Luis, or anyone else who cares to respond, I would like to get your opinion on something I have been trying to get people to pay attention to for some time, but with little success.

A year ago the Center for Strategic and International Studies published a paper on Saudi decline rates.

Without “maintain potential” drilling to make up for production,
Saudi oil fields would have a natural decline rate of a hypothetical
8%. As Saudi Aramco has an extensive drilling program with a
budget running in the billions of dollars, this decline is mitigated to
a number close to 2%.
• These depletion rates are well below industry averages, due
primarily to enhanced recovery technologies and successful
“maintain potential” drilling operations.

According to this report Saudi has decreased it decline rate from 8% to 2% by an aggressive drilling program. Other reports have explained how they have done this. In some wells they have plugged the well just above the point where the water mix was too high. But most of the decline was slowed by replacing the vertical wells with MRC (Maximum Reservoir Contact) wells. These wells, once they hit the very top of the reservoir, turn horizontal and branch out like a Christmas tree. This enables them to pull more oil from the very top of the reservoir where there is very little water. This has enabled them to lower their water to oil mix and, at the same time, decrease the decline rate of the field.

But now notice the second sentence I quoted above: These depletion rates are well below industry averages,… Now it is my contention that while the decline rate has indeed been decreased the depletion rate of the well would have to increase. Decline rate refers to above ground factors, or how fast production is dropping. Depletion rate, on the other hand, refers to below ground factors, or how fast the oil left in the reservoir is being depleted.

If they pull oil only from the very top of the reservoir, and if they increase water injection thereby increasing reservoir pressure, they might even get the decline rate to zero, or even increase the production rate. That would give them a negative decline rate. But what would be going on below ground is an entirely different story. The depletion rate would actually be increasing.

It is my contention that by decreasing the decline rate with these super straw methods, they are actually hastening the day when they will have a catastrophic drop of in production. When the water hits those MRC wells it is pretty much all over. I am expecting a catastrophic drop in Saudi production in less than a decade, probably in the next five years.

Their depletion rate is not 2%, far from it. If their natural depletion rate was 8% before then with the aid of these super straws they have increased to about 14% or greater. Now I am not saying that because the original decline rate was 8% that this was also the depletion rate. But that would be a pretty good guess.

Ron Patterson

Ron, thanks for your question. I don’t have enough info to support or contradict your reasoning about the later effects of MRC. But I can confirm you, and as it has been reported extensively on TOD, that the Saudis have drilling heavily in recent times. Offshore the number of rigs operating known, but not in land, still there’s reason to believe that a surge in number of rigs have also taken place.

If you check the post where Euan undergoes a bottom-up analysis on Saudi and compares it to the Dog Leg Up model, you’ll also find that “crash” by 2015.

I’m betting on the Saudis avoiding a significant drop in production when Ghawar reaches its final stages for 3 reasons:

. The Saudis seem to have been very careful managing their fields;

. They haven’t yet started a large scale program of EOR (which should be profitable given the size of their fields);

. There are at least 30 Gb to 35 Gb of reserves in fields yet to be developed.

Luis, thanks for the reply. I cannot locate the page now but on one of the Saudi threads a few months ago there was an article on Ghawar and how they had lowered the water cut and decreased the decline rate. It pointed out that they had overhauled the North Ghawar wells in two ways. They had plugged some wels just above the high water mark, and others they had completely shut the verticle portion off and drilled a short horizontal extension at the top of the reservoir.

If anyone has a link to that paper or thread I would appreciate it if you would post it.

I noticed that my link above leads to the wrong page. This one will work:
http://www.csis.org/media/csis/events/061109_omsg_presentation1.pdf

Ron Patterson

I found it:
http://freeoil.1111mb.com/spe/spe93439.pdf

You will see from this article that the WSO (Water Shut Off) and Horizontal Drilling wells began in 1997. It has been under way for ten years! That is, these super straws have been sucking the oil from the very top of the reservoir for ten years because just a few feet below the water to oil ratio was too high.

Methinks the collapse will be a lot sooner than a lot of people believe.

