The Oil Drum | Saudi Arabia's Reserve "Depletion Rates" provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining

159 comments on Saudi Arabia's Reserve "Depletion Rates" provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining

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westexas on April 20, 2007 - 12:45pm

I've broken down declining net oil exports in individual countries into Phase One and Phase Two--within the context of an overall decline in world oil exports.

In Phase One, cash flow is increasing, even as exports fall, because oil prices are rising faster than exports are falling.

In Phase Two, cash flow begins to stagnate or decline, because rising oil prices can't offset all of the decline in exports. At this point, I would expect to see some efforts to curtail domestic consumption, but by this time, net exports will have fallen quite a bit anyway.

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memmel on April 20, 2007 - 1:32pm

The phase two situation is one reason I feel that overall production will decline at a acclerated pace as above ground factors lower production even more. Right now we are seeing above ground responses to peak oil take over one barrel off the market for each barrel lost to depletion. In time this will grow too 2:1 4:1 etc doubling at I figure between 2-5 years.

Your not including even more cash and oil that needs to be pumped into the oil industry itself because of skyrocketing production costs and declining EROI. I'd be surprised if any oil is produced in volatile regions of the world 6-7 years post peak much less the projected 50%.

This is the real reason for the Iraq war at any cost not just the depletion we are watching. A lot of places are going to go to zero quickly. It not about money its about having any oil. Very little of the remaing oil will be produced in our lifetimes if ever.

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Swede on April 20, 2007 - 3:49pm

You scare the hell out of us normal persons, it seems that both TEOTWAKI and TSHTF fulfills.

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memmel on April 20, 2007 - 5:05pm

Nothing surprising about what I'm saying if you hit peak oil world wide we face conditions that our ancestors use to face for thousands of years. They were not dumb people and our ability to make our recent technical leaps has a lot more to do with oil than some sort of superior intelligence. Periodic collapse of civilizations in the past plus a low energy base has a lot to do with the lack of a industrial civilization until we hit a triple play home run of the New World/Coal/Oil.

A lot of things had to come together to ignite our current civilization and we seem to forget this.

Civilizations die get over it.

Lets hope we can keep enough together to build a new better one for our children.

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whaleoil on April 20, 2007 - 8:16pm

Mmmm, that typically takes what, 1000 years? Maybe
not such a bad thing.

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memmel on April 20, 2007 - 9:27pm

Everything moves faster today :)

Seriously though we don't have the right economy to handle disruptions from oil supply problems. Everything has gone to just in time overseas production. It will unravel pretty quickly until we adjust to a older style of doing business with significant stocks of critical components. I hope and expect us to simply have serious problems with the random riot and burning slum.

In general we are in a far worse position today to deal with problems than we where even 10 years ago. I think you will be unpleasantly surprised at how fast things unravel. These last ten years of SUV's, McMansions and globalization probably increased the pain by a order of magnitude. Its like we have done everything in our power to make peak oil as painful as possible. The biggest unknown is that a lot of the people that will suffer demand destruction actually live in the same cities as the wealthy its unclear they will take dropping to a third world living standard peacefully.

Large parts of greater Los Angeles will burn for sure how this effects the rest of the US is unknown. On the east coast you have a number of the older poor cities that could potentially succumb to rioting. In the San Francisco area Oakland for example is likely to suffer riots. I think these demand destruction riots and resulting crashes in property values as people flee the effected regions will cause serious problems for the US.

I don't know Europe well enough but I'd expect Paris to have problems maybe other cities. They have good enough public transport that fuel costs are not as threatening there.

Back in the US we have a large enough concentration of poor in certain areas that depend on gasoline we are certain to have riots initiated at gas stations if they don't start for other reasons. Its hard to guess how the migration from these hot spot metropolitan areas will effect the US.
Certainly property value will plummet and business will leave the effected region the question is will it initiate a feedback mechanism causing further problems in itself. This is unknown. Near many of these poor regions is some of the most expensive property in the country so your looking at loosing a lot of wealth. America has never really had large regions that are no longer under the rule of law I'm sure we will contain the problems but at what cost ?

