<POLL: Credit crunch, new IEA production high (but what about the net?), lower world exports? Whither Oil Prices? The Oil Drum Food Price Inflation>
<DrumBeat: December 16, 2007 DrumBeat DrumBeat: December 18, 2007>

209 comments on DrumBeat: December 17, 2007

Comments can no longer be added to this story.

Show without comments | PDF version

westexas on December 17, 2007 - 4:23pm Permalink | Subthread | Parent | Comments top

Are you going to believe me or the Vice President of Lukoil? Of course, I guess we are saying the same thing.

The most recent EIA C+C data (September) show production to basically be the same as October 2006, and based on Russian data, November was down to the lowest level since May.

As I have previously outlined, the post-1984 Russian production and post-1970 Lower 48 cumulative production were basically been what the HL model predicted they would be, using only data through 1984 and through 1970 respectively to generate the models. Of course, they had wildly different production curves, which results in the anticipated higher decline rates for Russia.

So, let's see if the VP of Lukoil is correct. And if he is correct, we'll find out what kind of decline rates we see because of the rapidly rising water cuts in the old Russian fields.

Excerpt from an e-mail from a European energy analyst (I don't have the link):

Dec. 3 (Bloomberg) -- Russia, the world's second-largest oil supplier, cut production 0.9 percent last month to the lowest level since May as the eight largest producers all reported lower output, the Energy Ministry said.

Russia's older oil fields require increased investment to maintain output as they age. Large new fields such as OAO Rosneft's Vankor and OAO Lukoil's Yuzhno-Khylchuyuskoye won't start producing before next year. . .

But regardless of all of the above, the fundmental point is that the top five net export decline rate--as our model and recent case histories suggested--appears to be accelerating.

Comments can no longer be added to this story.
Pitt the Elder on December 17, 2007 - 5:24pm Permalink | Subthread | Parent | Comments top

Are you going to believe me or the Vice President of Lukoil?

I'll certainly believe that the VP of Lukoil wants his government to invest in his business sector. I don't believe your prediction that Russian oil production is going to enter a 15% annual terminal decline. And I also don't believe that he's saying that, either.

Besides...

Peak oil production is still decades away, according to Lukoil's top executive.

...I think you'll agree that we shouldn't take what Lukoil execs say as gospel.

Excerpt from an e-mail from a European energy analyst (I don't have the link):

The article isn't available online, at least based on googling for select phrases.

But regardless of all of the above, the fundmental point is that the top five net export decline rate--as our model and recent case histories suggested--appears to be accelerating.

Two problems with that analysis:

  1. Saudi production appears to have been voluntarily constrained, rendering any attempt to use their data to derive involuntary decline rates suspect.
  2. The top five net exporters are expected to change over time, as they have in the past. It's quite possible for net exports to rise even as net exports from the top 5 decline.

Intuitively, I would expect to see the relative share of the top five exporters decrease as oil gets scarcer, as their big, easy fields are used up and more players are enticed into the game with more marginal supplies.

To a certain extent, that's exactly what we see. The net exports from the countries which are currently the top 5 exporters fell in 2006 to 50.2% of net exports, from a recent high of 52.4% in 2003 (EIA data). It's far too early to call that a trend, of course, but it suggests that looking only at the top 5 might not give the full picture.

Comments can no longer be added to this story.
westexas on December 17, 2007 - 5:37pm Permalink | Subthread | Parent | Comments top

From the January, 2006 post:

. . . so we could actually see a year or two of rising production before production reverts to the curve (assuming that it will). For what it's worth, my bet is that Russia will start a steep decline no later than next year.

The 11% number was a rough guess. As noted down the thread, Khebab's most recent work that I presented at ASPO-USA shows a middle case decline of about -7%/year.

We can continue to argue about "why" as the Titanic sinks, but the net export decline by the top five--accounting for about 50% of world net oil exports--is almost certainly going to show an accelerating decline rate, as suggested by our model and recent case histories.

We shall see what future production and export data show.

Comments can no longer be added to this story.
Pitt the Elder on December 18, 2007 - 7:00am Permalink | Subthread | Parent | Comments top

The 11% number was a rough guess. As noted down the thread, Khebab's most recent work that I presented at ASPO-USA shows a middle case decline of about -7%/year.

As I've previously given the calculations for, the decline rate would need to be ~13% for the cumulative production given by HL to be right. And if it's wrong, what reason do we have to assume a high rate of decline?

We can continue to argue about "why" as the Titanic sinks

We're arguing whether we're on the Titanic - Russian production has been growing strongly, and has shown little sign of an imminent and rapid decline.

the net export decline by the top five

The top five are accounting for a decreasing share of net exports, so an analysis that fixates on them is likely to systematically overstate the problem.

Comments can no longer be added to this story.
westexas on December 18, 2007 - 10:58am Permalink | Subthread | Parent | Comments top

So, I guess when the top five net exports have dropped by 90%, against an overall 75% net export decline, we are in fine shape, because the current top five would account for a small percentage of net exports at that point. Makes sense to me.

Comments can no longer be added to this story.
Pitt the Elder on December 19, 2007 - 3:11am Permalink | Subthread | Parent | Comments top

So, I guess when the top five net exports have dropped by 90%, against an overall 75% net export decline, we are in fine shape

Straw Man fallacy. Is it that hard to address what people actually say?

Of course that would be a problem, and I've said as much repeatedly. It would be a 75% net export decline problem, though, and not a 90% one.

Comments can no longer be added to this story.

209 comments on DrumBeat: December 17, 2007

Comments can no longer be added to this story.

Show without comments | PDF version