It seems to me that the peak could be caused by a voluntary reduction (plus other factors). Then when the time of the ramp up comes, the production increases, but it does not ever again exceed the peak caused by a multitude of factors (including geological).

I guess what I am trying to say, is that I believe the peak will be (or has been) reached and caused by a multitude of causes, with the geology just being one of the causes.

Rick

Good explanation.  Thats always been my point about the difference between "geological" or true peak, and "logistical" or peak caused by logistical factors such as lack of manpower, lack of machinery, political instability, lack of investment capital, lack of demand, etc, etc.  Logistical peak can be recovered from, as in the 1980's.  But "true geological peak" can never be.

Westexas makes the great case of this in regards to Texas and lower 48 U.S.

There was no war, the technical talant was as good as anywhere in the world, there was plenty of money, and there was the best machinery in the history of the industry....but when Texas went into it's "geological" decline, no amount of money, no amount of effort and no amount of drilling could reverse it.
When that happens, EVERY OTHER FACTOR becomes moot.  That is the question we are all asking:  How close is the world to that point?  Because once it happens, looking for alternatives, and restructuring consumption downward has got to happen FAST.  If the U.S. peak was any indication, we will get no advance warning, and the price signal will tell us nothing.  American oil was as cheap as it had ever been (inflation adjusted) at the time of the U.S. peak, and everyone was living large.  Only months later, we were over the top and starting the long, long decline.  

Right now, if you factor in inflation, oil is still relatively cheap (taking a price between $58 and $62 per barrel) when compared to inflation on everything else since the early 1980's.  

Even the optimists know this:  Light sweet liquid crude, and that prestine natural gas are one shot deals.  We may be able to find alternatives, synfuels, etc., but the time of pulling this miracle elixer out of the ground and out of the ocean floor can only happen for us once on this Earth.  That first time was a "freebie" in a way.  All the rest we will have to design ourselves, at great cost and effort.  If we are too lazy to get off our lazy arses and start now, we will have only ourselves to blame for using up the last of a miracle of nature as great as natural water or the giant tropical forests, there will be no "store" to run to and buy what is the only GEM of nature and God of the likes of this planet ...there will be no putting the toothpaste back in the tube.

Forgive us, we do take it so for granted don't we?

Roger Conner  known to you as ThatsItImout

Resolved:   World Net Oil Export Capacity is Now Declining Because of Involuntary Reductions in Production and/or Because of Increases in Domestic Consumption in Major Oil Exporting Countries

A Guest Post by Westexas (Jeffrey J. Brown)

Background
Robert Rapier suggested that we debate this topic, and I agreed.   In reality, there are only shades of gray difference between us regarding the timing of Peak Oil and Peak Exports.  I believe that the crisis has hit, while Robert believes that the worst won't be upon us until some time shortly after 2010.

In any case, in a guest post on The Oil Drum (TOD) in January 2006 http://www.theoildrum.com/story/2006/1/27/14471/5832, I predicted, based on graphs primarily done by "Khebab," who is now a TOD Contributor, that the world would see declining net oil exports this year.  

I focused on the top three net oil exporters--Saudi Arabia (KSA); Russia and Norway--which together accounted for 48% of the (total liquids) exports by the top net oil exporters in 2004 (all production data based on EIA numbers, unless noted otherwise).  Top exporters are defined as those exporting one mbpd or more.

In his most recent book, "Beyond Oil:  The View from Hubbert's Peak," Kenneth Deffeyes outlined a simplified version of the mathematical techniques that M. King Hubbert used to accurately pick the time frame for the peak of Lower 48 oil production.  The method, named "Hubbert Linearization" (HL) by Stuart Staniford on TOD, is outlined in the following article "Texas and US Lower 48 oil production as a model for Saudi Arabia and the world." http://www.energybulletin.net/16459.html

Deffeyes defines Qt as a mathematical estimate of the ultimate recoverable reserves for a region.     Regions tend to peak, and start declining when they are about 50% depleted, i.e., the 50% of Qt mark.  