If your super rich and have a big house in Santa Monica I'd sell that puppy soon if you need the money. In general I'd not own anything near Compton that I could not afford to lose. Oakland I don't know well enough to guess where a riot could concentrate. Where I live in Orange County the city of Santa Anna is a potential flash enough of a concern I won't buy property in the area regardless of price. Its a double problem because its population contains a lot of illegal immigrant that work in the declining housing industry so the combo of peak oil and job loss without workers comp will make the region esp volatile. I'm sure a lot of the other poor areas in California have this same double impact situation from the collapsing housing industry and oil. Its a really bad time to have price spikes in gasoline in CA.
We have plenty of A*&Holes with Hummers in this area the chances of a Hummer being part of the cause of riots in orange county is very high.

In general worldwide riots by demanded destructed poor will be a big factor in how peak oil plays out. These riots are not the end of the world but it will fuel our downward decline. The collateral damage can easily push regions over the edge.

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PeakTO on April 20, 2007 - 9:53pm

On the subject of riots/collateral damage, I remember a few weeks/months back where in Pakistan, people were attacking the local power utility station because of "load shedding" and blackouts.

This is the challenge going forward...people insist on blaming big oil for all their problems. So, you can easily see the leap to damaging refineries/pipelines etc.

It's the "if I can't have, no one can, rationale"

This was evident again last year(?) in the UK with the refinery blockade by truckers. It nearly caused a national disaster, and brought the country to its knees.

These gut reactions on the part of the public will likely be the death spiral of industrial civilisation.

That said, I am personally hoping for little green men to arrive and hand me the patent for Mr. Fusion. :P

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AlanfromBigEasy on April 21, 2007 - 8:31am

I am a bit surprised that you think today's poor will be the only source of rioters.

Take today's low six figure income :whatever:, deprieve him (they riot more than her) of a job (even minimum wage, a house, all of his possessions & "savings" and even a place to sleep (except a squat in a foreclosed property). No social support before, he has developed just some minimal social network since TSHTF *like many Americans, he lacks that skill set.

I see him as a greater riot risk than today's poor.

Alan

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memmel on April 21, 2007 - 12:17pm

First since their is a good chance that peak oil will help initiate a chronic recession of some other sort. A lot of these rioting poor will be former six figure incomes and hard working middle class. Economic problems will drive them into the poorer areas. Next the only reason I focused on the poor is that they are the ones who would suffer demand destruction first. In general its anyone who is living on the edge or past it regardless of income that has to work. A lot of Americans cannot suffer a few hundred dollar increase in expenses since they are in debt way over their heads. Persistent 5+ dollar a gallon gasoline coupled with attempt to use monetary inflation to hide uncontrollable rises in resource prices to keep the economy going will ensure widespread price inflation. When your customer prints the money he pays you with life is interesting.

The first people that are effected are the working poor who live with what I call the shiftless poor. And I grew up in Holly Springs Mississippi so I'm familiar with all the various forms of poverty its not just someones income.

I don't expect it to stay contained as you mention. But I would suspect the wealthier people would engage in marches and the like that will eventually be brutally put down.
One thing about suburbia its not a good place to have a old fashioned riot since the government offices are downtown you have to attack something. Suburbia either by accident or design is effective at limiting active political action.

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jbunt on April 21, 2007 - 5:02pm

jbunt
memmel

At first, I thought it was a typo (excusable) - (how this "effects" the rest of US) should be "affects"

then (people flee the "effected" regions) should be "affected"

then (business will leave the "effected" region) should be "affected"

and finally (A*&Holes with Hummers) shows your mindset

Why are so many posters likw you eager for peak oil? You guys want it SOOO BAAD!! You want the A*&Holes to be forced back to Walden Pond with you, where you think that everything in the world will then be right.

Well, according to this site, the A*&Holes with Hummers do not have a clue about peak oil - along with most other Amerians, so why call them that?

With respect to the Walden Pond that you desire, just look at New Orelans without power. That is what anyplace and everyplace in America will look like if there is not enough power.

All Walden Pond posters should identify themselves as such in their lead sentence.

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expat on April 22, 2007 - 12:18am

I truly think you miss a major thread among many TOD posters (often American) - that is, the 'A*&Holes with Hummers' are going to destroy Walden Pond, along with anyone suggesting that doing so is just plain idiocy.

The other point is that many here also think what the 'A*&Holes with Hummers' believe, as compared to what they do, won't matter anyways - there will be less oil, regardless of what the 'A*&Holes with Hummers' want.

Very few people here think Walden Pond is an option - as a matter of fact, the number of such posters probably hovers around zero.

