The Oil Drum | An Attempt to Apply The Parabolic Fractal Law to Saudi Arabia

76 comments on An Attempt to Apply The Parabolic Fractal Law to Saudi Arabia

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Sam Foucher on June 17, 2006 - 9:05am

A critical point to keep in mind is the age of the top nine oil fields, especially Ghawar. The range in recoverable reserves for the top nine fields is from 168 Gb to 239 Gb. Reserve transparency is a huge issue for these fields

It'a key issue, uncertainty on the top fields has to be reduced.

I assume that the PFL is an attempt to address the problem of undiscovered (presumably but not necessarily smaller) fields, since the HL technique just plots annual production as percentage of cumulative versus cumulative.

yes, it's somewhat an orthogonal approach to Hubbert approach.

It is entirely probable that because of a lot of smaller fields, URR for SA will be between 186 and 274 Gb. The question is, will that have any effect on a near term peak?

The PFL gives an upper bound on the URR value (crude oil only), it's very unprobable that we will reach it.

Also, note that it will be a huge logistical effort to bring swarms of smaller fields on line. And again, historically it has not worked to try to offset the declines from large old fields with smaller newer fields.

Agreed. Once you are in the tail portion of the PFL you get very small production increases despite huge investments.

IMO, I don't think that it makes much sense to use one portion of a producing province as a model for a very large producing province like SA or the world.

UK is not a model, I just got the same curvature estimate as the world.

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westexas on June 17, 2006 - 9:45am

As I understand it, the HL method is a simplified version of the methodology that Hubbert used to successfully predict the approximate peak for Texas and the Lower 48.

The HL method indicates that SA and the world are now about the same points at which Texas and the Lower 48 peaked--and coincidentally or not--recent reports indicate that SA and world production are both trending down.

It seems to me that the HL method is best for picking the timeframe for peak production, while the PFL method may be best for estimating ultimate URR, including all economically viable smaller fields, with some occasional large "surprises." However, historically nothing has brought production back to the peak level once a large producing region has declined in the vicinity of 50% of Qt.

Texas is still a very fascinating case history. We had the biggest drilling boom in state history in the Seventies to early Eighties, and we succeeded--we increased the number of producing wells by 14%. But the net decline in production--after the new wells were put on line--from 1972 to 1982 was 30%.

This is actually a variation of the argument that I have been making, to-wit, that I see permament boom times ahead for the energy industry--at least until we hit the net energy problem, which for some areas in the US may not be too far away.

In any case, vast sums of money will be spent, looking for and (in some cases) made producing smaller oil fields. (This is precisely what I am doing.) However, IMO it won't do anything to reduce the Saudi and world production declines.

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Sam Foucher on June 17, 2006 - 10:12am

It seems to me that the HL method is best for picking the timeframe for peak production, while the PFL method may be best for estimating ultimate URR, including all economically viable smaller fields, with some occasional large "surprises." However, historically nothing has brought production back to the peak level once a large producing region has declined in the vicinity of 50% of Qt.

The PFL does not need the production profiles but can give an interval of probable values for the URR based on the mature top fields. Preliminary results on Norway suggests a lower curvature value (around -0.35) so it's very possible that SA has also a lower curvature that could lower the resulting URR. More oil field data (at least the top 15 fields) could help refine the curvature estimate. If I'm not mistaken, SA production comes from the top 15 field which are believed to be very mature, the PFL is showing that this ubset of fields contains 90% of the URR. Once you have to developped smaller fields, it becomes very difficult to maintain an elevated production rate.

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Prodigal Son on June 17, 2006 - 4:25pm

Even though I'm not an oil geologist or a mathematical modeler, the technical discussions I see here is what makes this such a great site. I learn just by trying to soak this stuff up. Something tells me this type of online discourse is what eventually most scientific journals will look like...

Anyway...

Texas is still a very fascinating case history. We had the biggest drilling boom in state history in the Seventies to early Eighties, and we succeeded--we increased the number of producing wells by 14%. But the net decline in production--after the new wells were put on line--from 1972 to 1982 was 30%.

This point, made all the time by Westexas, seems to always be the 800 lb. gorrilla sitting in the room. In an empty world economic model this fact could conveniently be ignored as high prices would mean more oil could be discovered somewhere, if not in the mature fields themselves.

In a full-world model, however, with companies having scoured the earth for every last economically recoverable barrel, this fact just seems to sit there showing to all who want to look that geology eventually trumps the laws of supply and demand. Demand, no matter how high, cannot by itself create supply if the physical resources simply aren't there. This information about Texas is simply terrifying once you understand the implications. No wonder most people don't want to acknowledge it -- it really does call into question basic fundamental assumptions about our society and our way of life.

