Let's keep the focus on Russia for this thread :-)

Yes, thanks for a very nice summary Stuart. Your efforts are greatly aprreciated. With all the talk about Saudi Arabia, we tend to forget that Russia is equally as important.

Picture is getting clearer and clearer thanks to your work and that of other contributors to this site.

Ken

Following is the Russian commentary portion from our draft of the final written report on Brown/Khebab Net Oil Exports by the top five:

Russia’s initial 10 year projected production decline rate is -5.1%/year plus or minus 2%. The projected rate of increase in consumption, which is heavily weighted toward recent consumption and therefore on the low side, is +0.3% plus or minus 0.8%. The initial 10 year projected net export decline rate is -8.2%/year, plus or minus 4%. Our middle case shows Russia hitting zero net exports is 2024, within a range from 2020 to 2029.

We believe that Russia’s recent rebound in production was primarily a result of Russia making up for what was not produced following the collapse of the Soviet Union, and based on our mathematical model, Russia has now “caught up” to where its post-1984 cumulative production should have been.

This summer Alfa Bank warned of problems with mature Russian oil fields because of rapidly rising water cuts. Just recently, Renaissance Capital brokerage said that excluding the Sakhalin-1 Field, daily crude output in Russia has been down year-on-year since May. And there have been recent warnings that new fields in Eastern Siberia are too small and being developed too slowly to offset the production declines in Western Siberia.

The above image is from Jeff Rubin's (CIBC) October 2007 presentation OPEC's Growing Call on itself (PDF).

You probably mean this news which has been circulating for 2 years now:

Russian oil output could peak .... in 2010..... Russian Industry and Energy Minister Victor Khristenko said.

The latest I could find about that was this IHT article:

The oil and gas fields feeding this bonanza are running dry. Russian gas output has leveled off; oil production is expected to peak by 2010. Russia has more gas and oil, but its energy sector has to make the right decisions now to tap new fields. Western energy companies, whose capital and know-how will be essential to sustain Russian oil and gas production, have felt distinctly unwelcome in Putin's Russia

Coincidentally, Rosneft is also renegotiating their deal with China after 2010:

State-controlled Rosneft (ROSN.MM: Quote, Profile, Research), Russia's largest oil firm, said on Tuesday it will not renew its existing crude oil supply contract to China after 2010 unless China offers better terms.

There has also been discussion about overstated reserves:

Mitvol was visiting analysts with several banks in the United States who hold investments in companies operating in Russia, warning them about the dubious reserve accounting methods.

Then again, there's been discussion about Russia capping it's production voluntarily. High prices really is good for Russia (and esp. Putin's cabal):

So Russia may be about to cap its oil production just when the global community is looking for it to produce more oil. Of course, that is the global community's problem, not Russia's.

As for actual export data, exports did fell in 2006 2.4% according to Prime-Tass news agency (article not available on web anymore). Rian reported a 1% fall y-2-y for 2006 exports for Russia.

However, according to Alexander's Gas & Oil Connections, Russia's 1-8/2007 oil exports grew by 4.75% compared to year earlier.

You're right on the swapped legends. I'll fix it tonight.

The lables for rig count and IEA are swapped in the rig/production chart. It freaked me out seeing such a vast difference in the IEA and EIA figures, which are always reasonably close. Blue is rig count and the dark red/green is production. This is very telling and goes a long way in refuting the standard argument that high prices will cause more drilling and more oil. A similar chart for Saudi Arabia would probably look the same.

I agree. I think most people equate Siberia to Saudi Arabia or Texas. Siberia is much larger then all of USA but at the same time the weather is very harsh. I do not think that Siberia is as well explored as Texas or Saudi Arabia, which in turn means that there is potential (but of course no guarantees) that there are additional large oil fields.

claassen,

I wish I had your confidence that supplies are sufficient for the next 50 years. Most of the studies I've seen claiming this use a lot of hand-waving compared to the hard analysis arguing for a near-term peak in oil production.

IMO the urgency of the need to begin mitigation cannot be understated.

Clint

Thanks for this BP...and welcome.

Thanks BulletProof, this is a great link. I had no idea Russia would be so transparent in their energy production numbers, yet this link gives daily numbers. If I read it right, it shows they produced 1348.4 tons of oil on October 30, which at 7.3 barrels per ton is about 9.84 million barrels (I'm not sure 7.3 is the best figure to use, though).

Absolutely brilliant link. Perhaps TOD should get a feed off it :=)

Why would they be ramping up rig count like crazy if they were saving their reserves for later?

Interesting! If so, that would presumably also account for the relatively low recovery factors seen during the soviet era.

Yikes.

That would be the kiss of death for low oil cut REDA / submersible production. As I understand it, the key to managing production from those types of wells is having a large enough pump to pump them down, but not so large a pump as to uncover the pump and have it run free / burn itself up. Having a thousand or more feet of standing fluid could dramatically reduce the oil cut.

