The Oil Drum

The increased number of rigs are probably working 24 hours/day to ensure that the two 2008 key projects of AFK and Shaybah expansion are not delayed any further.

Here are more charts on Saudi Arabia.

Saudi Arabia Ultimate Recoverabe Reserve (URR) Scenarios

Further to my comment on using HL analysis to estimate the Saudi Arabia URR, I thought I would plot depletion rates and remaining URRs for the three scenarios of URR=165, 175 and 185 Gb. Depletion rates are calculated as the annualised monthly production volume divided by the remaining URR.

In the annual BP statistical review, Saudi Arabia reported reserves of 169.6 Gb in 1987 and 255 Gb in 1988. Technology and increasing prices should increase reserves which gives justification to the higher URR scenarios of 175 Gb and 185 Gb. I believe that the huge increase to 255 Gb in 1988 is not true as no new fields were discovered. The misleading increase might have been due to the introduction of the OPEC quota system or some representation of original oil in place (OOIP).

URR=165 Gb

The figure below shows Saudi Arabia increasing production to just over 9 mb/d in 2011 but due to the lack of scheduled megaprojects, the production declines to under 6 mb/d in 2020. The remaining URR of crude oil and lease condensate is just under 20 Gb at the end of 2020.

Fig 1 – URR 165 Gb – 2020 Forecast – click to enlarge

Fig 2 shows in red the depletion rate being over 5% during the Iraq invasion in early 2003. However, during the high oil price periods of 2005 and the first part of 2006, depletion rates reached almost 6%. This depletion rate appears high as some damage to reservoirs could occur.

Fig 2 – URR 165 Gb – Depletion Rates – click to enlarge

URR=175 Gb

This figure has the same production profile as Fig 1 but the remaining URR at the end of 2020 has increased to just over 25 Gb.

Fig 3 – URR 175 Gb – 2020 Forecast – click to enlarge

Fig 4 below shows a lower depletion rate than the 165 Gb scenario. The depletion rate reached almost 4.5% during the Iraq invasion and then increased to just over 5% in July 2006 and fell as production rates fell. If depletion rates were increased back above 5% this would correspond to a surplus capacity of about 1 mb/d for Saudi Arabia.

Note also how production drops before quotas are reduced.

A depletion rate of 5% might be the upper limit for Saudi Arabia's fields before reservoir damage occurs. Does anyone have technical knowledge of appropriate depletion rates for Saudi Arabia fields?

Fig 4 – URR 175 Gb – Depletion Rates – click to enlarge

URR=185 Gb

This figure has the same production profile as Fig 1 but the remaining URR at the end of 2020 has increased to over 35 Gb.

Fig 5 – URR 185 Gb – 2020 Forecast – click to enlarge

For the scenario below, depletion rates never exceed 4.5%.

Fig 6 – URR 185 Gb – Depletion Rates – click to enlarge

As field by field data is not available from Saudi Arabia, the depletion rates shown in the URR 175 Gb scenario together with the HL analysis points to an increased probability of Saudi Arabia having 175 Gb URR.

Changes to Red Zone Boundary

Robelius’ thesis predicts peak oil between 2008 and 2018. However, this range of peak oil dates is due mainly to one parameter in his model: the best and worst case assumptions of Ghawar – worst case URR 66 Gb and best case URR 150 Gb. That’s a huge difference! As the world does not have any certainty over the accuracy of Ghawar URR, the red zone now starts this winter in about Jan 2008.

Given the increased confidence of Saudi Arabia having 175 Gb URR, this means that as of April 2007, Saudi Arabia has produced about 60% of its URR. This gives more support to the red zone starting sooner.

Based on the analysis above, Saudi Arabia, being the only country with significant surplus capacity, probably has about 1 million barrels/day surplus capacity in heavy crude. Since demand is forecast to be at least 2 million barrels/day greater than supply later this year, Saudi Arabia will not be able to meet the supply call and oil price shocks will occur.

Fig 7 – Ghawar URR Uncertainty brings Red Zone closer – click to enlarge

Green Zone:
Supply was able to meet demand. Sufficient surplus capacity existed. Prices showed only moderate volatility. This zone ended on about May 2005 which coincidentally is the peak for crude oil & lease condensate production.

Amber Zone:
Saudi Arabia has become supply constrained. Prices show more volatility. Price shocks occur in 2007Q4. Surplus capacity is going to zero. Supply is struggling to meet demand. Increased production from natural gas liquids and ethanol delays the total liquids peak to July 2009. The desperate attempt to use subsidised ethanol has doubled corn prices and is now indirectly increasing other food prices. Nationalisation of hydrocarbon reserves continues. Refineries need to be modified to accept the heavier and increasingly sour crude stream. Horizontal MRC wells have become common practice but have steeper decline rates. Old infrastructure needs replacing. A shortage of skilled people exists. CONSERVATION PLANS NEED TO START NOW.

Red Zone:
Although peak total liquids is still forecast to be in mid 2009, this zone now starts in Jan 2008 due to tightened supply demand balance. There is no more surplus capacity as Saudi Arabia's remaining surplus is used. Supply falls far short of demand leading to drastic demand destruction. The name of the last basin is called “conservation” – world must use less oil. Saudi Arabia announces further “voluntary cuts” in production. Oil prices increase at a faster rate than during the amber zone. World economic growth rates become lower. The IEA emergency sharing system may be invoked and rationing occurs......