The following regions have now shown lower production after crossing the 50% of Qt mark:  Texas; Lower 48; Total US (which had a secondary, but still lower peak, after the North Slope production came on line); Russia; North Sea; KSA and Mexico.  

In the January article, I outlined my "Export Land" model, which was inspired by work done earlier by Matt Simmons.  I stipulated that we had a country producing 20 mbpd and consuming 10 mbpd.  

I then stipulated Export Land hits the 50% of Qt mark, and over a five year period, production declines by 25% and consumption increases by 20%.  Because of these two factors--falling production and rising domestic consumption--the net oil exports from out hypothetical exporter decline by 70%, from 10 mbpd to 3 mbpd.  

Note that the underlying assumption, which I think is generally true, is domestic demand is generally satisfied before oil is exported.  We have a real life example of the Export Land model in the UK, which has gone from exporting one mbpd in 1999 to being a net importer in 2005.  

Also note that I expect domestic consumption in the exporting countries to go up quite rapidly, at least initially, as oil prices rise faster than their production is falling.

What I found deeply troubling in January was that the top three net oil exporters were all past their respective 50% of Qt marks.   In January, KSA was showing stable production, Russia was showing a slow rate of growth and Norway was in decline.  I predicted, based on the HL method and based on the Export Land model, that we would see lower exports from these three countries in 2006.

Roger the time for mitigation projects has long since past. This is now the time to build lifeboats. The bottom line is that when the world recognized Peak production and permenant declines, much of the world's leading exporters will cut or stop exports altogether. It makes no sense for countries to continue to export oil and gas to the west when much of them have their own populations to support. Perhaps some oil will still imported to the US, since the US is the leading exporter of food, but it certainly won't be enough to preserve our standard of living. Whether the US can contine to produce the same volumes of food without plentiful and cheap oil is a big question. The US is now the third most populated nation (300+ million), especially when you consider the rapid deplention of the major aquifers.

Finally to put ones preservation in the hands of the US gov't seems foolish to me. Our politians have been arguing for the past twenty five years on silly stuff, and make poor decisions because it gets the re-elected, (Ie bigger entitlements, new highways, etc). Its likely to take another twenty years before they start making sound policies, unlike the silly energy policies which have only hasten our demise. By then the Union will have all but disolved as states and local gov't realize that Washington isn't going to save them. Thats assuming that they continue to exist and have enough capital to finance projects with.

The Saudis may have already decided to not produce flat out, to conserve the resource, and engineer a more sustainable oil production future. This is what Simmons recommends. So, to think that we will ever have a peak which is coincident with producing flat out may not be in the cards.

I find that highly unlikely. The fact that Saudi has admitted to a 5 to 12 percent decline rate means exactly that. They are declining by an average of around 8 percent. Saudi produced an average of 9.55 mb/d last year. Now is that decline rate voluntary?

A year ago last September Saudi produced 9.6 mb/d. This September they produced 9.0 mb/d, a decline of 6.25 percent. And it can be assumed that they found some new oil, or pumped faster from some old oil patches, to get their decline rate down to 6.25 percent.

But this is all beside the point. IF they are just resting their fields, this does not mean they can go back to pumping a lot more oil later. They are resting their fields because they were overproducing them before. Even if they are just resting their fields, it means they will never likely go back to what they were producing before.

Therefore, the concept of a geological peak, may be a bit misleading in the since that we could have a voluntary peak that is, not strictly speaking, constrained by short term geological considerations.

I don't think so. If they are telling the truth when they say their existing fields are declining at 5 to12 percent per year, then they are at geological peak.

Isn't it true that the Kuwaitis have decided to not wait until they a decline in production is not a choice?

No, that is not true at all. The opposition party in Kuwait has discussed this but to no avail. Kuwait is still producing flat out, or was until November 1st anyway.

I think it would be more accurate to say that we may have a peak based upon geological considerations, but not one based upon an absolute inability to produce more in the short term.