Ron Patterson

I agree with you since we have no easy way to normalize advances in production which lead to increased depletion rate. This in my opinion is as important as Export Land and as scary.

HL is a overestimate and even the conservative HL plot in the paper is probably still high.

The critical flaw if you will in HL is its blind to the technical advancement that trades increased depletion rates to maintain and increase production rates.

Can we even get a handle on this error ?

I think we can.

1991-2002 gives a URR of 178
The dogleg gives a URR of 241
Subtracting these two gives a known technical distortion
of 63 GB if you agree that the dogleg is predominantly technical advancement.

Now lets make what seems to be a save assumption and assume that the low estimate is also high because of systematic technical advances.

How high ?

A good starting point is that and additional 63GB has been extracted at higher production rates via technical advances that are not as obvious as the dogleg this gives a URR for KSA of
178-63 = 115

So I think 115GB is closer to a reasonable low estimate for the URR of KSA. Now you can consider that they did not develop some large fields and parts of Ghawar for some time so this should be too low by a bit but not all that much.
Considering that we are saying that technical advancements over decades is equal to a 5 year or so burst of technology.
You can see that even if I'm over on the technical portion of the dogleg I'm probably well under on the guess of 63GB
because of additional technical distortion. The positive correction is later discovery/late development of fields.
But even correcting for this for KSA we are still well below the lowest current estimates.

This fits with my gut feeling that technical advances may have resulted in us overestimating URR by as much as 50% even with HL. Also you cannot really trust the reserve estimates since they are also inflated about the same amount because of technical advances in fact they probably have larger errors. So the bottom up approaches even with discovery included have a bigger systematic technical error vs HL. And indeed most of the bottom up approaches come in consistently higher than HL.

So what is this URR that HL is giving. Its a combination of the real URR and progressive technical growth leading to exponential increases in extraction rate at the expense of a higher depletion rate thats not accounted for. So its really two super imposed curves. On the technical side with MRC wells its easy to say we are maxed on technology for primary/secondary recovery so the technical boost ceased over the last 10 years. So we peaked when technology peaked.
The real mid point of URR may have passed a while back in the late 1990/2000.

This systematic error if real is huge.

Next we have a pretty good case for what the worst case scenario is for the future.

1.) Technical advances will go rapidly to zero as far as their ability to increase production rate. This steady increase seems to have inflated production rates by 50%.
Say assume a exponential decline for technical reason.

2.) We may be far more depleted then has been predicted 70% globally seems reasonable. So we have say 10% of this greatly reduced global URR of about 500GB will be produced at a high rate this gives us less than two years before we see accelerated decline rates.

3.) We have Export Land.

Effectively the worst case scenario seems to indicate that we will slowly come of the current peak for about 18 months followed by and accelerated drop down to about 15GB per year
probably a lot faster than expected say 2015-2018. Of this amount export land should drop export rapidly to zero as early as say 2011-2012. They can't go to zero that fast but this puts us easily in to a really strained political situation by 2009.

The good news is this seems to be the worst case possible and even it seems to indicate we probably still have 18 months before we see accelerated decline rates in production.

Hi Memmel,

Interesting comments!

You said that the "real mid point of URR may have passed a while back in the late 1990/2000". Assuming this was in reference for KSA and assuming 1997 as a midpoint of Saudi URR, this would imply that the URR of KSA is about 165 Gb as shown by the lower red line in the chart below. The upper red line assumes that EOR actually increases recovery factor instead of just increasing the production rate temporarily.

Hans Jud thought 160 Gb was a good estimate of KSA URR
http://www.aspo-portugal.net/Articles/SA-Oilprod_field-by-field_V2.pdf
http://i129.photobucket.com/albums/p237/1ace11/4HLAll.jpg
I'm currently assuming URR=185Gb
http://i129.photobucket.com/albums/p237/1ace11/fig10r.gif

click to enlarge, - the source of the underlying chart without the red is from one of Robert Rapier's stories

You also said "We may be far more depleted then has been predicted 70% globally seems reasonable".

