The Oil Drum | Reserves Growth and Production Flows

192 comments on Reserves Growth and Production Flows

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oilaholic on August 30, 2006 - 12:02am

I hesitate to challenge an expert, westexas, but must point out what seems like a logical flaw in your argument that technology has not impacted HL analysis. I believe it is improper to compare, as you do in comparing the U.S. and North Sea, land based and deep offshore drilling histories and use the results to make any valid conclusion about technology because the economics of offshore drilling (cost of equipment and labor) are so much worse that the care and the technologies that would be applied to land drilling are not cost-effective and therefore are not applied in similar fashion to offshore fields. Land and offshore are apples and oranges, I believe, from the viewpoint of sustaining a very high level of production flow by means of modern seismic and drilling technologies. I believe offshore fields do not generally yield as high a percentage of OOIP nor the expansion of reserves found over time that is true for land drilled fields.

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westexas on August 30, 2006 - 5:54am

Oilaholic: "I hesitate to challenge an expert, westexas, but must point out what seems like a logical flaw in your argument that technology has not impacted HL analysis."

I'm not sure I would classify myself as an expert; however, in my opinion the North Sea is the definitive proof of the HL method--for many of the reasons you cited--primarily because it could not be more different from the Lower 48, yet both regions peaked at the same stage of depletion.

What the North Sea did have was better seismic and more advanced drilling practices, but again the two regions peaked when about half the reseves had been used.

However, the rise and fall of the big fields drives the production curve--regardless of whether the producing region is onshore or offshore, and (largely) regardless of the state of technology. This is why we can compare the Lower 48, Texas, Russia, the North Sea to the world, Saudi Arabia, etc.

Better technology can help with unconventional production, but that is, at best, hugely capital intensive and low rate of production.

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MUDLOGGER on August 30, 2006 - 6:41am

From Today's Press and Journal (The Aberdeen Daily)

Funny how it is always 'one off factors'....

ONE-OFF FACTORS BLAMED FOR LATEST DECLINE IN NORTH SEA OUTPUT
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IAN FORSYTH

08:50 - 30 August 2006
The decline in UK North Sea production has been continuing, according to the latest Royal Bank of Scotland oil and gas index released yesterday.

Combined daily average output in June was 2,570,537 barrels of oil equivalent per day - down 13% on the previous month, while annual production fell 18%.

This was the worst figure in 13 months and well off the high in this period of nearly 3.35million barrels a day in January.

Last night, The UK Offshore Operators Association (UKOOA) blamed the latest drop on exceptional factors and was hopeful production will climb as the year progressed.

The body expects the monthly figure for 2006 to average out at more than 3million barrels a day.

The Brent crude price averaged 68.69 a barrel in June - a fall of 1.18 on the month before but up 14.24 on June, 2005.

The index said: "Early summer maintenance depressed oil and, in particular, gas production in the North Sea in June, but the sharp decline in production compared to one year ago suggests that the secular decline of the North Sea continues.

"It is a conundrum that the increase in investment spending seen over the last year has not resulted in measurable output growth.

"Soaring costs fail to explain the sluggish supply response - since higher input bills have not prevented a sharp pick-up in drilling activity. This is particularly puzzling, given that drilling activity aimed at the development of new fields or at boosting production of existing fields, which has a more immediate effect on output compared to exploration drilling, has accounted for the lion's share of the recent sharp increase.

"The relative weakness in exploration drilling in turn bodes ill for future production growth."

The index said crude oil prices would only moderate if spare capacity became available, which would cushion the effects of any supply disruption, or if there was a measurable deceleration in demand growth.

Steve Harris, communications director at UKOOA, said the figures from the Royal Bank survey were disappointing, but did not tell the whole story.

He added: "Our members are investing at near-record levels and it is estimated that the workforce offshore has swelled by about 20% in the last 12 months.

"The Royal Bank figures compare a single month with a single month 12 months ago, making no allowance for any exceptional factors that have contributed to this position."

Mr Harris said that the fall reported by the Royal Bank was because of reduced demand for gas in June because of the warm weather and annual maintenance being brought forward.

But he conceded that production was not picking up as UKOOA would like.

"We face challenging times, but our commitment remains," added Mr Harris.

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MUDLOGGER on August 30, 2006 - 6:43am

I particularly like this bit from the above post:

"It is a conundrum that the increase in investment spending seen over the last year has not resulted in measurable output growth''.

Sound familiar?

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westexas on August 30, 2006 - 7:00am

"Sound familiar?"

"Deja Vu all over again"

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VW on August 30, 2006 - 8:37am

"The index said crude oil prices would only moderate if spare capacity became available, which would cushion the effects of any supply disruption, or if there was a measurable deceleration in demand growth."

Exactly!!! Those are some mighty big "ifs".

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JCK on August 30, 2006 - 7:19am

the North Sea is the definitive proof of the HL method

This is logically flawed. No single working example can prove a theory. You are making an assumption. That the HL method worked for the North Sea does not prove that the method is generally applicable.

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Bokken on August 30, 2006 - 10:06am

I believe the point Westexas was trying to make is that if any field was going to provide a failing case for the HL method, it would have been the North Sea.

