 | DrumBeat: November 19, 2007 | The Oil Drum | Estimating the World Production Decline Rates from the Megaproject Forecasts |  |
81 comments on Is the Decline of Base Production Accelerating?
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81 comments on Is the Decline of Base Production Accelerating?
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Regarding JD's reappearance, what was truly bizarre about his comment is that there is almost no chance that Saudi Arabia will not show an accelerating crude oil production decline rate from 2006 to 2007, versus 2005 to 2006 (average annual production data). We can argue "why" Saudi production is down, but an accelerating annual production decline rate, at least from 2006 to 2007, is a near certainty, and I estimate that this will result in close to a 10% decline rate in net liquids exports.
Regarding the base supply, like a lot of people, I think that we tend to find the big fields first. Peak Oil is really the rise and fall of the big fields. We can make money finding smaller fields post-peak, but it doesn't look like we can make a real difference, e.g., Texas & the North Sea--virtually no restrictions on drilling, best available technology, developed by private companies, resulting in declining production.
And Stuart's posting is the highest compliment JD could get from all his efforts. It really doesn't matter what kind of claims he makes (made for so long back then), just like the yellow press - main thing is that it gets attention!!
Cheers, Dom
I was struck in this analysis by how little the small fields seem likely to contribute. After I finished the piece, I thought of the following way of looking at the data. I sorted all the 2007 report projects (through year 2010 again - about 15mbd of total capacity), and computed the cumulative capacity if you cutoff on the low side below each project. So essentially it was as though I tried the cutoff at every project size. That gave me this graph:
As you can see, the extrapolation suggests there's only another 2mbd of capacity - about 15% more - in the fields below 40kbd. Unless it turns out that fields less than 40kbd have some completely different behavior than those above 40kbd.
Of course, in the analysis in the piece itself, new small fields are effectively one of the things going into the base production decline/growth rate.
Yes, they tend towards not being economically viable, particularly those in x thousand feet of storm tossed ocean.
Therefore you should expect that 2Mbpd to be an optimistic estimate.
If I fit only to the data below the big step at 100kbd, I only get another 1mbd of small field capacity:
(Clearly, people like to design projects to produce a nice round-number nameplate capacity).
It's an interesting approach, it reminds me a little bit of the parabolic fractal law. Have you tried to order projects in log(size) versus log(rank)?
Yep. My eye based regression ended up at about 15.5Mbpd or 500kbpd extra. However all those 100 and 200 kbpd items scream marketing numbers rather than engineering.
All of which is unlikely to change the price of fish overall. Even if someone did find a >1mbpd field tomorrow; its still going to be post peak before it came onstream, subject to the same post peak political pressures. Frankly, now, its mass efficiency gains and culture adaptation that has the biggest part to play.
Stuart,
the reason that the small fields seem to contribute less is overhead. Small fields in shallow water can be drilled and recompleted with a jack-up drilling rig. When the water is over 500 ft, it requires a drill ship and a floating production platform which is much more expensive. I'm not sure about the break for the water depth, it may be shallower but I do know the drill ships are a lot more expensive.
That's the reason that the horizontal wells have such a quick collapse, too. Because they are in areas like the North Sea which require much heavier engineering than a tropical sea, the operators can't operate low volume wells. Onshore in places like the Giddings field, a horizontal well can make money with a 5 barrel a day well but in an offshore field a fifty barrel day well may be uneconomic. Its BS to say it makes them colapse quicker for a horizontal, the real reason is the overhead. Multinationals also have a lot higher company overhead than Devon or Apache in shallow water, or Anadarko in the Austin Chalk.
Bob Ebersole
But the overall contribution of these low flow rates are small so who cares about the economics of 5 vs 50 barrel a day wells. What I think your missing is once you drill a horizontal well the opportunities for rework are small. They are very efficient and basically give a square production profile. The key is that production profiles from horizontal drilling are quit different from traditional approaches and at the end of the day decline is much steeper. Correct me if I'm wrong but my understanding is that if you produce using horizontals once production collapses you move on with no attempts to work over.
Also another point is that technology does not makes production from deeper offshore regions equivalent to shallow or on shore wells. Its a apples to oranges comparison yet over time more and more of our production has come for deeper and deeper offshore regions.
The net effect is that the amount of oil that can be produced at high production rates has dropped far faster then the production rate and thus we have extracted our easy oil a lot faster over time. The easy high flow rate oil is gone. One reason I don't like URR the bulk of the oil that extractable on the back side would be extracted at a lot lower flow rates compared to the front and the economics esp offshore points towards little of this oil as actually being recovered.
We are facing the collapse of two major sources for oil. Offshore and the giant fields. One because horizontal drilling and conditions makes workovers or low production uneconomic and the second because we have already worked over the giant fields extensively. The total amount of oil remaining may not drop that much over the next few years but it makes sense that production rates will decline fairly steeply.
Good points, memmel, Ill think about them. Horizontal workovers are a lot harder and more expensive, because its hard to get downhole equipment out when its anything other than verticle. They are a lot more likely to get stuck. Also washing sand out can be a very tough problem. I've never done either, thats coffee shop gossip. And when you add in my point about overhead being a lot higher it all is pretty muddled . Bob Ebersole
I think the collapse of the onshore Yibal field in Oman following horizontal drilling and massive investment by Shell is more consistent with Memmel's argument. Thoughts?