The summary of this report by the German based Energy Watch Group by the Guardian
http://www.guardian.co.uk/oil/story/0,,2196435,00.html
says that "the EWG study relies more on actual oil production data which, it says, are more reliable than estimates of reserves still in the ground. The group says official industry estimates put global reserves at about 1,255 gigabarrels - equivalent to 42 years' supply at current consumption rates. But it thinks the figure is only about two thirds of that." Two thirds of 1,255 Gb is 840 Gb. If about 1,100 Gb is produced to date that means almost 60% depleted globally, which is less than your 70%.

The report should be released in full, in just over an hour, from here
http://www.energywatchgroup.org/Reports.24+M5d637b1e38d.0.html

Maybe this report might have a new source/method for estimating Saudi URR!

Thanks Ace !

Yes 1997 for KSA makes sense according to what I'm saying.
And I believe the numbers your presenting from my technical discount concept. They may be a little bit high 10-30GB but
KSA is a bit problematic since a lot of fields where developed late but on the other hand when developed more advanced technology was used since they where developed later. So the numbers your presenting are close to slightly high. My estimate is I feel a good guess at the minimum.
This leaves about 30GB that needs accounted for. I think a lot of these are still ghost barrels.

The key point is no method presented to date as adequately discounted our advances in technology allowing increased extraction rate. Using a known period when reserves did not change much but technology was applied i.e the infamous dogleg indicates that the technology effect may account for 50% of the increase in production rate. The reverse is we are depleting the oil supply 50% faster today then we where say 30 years ago.

HL is actually measuring two entangled effects. Technical advances and actual depletion. The relentless technical advances hide a significant amount of depletion as we have gotten better and better at keeping the oil production high.
HL gets the peak date right but it can be off by as much as 50% on the URR estimate to the high side.

For primary and secondary recovery MRC or Christmas Tree wells aka super straws represent a maximum extraction method we really cannot do much better. The current peak is then actually a maximum in our ability to reasonably apply technology to maintain and increase extraction rates. The world peak i.e 50% of URR is in the past I'd guess we hit 50% of global URR in 2001-2002.

Thanks for the numbers Ace and I really think people should seriously consider this argument. On of its strengths is it answers the people that claim technology will save us.

It already has.

Our worst case Saudi scenario (fastest decline + fastest rate of increase in consumption) was that net exports hit zero in 2024, in 17 years (middle case was 2031).

In regard to worst case URR's based on HL, the lowest estimate I could come up with is about 150 Gb (C+C), which totally discounts the recent dogleg up. Note that including NGL's would increase the estimate. Looking at just C+C, my personal guesstimate is between 150 and 200 Gb.

In any case, if we look at the totality of the HL data set from 1991 to 2007, it certainly looks like 2003, 2004 and 2005 are outliers, which, as I have pointed out ad infinitum is what we saw on the Texas data set.

I should also point out that Khebab and I did not discount anything in the May, 2006 Texas/Lower 48 paper. We used production data from 1991 to 2005, and the Texas model, to warn that Saudi Arabia was on the verge of a production decline.

It all comes back to Saudi as the "swing" producer-- meaning we can expect all data based upon KSA's "swings" in production to also swing back and forth as to URR.

As for me, I see induced swings in production in connection with the 2003 invasion of Iraq; and again in March 2004 and March 2006 to drop prices in the USA in time to influence our elections (is there someone who doesn't believe KSA cares about who controls Congress and the White House?).

I would suggest that a view of KSA production that identifies those periods when we can reliably believe that KSA was maximizing production (like in 1991, 2003, and early 2004 and 2006) based upon external events, could provide the most reliable set of data points. In every other case, the data could be because KSA was "swinging."

I would also suggest that the limited surges in 2003, 2004 and 2006 would likely be not a sustainable maximum, but the absolute maximum-- if KSA could have bumped production more in 1Q 2006 I believe that they would have, to give their BFF GWB more leverage in Congress. Just remember what happened to gas prices between Aug. 15 2006 and Nov. 1, 2006.

Regardless of what the actual number is, though, the USA should be acting, from a policy standpoint, as if the lowest number were the actual number, at least to generate some margin of safety.

