<DrumBeat: August 29, 2006 The Oil Drum DrumBeat: August 30, 2006>

44 comments on From the old to the newer, or a thought for Khurais and its companions

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Asebius on August 29, 2006 - 3:36pm Permalink | Subthread | Comments top

Looking at those constantly updated wind speed probability tables offered by the National Hurricane Center made me wonder if the TOD contributors with expertise could offer something similar in this field.

ie. What do they see is the probability that KSA will peak by 2008, 2010, 2015 or even by now?

Same for other oil producing nations.

Simmons has said that much of the debate currently is "theological".  i.e. The data is just not available.

It that case, provisional conclusions expressed as probabilities seems to make sense.

Asebius
 

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jkissing on August 29, 2006 - 3:44pm Permalink | Subthread | Parent | Comments top
I remember long ago when verbal requests for bid would come in like "well, just give me a quick guess, maybe within 10%... oh, and tell me which way."

Insufficient data means you simply don't know. Probabilities based on insufficient data are just swags, have no meaning.

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Asebius on August 29, 2006 - 4:04pm Permalink | Subthread | Parent | Comments top

Spoken like an engineer.  (Are you one?)  But decision makers almost never have the luxury of sufficient data.  And so they mentally navigate the "fog of war" with probabilities.
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jkissing on August 30, 2006 - 2:41am Permalink | Subthread | Parent | Comments top
Was, now retired. Mechanical, specialty nuclear heat exchangers and prssure vessels.

Regarding SA, I agree with simmons that there is not enough data to guess future production, even though the clues seem to point to major problems. Like many, I guess that they will have difficulty getting back to 9.5mm/d regardless of the number of rigs, but moving from an avg of 18 to, say, 180 may be enough to increase production for a time. They have clearly decided to do their best, we will just have to wait and see. I don't see how anybody not closely involved could assign probabilities.

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copelch on August 29, 2006 - 4:06pm Permalink | Subthread | Parent | Comments top
Simmons has said that much of the debate [on KSA's peaking]  currently is "theological" ...

The curious thing about Simmons is that he bases his early-peak pessimistic case to a large extent on an analysis of data provided by the SPE (Society of Petroleum Engineers), whose expertise he greatly admires.

Yet the SPE apparently estimates KSA's capacity to be greater than do the Saudis themselves. This is because the SPE includes reserves attributable to enhanced oil recovery in its standards, but the KSA excludes such reserves. And that makes quite a big difference.

Some mishtake here shurely ...

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jkissing on August 30, 2006 - 2:45am Permalink | Subthread | Parent | Comments top
The spe papers simmons reviewed are those written by aramco engineers describing their problems and solutions. I never noticed that he used any non-saudi data from the spe for his research.
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Darwinian on August 29, 2006 - 4:12pm Permalink | Subthread | Parent | Comments top
What do they see is the probability that KSA will peak by 2008, 2010, 2015 or even by now?

KSA date of peak? The date that has the very highest probability of being the peak, 1980 when they produced an average of 9.9 million barrels per day, crude + condensate.

Second highest production year would be 1981 when they produced 9.815 million barrels per day, crude + condensate.

Third highest production year? That would likely be 2005 when they produced an average of 9.55 million barrels per day crude + condensate.

So far this year they have produced an average of 9.357 mb/d through May. But that figure is surely to drop to around 9.2 or 9.3 mb/d as the year wears on.

Ron Patterson

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Asebius on August 29, 2006 - 4:21pm Permalink | Subthread | Parent | Comments top
Can you offer you views in tabular form?  (on the 2nd peak that is)

so, the table would be something like:

2005     2006     2007     2008     2009

 P1       P2       P3       P4       P5

With the sum of the probabilities equaling 100.

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alistairC on August 29, 2006 - 4:36pm Permalink | Subthread | Parent | Comments top
But the Saudi production numbers are also consistent with their claim that they have a reserve capacity of 1.5 Mb/day... aren't they? i.e. they may be dropping production to tighten supply to keep oil around $70. What is the evidence against this?
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westexas on August 29, 2006 - 6:24pm Permalink | Subthread | Parent | Comments top
Re:  alistairC

If you haven't seen it, the HL case for a (final) Saudi peak in 2005:

http://www.energybulletin.net/16459.html

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alistairC on August 30, 2006 - 6:27am Permalink | Subthread | Parent | Comments top
OK, after several months I've started to have an intuitive understanding of Hubbert linearization. Now I only need to have "faith" in it!

To summarize :

  • it's likely, but unproven, that the Saudis are lying about spare capacity. It's also likely that they could squeeze out a spurt of additional production, but unlikely that they could sustain it.
  • they are managing a long plateau of production, which has quite likely masked the "true" peak production rate.

Now, in order to have faith in the Hubbert linearization of the Saudi peak, I guess I need to study how the curve-fitting was done for Saudi -- can someone point me to an article which discusses this in detail, analogous to "Four US Linearizations", i.e. identifying which period is linearized?

