the hurricanes (a) and the Saudi's said " We will respond". We had the Nigerian conflict (b) and they said " We will respond". Now we have the BP debacle (c) and they said , you guessed it " We will respond". See for yourself.

The latest edition of The Economist (12 August 2006 -- i.e. today's) has the answer (I write with my devil's advocate hat on):

"Saudi Aramco's proved reserves alone could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields, so will be able to pump at the present rate for about 70 years even if it never discovers another drop of oil. In fact, Aramco and other NOCs [=National Oil Companies] are likely to find plenty more if they look, since their territory has not been very thoroughly explored. Only 2,000 wildcat wells have ever been dug in the countries around the Gulf, according to Leonardo Maugeri, an Italian oilman, compared with more than 1m wells in the United States." (my italics)


Discuss ....

Doesn't anyone get that we do not go from 9.5 million to zero in a day? These analysts will kill us.