And 150 may still be high since its not discounting more gradual changes in technology. The dogleg period is obviously the result of technical changes not some sudden large discovery and it obviously causes HL to produce a higher URR estimate.

Less obvious has been the continuous technical advancement over decades that has exactly the same effect. Inflating the URR reported by HL. This is because the URR determined by HL is actually two variables the rate of technical improvement in extraction capability and the real geologic depletion rate. Technical improvements are a two edged sword since they increase depletion rate but in general they make the final decline far steeper causing a large systematic overestimate of URR until technical advances no longer help.

The technology to extract oil has increased at a astounding rate topping out with the MRC wells in use today for primary and secondary recovery. We are still advancing to some extent in final recovery processes.

Assuming that this technical advance is effectively at its peak over the last few years means that we are no longer getting large production rate gains from technology.

The actual geologic peak was passed some time ago probably around 2000-2002 for global oil production. Increases in production rate since then have been because of aggressive technical extraction. Over the last few years we hit peak technology the peak production rate has nothing to do with the actual URR.

HL is still valid for predicting peak production but its URR estimates are probably invalid. The US happens to work primarily because technological advances in extraction within the US have been relentless. If we had peaked in technology earlier we would have seen that HL estimates for the US where to high.

These dogleg regions are one of the few ways we can get a good handle on the technical effect on extraction rate. And they point to a fairly large technical boost factor on the order of 50% higher extraction rates vs stagnant technology.
This means the real depletion rates are up to 50% faster than prediction by HL or more correctly the URR may be over estimated by up to 50%.

Now the flip side of the coin is that we can now probably maintain a high production rate to about 80-90% of URR but the decline rates are incredibly steep.

The technical peak then production a production profile close to a square wave on the post peak side.

So HL is still valid for determining peak since it is measuring both technical advances and real depletion rates.

Its simply a coincidence that the lower URR estimates also concide with time periods that prices where low or declining and thus technology was not being applied at a feverish pace. So these quite periods are a good time to calculate the real geologic URR.

This means HL used during times of stable low or falling prices is able to get the real URR since technical advances and aggressive drilling are much lower during these times.
KSA is tough because they actually shut in a lot of good production and this messes with the numbers.

If I'm right I find it funny that peak oil production is actually related to technology and has little to do with the geologic peak except its well after we have passed geologic peak. And its no surprise that the two are not offset by all that much since geologic declines are driving the technical advancements but the critical factor is they lead the technical decline in production rate. But its critical to understand whats happened the last few years is we have hit peak technology and can no longer mask the geologic decline.
Technical peak is effectively a ceiling or flat line and its boost effect goes almost directly to zero governed by the deployment rate. Most of the NCO's have rejected advanced methods in the last few years.

Look at the average production rate vs geologic depletion over time and you see we have been highly successful in keeping production rates high at the expense of faster depletion. Almost every method used to account for URR falsely includes this as a higher URR. No one has correctly subtracted the effect.

So in closing it seems we are actually 5 years or more post geologic peak and have lasted this long on a last ditch technical burst. If true then we will soon see some fairly steep global decline rates generally inline with natural depletion rates for fields that have been extracted using advanced technology these can be steep on the order of 15%.
This probably equates to the decline in overall production rate quickly approaching 5-10% globally over the next several years.

Peak Oil production rate has nothing to do with 50% URR except that it happens well after we have passed 50% URR.

"they haven't yet started a large scale program of eor"

well, i think if you dig through the analysis of ghawar, at least, you will conclude that ghawar is indeed gravity stable. i dont know of any eor method that will provide much improvement on gravity drainage (or in this case gravity stable pressure maintenance by water injection).

From an analysis of what is visible on Google Earth, I arrived at the following:

Rig Count, Summer 2006 (visible)
Area Oil Water Gas
'Ain Dar 6 0 0
Shedgum* 0 0 1
Uthmaniyah 9 1 1
Hawiyah* 3 0 7
Haradh* 0 3 0

* = data incomplete

These are just rigs: many other sites being prepared for drilling, as well as recently completed wells, are visible. Most of this represents activity on a single day in May 2006. Unfortunately, there are large areas of Shedgum, Hawiyah, and Haradh covered only at low resolution. Also, except for a sliver on the eastern fringe where a few new water injection wells were being drilled, none of the Haradh III drilling is visible as the images there date to 2004.