Well a few countries have yet to peak, Nigeria, Angola, Brazil, the Caspian area and perhaps Russia. But Russia is very close.  But I have absolutely no doubt that Saudi Arabia is post peak, as well as Iran, Venezuela, US, UK, Norway, Mexico, Indonesia and about a dozen other major producers.

There will always be some problems an/or conflicts in the world that keep a few nations from producing full tilt. That is to be expected. But right now if Nigeria and Iraq had no problems, we would still have peaked, so far, last December because last December those same problems held back production then as well.

Bottom line, when we peak, or when we peaked, it will be because everyone is producing every barrel they possibly can, or could.

Ron Patterson

I have answered this question at least half a dozen times. It is because there isn't nearly as much excess capacity in the market as there was a few years ago. Peak Lite. Demand rising faster than supply.

No. It doesn't mean they are producing at max capacity. But it may mean that they see all of the excess disappearing in the not too distant future unless they accelerate some of their projects.

Refineries, for instance, have greatly increased capacity over the years. When they do a project, they will have excess capacity for a while. As demand grows, they look out and decided that another project must be done. If demand grows faster than expected, we will need to accelerate the project. We weren't ever necessarily producing full out, but we saw that we would not be able to meet future demand without the projects.

Why the change?

They may have figured out, like many of the rest of us, that this ethanol business is a scam that won't put a dent in our oil consumption.

The Saudis have had a change of view on the "proper" price of oil.  But it shouldn't be too much of a mystery since higher oil prices are clearly in their interest.  The real mystery is how they were persuaded for so long to keep the price so low.  I'd propose 2 explanations for their change of heart.  First, they saw that $75 oil didn't crash the world economy, which many had feared.  And second, the Saudis have a new king, and he is not so closely aligned with the US.  This realignment is illustrated by another recent Saudi move; showing the US military the door.

in 1980, KSA's lifting costs were closer to $2 / bbl.

Cost / Number of bbls flowed.

KSA is blessed with massive, onshore fields that were once under high pressure at relatively shallow depths.

This is why KSA has been a fount of cheap oil throughout most of its history to date.

Look at the number of wells required to flow this wealth and compare it with the number of wells required by its next nearest contemporary (in time, not size). This would be Texas.

KSA benefitted from its particular geology and the lack of development required to bring it on stream and up to full flow.

Things may now change, and lifting costs will rise, but for the bulk of its history, KSA oil was at very low lifting cost.

What will change KSA's lifting costs will be the new arrivals, many of which are Jack Ups. Also any new fields that are stranded and require piping to current infrastructure will also increase lifting costs. But even so, they are in pretty good shape wrt lifting costs.

Compare it with Thunderhorse or Jack or the Barents Sea.

And, at the end of the day:

Engineer: ' what are our projected lifting costs?'

Accountant: ' What do you want them to be?'.

in 1980, KSA's lifting costs were closer to $2 / bbl.

Cost / Number of bbls flowed.

KSA is blessed with massive, onshore fields that were once under high pressure at relatively shallow depths.

This is why KSA has been a fount of cheap oil throughout most of its history to date.

Look at the number of wells required to flow this wealth and compare it with the number of wells required by its next nearest contemporary (in time, not size). This would be Texas.

KSA benefitted from its particular geology and the lack of development required to bring it on stream and up to full flow.

Things may now change, and lifting costs will rise, but for the bulk of its history, KSA oil was at very low lifting cost.

What will change KSA's lifting costs will be the new arrivals, many of which are Jack Ups. Also any new fields that are stranded and require piping to current infrastructure will also increase lifting costs. But even so, they are in pretty good shape wrt lifting costs.

Compare it with Thunderhorse or Jack or the Barents Sea.

And, at the end of the day:

Engineer: ' what are our projected lifting costs?'

Accountant: ' What do you want them to be?'.

Thats deficit is probably not something the Saudis have forgotten about.  Again does it really matter what their historical costs are?  What SA and other countries are really shooting for is a price which will cover oil extraction and development costs + governmental adninstration costs.  Otherwise they would eventually exhaust all their savings and be forced to greatly reduce their standard of living.  

Much of the existing infrastructure was scrapped at that time.

Alan