Russia's Oil Production is About to Peak
Posted by Khebab on April 24, 2008 - 10:00am
Topic: Supply/Production
Tags: megaprojects, oil, peak oil, russia, sakhalin [list all tags]
Megaproject contribution from 2005 to 2013, the decline rate is 4%/year with a linear transition period of 6 years starting in 2005. Historical crude oil + condensate production from the EIA.
When Will Russia Decline?
Since 2005, the Russian oil industry has been in constant turmoil. Production growth has also slow down significantly maybe as a result. The Exxon Sakhalin-I project has now reached its peak and production is experiencing a steep decline since. On the upside, many projects are expected to come online and the IEA forecasts that oil production in Russia will increase by 90,000 bbl/d in 2008 and 300,000 bbl/d in 2009, following growth of 200,000 bbl/d in 2007.
Figure 1. Monthly crude oil + condensate production (from the EIA). The blue and green lines are 12 and 3 months average respectively. Click To Enlarge.
The dramatic drop down in production growth observed by Stuart is still going on and is now close to 0 (i.e. flat production). Several trend lines can be drawn, in particular the trend for 2007 in purple would imply an immediate decline in 2008. However, several decline acceleration periods have occurred in the past (similar lines could have been drawn in 2001 and 2004) so it is unlikely that the rapid decline observed in 2007 will continue in 2008.
Figure 2. year-on-Year change in monthly production for crude oil + condensate. The magenta line is based on 2007 data only, the green line is the average trend using 2005-2007 data and the blue and red lines are the low and high case respectively (95% confidence interval for the fit).
From the above linear trends, we can derive different oil production scenarios as shown on Figure 3 where peak production is seen between 2010 and 2015 with a peak production between 9.5 and 10 mbpd.
Figure 3. Oil production scenarios based on the trend lines shown on Figure 2
In terms of corresponding oil reserves, these scenarios are consistent with published reserve numbers. Using various reserve estimates gathered by Dave Cohen, I derived an empirical reserve cumulative distribution function (CDF). We can see that the dotted green line (Middle case) around 105 Gb is close to the median estimate at 116 Gb (F50).
Figure 4. The thin blue line represents the CDF of available reserve estimates for Russia. The vertical dotted lines indicate reserve figures corresponding to the different scenarios on Figure 3.
Impact of Future Megaprojects
There are quite a few projects for Russia listed on the wikipedia Oil Megaproject list. I assumed an ultra-simple triangular shape for each project with a linear ramp-up until the peak year and an immediate exponential decline (decline rate at 5% on the figure below). When the peak year is not available, the year following the starting year is taken as the peak year. The most important project in terms of flow rate is the Vankorskoye that could reach between 0.4 and 0.6 mbpd in 2015-2017 and therefore will probably offset production decline in existing fields and not really contribute to maintain production growth in the near future.
Figure 5. Hypothetical megaproject contributions for Russia (source: Wikipedia Oil Megaproject project).
The gross new supply addition is shown as a blue bar on Figure 6, the above field model (therefore including depletion) gives an equivalent net annual supply addition shown as the the green bars. In addition, a Monte-Carlo procedure is applied on the field models shown on Figure 5. Parameters for each field model (time of the peak, post-peak decline rate and duration of the production plateau) are chosen randomly based on empirical probability density functions derived from the UK/Norway dataset (the Monte-Carlo runs are shown in gray on Figure 6).
Figure 6. The blue bar is the gross oil megaproject contribution attributed to the project starting year, the green bar is the annual supply addition from megaprojects based on the field model shown on figure 5. In gray are the Monte-Carlo runs and in red is the average production.
Below, I assumed an ultimate decline rate for the existing production post-2005 at 4%/year and 3%/year (EIA estimate). In addition, because fields online prior to 2005 won't go into decline immediately (see this post for an detailed analysis), the decline rate is set to increase linearly from 0 to 4% between 2004 and 2011. Current production seems to be well within the Monte-Carlo uncertainty interval and at best, a production plateau is seen in the near future.
Figure 5. Megaproject contribution from 2005 to 2013, the decline rate is 4%/year with a linear transition period of 6 years starting in 2005.
Figure 6. Megaproject contribution from 2005 to 2013, the decline rate is 3%/year with a linear transition period of 6 years starting in 2005.
| 2007 | 2008 | 2010 | 2012 | 2008 - 2030 Cumulative Production (Gb) | |
| Low Case | 9.44 | 9.43 | 9.57 | 9.47 | > 62 |
| Middle Case | 9.44 | 9.43 | 9.64 | 9.67 | > 67 |
| High Case | 9.44 | 9.43 | 9.73 | 9.93 | > 78 |
| Megaprojects + 3% decline rate | 9.44 | 9.42 +/- 0.17 | 9.44 +/- 0.15 | 9.21 +/- 0.12 | > 64 |
| Megaprojects + 4% decline rate | 9.44 | 9.27 +/- 0.17 | 9.17 +/- 0.15 | 8.79 +/- 0.12 | > 57 |
Production forecasts for Russia (Crude oil + condensate).