Further analysis shows that, while there were some workovers, most of the wells going in were in fresh sites, though sometimes right in the middle of an array of existing wells. From what little KSA has published, their goals are 1) to bring in dry production to bring down the overall water cut going into a given GOSP, and 2) to minimize stranded oil pockets. Multilaterals are not drilled to the same level; they will place a well on the fringe of the dry area and drill some of the arms down dip into wet regions and some into dry. They fully expect that some will water out before others--those will be shut off.

Similar efforts are visible in Abqaiq, and I would say it just means using new technology to more fully (and economically) deplete a field. The real problem with Saudi Arabia is that there is no evidence of discoveries sufficient to replace what they've become used to as it depletes more and more. Perhaps they are just delusional about what is out there.

Joules - this is amazing! 18 rigs drilling Arab D oil seems quite a lot to me. Can you remember how long it takes them to drill a well - and translate this to rough wells / year?

9 rigs drilling Khuff gas is a lot - and I've gotten sceptical about them adding NGL to the oil count. No doubt a fair proportion of Ghawar "oil" is now NGL and this serves to mask the state of depletion of the Arab D honest to God oil.

Some months ago you sent me an image of Abqaiq - is it possible to have same with an accurate scale bar attached?

Thanks, Euan

Here you go, Euan:

Click on the image from a large version. The white vertical line is 10 km. The area of the enclosed area is 400 km^2. The green diamonds are rigs and the green dots are "new" wells.

As far as rigs go, here are excerpts from the Saudi Aramco 2006 Annual Report:

We have embarked upon an expanded exploration
program, designed to grow our proven reserves of oil
and natural gas both onshore and offshore. With our
greater emphasis on increasing production of natural
gas to fuel the domestic economy, our major discoveries
in 2006 were gas fields. We plan to drill more than 300
gas development wells and 230 exploration and
delineation wells by 2011. In the next 10 years, we hope
to add 50 trillion cubic feet (tcf) to our current 248.5 tcf
of gas reserves.
...
One of the central components of our expansion is our
drilling program. At a time when worldwide demand
for drilling rigs is at historic highs, we increased our
drilling rig count by 26 percent, from 90 to 113 rigs.
This total rig count comprised six exploration rigs and
75 development rigs (65 onshore and 10 offshore). In
addition, we deployed 32 workover rigs (24 onshore
and eight offshore). We drilled 368 new development
and 13 exploration wells, and performed 206 re-entries
and 136 workovers.
More than 80 percent of all wells drilled in 2006 were
horizontal wells with either single or multiple laterals.
...
Crude oil increment drilling continued throughout the
year, including the completion of 73 wells for the Haradh-
III increment, 28 of which were MRCs. Drilling for the
AFK increment continued with 54 wells. We began drilling
for three other crude oil increments in 2006: Khurais,
Shaybah and Nuayyim. The Hawiyah gas increment drilling
program was initiated, with 32 wells planned.

I suppose one could derive the rig residence time from this data.

I should mention here again my interpretation of what's happening. No certainty, but it fits the facts and it feels right to me.

In regard to Abqaiq, Ain Dar and Shedgum, what I think is happening is Aramco is progressively redeveloping the fields with MRC, and then shutting them down. We know from previous published data that with the depleted fields production from an MRC well only lasts a short time.

As they close down these fields (and eventually Uthmaniyah) they are starting up new fields elsewhere with the aim of maintaining a flat production profile out to 2018-2020. Somewhere around the 8-9 Mbpd mark. Euan has a graph that shows just this if you make certain assumptions for the reduction in supply for Ghawar. Its too perfect to be by chance.