Maybe you should do some reading before writing something that seems to fit your pre-conceived notions. For example, this quote from memmel - 'These last ten years of SUV's, McMansions and globalization probably increased the pain by a order of magnitude. Its like we have done everything in our power to make peak oil as painful as possible. The biggest unknown is that a lot of the people that will suffer demand destruction actually live in the same cities as the wealthy its unclear they will take dropping to a third world living standard peacefully.

Doesn't sound like Walden Pond to me.

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CrystalRadio on April 22, 2007 - 11:06am

The pond will shrink to the last bullfrog, pretty tough on us tadpoles.

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jkissing on April 20, 2007 - 2:20pm

sa is in phase 2 now - oil price down 20% from peak, production down 10%, exports down 13%? so gross revenue down 1/3 even as costs are rising fast, meaning net may be down 40% from last year's peak... and net per capita (even p/p, or per prince) down further. IMO their need for revenue will prohibit their ever voluntarily reducing production to save for the future, and opec has lost its raison d'etre... I am now convinced that all of sa cutbacks, meaning 80% of opec's, have been involuntary.

Groppe thinks there is substantial demand destruction remaining in third world still using oil for electrical power generation (eg senegal), and that current 60/b is high enough to hold prices around where they are now. He has a great record, but imo the transition from oil to ng/coal will be more difficult and slower in the third world today than in the US in the seventies because of the difficulty of transporting these alternate fuels to regions ill prepared to handle them combined with a lack of capital.

... my son will ride a camel; - there are not enough camels to go around, or grain to feed them... as in other places, there are too many sons...

Imagine that Wolfowitz has been diligently eliminating all birth control from world bank funded programs...

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memmel on April 20, 2007 - 2:36pm

I don't think they have quite transitioned to phase two just yet. We have no indication of internal consumption constraints yet from KSA. Until you get pressure on internal consumption its hard to call a Phase II transition. Iran who has even more problems might not be phase 2 yet either. I assume Iran will cross over later this year or next. And KSA will cross over actually about the same time because of Ghawar. Mexico is a easier one to watch and they have not crossed yet either. Its interesting that Mexico Iran and KSA look like they will cross over into phase 2 at about the same time ensuring internal crisis will almost certainly effect exports. I assume Venezuela is later but Chavez is doing his best to get his country into phase 2 conditions as fast as possible. Back to Iran they threatened to cut gasoline subsidies but I've not seen that they have actually carried through yet.

http://www.weeklystandard.com/Content/Public/Articles/000/000/013/255wbn...

Iran will go before KSA for sure then probably Mexico then KSA. But it is a tight race.

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kebu77 on April 23, 2007 - 2:52pm

"Mexico is a easier one to watch and they have not crossed yet either."

I don't pretend to understand how this might apply to the 'pahse I/phase II analysis, but if the chart is correct in this NYT story, just talking crude oil, 'export land' doesn't seem to be happening yet - in the last 4 years prod. has dropped while exports to US have held level, mas o menos. (Is Mexico shorting other customers?)

http://www.nytimes.com/2007/03/09/business/worldbusiness/09pemex.html?ex...
_________
Rex says, "Happy motoring!"

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memmel on April 23, 2007 - 6:23pm

My understanding is exports have been dropping. I could well be wrong. If not then its internal demand that is being shorted.

Right now it looks like it still exports dropping.

http://www.rigzone.com/news/article.asp?a_id=40538

My opinion is that they will simply allow this to continue until the country goes bankrupt. I would be surprised if any country does anything to control internal demand until they are either bankrupt or exports drop to zero which ever comes first. In general I'd expect them to actually go bankrupt by the time the exports are about half what they are today.

So I'd expect financial conditions of the NCO/Governments to collapse before oil production. Of course this means little real investment in the oil infrastructure in the next few years further aggravating the situation. Sure you have a initial burst of investment when you first peak this happened in the US but once its clear that the decline cannot be averted by very expensive technical means this investment will dry up swiftly since it would require taking money away from internal government programs. If I'm right as early as next year Mexican investment in oil production will actually decline not increase then its a matter of riding the world oil price down to collapse. I think KSA is going down the same route I'd be surprised if the do any significant investments past the projects they are committed to now. So overall its simply a matter of when the price of oil internal demand and exports and dropping financial reserves result in these various countries going bankrupt.
Overall its a money game at that point. If I'm right these countries will finish projects the must and cancel the ones they can. Thats when you know the situation will play out as I've outlined.

