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156 comments on DrumBeat: March 21, 2007

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Calorie on March 21, 2007 - 10:14am Permalink | Subthread | Parent | Comments top

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.

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Cid Yama on March 21, 2007 - 11:18am Permalink | Subthread | Parent | Comments top

Also he is restarting a post where everyone pointed out he only used data up to 2005. Like proving the US production didn't peak by only using data up to 1969.

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ace on March 22, 2007 - 1:23am Permalink | Subthread | Parent | Comments top

Saudi Arabia’s Rapidly Thinning Oil Columns and Smart Well Installations

From Saudi Aramco’s press kit page 11
http://www.saudiaramco.com/sa/webServer/presskit/press_kit_full.pdf

”Technological Advances

Smart Wells and Intelligent Fields:
Smart well systems and down-hole sensors are part of a larger strategy to develop “intelligent fields,” an approach that combines real-time monitoring and timely reactions to changing well and reservoir conditions to optimize production and reservoir management. Overall, the company completed 24 smart well installations in 2005 (versus two the year before), and 55 maximum reservoir contact (MRC) wells, more than double the year before.”

To perform the above they needed one of these, a

”Geosteering Operations Center (GOC):
To further exploit the technological gains of horizontal, multi-lateral and MRC wells, Saudi Aramco opened the Geosteering Operations Center (GOC), where geologists and engineers remotely guide drilling activities in real time, around the clock, helping ensure that every well is optimally situated.”

In 2004, Saudi Aramco completed two smart well installations. In 2005, they completed 24 – that’s a twelve fold increase in one year! The world’s first smart well installation was in 1997 for SAGA Petroleum in the Snorre Field, Norway.
http://www.halliburton.com/news/archive/1997/hesnws_090497.jsp

Why do we need smart wells?

According to Martin Madsen, Production Engineer Visund, Statoil,
http://bergen.spe.no/doc/1%20day%202006/Presentasjoner%20PDF/Peer%20Gynt...

”– Compensate for different reservoir properties
•Pressure, PI etc
– Balance inflow
– Close / choke back zones with high GOR or WC
– Save intervention (time and money)
– Take into account the unexpected”

Point three above is important as zones with gas or water breakthrough can be closed or choked back using “above ground” controls. In other words, in these zones the column of oil is too thin to extract. (GOR – gas oil ratio; WC – water cut)

Smart well studies by Baker Hughes
http://www.bakerhughes.com/bakerhughes/water_management/completion_IWS.h...
state that the use of smart wells can increase ultimate recovery by 53%. The main reason for this is the improved ”management of undesirable fluids”.” (The undesirable fluid is water.)

On an annual basis, from 2004 to 2005, Saudi Aramco has a twelve fold increase in smart well installation completions from 2 to 24; and a two fold increase in MRC well completions to 55. (would be nice to have 2006 data – Haradh Increment III was completed in early 2006 with 32 intelligent MRC wells – intelligent=smart. I don’t know if these 32 wells are partly counted in 2005 data)

The huge increase in smart well installations and MRC well completions from 2004 to 2005 strongly indicate that Saudi Arabia is now extracting its last remaining oil reserves – difficult to extract oil from their rapidly thinning oil columns. Saudi Arabia's oil production rate may already have passed its peak.

For more information about smart wells - this website is good.
http://www.welldynamics.com/technology/installations.htm
Welldynamics have installed 228 smart well up to October 2, 2006. They state that this is more than 50% of the world's smart wells so it could be assumed that there are about 400 to 450 smart wells worldwide.

This is a link to Shell's snake well technology, (I think a type of smart well as it uses smart technology). The video on the right is worth playing. It states that without this technology the oil was previously inaccessible.

http://www.shell.com/home/Framework?siteId=technology-en&FC2=/technology...

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totoneila on March 22, 2007 - 2:12am Permalink | Subthread | Parent | Comments top

Hello Ace,

Excellent info--thxs for digging this up! I am not sure if it is RR's or SS's keypost that will hit TOD first, but I recommend you repost this in that comment thread pronto. It is too good to be 'lost' in a late Drumbeat--needs more eyeballs in a new KSA discussion. Good job!

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

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ace on March 22, 2007 - 5:21am Permalink | Subthread | Parent | Comments top

Thanks, I will repost!

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alistairC on March 22, 2007 - 8:47am Permalink | Subthread | Parent | Comments top

The huge increase in smart well installations and MRC well completions from 2004 to 2005 strongly indicate that Saudi Arabia is now extracting its last remaining oil reserves

That's one interpretation. An alternative interpretation is that

the use of smart wells can increase ultimate recovery by 53%

i.e. the payback more than justifies the extra expense, and therefore the use of smart wells, in itself, tells us nothing at all about the amount of remaining oil.

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ace on March 22, 2007 - 7:09pm Permalink | Subthread | Parent | Comments top

Both interpretations can be true: Saudi Arabia is extracting its last remaining oil reserves and ultimate recovery may increase by 53%.

Smart MRC wells are required for thinning oil columns. These thin oil columns may be able to produce for a long period of time but it's difficult to reach oil. These fields need to produced very carefully.

Who knows, next the Saudi's will be using in situ steam flooding as they do in Alberta tar sands. The tar sands reserves are huge but converting them to production is tough.

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Euan Mearns on March 21, 2007 - 1:20pm Permalink | Subthread | Parent | Comments top

Calorie, fair comment. Myself, New Account ± Robert did offer an alternative wager:

http://www.theoildrum.com/node/2330#comment-166269

We're still waiting for Stuart to respond - but you're right, at this level it begins to smack of splitting hairs.

Othewrise on the investment front I am more or less out of the market - as much because my crystal ball is currently full of fog WRT unravelling the impact of recession upon demand and price for commodities.

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