Related Stories:
Stuart Staniford, Are We missing Russian Megaprojects?
Stuart Staniford, When Will Russia (and the World) Decline?
Heading Out, A little more illustrative info on Russia
Dave Cohen, Uncertainties About Russian Reserves and Future Production
Dave Cohen, For Russia, An End To Growth is In Sight, ASPO-USA.
Dave Cohen, Has Russia's Oil Production Peaked?, ASPO-USA.
Other stories related to Russia on TOD listed here.
http://www.theoildrum.com/story/2006/1/27/14471/5832
Hubbert Linearization Analysis of the Top Three Net Oil Exporters
Posted by Prof. Goose on January 27, 2006 - 1:47pm
[ED: This is a guest post by westexas...]
It’s interesting to take a trip down memory lane, to my original post on Net Exports, in January, 2006, and to scroll down through the comments. Note that I slightly modified my Export Land Model (ELM).
In the comment thread, based on Khebab’s work I said that Russia could probably show a year or two of increasing production, with the decline probably startng in 2007.
My concluding paragraph in the post (with my consent) was slightly edited by PG. The original reads as follows:
Based on EIA data, net exports by the top five net oil exporters dropped by 800,000 bpd in 2006, from a 2005 peak of 23.5 mbpd, and I estimate that they dropped by about one mbpd in 2007. If we average these two declines, we get 0.9 mbpd. 23.5 mbpd divided by 0.9 mbpd, gives us 26 years of remaining net oil exports from the top five, which is also the middle case in our (Khebab/Brown) top five net exporters paper.
$225 oil by 2021?? http://www.cnbc.com/id/15840232?video=721421158&play=1
Of course you meant 2012. Yeah, the CNBC gang looked pretty sick as Rubin once again went over what is basically the ELM (my usual disclaimer, I was building on work by Simmons & Deffeyes, among others).
At their current rate of increase, oil prices would double about every 18 months or so.
BTW, regarding the original post on the top three net oil exporters in 2005--Saudi Arabia, Russia and Norway (accounting for about 45% of 2005 net oil exports)--all three of them are currently showing annual and/or monthly production declines, with a predictable effect on net oil exports.
More alarmingly, the clip says in 2012.
Maybe sooner.
Hopefully sooner...
The sooner oil is expensive, the sooner alternatives will be proliferated...
So what do you say to the people that are advocating the Russian don't have western technology that would allow then to search and drill for more oil in the vast region's of Siberia that haven't been thoroughly explored??
Khebab probably has his own opinion, but IMO (for what it's worth--I have never claimed to an expert on Russia) the frontier basins in Russia are to Russia as Alaska is to the US. Alaska helped, but it was pretty much a blip on the long term US decline.
As I have noted several times, Hubbert found that a one third increase in estimated Lower 48 URR, from 150 Gb to 200 Gb (four Prudhoe Bays) only postponed the projected Lower 48 peak by five years.
I don't think it's a fair argument, the Russians are extremely capable and willing in expanding their own resources. Anyway, even if a flurry of new discoveries are occurring, projects are getting more and more complex and costly. It's not easy oil anymore and timing is of the essence in sustaining good production growth rates.
Could you post our Texas/North Sea graph?
These two regions were developed by private companies, using the best available technology, with virtually no restrictions on drilling. The initial Texas decline corresponded to a 1,000% increase in oil prices, and Brent crude, from 1999 to 2007, increased four-fold.
Well, I would reply to those people that actually western technology would not be as advanced as it is if the Russians hadn't been contributing to that advancement. The Russians have hired some of the best engineers from the west as they have also sent out some of their own best engineers to the rest of the world.
My wife has some family working over there and they work with Schlumberger, Maurel&Prom, and such. Some areas are really very extreme and I have a lot of respect for them : they are not only very skilled but also very tough and adventurous people.
What the Russian peaking means for the global crude oil plateau can be seen here (bright green area):
The graph shows incremental crude oil production only as explained in our article here:
http://www.theoildrum.com/node/3793
It contributes to the 2nd underlying peak (of hitherto growing countries) marking what can be considered the end of Bakhtiari's transition phase T1.
According to the late L. F. Ivanhoe, peak production was 12.6 million B/D in 1987.
http://hubbert.mines.edu Issue 98-3
Russia is using Western Technology, they are not stupid. Schlumberger was doing intensive in house training in YUKOS and the same model was then pushed to other Russian oil firms.
Western software, hardware etc. is there and if they lacked the expertise they would buy the consultants in the Market.
So if production is dropping it is dropping because they don't have anything at the moment to stop it from dropping. Fields with sufficient production to do it.
