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140 comments on Exxon, and the Implications of 8%

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LevinK on November 17, 2005 - 6:05pm Permalink | Subthread | Parent | Comments top
My understanig from the PO theory is that the logistic curve (less political/technical disturburances) approximates closely the normal distrubution. This kind of distribution produces year-to-year decline rates which grow approximately in arithmetic progression. I can argue that the back side of the curve will be much closer to normal distribution (than the front side) because of the lack of spare capacity that actually makes the growing part that volatile. But let's think about it more deeply: imagine a string you are trying to pull harder and harder... the first few years the string can handle it by elongating but after some years it will surely tear apart. This is the critical year and it depends on the accumulated pressure since year 0, and by that time we should have either another system or the same system replacing dependance on oil with the same rate as the oil production drops. This is the real year we need to find out to see what time do we really have.

I modelled the world oil production logistic curve with normal distribution given the following:

PO production = 30.9 Gbbo/year
Total URR = 2400 Gbbo
The standart deviation for this is 31 years.
Here is what I got:
Year    Production      Change  Cummulative change relative to year 0
0    30.88049825    0.10%    0.00%
1    30.88049825    0.00%    0.00%
2    30.84838404    -0.10%    -0.10%
3    30.78425576    -0.21%    -0.31%
4    30.68831322    -0.31%    -0.62%
5    30.5608548    -0.42%    -1.04%
6    30.40227596    -0.52%    -1.55%
7    30.21306715    -0.62%    -2.16%
8    29.9938113    -0.73%    -2.87%
9    29.74518084    -0.83%    -3.68%
10    29.46793426    -0.93%    -4.57%
11    29.16291223    -1.04%    -5.56%
12    28.8310334    -1.14%    -6.64%
13    28.47328974    -1.24%    -7.80%
14    28.09074164    -1.34%    -9.03%
15    27.68451269    -1.45%    -10.35%
16    27.25578415    -1.55%    -11.74%
17    26.80578925    -1.65%    -13.20%
18    26.33580732    -1.75%    -14.72%
19    25.84715776    -1.86%    -16.30%
20    25.34119383    -1.96%    -17.94%
21    24.81929652    -2.06%    -19.63%
22    24.28286831    -2.16%    -21.37%
23    23.7333269    -2.26%    -23.14%
24    23.17209914    -2.36%    -24.96%
25    22.60061485    -2.47%    -26.81%
26    22.02030097    -2.57%    -28.69%
27    21.43257571    -2.67%    -30.60%
28    20.83884299    -2.77%    -32.52%
29    20.24048703    -2.87%    -34.46%
30    19.63886723    -2.97%    -36.40%
31    19.03531332    -3.07%    -38.36%
32    18.43112077    -3.17%    -40.31%
33    17.82754659    -3.27%    -42.27%
34    17.22580534    -3.38%    -44.22%
35    16.62706559    -3.48%    -46.16%
36    16.0324467    -3.58%    -48.08%
37    15.44301593    -3.68%    -49.99%
38    14.85978596    -3.78%    -51.88%
39    14.28371276    -3.88%    -53.75%
40    13.71569384    -3.98%    -55.58%
41    13.15656684    -4.08%    -57.40%
42    12.60710849    -4.18%    -59.17%
43    12.06803397    -4.28%    -60.92%
44    11.53999651    -4.38%    -62.63%
45    11.02358743    -4.47%    -64.30%
46    10.51933641    -4.57%    -65.94%
47    10.02771211    -4.67%    -67.53%
48    9.549123056    -4.77%    -69.08%
49    9.083918785    -4.87%    -70.58%
50    8.63239124    -4.97%    -72.05%

Probably the real picture will be much worse because of the increasing political tensions, the shift to faster depleting oil sources (smaller standart deviation) etc. If you can notice the "tension" percentage gets to 5% in the first 10 years; then almost doubles in only 5 years; and then almost doubles again  the next 5 years. This speeding of the worsening trend goes up to the standard deviation year +31. I would suggest that years 10-15 will be most critical because of the sharp rise of the pre peak production drop.
Any comments on this will be very much welcomed.

P.S. Is it possible to place an Excel graph here?