Russia's very big part in the global peak can not be considered apart from the very large impact of the very large Soviet Union. The Russian production chart isn't a case of a single peak per Hubbert's theory, but what is going to be a twin peak - the first controlled by Soviet thugs and the present second peak controlled by a state run industry that by many opinions including that of Jim Rogers is as inept as ever (a "disaster going on a catastrophe" as Rogers has phrased it). As the production curve shows, their oil industry was pretty dormant in the 30s and 40s, but then was thrown into high gear in the 50s to the early '80s when the Evil Empire went on the war path for world domination. The Soviet economy had little to offer in world trade except a lot of oil. This was their funding for world conquest to the extent that Deffeyes suggested that a more powerful reason for the Soviet collapse than Reagan's arms race was an oil price war OPEC conducted with the less adept Soviet oilfield "managers" - a price war in the middle of an arms race, and they lost badly. I suspect that, during this desperate race with the free world, Soviet oil field management was done more from the point of a rifle than from a geology 101 textbook. This likely produced a lot of reservoir damage from overproduction, although if they were only tubing 1000' deep or less as Fractional Flow says, I don't know how much they would damage reservoirs. Would this mute or amplify overproduction damage? Anyway, they apparently were endangering the world's oil supply to the extent that the U.S. military was monitoring Russia's oil industry pretty closely during the Soviet years. One interesting article is this one written by an Air Force major in Air University Review in 1980. Way back then, he sounded just like Simmons today only talking about Soviet fields and predicting a production collapse by the mid '80s (which, in fact, did happen). He pointed out the big, easily developed fields playing out and the numerous new fields in inaccessible, hard to develope areas with a lot of technical issues. He points out that Russia ambitiously directed over half of their oil exports to Eastern Europe and other parts of the expanding empire, and other geopolitical factors that led to serious overproduction where "...rewards for exceeding goals are given without regard to productivity over the long term ...The consequences are...overproduction of existing fields using low productivity techniques that reduce the total amount of recoverable oil." The major was thus accurately predicting the first Russian peak (a Twilight on the Tundra). But not being a student of Hubbert on the bigger global picture, and narrowly focused on the Soviet run fields, he was concerned about a global oil war developing as soon as the late '80s, with 10 years of cheap oil left.

What you mention are parts of the problem, but too many people are another bit.
This reminds me of an analyst today saying he would change his sell signal to buy for Citi when they mark down all their securities to the price at which they can be liquidated. The problem is, such a write down would acknowledge they are insolvent, which the pretty talking head might (or might not) have known... at any rate she smoothly moved on. Good planning and working together is good, but not always enough.

No - it's just that KSA wasn't in the top five increasers or decliners in that timeframe.

Long term plans? What part of capitalism and representative government is incompatible with long-term plans? Which countries are best at long-term planning? Norway? Sweden? I have more questions than answers, but long-term planning requires some sort of consensus about the direction any government ought to go. This changes fairly frequently in the US. As clunky as our electoral system is, its exercise reflects broad changes in the mood of the electorate. And the electorate as a whole is uninterested in long-term planning. In the US, we can't decide what role we want government to play in health care, transportation, or environmental management. We can't decide whether going to war with Saddam Hussein/Iraq is our long-term best interests (NOT).

I would agree there's enough noise month-to-month that it's quite feasible for a single month or two to go above the highest so far. However, I'd be very surprised to see overall production go materially above where it is now for an extended basis.

"it would be premature - and damaging to our credibility - to proclaim the peak as already being past tense."

People keep bringing this up, but I have already heard criticism that the peak in oil has been predicted many times in the past and was always wrong. It seems to be a standard argument used by deniers, so I'm wondering how important it really is.

I heard an interesting analogy once where some people were continuously filling some container and were warned it was going to burst. It didn't burst, so they kept on filling it, until finally (of course) it did burst. I can't remember where I heard it though.

I for one can certainly tolerate some variation in the dates of the predictions for peak, hopefully this means the decline rate will be manageable.

Policymakers hopefully are capable of seeing past a temporary rise in production when a new project comes on line.

Clint

Euan-

Looking at the Exponential decline equation

Np= (qi-qf)/D

If we take D as 8%/year like that Saudi prince said was their "no activity" decline ....

And consider that their making 3.5 billion barrels per year more or less suggests they are tied to a reserve base of some 44 billion barrels.

And this is something I thought I'd never say- that makes the HL intriguing.

Then contrast with the fact that they claim I believe 260 billion total proven with 130 billion in development (PDP).

It should be no great feat to make 3 billion barrels a year from a 130 billion barrel pool.

The volumetrics is telling everyone something but the performance is saying something else entirely.

The exponential no work decline is the exponential no work decline.. and it is my experience that it does point you at a target.

FF

Your forecast shows the sa 07 decline continuing in 08 on account of reduced oil even as ngl grows a bit... then more later as both oil/ngl rise. Where did this forecast come from? Seems to conflict with sa promises to boost prod in nov, which I thought meant until further notice.