Why do this? Well shutting in your best producing fields provides you with surge capacity, all the way up to the 12Mbpd that Aramco claims. You can start them up, and suck that sweet free flowing oil fast when you need to. It places SA where they want to be, in control of swing production.

Of course, you can't produce for long. Its not real fulltime capacity. But you just need ~100 days for it to count under the rules and it allows SA to meet their stated aims.

Thanks for adding this garyp, very good observations on MRC.

I'd contend that Euan's forecast of 240 Gb is as probable as Colin Campbell's 280 Gb. In the latter case that plateau could last even longer.

Gary,

Here's why I don't buy your MRC shut-in theory. May of the new MRC wells, in 'Ain Dar and Shedgum at least, are being put in wet areas with laterals extending down-dip--they are designed to get the oil before it gets left behind by the retreating flood front. Given that they probably aren't completely shutting in the whole field, it is still be depleted and the flood front is retreating--thus negating one of their stated aims.

If they want to throttle something back, it would make more sense to do this with Haradh III or even just stop production in problematic areas like Haradh I.

My view is they do indeed stop producing those fields, in order to shut in the last dregs of production as their 3Mbpd surge capacity.

If you take the assumption that they are not totally lying then 12Mpbd has to be possible to a certain extent. Given that we don't think they can achieve it for years at a time, this theory fits the facts. Abqaiq, Ain Dar & Shedgum are the highest quality reservoirs and are most likely to be able to be turned on to +3Mbpd levels quickly. Better to hold them back and maintain that surge producer capability much longer.

Haradh doesn't work since the reservoir quality is much lower, its capacity isn't high enough, and its needed to provide the base load.

In the end the only way to find out is to determine if the northern GOSPs etc are still working to full capacity. If not then either N Ghawar is in very sharp decline, or this 'late surge' hypothosis is in effect.

RE new Saudi gas wells and ELM.

It might make good sense for KSA to use their extensive gas reserves for domestic energy needs thus offsetting a good deal of domestic use of crude oil. This would tend to go counter to the ELM (Export Land Model) in that more crude would be available for export than would be otherwise were it not for massive NG development.

Right idea, but in the short term at least, wrong direction.

Because of shortfalls in domestic natural gas production, I am aware of a report that indicates that Saudi Arabia will have to divert 500,000 bpd of liquids production in in 2007 and 2008 to power plants and desalination plants. Because of this report, I was guessing at a 10% increase in Saudi liquids consumption in 2007. Note that Rembrandt put the first half of 2007 increase in consumption at +9% year over year.

Because of the natural gas situation, Saudi Arabia is looking into importing coal and into building nuclear power plants (and I assume that they are looking into LNG).

Thanks JB, fantastic!

Euan,
check out the pattern of the lateral legs in the paper that Darwinian linked to. Their complexity is astounding, they look like tree roots. It would be impossible to estimate drilling times on patterns like that without an exact map of the patterns and distances of the legs.

These must be being completed open hole without any kind of liner.

Darwinian, these kind of patterns might be improving the efficency of the original production by making sure that the oil comes out of all areas of the reservoir and preventing any area of the reservoir from being pulled too hsrd. There isn't a gas cap on the Arab D reservoir in these wells, so producing them slowly and evenly will hopefully prevent one from forming. The paper stated that no tertiary techniques had been used yet in this field. I wonder how well miscable CO2 would work?
Bob Ebersole

In the discussion at the CSIS meeting in 2004, if I remember correctly the Saudi folk said it took 63 days to drill a well. But this doesn't give the total picture.

'Ain Dar certainly has gas caps which resulted from gas injection in the late 60's and early 70's.

Joules how do I tell when a particular Google Earth image was taken?

Xeroid.

Open up the "Layers" panel in the lower left, scroll to the bottom, and open the Digital Globe folder. You will find folders for each year containing DG images for the area being viewed. Checking the box for an image displays the approximate outline for that image on the current GE view. By matching up the checkerboard pattern on the GE view with the best fit DG image, you can identify which image is being used and the date. You can easily rule out the DG images with cloudcover, but do note that the most recent images are not always used.

Joules,

Thanks, it's easy when you know how!

Xeroid.