Some of the megaprojects are kind of iffy. TNK-BP's Uvat will be producing around 28,000 b/d in 2009. Expansion beyond that will be slow.
Gazprom's Prirazlomnoye oil field (Barents Sea offshore) is still in the discussion phase. I am doubtful it will produce 130,000 b/d in 2013. This field was discovered in 1989.
Lukoil's Yu. Korchagin (2009) is small -- 40,000 b/d.
Lukoil will be fortunate indeed to get Filanovsky off the ground in 2011 (peak at 210 in 2015?). Right now they simply can't finance development. They are hoping for some tax breaks that would allow them to start development after 2010.
Surgutneftegaz is taking Talakan (Sakha, Yakutia) to 60,000 b/d in 2009 from 20,000 b/d now. They will start production at Alenskoye in 2010. Together, they see these two fields having a potential of 80,000 b/d altogether, but no date can be assigned to that production peak.
Who knows what Vankor will eventually produce? Peak production is many years away. There are difficult financing issues i.e. where's the cash going to come from for longer term large scale development?
So, you see, what we know beyond the next few years (up to about 2011) is not much.
-- Dave
Dave ..
Nice names from those Russian Projects ..
Filanovsky = Fil-a-my-tank-anovsky
Suregutneftegaz = Sure-we-got-no-gas-lefty
Can't wait for them to develop the
No-more-fuel-at-allsky project !!
Triff ..
I actually did some work on Prira - zlom - noye in the mid 1990s. A big carbonate field being appraised then by Hamilton Brothers. Probably not an issue getting it to produce 130,000 bpd by whenever. The telling thing is that the Russians are now developing these deep water off shore fields like this one and Shtockman. I dare say if they had a cupboard full of nice on shore fields they wouldn't bother with this stuff far off shore in the Barents Sea.
Khebab,
What would the model look produce if the megaprojects produced only 50% of their supposed ultimate output?
Something like that (with a 3% decline rate):
I'm still working on that Monte-Carlo simulation, it's pretty much a work in progress.
Thanks! So even with a three percent decline rate, 2008 is peak. With a 4% decline rate, it would be worse.
Duplicate.
5% extraction rate on previous discovery-driven shock model, circa 2005
http://mobjectivist.blogspot.com/2005/11/fsu-oil-shock-model.html
I tend to look at the larger macro-historical sense and when I photoshop my graphs onto the micro-analyzed year-to-year data, I hope you can see what kind of apertures we have available to us.
Interesting, I didn't get good results with the HSM so far. In particular, the 1998 rebound is hard to replicate.
The rebound is basically a stabilization in extraction rate. The notch lines up with the collapse of the FSU. It seems logical that the social and financial chaos that existed during this time had a lot to do with the retrenchment and ultimate recovery in production.
"Russia is a riddle wrapped in a mystery inside an enigma." -Winston Churchill
Khebab's analysis is probably as good as any. But it is a vast, and still somewhat chaotic, land.
Huh. Thought that was from Oliver Stone.
Think they'll just wait for their wells to fill up again?
True about the size. Once I saw a map of Siberia with a scale map of Texas superimposed on it. Texas looked insignificant. I bet if they properly prospected Siberia they would find a lot more oil.
If Western oil companies were able to develop the Russian basins, perhaps they could duplicate the long term success that we have seen in Texas and the North Sea.
The analogy to Texas and the north Sea is invalid. Their production has declined but Texas was throughly prospected for oil in the first place. Much more than Siberia has been. When Texas peaked it's production was the most that could be hoped for. The same is probably not true of Siberia.The North Sea is an undersea formation and they tend to deplete very quickly for some reason.
As noted down the thread, actually Russia peaked back in the Eighties at about the same stage of depletion as the North Sea, based on the logistic HL models. Because of high operating costs, offshore regions are produced at high rates.
The rebound in Russian production in recent years was largely making up for what was not produced following the collapse of the Soviet Union, and as also noted down the thread Russia is now showing declining production.
The question is how the frontier basins, which were not in production in the Eighties, will perform. My guess is that they are to Russia as Alaska is to the US--some help, but no substantial difference.
What the Texas and North Sea declines do show is that regions peak and decline when oil companies can't offset the declines from the older, larger fields. These two regions had essentially zero impediments to drilling. Perhaps if major oil companies were in charge of all production worldwide, they could hold the world decline down to the Texas range, about -4%/year.
This is why I think a global decline rate of -8% and even my concept of accelerated depletion is probably more valid post peak then -4%. What a lot of people don't realize is a good bit of the oil glut that caused cheap prices in the 80's and 90's is related to offshore oil production. I believe its 40% but I'm not finding a good link for the exact number. In any case offshore production has in general much higher depletion rates and thus in general steep 10-30% decline rates after about 80% depletion. On land modern horizontal drilling also has this square wave like depletion/production decline pattern.