"Thxs for the keypost! I recall some earlier postings that global warming has shortened the frozen days across Canada and Alaska: thus reducing the time to move heavy equipment, then drill, or run pipelines, etc, across the tundra."

Just another positive feedback loop, Bob.
I guess you are now living with your mam..? Good for you
Edit: Good for her!

I skimmed it, but the error bar on the conclusion seems to be enormous (because the input numbers have large uncertainties). I'm suggesting that looking at the rig counts pins the situation down a lot tighter.

I would be curious about what 1st or 2nd class fields are being held back (apart perhaps from ANWR). Any specifics offered? It still just seems like speculation/excuses to me. Unless, it really just means they will produce 1st class fields conservatively to maximize long-term production rather than overproducing for quick profit.

It's been known forever that individual metal mines and districts deplete and eventually run out of ore, and that prices fluctuate, and that gold prices, for example, can rise suddenly. Yet I can't think offhand of any example of a rich deposit, once discovered, being left fallow, as it were, when economic conditions allowed it to be placed into production. (Lower grade or deeper deposits, on the other hand, may be left fallow for decades, until prices rise enough to make them profitable.) It's theoretically possible, of course, but examples don't come to mind. Consequently, average ore grades and ore-to-waste ratios (for open pit mines) have decreased with time, as the nearest-to-surface, richest ores were mined first. Hubbert linearization, as I understand it, depends on this sort of "diminishing returns" assumption.

Put differently, human lifetimes are short, and everyone wants to get theirs while they can, because they may die tomorrow. In a free enterprise system, you want to increase the value of your own stockholdings, or year-end bonuses, or whatever. In a totalitarian system, you want to employ as many miners as possible, or maximize your ability to buy foreign wheat, or enrich your Swiss bank account, or whatever. Energy is hardly unique in this regard. People, corporations, and governments tend not to leave money lying inside the ground, any more than they tend to leave it lying on top of the ground, unclaimed.

Family ties or impending death may change the Hubbert equation, owing to a desire to pass wealth on to offspring or charities (forms of individual immortality). The Guggenheims and the Rockefellers notwithstanding, world production is unlikely to be affected appreciably by such motives. (Neither family left undeveloped mines or wells behind.)

Promising sites where drilling and production are expressly forbidden by treaty or law (e.g., Antarctica, national parks) are probably also negligible in terms of worldwide production statistics, with metals in the deep seabed perhaps providing an exception. When there are none left elsewhere, they might be put into production (provided that there is still a market and the means).

To date at least the pattern of development has tended towards maximizing production even in KSA which has deployed the latest technology. KAS does seem to generally manage per well production in a conservative manner but that does not mean they don't use the latest well technology which increases extraction ability.

Lets say a modern well can produce oil at 5 times the rate of one in the 1970's running said well at say 70% of capacity does not change the fact its 500% times more efficient than older wells.

These are not real numbers but you see the point. My best guess it that our extraction efficiency has at least doubled if not tripled since the 1970's.

I define extraction efficiency as the rate you can produce a reservoir under a given set of constraints. Obviously some reservoirs where basically un-producible in the past but thats and outlying condition.

I'd love to see a comparison of similar reservoirs developed say from 1960-1980 and one from 1980-current. I dunno where this data is.

This is what makes me wonder about the true nature of the plateau. If it was just geology how did we manager to plateau in the first place and go through strong growth in the last few decades with no major discoveries.

From a discovery perspective we probably have done a fair job of exploiting them by the end of the 1990's if you look at the discovery curves. The shock model and a few others use shifted discovery I noticed that shifting forward to give a peak production in the 1990's seems to work fairly well. Growth since then seems to be more based on a combination of two factors. The collapse in price at the "peak" and technical advancement. The reason I feel like setting the real geologic peak in the 1990's is this is when prices collapsed and signaled that we had the most oil available ever.

It took a while to burn up all this oil and the real peak was hidden by the price collapse and then the collapse of the Soviet Union. Later as the price increased we also continued to make a lot of progress in oil extraction technology and this allowed use to continue to increase production even though we were probably well past peak.

So it looks to me that the current plateau is more from technology reaching its limits coupled with decline rates becoming so high that they cannot be overcome. If technical advances have flat lined this means that we will effectively see the real underlying geologic decline rates and pretty much nothing we can do about it.

As was point out in this post even a exponential increase in the drilling campaign could do little to offset declines. But the underlying geologic decline rates are not the ones for a system at geologic peak but ones for a system thats well past peak so the curve is not symmetric but heavily distorted with the bulk of the oil extracted on the front side.

So I think your numbers are right but we should be seeing real production decline rates starting to accelerate and technology no longer helps. The probably will double every year say 2% 4% 8% 16% this leads to us starting to lose a increasing amount of production each year something like 500kb say for 2006 1mbpd for 2007 2mbpd for 2008 and 4mbpd for 2009. This means production will probably basically collapse because of external factors in 2011-2012.

This is I think close to the real treadmill we face.
And of course throw export land on top and things move a bit faster.