<The Road from Hel is paved with wind turbines!The Oil DrumDrumBeat: October 2, 2006>

50 comments on Remembering Mr Micawber*

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westexas on October 2, 2006 - 10:32am Permalink | Subthread | Parent | Comments top
Five reasons I believe that we are past the peak of crude + condensate production:  The HL model; Ghawar; Cantarell; Burgan and Daqing.  

Mathematically, the world (based on crude + condensate) is at the same point at which the Lower 48 and the North Sea peaked and declined, and who among us is willing to predict rising world production when we have credible reports that the four largest producing fields in the world are declining or crashing?

Yesterday, I pointed out that the Saudis were celebrating over reportedly getting the Ghawar water cut "down" to about 35%.  Note that this is after redeveloping the field with high tech horizontal wells.

From yesterday's open thread:

This is a link to an updated version of Morton's excellent article on Ghawar:  http://home.entouch.net/dmd/ghawar.htm

In this paper, Morton said that there were reports circulating at the Offshore Technology Conference about Ghawar's water cut being up to 55% (one barrel of water for every barrel of oil).  I would also point out Heinberg's report that Ghawar was down to three mbpd.

So the question is, is Ghawar producing one barrel of water for every two barrels of oil, or one barrel of water for every one barrel of oil?

IMO, Ghawar and Cantarell are beacons--burning brightly in the night sky warning of the onset of Peak Oil.  

These two fields account, or accounted, for 10% of world crude + condensate production.  In both cases, the remaining oil is in rapidly thinning oil columns in carbonate reservoirs, between rising water legs and expanding gas caps.

BTW, the Saudis earlier this year complained about not being able to find buyers for all of their oil--even light, sweet oil--so, they "elected" to cut back their production.  Note that light, sweet oil prices traded in the highest (nominal) price range in history during this period.

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jkissing on October 2, 2006 - 1:27pm Permalink | Subthread | Parent | Comments top
I doubt that ghawar is down 40%... if they are down 2mmb/d, then other fields are up nearly that much, which is hardly credible.
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westexas on October 2, 2006 - 2:04pm Permalink | Subthread | Parent | Comments top
Assuming that Ghawar is declining--which seems credible to me given the reported 35% to 55% water cut--one question is when did production start falling?  

For all we know, the most recent decline may have been from 4 mbpd to 3 mbpd.  There is also the possibility that they are draining their inventories.  

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ThatsItImout on October 2, 2006 - 5:42pm Permalink | Subthread | Parent | Comments top

westexas

The problem is, and I quote from the excellent paper of Morton's (great maps too!) you link,

"Unfortunately for the world, few know the actual state of Ghawar."

And this is considering that everyone in the business had tried to beg, borrow or steal information about the condition of the field....imagine how little we know about the less studied Saudia areas, including Saudi offshore oil.

The problem is that sooner or later, this lack of oil would have to start showing up in a big way.  If Ghawar really is done that much, combined with Bergen, combined with Canterell combined with the known large drops in the North Sea combined with Norway, combined with China's field, then...?

Where is the oil coming from?  Are refiners having any difficulty getting supplies?  Are contract prices rising to lock in supplies?  Is any serious effort at diversification being made, to nat gas and propane, which for now we seem to up to our eyebrows?  Are drillers of gas and oil jumping back in in a big way?

These would be confirmation signs.  In the short range, we can find no one in the industry itself showing signs of panic or need for expedited action.  In fact, the trend in the short terrm is running the other direction, with countries talking of reducing production to protect price, investment firms running scared after the derivitives in natural gas collapse  (a collapse brought on by falling, not rising, natural gas prices), and gas drillers out west now delaying action on drilling of known assets to "store the gas in the ground".

There are however some confirmations, in the Saudi's march to more complex and expensive fields (remote ones which require pipeline water to inject and expensive pipeline to get the oil out) and high tech drilling to boost production, and into the offshore area in a bigger way  (this to me is always a sign that gas/oil is getting difficult to find onshore....otherwise, why go through the pain in the azz that is the nature of offshore drilling....and the deeper they go, the more it signals that onshore oil is getting hard to find and develop, for whatever reason.

There is one more thing I have to mention, even though I don't want to go too long.....these so called "oil insiders" or "a Mexican oil worker has leaked" or "an unnamed Saudi oilfield insider said" type stories are completely useless.

There is no way I can know that this is not some guy who saved up a couple of thousand bucks, bought oil futures on the long side and then started making a few phone calls to back up his bet and pick up some extra money.
It could be a PEMEX or ARAMCO secretary or janitor for all I know....with no attribution or confirmation, that is National Enquirer type stuff....

Roger Conner  known to you as ThatsItImout

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westexas on October 2, 2006 - 6:21pm Permalink | Subthread | Parent | Comments top
No one is denying that additional sources of oil are coming on line.

I'm developing new (small) oil fields in Texas, decades after we peaked.

The problem in Texas, the Lower 48, the North Sea and now the world is replacing the production from the old, large oil fields.

There appears to be no dispute regarding Cantarell, Burgan and Daqing.  

The estimated worst case decline rate of 40% per year for Cantarell came from an internal Pemex report.  In any case, Pemex has confirmed the Cantarell  decline

The only question regarding the top four  is Ghawar.  Morton refers to the problem with recent data regarding Ghawar.  A lot was known about the field before the Saudis took over operations.  What we do know is that cumulative production is getting close to the same stage of depletion, as a percentage of OIP, at which the Yibal Field--same reservoir, also redeveloped with horizontal wells--started declining.

Since the net decline (or increase) = older declining production + rising new production + workovers and infill wells, the initial decline can be quite subtle, e.g., the 0.6% Texas decline the first year after the peak year.  Worldwide, we are also seeing production from non-conventional sources.

However, historically, we have not seen production increases when the largest fields are all declining, and despite the highest (nominal) oil prices in history, world crude + condensate production is still down from December, as predicted by Deffeyes' HL work, just like the Lower 48 and the North Sea.

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Hothgor on October 2, 2006 - 9:08pm Permalink | Subthread | Parent | Comments top
Oil is very fairly priced currently, and as a proportion of gross income, at an historic low still.  It was much worse in the 70's, and even when oil was first being pumped.
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