OK I could hunt for it myself... the smart people already know it by heart anyway... but I'm hoping that by reiterating this crucial point in detail, we can come to a better collective understandings of the underpinnings of the peak.

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ThatsItImout on August 29, 2006 - 6:25pm Permalink | Subthread | Parent | Comments top

AlistairC,

"Smile when you say that pardner!"....I recently commented that the Saudi's and other producing countries could be exercising what they like to call "good supply managementl" to (they like this word) "stabilize" the market, and it sent folks into fits of anger and disgust...IT'S A CONSPIRACY THEORY!!
(this from the same folks who accept a massive linkup of the oil, auto, housing, banking industries and press in "misleading the sheepie")

Of course "supply management" has been a part of the long history of the oil and gas industry, from the Texas Railroad days, right up to the
 1970's-1980's OPEC "adjusting the tap days.  It often greatly confuses the production picture, and it is extremely naive to assume that all oil producers run "wide open" simply for the purpose of keeping American gasoline prices dirt cheap.  That is NOT their first priority.

Roger Conner  known to you as ThatsItImout

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jkissing on August 30, 2006 - 2:52am Permalink | Subthread | Parent | Comments top
Putting it a little differently, their stated desired range used to be 22.5-27.5, or 25/b.  More recently, they said 50/b was a fair price. They keenly remember that high prices in the seventies brought about substitution and new production, and they have consistently done what they could to avoid a repeat.  Nowadays they might have confidence that peak is near and/or substitutes/new supplies are not coming soon, but there is no basis to conclude that they are withholding production to boost prices further.  Indeed, such behavour is more likely than anything else to encourage invasion - they must at least provide the appearance of doing everything they can to increase production in the face of record prices.
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fireangel on August 30, 2006 - 8:45am Permalink | Subthread | Parent | Comments top
Saudi Capacity continues to decline even in the face of new disruptions which would theoretically allow them to ramp up without causing a price fall. They produced 9.1 mpd last month versus 9.6 around september last year.
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alistairC on August 30, 2006 - 9:13am Permalink | Subthread | Parent | Comments top
As devil's advocate, I might reply :

If the Saudis wanted to fine-tune oil prices to keep them at $70, what would they do ?

How about exactly what they are doing now : throttle back just a touch, to counter the easing of the market which results from demand destruction?

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fireangel on August 30, 2006 - 12:40pm Permalink | Subthread | Parent | Comments top
True but the timing seems really inappropriate considering what we know about inelasiticity of demand. You lose 700,000 barrels in nigeria and you respond immediately by cutting? No way. And if they are comfortable with their production and have light sweet coming out of their camels arse then why all the rigs. These rigs dont come cheap. Land rigs go for as much as 22,000 a day. They are not getting all those rigs to store in their backyard.
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Asebius on August 29, 2006 - 4:42pm Permalink | Subthread | Parent | Comments top

But that figure is surely to drop to around 9.2 or 9.3 mb/d as the year wears on.

I've been reading TOD for a few months now and gradually have become convinced by articles like HeadingOut's that there is very substantial expertise here.

But just how sure are the main contributers? And when new info surfaces, how are views shifting.

It can be quite difficult to piece it all together.  Those various probability products at the Hurricane Center's site speak volumns to me.  I realize they are derived using a strict methodology.  And that anything so strict can't be developed for use with KSA production forcasts.

Asebius.

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Euan Mearns on August 29, 2006 - 5:44pm Permalink | Subthread | Parent | Comments top
The history of Saudi oil production is one of swing producer, witholding capacity to prop up prices, often thwarted by OPEC colleagues who saw a chance to earn a quick buck.  So I too fret about whether KSA is pumping flat out or whether they are whitholding some production.

The truth is they could be doing both.  Simmons points out that they frequently have over produced their fields - putting their old marathon runners on short sprints to meet demand peaks.  Right now they may be taking the opportunity ro rest but coud conceivably have 1 million bpd+ in the back pocket available for short term production sprints.  Tend to agree with Darwian though that they are past peak.  The relentless decline of their super giants will inevitably take its toll.

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memmel on August 29, 2006 - 11:39pm Permalink | Subthread | Parent | Comments top

If KSA tank farms are low which I think they are then they are refilling those as opposed to lowering production rates.

They have a fairly large storage capacity which I think throws a major monkey wrench into any monthly Saudi numbers.

I've not seen anyone come up with a way to see when there pulling out of storage. That would be a useful number.

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raulcrk on August 29, 2006 - 6:43pm Permalink | Subthread | Parent | Comments top
From TradeArabia.com:

*Russia became the world's top producer, pumping 9.636-million bpd in May. Saudi Arabia's output stood at 8.93-million bpd, sharply lower than the 9.432-million bpd it produced in the same month last year, said the report.
*

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44 comments on From the old to the newer, or a thought for Khurais and its companions

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