To some extent but I'm asserting that the situation has gotten to the point that whole regions would show production profiles similar to Yibal.
A simple example consider the case that you have one well drilled with old technology and it produces at a constant rate for 30 years and one drilled 15 years later with new technology and it produces at a constant rate for 15 years when you hit the 30 year mark both wells need to be replaced.
Now assume that you manage this and replace with two wells that last only 5 years in five years all production has to be replaced. Real live of course causes this to be staggered but you see that even though you where digging your self into deep trouble production rates remained constant. In effect the treadmill of depletion has been speed up by technology and now we have reached the point that 5 year well lifetimes are not uncommon. This means overall production will effectively collapse since you cannot sustain production rates for any length of time under these conditions.
In any case lets just watch the GOM production if I'm right then we should soon see people talking about unprecedented and unpredicted decline rates. They just are not reading the right blog.
Jeff - since you actually work in small oilfield operations, do you see any trend on the ground in the ability/desire to execute on small projects? Eg, one hypothesis for part of this decline acceleration could be that it's gotten harder for small projects to get rigs and other needed capital equipment, so the small project/large project capacity ratio is worsening. Do you see any evidence of that?
Yes & No.
We are on the bottom of the food chain, looking for small (but potentially very profitable) shallow oil fields in the 1,000' to 5,000' range. Our shallowest current production is about 1,300'. Our deepest about 4,200'. So, the small rigs that we use are really of much use for deeper stuff. And while we are seeing across the board increases in costs, the costs for deeper wells are increasing at a vastly higher rate than for shallow wells.
Having said all of that, access to drilling rigs is still a problem, and my principal joint venture partner has gotten around the problem of a lack of equipment by buying two small drilling rigs and a workover rig.
I sent a memo out to my joint venture partners telling them that, IMO, the neverending energy crisis/boom (two side of the same coin) really kicked into high gear on 10/1/07, based on the premise that world oil demand is currently being met by drawing down inventories. I told them that what we have seen so far was just a squall line in front of the gathering energy storm.
As I have mentioned several times, if I am wildly successful at looking for one to ten mb shallow oil fields, the cumulative lifetime production from all of the oil fields that I might reasonably find would meet world oil demand for a few hours. Like a small organic farmer, the best that I can hope for is to at least be a net producer.
Also, the deeper rigs have much of the experienced personel hired. They are making more money with horizontal wells drilling in the Barnett shale and its hard for a little drilling co. to find a good tool pusher when he can work 8 days a week on a new horizontal rig.
Bob Ebersole
... I estimate that this will result in close to a 10% decline rate in net liquids exports.
Hi Jeff,
I've got a tweak for you too:
Source
Did you forget that one? Before moving on to your next prediction, maybe you should explain why the last one didn't pan out.
I think that it is an accurate statement. 2006 was the start of a net export decline that we now estimate will result in the top five hitting zero net oil exports sometime around 2031.
In addition, we explicitly warned, in May, 2006, of a near term decline in Saudi crude oil production, and we are going to see, at a minimum, two years of Saudi crude oil declines, with the 2006 to 2007 decline rate accelerating from the 2005 to 2006 decline rate.
Because of year over year declining oil production and rapidly increasing consumption, it is a virtual certainty that Saudi Arabia will show--as our model predicted--an accelerating net export decline rate, probably about -10%/year, which is what you referenced. So, what is your point again?
So then in your lexicon, the fact that we currently have to pay $3.50 for gas constitutes a "ferocious crisis"?
I think we should save our superlatives for rainier days than this...
The term "pot calling the kettle black" comes to mind. Like you, if I had a "do-over" I would have used more measured language. But as I warned in January, 2006, net exports--especially by the top net exporters--are down. And the implication of your March postings on Saudi Arabia was correct--the 2006 to 2007 year over year production decline rate will almost certainly be higher than 2005 to 2006.
In any case, my point is that 2006 was just the start of the long term net export decline that will probably show an accelerating decline rate. Whether key exporters actually hit zero is not really relevant. It's the first few 10 percentage point declines in net exports that will really hammer the world economy, not the final percentage points.
Three key points: (1) Net export decline rates are generally higher than production decline rates; (2) Net Export decline rates tend to accelerate with time; (3) Only a small percentage of post-peak production will be exported (10% for the ELM, more for countries with lower levels of consumption at peak).
Don't forget, guys, JD never makes predictions.
He just rips on others who are willing to stick their heads out.
Cheers, Dom
Which, if the data isn't strong enough to support a prediction, is a pretty reasonable thing to do.
More than that, though, it's one thing to make a tentative but informed guess and another entirely to act as if the data supports firm conclusions about the future. There's nothing wrong with doing the former...provided you don't let people misinterpret you as doing the latter when the latter isn't warranted. That, to a certain extent, is what happened with SS's prediction - a number of people took it as more authoritative than I think he originally meant it as, but - re-reading those articles - I think he picked up that vibe from the commenters and came to present his predictions more forcefully than the data allowed.
So it's worth being reminded that we need to be careful to not stray too heavily outside where the data can support us.
There's nothing wrong with that. He didn't have to be a jerk about it, though - the tone of his recent posts is much less reasonable than in his pre-hiatus posts.