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148 comments on DrumBeat: March 2, 2008

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westexas on March 2, 2008 - 3:36pm Permalink | Subthread | Parent | Comments top

Regarding the rapid growth in GDP since 2000, you might want to compare it to the net oil export chart shown above. I agree with you that Russia has a much better tax system.

If oil production continues to decline, I agree that importers will be hit much harder than exporters. Russia, IMO, is in what I call a Phase One decline--where cash sales from declining oil export volumes increase, because of rising oil prices.

Using the production data through 1984 to construct a HL model suggests that Russia--at least from mature producing basins--is roughly at the same stage of depletion as the Lower 48, in the vicinity of 85% or so. Cumulative Russian production has recently "caught up" to where it should, based on the HL model. Excluding the Sakhalin-1 Field (which was not producing in the Eighties), daily crude output in Russia has been down year-on-year since May, 2007 and very recent data show declining total production.

My premise is that frontier Russian basins are to mature Russian basins as Alaska is to the Lower 48--it helps, but it's no panacea.

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dissident on March 2, 2008 - 3:59pm Permalink | Subthread | Parent | Comments top

I agree with you that Russia's oil and gas production will decline, sooner rather than later. Oil export revenues did not jump in 2000, they jumped after 2004. The post collapse production decline was already over by 2000. But the export revenue increase in the last three years is only part of the general increase in government revenues and private sector profitability in the last eight years. Also, until Putin's second term a major part of the oil revenues was being siphoned off into offshore banks by oligarchs like Khodorkovsky. Much like in Venezuela until "petrotyrant" Chavez and his "socialism".

One of the biggest factors in the 2000 GDP growth was import substitution driven by the devaluation of the ruble in the wake of the 1998 financial collapse. The 1998 financial crisis was the best thing to have happen since the collapse of communism. It killed off the monetarist voodoo economics that was destroying Russian industry and turning people into paupers.

Perhaps all the sanctimonious windbags in the western media and punditocracy should take into account the experience of the average Russian in the last 20 years when trying to explain the political evolution of the country.

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westexas on March 2, 2008 - 4:19pm Permalink | Subthread | Parent | Comments top

Oil export revenues did not jump in 2000, they jumped after 2004.

We may be looking at different net export graphs. I'm looking at the one just up the thread.

Granted, world oil prices did not move out of the teens to twenties until 2004, but Russian net exports started a steep increase in 2000.

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dissident on March 2, 2008 - 6:24pm Permalink | Subthread | Parent | Comments top

According to your graph the exports were 4 million bpd in 2000, which is about the same as in 1999 and they hit 6 million barrels per day in 2005. Convolving a linear increase of 50% over 5 years with an exponential increase in price after 2005 produces a spike in revenues after 2005. So your graph does not back up your claim that Russian oil revenues shot up in 2000. Like I said, Khodorkovsky and friends were shipping the money out of Russia until Putin's second term (i.e. after 2004).

Believe whatever you want.

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Robert Marston on March 2, 2008 - 9:44pm Permalink | Subthread | Parent | Comments top

I've been researching Peak Oil for the better part of four years now and at no time has there been such a disconnect between what the news and government agencies have been reporting and what is actually happening. Now that's really saying something as, so far, the IEA, the EIA, and other thinktanks have been mostly wrong on all their predictions.

1. Your points on Russia and the following article piqued my interest:
http://uk.reuters.com/article/marketsNewsUS/idUKN0229469320080303?rpc=40...

According to these statements, Russian production is now in decline. But we have the EIA predicting a substantial increase in Russian output (around 800,000 barrels per day) by the end of this year.

2. Saudi Arabia is supposed to increase net oil production, according to the EIA, by about the same amount as Russia. But, according to the Saudis, we are seeing lower output from new projects in addition to delays. This coupled with OPEC threating to cut or keep production steady in the face of record oil prices does not inspire confidence and begs the question -- is OPEC even able to increase production for significant periods of time?

3. Biofuels are feeling the crunch due to food shortages and high food prices. So one wonders if biofuels will be able to grow at the pace predicted for 2008.

4. We had a bump in supply at the end of last year and early this year. But what I want to know is do you guys think it's sustainable? If you read the reports at face value it seems to be the usual fluff. But look a little deeper and things get a little scary. For one, the EIA keeps revising its estimates downward and while stocks are building in the US, they're falling everywhere else.

In all, what I want to know is where is all this expected new supply going to come from? Maybe it's a little too early to call but it seems 2008 may shape up to be a Peak Oil year after all.

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westexas on March 2, 2008 - 11:05pm Permalink | Subthread | Parent | Comments top

IMO, Deffeyes was right and crude oil (C+C) peaked in 2005. Like the initial 48 decline we have seen two years of slow declines worldwide.

As Simmons pointed out, a lot of the total liquids bump is probably coming from oil fields blowing down their gas caps and temporarily boosting NGL production.

But the big problem is net exports.

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Robert Marston on March 3, 2008 - 12:51am Permalink | Subthread | Parent | Comments top

How long does this added gas last in a mature field?

And I have to hand it to you guys RE the Export Land Model. It really helps put the problem into perspective.

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Joseph Palmer on March 3, 2008 - 2:05am Permalink | Subthread | Parent | Comments top

Unfortunately, the first perspective many Americans will have ont he problem will be looking down out of their SUV window at a gas pump with a "No Gas" bag draped over the nozzle.

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Cslater8 on March 3, 2008 - 4:27am Permalink | Subthread | Parent | Comments top

Ah, the dreaded out of gas yellow plastic bag with black lettering. That will be the last day for the Cornucopians when everyone is forced to become a Peak Oiler, whether they like it or not.

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