Since there are now several examples of oil field depletion (Texas, Yibal, North Sea, etc), perhaps it's time to formulate a set of "Hubbert's Laws" in honor of M.K. Hubbert.

Bokken

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memmel on August 30, 2006 - 10:42am

Its funny you say this since the Hubbert Law is exactly the same as concept as Moore's Law.

http://en.wikipedia.org/wiki/Moore's_law

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memmel on August 30, 2006 - 10:48am

Replying to my own post.

Once one can prove that Moore's law no longer holds it has no predictive power for the evolution of cpu complexity post peak. In fact what we are seeing today is a massive drop in the rate of increase in complexity of cpu's made up by multi-cores and addition of memory.

Considering that Moore's law fails post peak circuit density I argue that HL fails for oil production rates after the peak.

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Bokken on August 30, 2006 - 11:14am

You could also include Finagle's corollary to Murphy's Law into your proof:

"Anything that can go wrong, will -- at the worst possible moment."

Bokken

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pseudonaja on August 31, 2006 - 4:22am

I have it on good authority that Murphy didn't actually write Murphy's Law, it was actually another fella with the same name!

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GreyZone on August 30, 2006 - 3:07pm

This may be true but has not yet been true in any individual field that has peaked. HL methods have accurately assessed dozens of fields and provided accurate pictures that defied "expert" forecasts on multiple occasions.

Until you provide data to prove your assertion, it is worthless. Personally, I suspect that sociological and political factors could make you right, but that's not proven anywhere yet so we're both just guessing. And rather than guess, I'd prefer to look at methods that have a proven track record, like HL analysis.

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memmel on August 30, 2006 - 9:14pm

After peak the production rate of a field is very sensitive to how its been developed produced and the geology of the field itself. Technical factors come into play to determine the post peak production profile. Almost all the offshore fields show steep declines post peak because of the way they are produced. For cpu's and Moore's law heat and static discharge have ben the major factors on the real increase in computing power the last few years.

These technical factors certainly sometimes result in higher production rates then would be predicted with a smooth curve generally in exchange for a drop in production later.

In general just looking at the graphs most fields tend to show a initial slow decrease in production rates post peak for several years say 3-10 followed by rapid drops as technical factors come into play. Look at the field production profiles for Texas and the north sea.

Here is a article on the North Sea.

http://www.energybulletin.net/17262.html

The decline rates post peak are all over the map.

I agree I'm guessing but it would sure be nice to have someone come up with a reasonable explanation why the post peak decline rates won't be steep. I can come up with lots of reasons to expect steep declines and so far not single reason to expect them not to be steep. And yes I take political and engineering issues into consideration because they are relevant.

How can we ensure that we are not headed for serious problems ?

Treat oil as a world resource not a national or resource open the books and do independent analysis. Find out the truth then with this information work out a way to power down in a dignified manner. Transparency regardless of if the news is good or bad is the only answer.

Are we going to do this ?
Probably not.

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odograph on August 30, 2006 - 8:15pm

as someone who eagerly awaited the hot new chip, each year, for 20 years ... it doesn't surprise me that moore's law would slow now. the users and applications that need a new chip are becoming fewer and fewer.

IOW, the average age of a home or office pc is increasing.

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Kevembuangga on August 31, 2006 - 2:13am

applications that need a new chip are becoming fewer and fewer.

Not so sure!
This may be a chicken and egg problem.
Some applications which would require orders of magnitude more processing power are put on a back burner and not investigated further.
For instance I know of an on-the-fly compression/decompression algorithm which is limited to a few dozen kb/s with current chips, a 100 or 1000 speed up factor would help.
I suspect there are many, many such hidden nuggets.

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odograph on August 31, 2006 - 8:49am

Yeah, that's why Intel pushed so hard a few years ago for more entertainment uses and video applications. Unfortuntately for them, home users have largely stuck with digital still photography, and relatively small pipes for internet.

I ran my pc as a PVR for a while ... but I think that one's better done with a lower horsepower, lower electrical power, device like a dedicated DVR with a big disk.

On the server side Google showed that you could do it with dirt-ball hardware (IIRC their term). Now they are backfilling, not for more horsepower, but less electrical power. Related:

The Server Market Struggles for Growth in Q2, Says IDC

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Kevembuangga on August 31, 2006 - 1:39pm

Yeah, that's why Intel pushed so hard a few years ago for more entertainment uses and video applications.

Indeed, blessed are the video-games addicts (some spending 40% of their income), I thank them for the cheap chips we can all enjoy.

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Magnus Redin on August 31, 2006 - 4:52am

Even if the demand for faster chips would slow down more transistors per chip gives more compacty and cheaper systems and flash memory is very practical. And there is a tradeoff between speed and power consumption, if you have the speed you need the development can give you lower power consumption.

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odograph on August 31, 2006 - 8:40am

Heh, my phone has one of those microSDs and supports a gig of flash. That still cracks me up.

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Bokken on August 30, 2006 - 10:51am

I design ICs for a living... Moore's Law is my best friend ;)

Bokken

PS: Until PO hits, then it'll probably be a hoe.

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Comp Lex on August 30, 2006 - 11:29am

That's why it's called a model.

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192 comments on Reserves Growth and Production Flows

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