Euan, in your post you turned down Stuart's $2000 bet, but you did not make a counteroffer. Why not? It's clear that you and Stuart have a fundamental disagreement on Saudi Arabian oil supply, so why not stand up and be counted and put some real money on the line? If you and Stuart can't agree on a bet that both of you would accept, then perhaps your positions overlap so much that the outcome of such a bet is not a good financial proposition?

As Robert pointed out when he offered a $1000 bet on oil prices a few months ago, people tend to behave differently when real money is on the line. Their arguments weaken as they start negotiating the terms of the bet. They want a sure thing, so the event they end up betting on is often far afield from their original claims. This is when everyone else finds out what they truly believe.

Euan, I just posted a comment on the stacked Saudi production forecast chart near the bottom of yesterday's thread - it is a very scary chart IMHO. Is it really based on the Saudi's own forecasts of their production ? Is there a source reference for the data for that chart ?

It actually _shows_ a peak in Saudi production, and the very beginning of decline. The problem is that oil companies have historically had terrible track records at predicting the actual decline rates for their fields. So I have to assume that the actual decline rates will be higher than shown.

It is also the worst kind of "hockey stick" chart - it shows a sharp discontinuity in trend lines, which is a big red flag in any business I have been in. "Sure, we are flat-to-declining", but everything will be great 'tomorrow'".

Yikes!

CW
Global peak: 2007 - 2010
Global decline rate, Post peak: 2%
Economic response: Severe global recession, ~5 years, then slow recovery

Am I reading this right?

1. Productivity fell from 1980 to 1990, be it by above ground constraints (oil price, resting wells etc) ... except for a pumping spike (maybe associated with a show of strength, or may be in response to the Iran-Iraq war?)
Or maybe it fell because the North Sea and North Slope came on stream at full bore.
2. Oil flattens at 6 k per well thereafter.
3. A horizontal well campaign commences circa 1991 (BTW: Such a campaign would have required about 2-4 years of pre-drill planning, tech analysis, G and G work up and drilling services procurement, etc)
4. Campaign commences, Productivity remains flat at 6k per well.

All that drilling, no improvement...

I can only assume that when KSA decide to turn on the taps and utilise the new productivity due to the HD campaign which ramped in 1996, then the oil will flow like a cornucopean's wet dream :-)

Or maybe they were running to stand still even in 1990?

Nice graph Euan.

Jeez Euan, this is just dandy! Not to show my frustration. Your attempt to analyze SA spare capacity by getting a handle on well productivity was creative. This latest data though takes the contention from your article and stands it 180 degrees on its head. As a bonus, we find that with all the horizontal wells the peak will not likely be a gentle, pretty downslope, but much closer to cliff. Thanks for putting my mind at ease about PO ;)

Here's something else to smile about if it hasn't been caught earlier:

A decline in imports of natural gas from Canada may lead to higher U.S. prices this summer, said Peter Linder, an energy analyst with DeltaOne Capital Partners in Calgary.

``We're going to have the biggest decline in western Canadian production in the history of the industry,'' Linder said. ``There's going to be 400 to 600 million cubic feet a day less production from western Canada in 2007 versus 2006.''

http://www.bloomberg.com/apps/news?pid=20602099&sid=aKfnFfrQZo8M&refer=e...

best wishes all.

TOD has experienced an intense discussion of KSA's ability to increase or maintain production. Almost all of the discussion has focused on the existence / lack of existence of new prospects and the stage of depletion of the sweet spot in the Arab D formation in various parts of Ghawar.

The discussion has not gone into the existence of stacked pays at Ghawar and other developed fields. The U.S. has had something over a million and half wells drilled over the past century and a half. The target zones for most of those wells were not realistically expected to produce thousands of bbls per day for decades. It doesn't take thousands, hundreds, or even one hundred of bbls per day to justify drilling a 5000 foot onshore oil well in close proximity to other oil field infrastructure.

My question [which may relate more to the probability of a fat tail to the right of peak oil than to the peak itself]: Do stacked pays in existing fields represent a major part of the future of production for the KSA?

Ha! My (admitted limited) experience with new & infill horizontal wells is that they produce on the order of 20k bbls/d, at least initially, but also decline faster. So if they have to drill that many horizontal wells to keep their average well productivity level... all their older wells must really be going to shit, and I'd say a lot of the horizontal wells drilled prior to 2000. (Unless of course they were drilling the horizontals but not using them as Euan suggests... damn theres just too much we don't know!)

Question is how much longer can they keep exponentially increasing the number of horizontal wells drilled just to hold average well productivity steady? Not much longer I'd say, but again, given currently KSA as a whole has a miniscule number of drilling rigs compared to say the US, there is a lot of room for increases, so "not much longer" could be 5 years or so...