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WebHubbleTelescope on November 17, 2005 - 10:35pm Permalink | Subthread | Parent | Comments top
Please consider using something other than the logistic curve. Use a rate-based model and you can actually make sense of the numbers.  The logistic curve is not rate-based.
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LevinK on November 18, 2005 - 11:17am Permalink | Subthread | Parent | Comments top
Of course, you are perfectly right. The logistic curve contains some important assumptions which do not correlate very much with reality. I think the base assumption is that the oil producers are trying to maximize production in every moment of time while constantly drilling more wells to offset decline. The reality of course is not that simple; there are lots of mainly economical restrictions on constantly investing in a field. Usually there are huge initial investments leading to a "spike" of the
initial production. Then the producers tend to invest in expanding production depending on market conditions (which are rather unpredictable). When the field reaches its peak, in most cases it is much more reasonable to maintain a sustained decline than to fight the peak - nobody would pour huge money in a declining field, because the investments are not likely to pay off. For example I am sure that if they drill more wells in West Texas they can temporary rise the production to say 1.2 mln.bbd but then it is inevitable that the production will again slowly slide down (following the logistic curve) and the slide will soon become uncontrollable. That's why they preffer to have a long controllable decline than making unfeasable investments. In short the logistic curve is what we can expect from a field if we target maximum production all the while during its lifetime.

I think that in the short term we will see the West Texas pattern world wide - the first several years will be of significant constant decline rates (3-4%?). But after that the shortages will attract huge investments and in the medium turn the production curve will start to follow closely the logistic curve as producers scramble to boost production by all means.

Of course all of this is too speculative for me to bet on... If the producers start chasing their long-term interest they will probably abandon the "maximum production" goal and even allow temporary free fall of production to preserve it for the future. This is what may cause the real trouble and why we need sufficient energy independance now.

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WebHubbleTelescope on November 18, 2005 - 11:28pm Permalink | Subthread | Parent | Comments top
but then it is inevitable that the production will again slowly slide down (following the logistic curve) and the slide will soon become uncontrollable.

Why again does it follow the logistic curve?

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Stuart Staniford on November 18, 2005 - 11:36pm Permalink | Subthread | Parent | Comments top
You continually critize the Hubbert curve, yet as far as I know you still haven't done any evaluation to show that your model can project forward any better.  Your modeling tends to use a lot of parameters, and smells strongly to me of overfitting the past data.  The onus is on you to show that your model is useful predictively.  I for one am weary of all the carping about the logistic model, which, while it's undoubtedly a crude approximation, does actually have a track record of useful prediction in a significant number of basins.  Please put up or shut up.
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frenk26 on November 5, 2006 - 6:11pm Permalink | Subthread | Parent | Comments top
Most of us thinking about peak oil have been aware for some time that the central uncertainty is the decline rate on fields in production (FIP). This dramatically affects when one believes peak will be, and seems to be the main difference between more pessimistic projections such as Chris Skrebowski's , and CERA's. It's also critically important in assessing the economic impact, since the faster total production declines, the harder it will be for the economy to adjust, and as we go further and further past peak, the fewer new projects there will be to add to the declining bulk of production.
In the past, peak oil projections have used fairly low decline rates for FIP - 3%-6%. There are now several pieces of evidence that the FIP decline rate might be more like 8%. Adding that to Chris Skrebowski's list of new projects makes for a very rough ride:
Most of us thinking about peak oil have been aware for some time that the central uncertainty is the decline rate on fields in production (FIP). This dramatically affects when one believes peak will be, and seems to be the main difference between more pessimistic projections such as Chris Skrebowski's , and CERA's. It's also critically important in assessing the economic impact, since the faster total production declines, the harder it will be for the economy to adjust, and as we go further and further past peak, the fewer new projects there will be to add to the declining bulk of production.
In the past, peak oil
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paradox on November 17, 2005 - 10:51pm Permalink | Subthread | Parent | Comments top
Image hosted by Photobucket.com
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LevinK on November 18, 2005 - 1:03am Permalink | Subthread | Parent | Comments top
Thank you, that makes it much more valuable.
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140 comments on Exxon, and the Implications of 8%

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