There is no somewhere else.

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jkissing on June 18, 2006 - 12:35am

geology never trumps the law of supply and demand. This law never promised any level of production - it only says that supply and demand are always in balance. Price can and does change dramatically and quickly as supply expands and contracts.

The only exception is when a product is rationed, as oil was in the US during the seventies and has been in China until recently. In this case, product disappear from the shelves (or pumps) and cannot be obtained by the non-priveledged at any legal price, thus bringing into being an illegal black market. China is now in the process of allowing prices to rise to world levels, which acted to ration liquid fuels, thus allowing demand/supply to increase.

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Prodigal Son on June 18, 2006 - 2:42am

Geology never trumps the law of supply and demand. This law never promised any level of production - it only says that supply and demand are always in balance.

Yes, and in the long-run we're all dead too. Thanks for your helpful economic lesson.

Supply and demand always balance? Wow. Did you also know E=MC^2 too? Your point is trivial. What's important is what equilibrium markets fall into.

Noting that 'supply and demand' always balance may be 'technically' correct in econo-speak, but that's cold comfort to individuals who will, in the future, likely face ever higer prices for a resource that is in ever shorter supply. Society at large is under the mistaken impression that absolute scarcity can be overcome simply with higer prices. Somehow the magic of the market will produce affordable alternatives all by itself. That this is not the case, as the record on Texas depletion aptly demonstrates, will come as a very rude shock to people who have been sold a bill of goods on how markets operate. That Texas has not once produced more than its 70s peak despite massive investment and never-before-seen prices is, quite simply, terrifying and the implications staggering.

The only exception is when a product is rationed, as oil was in the US during the seventies and has been in China until recently. In this case, product disappear from the shelves (or pumps) and cannot be obtained by the non-priveledged at any legal price, thus bringing into being an illegal black market. China is now in the process of allowing prices to rise to world levels, which acted to ration liquid fuels, thus allowing demand/supply to increase.

No, you misunderstand what occured. What happend is that hoarded, untraceable, blackmarket supply has come out into the open. No additional 'real' supply has necessarily been created, it has merely come out of hiding as legal trading became more profitable than illegal trading. Overall 'real' supply only increases in this case if the shift from illegal to legal trading frees up productive resources that can then be allocated to the production of the good in question.

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cynus on June 18, 2006 - 8:38am

geology never trumps the law of supply and demand. This law never promised any level of production - it only says that supply and demand are always in balance.
The notion that the "law" of supply and demand is a law like a law of nature is a joke. That supply always equals demand, is what a philosopher would call an analytic statement, and doesn't really tell us anything about the nature of reality at all.

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Prodigal Son on June 19, 2006 - 5:25pm

exactly. It's trivial, like saying that A->B->C, therefore A->C. Who the hell cares? Why is it important? It's verbal handwaving.

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Oil CEO on June 20, 2006 - 1:38am

Don't get me wrong, I have actually agreed with almost all of what you wrote today, and I also haven't read any of the parents to this comment, I just stumbled on it with my "Firefox -[n".

This isn't verbal, this is math. Somebody will have to remind me whether it is transitive or associative. I only failed that quiz once, but I sure as hell have learned when it is an important since.

I'll read the parents now to see what an ass I just made of myself.

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Oil CEO on June 20, 2006 - 1:47am

I'm not sure people, even good economists, understand the relationship between supply and demand. One of my first comments here dealt with this issue. In the time since I haven't seen any evidence that people understand it any better.

This is a time when I wish Sailorman was still posting. That guy could wrap something like this up in about 3 paragraphs and leave you begging for more. And the bibliography he could throw at you would put you out of your misery.

Where the Hell are you? If you've got better things to do, then at least say hi once in a while.

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cynus on June 18, 2006 - 8:41am

"when a product is rationed... , [it will] disappear from the shelves (or pumps) and cannot be obtained by the non-priveledged at any legal price."
Of course when a product that is in short supply is NOT rationed, it can ONLY be obtained by the wealthy at a high price.

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Prodigal Son on June 19, 2006 - 5:38pm

Or by a mobster with a gun.

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peakearl on June 18, 2006 - 10:56am

So, explain again how this works in an open boat in the Pacific with 15 people having 1 gallon of water to share? Demand will equal supply?? This is an extreme example to make the point, of course, but not really that off base. Demand = supply is a meaningless statement in the real world.

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Prodigal Son on June 19, 2006 - 5:39pm

The important thing is what equilibrium demand and falls into. Obviously, the relvant one here is the one where we all live versus the one where we all die, or where I live and you die.

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