319 comments on A Different Approach to Calculating Saudi Arabia's Oil Reserves
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Every day can seem pretty much the same as the next here on TOD - one difference right now is that my wife keeps screeching at me that I am wasting my time here - and she may be right.
So here's an HL for Saudi that I posted a few days back. A key feature is the "dog leg up" of the 2003 - 05, leading in this case to infinite possibilities in KSA reserves. This essentailly is diluted in the HL for the world that Freddy posted - and while Laherrere is the God Father on Hubbert (and I only learned about this a few days ago) you don't need to be a genius to work out that the line pointing at 3Gb is based on 2 points and should be viewed with lashings of scepticism.
In the HL shown above, perhaps the two most relevant points are 1991 and 2005 - two years that KSA was probably pumping at capacity, and so IMO right now the red line may give the best estimate for URR of currently developed KSA reserves - 124 Gb remaining. That should be viewed as a minimum figure. Its a lot less than the BP number (1P) of 262Gb.
The 2005 number is almost certainly high from emptying storage tanks. They have enough storage to inflate production figure for 3-6 months. I'm sure you will see a "boost" in production this summer also but I'm equally certain that KSA is now filling storage tanks through the winter to catch the spring summer price run-up.
In my opinion cuts by KSA now have a lot more to do with need to refill storage tanks than price. If they don't they will be caught next year.
And do you know how many hundreds of millions of barrels tank storage KSA has?
Global warming has helped eliminate the fall runup.
The demand runup has shifted to later in winter.
http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/stocks_text.htm #Stocks%20Are%20Seasonal
This is no longer true hence low prices now.
The current string of warm winters and recent economic softening is probably the only thing keeping oil prices in check.
Here is some.
http://www.photius.com/countries/saudi_arabia/economy/saudi_arabia_economy_hydrocarbon_sector_t~1424 .html
Plus they use additional VLCC's for floating storage and they have additional storage at other places in the world.
Quote
http://www.eia.doe.gov/emeu/cabs/saudi.html
Aramco's shipping subsidiary Vela has around 20 VLCC's (very large crude carriers) and 4 ULCC's (ultra large crude carriers), carrying a significant proportion of Saudi oil exports. In September 2004, the Saudis placed a $200 million for two VLCCs from Hyundai Heavy Industry, with delivery expected in 2007. In addition to tankers, Aramco owns or leases oil storage facilities around the world, in places like Rotterdam, Sidi Kerir (the Sumed pipeline terminal on Egypt's Mediterranean coast), South Korea, the Philippines, the Caribbean, and the United States.
In total they have significant storage capacity how much is unknown and also how its used. I believe that any recent production spike were caused by storage draw-downs not pumping.
If I'm right you will see KSA periodically cut production as they refill storage tanks. If I'm right you will find tanker sailing indicating more oil moving then hits the consumer market this oil is going into overseas storage.
Of course any of the tanker tracking outfits can watch how often and where tankers are refilling storage.
If you want to really know the status of KSA's oil industry simply track how they are using their storage tanks.
The information is probably available. The only unkown is the state of tanks inside KSA but you have to assume if they are filling external stores the internal ones follow the same pattern.
Total amount unkown I looked for a number.
http://topics.nytimes.com/top/reference/timestopics/subjects/s/stockpiling/index.html?query=SAUDI%20 ARABIA&field=geo&match=exact
Says 60 million barrels I've seen much larger numbers.
Even at 60 million if they need to give a 2mbpd boost they have that for 30 days. Figuring this out would make a good topic I'm sure they can cover for longer than this.
Gotta go sorry for spelling.
As I previously noted, both Texas and the Lower 48 showed similar inflections right before they peaked. And like the Lower 48 and Texas, Saudi production is now down declining.
Euan :-]
PS - should you not be arguing against Freddy and not me? And have you noticed that the red line on the HL I posted here would put KSA at beyond 50% of Qt by end of 2006? But I would qualify that for developed resources - and as I've said many times - what about all the rest?
Note that we have the same situation regarding the Lower 48 and the North Sea. The Lower 48 has vastly more fields--predominately onshore--versus the smaller number of fields in the exclusively offshore North Sea. Yet, both peaked at 50% of Qt.
In any case, as I predicted, KSA production is now declining. The argument is not when will KSA production decline. The question is why now?.
Well there may be several answers and the one you favour may be correct. But one answer that anyone reading this BLOG should at least consider is the fact that world oil demand growth has been soft this year and that KSA has played the role of swing producer for a couple of decades.
No she is not. You are making a valuable contribution to the discussion. You are moving the community towards a new vision.
(P.S. my wife screeches too. it's part of the female brain structure. they can't help themselves. they see the computer as a competing female for your attention. give her some attention.)
Once linear Hubbert behavior begins (say 1991) in your graph, then the graph must remain substantially linear moving foward on that line if Hubbertinian behavior is persisting (constant technology and greedy market behavior).
If there is a shift to a new slope (your "Dog leg up") that means the producer has shifted to new behavior and the Hubbert model no longer holds true.
Let's say the Suadi's have shifted to rapid water injection in order to meet the promised production rates. That means they are destroying the future productivity of the wells and we will see Non-Hubbertinian decline (rapid decline) moving forward.
The problem with our male-hormone-driven brains is that we get on a one track path chasing after our prey on a fast paced line. Even when our prey has zigged and zagged, we tend to "stay the course". HL is no longer valid once the Saudi's have zigged and zagged. We need a new model. What it is I don't know. Are there any other fields with empirical data showing what happens when there is switch over to horizontal drilling and third generation extraction techniques?
Don't forget. Hubbert is just empiral data collection based on capatilistic non-monopoly market behavior and first generation drilling technolgy in the lower 48. None of that is true for KSA.
This is exactly right. The principal new behaviour for KSA has been ramping to capacity production - relatively rare for them. That capacity is defined by their existing infrastructure.
We need to be very, very careful applying HL to KSA that has a history of political and economic intervention in its production history. But I still think that HL provides the best clue to the future of KSA.
I hear screeeeeching so got to go. But thanks for your comment - I'll put my last polonium pill back in its lead case for another day.
I hear screeeeeching in the background so I'm going to answer Stepping Back then off to siesta.
Then he developed the "other 50% of SA's fields" that are now untouched. His kids needed the money. Get the picture? If u visualize SA as fully developed or as "two countries", then we have greater production.
Back to your graph. Your fault was in being too fair. The green solid line should have a much steeper slope running along the bottom of the green troughs. This intersects the x-axis at 146-Gb. That's one country. The other country is shuttered and would add another 146-Gb for a total of 290-Gb. And what has Aramco been claiming in all their Outlooks? 260 P1 + 32 P2 or 292-Gb!!
As the decade unfolds, u will see a new paridigm in your HL. A new dogleg line pointing to 292-Gb. It's not a optimistic as your IEA forecast indication, but draw a line 'tween the two and u'r fricken close...