Reports like this will abound

http://www.bloomberg.com/apps/news?pid=email_us&refer=news_index&sid=a2y...

These plans will not go through

http://goliath.ecnext.com/coms2/summary_0199-2828456_ITM

The problem is these NCO's cannot offer better terms because of their internal commitments and restrictions so they and their governments will fail well before geologic decline indicates the would.

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Cherenkov on April 20, 2007 - 10:44pm

You are forgetting Phase 2.1.

S.A. finds itself with a growing population becoming more and more unhappy with what it perceives is an unhealthy relationship with the infidel West. Falling employment rates, standards of living, water woes, and increasing radicalism all contribute to the fall of the Kingdom. With the royal family either dead or in exile, the kingdom and its infrastructure are doomed. What had been a marginally controlled collapse of exports becomes a freefall. The U.S. finds itself once again invading a country to save the oil. This time, the gloves are off. We do not have the inclination, nor time, to pretend that we are assisting the Saudi Arabians to find the guiding light of Democracy. Though we will hear little of it, the scorched earth method will cut down on pesky insurrectionists. Depending on how quickly the Royals are ousted or killed, and how angry the mobs are, me may arrive on the scene too late, discovering a smoking hole where the infrastructure used to be.

Here is where "above ground factors" get really nasty. This will be interesting.

I give this six years before total chaos in S.A. unless we do something really stupid like bomb, bomb, bomb Iran.

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davebygolly on April 20, 2007 - 11:42pm

WT, how do you know the point at which increasing price can no longer compensate for decreasing volume?

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westexas on April 21, 2007 - 5:29pm

Lots of variables--oil prices; war; domestic consumption; production decline rate, etc.

I did come up with some more numbers. If we assume a 5% net decline rate in production and current consumption of 2 mbpd (C+C), it looks like any increase in consumption of 2.4% or more per year would result in a 10% or greater annual decline rate in net oil exports. A 10% annual decline = a 50% decline in 7 years.

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CrystalRadio on April 22, 2007 - 12:39pm

You are one of my favorite posters, so please don't take what I have to say as a criticism of you. I have been thinking that the big drawback to this site as far as popularizing it's views is that there is no way for the general public to get a swift idea of what the problem is. There are sites out there that pander to the public, in particular, the business crowd and talk of how reserves are replacing and exceeding production.

http://www.fullermoney.com/content/2006-08-11/MarketWatch200617-4-03-Dep...

On the surface they make simple and easily understandable presentations that seem quite reasonable and indicate everything looks if not just peachy, then fairly rosy.

In your post here you illustrate the difficulty that many have in understanding what the hell is being talked about, eyes glaze. The discussion is so far ranging and technical that I think many intelligent but teck challenged people just throw up their hands and wander off to the easy read sites.

A few ideas made simple would help, as in the thought that the oil that can be produced is the more important factor than the amount in reserve (other than discrepancies in reporting reserves). The tar sands might be a good example of great reserve but limited output. One could then move on to the idea that the situation is similar to the Saudi situation?

When Ace says: production decline rates will accelerate to ensure that depletion rate (rem) are kept below 5%.

It might be more generally readable in this form?

They will have to increasingly reduce the amount of oil pumped out of the ground to keep below 5% pumped a year to make sure that the bugger doesn't destroy itself.

I don't presume to suggest that Ace change his post, merely that I think there is a need here, from time to time, for someone with teck understanding as well as journalistic abilities.

If you find what I say so much rubbish, please don't hesitate to say so as I've got carrots to plant and a wood stove to install, much to do and so little time.

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memmel on April 22, 2007 - 6:33pm

Well I'm pretty convinced that above ground factors will ensure the decline rate is much faster than that caused by peak oil alone. And people seem to at least think they understand above ground factors. I think presenting the combo makes peak oil a lot easier you show the problems then explain we have less oil every year making the problems worse decreasing the amount of oil ....

The focus is on explaining why above ground factors keep pushing us down. In reality its the reverse peak oil is what is allowing above ground issues to grow and fester but I think this is much harder to explain.

So focusing on the effects of peak oil and explaining the feedback loop goes a long way I think to getting people to understand. Global Warming for example has made positive feedback popular. People tend to understand that the warmer it gets the more the planet can warm further.

So a statement like the less oil we have the less oil we are able to pump is pretty simple. I know it removes the emphasis off of the peak but I think thats ok. Because the next statement is oil is declining. Then with that established you can talk about peak and why its declining.

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