So assuming -4% production declines for the world is probably not a good bet. Given the historical production pattern with the long large easy fields on land drilled and depleted first followed by fields generally offshore or smaller with increasingly higher depletion rates one would expect us to see the worlds depletion level to climb fairly quickly on average followed by a steep production decline once the old large mature basins are in production declines. Its the tortoise vs the hare race and in our case both are going to lose about the same time.
I think this is what really driving the fact that technology simply can't stave off production declines post peak the simple dynamics just don't add up.
This is a graph on onshore / offshore shallow / offshore deep production that Matt Mushalik sent me. It was prepared by Energyfiles Ltd.
The graph is of separate layers of world oil production. They are not stacked, which is why the top amount is not equal to world oil production. From this graph, it appears that something over a third of world oil production is currently offshore. The graph includes some forecasts by these folks.
I remember a comedy bit on TV, a parody of USSR television, where a guy would take an outline of a country and place it inside Russia, then cackle madly. "What Fits Into Mother Russia." Everything to scale.
The catch is that in figuring out whether it makes sense to develop these resources, one has to factor in the cost of roads and pipelines to the remote locations. If there is only a small amount of oil, it may not make sense to build a pipeline or roads. Even if it does make sense, the roads and pipelines add huge costs and delay.
I think I'm starting get an idea why it's so hard to convince people of peak oil. My wife has her Masters degree, belonged to Mensa and has a high IQ, yet I can't convince her of the gravity of the situaion, i.e. that prices will continue to rise. She says things like, they'll find more, or other technologies will replace the need for oil. Yesterday she said it was investors manipulating the market. I tried to explain it to her, but to no avail. The reason why is because she has a certain view of the world that is entractable. For her the assurance that the past equals the future is set, without much deviation. Any increases in price will be followed later by decreases and things will be rosey once again.
So here I am not understanding why the World as a whole can't catch up to the idea of Peak Oil, when I'm actually living with a well educated person that refuses to believe it. It's very disconcerting to me that it takes so much to breach the density of people's perception. I guess that's why situations must become dire before anyone acts.
For some, the glass is half empty. For others, half full. And for some, when it's half empty, it starts refilling itself..
I have tried to gently introduce this issue to family and friends, so far no one "understands" what I'm talking about. Better technology will save us, always. I think people are fobic of peak oil and its consequences.
It's very difficult to convince people, especially the educated ones. Nate Hagens has a few posts about the psychology behind peak oil. Most still think that oil is being produced and not extracted. King Hubbert could not even convince his peers in the 50s about the US peak production and it has not changed today.
Cs: I am not sure that the premise "the World can't catch up to the idea of Peak Oil" is valid. CEOs, stock analysts, energy analysts, politicians, MSM mouthpieces, etc. etc. are notorious for dishonesty so at this point it is very difficult to quantify what % of the world "gets" Peak Oil-IMO it is dramatically understated. IMO the Saudis will be trumpeting endless reserves the day after they are safely ensconsed in Geneva or Monaco or some other haven and the well has almost literally run dry.
My wife and I had some raging fights about it.
Three things helped greatly:
1) I have a Peak-Oil aware coworker. We went and visited him and his wife. While Paul and I disagree on the final outcome, we both agree on the technical whys.
2) My plans for mitigation all involve keeping one foot in both worlds and slowly shifting weight just a little bit ahead of the rest of humanity. I bought a farm so we could produce our own food and be out of the cities when the chaos erupts.... but for now, we raise natural produce and food for the hoighty-toighty Boulderites. So if oil really is replaced by magic fairy elves and sunshine, well... I've got a nice farm that I enjoy anyway. If chaos erupts, I've got a safe haven.
3) My wife likes the chickens, sheep, and vegetable garden.
My wife and I had some raging fights about it.
Four things helped greatly:
1) I have a Peak-Oil aware coworker. We went and visited him and his wife. While Paul and I disagree on the final outcome, we both agree on the technical whys.
2) My plans for mitigation all involve keeping one foot in both worlds and slowly shifting weight just a little bit ahead of the rest of humanity. I bought a farm so we could produce our own food and be out of the cities when the chaos erupts.... but for now, we raise natural produce and food for the hoighty-toighty Boulderites. So if oil really is replaced by magic fairy elves and sunshine, well... I've got a nice farm that I enjoy anyway. If chaos erupts, I've got a safe haven.
3) My wife likes the chickens, sheep, and vegetable garden.
4) Current trend are proving me a lot more correct than her friends who were all afraid she married a lunatic. So far I haven't killed her and buried her in the back yard, but gas prices are going through the roof and we are still in Iraq.... both things I promised would happen. She is a little bitter that her IRA was moved to Gold and it has been holding steady but my point is always "look at Alcoa and tell me you wanted it there!"
Men In Black