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Asking one of the less comfortable questions about our energy future...
Posted by Heading Out on July 10, 2008 - 10:00am
Topic: Supply/Production
Tags: cantarell, decline rate, north sea, original, schlumberger, yibal [list all tags]
| In my last post I talked a little about the media’s normal pre-disposition to ask relatively comfortable questions about the state of oil (and natural gas) supply, with the consequence that some of the more difficult questions and those with more painful answers don’t get asked very often. The painful questions take one beyond the current concerns on the ability of supply to match demand at a reasonable price, to the point where oil production can longer increase in absolute volume, and then on to the point where overall production starts to decline. It is an issue that Euan and the TOD Europe group are beginning to ably document, as they outline the problems that Europe will face. It is a point that is illustrated in the recent post on the Megaproject update by Khebab, and more specifically in the comments on that post. But what I would add to that, and ask, as a painful question, is as to whether the projection is overly optimistic. |
Ken Deffeyes, who did so much to bring this current situation to our attention with his writing and books, who has said that he is no longer a prophet, but has become a historian. His remark implies that the much of the debate over peak oil is perhaps over. And there I would disagree with him, because I remain critically concerned, as Euan is, that the world does not really understand the size of the problem that is approaching, and the speed of that arrival. Further the information that controls the shape of the production curve, post peak is usually derived relating to the pattern of the peak in the United States. To anticipate that the world curve will look the same, overlooks the critical difference that, at the present time, there is no satisfactory alternative fuel to satisfy demand. Thus the market imperatives to extract more oil in the immediate short term to meet needs may over-ride more rational concerns about achieving maximum ultimate recovery by producing the oil more slowly. This is a different situation than that which held over the time that the American production plot was developed, and alternate supplies of oil were available from abroad.
One of the significant concerns relates to the rate at which production decreases in mature fields. The average value has been assumed to lie at around 4 – 4.5%, and it is initially disquieting to note the comment that the Wall Street Journal recently quoted from the IEA.
Project delays averaging 12 months, coupled with global average decline of 5.2% - up from 4% last year – are the factors behind these revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady. “Our findings highlight again the need for sustained, and indeed, increased investment both upstream and downstream — to assure that the market is adequately supplied,” stated [IEA Executive Director Nabuo] Tanaka.
The acceleration in the decline rate is likely to continue as more horizontal wells become the norm in oil fields and as these become spent and drop out of production.
To explain why this is one should understand the difference between the behavior of vertical and horizontal well production, particularly in the way that they behave as the oil in the reservoir declines under the driving waterfloods that push oil to the well and how they interact with the well. With a vertical well the water level rises slowly in the well, reducing the overall extraction length, but making that change slowly, over time. (Oil production is a function of the length of well exposure, among other things). With the horizontal well production remains relatively stable, until water reaches the horizon where the wells have been located, and then the entire well can become flooded, with an immediate and rapid drop in production.
In fields where these wells dominate, production declines of 10 – 14% have been observed, and, as horizontal wells become more common, it is towards that value that decline rates are heading in the future. These decline rates are not used in the conventional models that look at what the oil supply situation will look like over the next few years. Discussions that I have had, informally, with several people that talk about the peak oil situation have found them somewhat defensive about using the lower values of around 4.5%. It is as though, having grasped the nettle required to face the reality that oil production is peaking, that they then hesitate to look at the abyss that higher decline rates are going to bring.
That decline rates will increase is not itself news, Andrew Gould of Schlumberger was talking of 8% declines as long ago as 2005.
Secondly, the industry is dealing with a phenomenon that is exaggerated by the lack of investment over the past 18 years. This phenomenon is the decline rate for the older reservoirs that form the backbone of the world’s oil production, both in and out of OPEC. An accurate average decline rate is hard to estimate, but an overall figure of 8% is not an unreasonable assumption. The maintenance required to slow the rate of decline, and increase the overall recovery, is a key element of the supply picture going forward.
While I don’t think he was alluding in any way to the increasing use of horizontal wells, his number, and his position giving him more than most the sense of accuracy of the number is a recognition of the change to come.
Unfortunately, as the example of Cantarell is demonstrating when production starts to drop at around 14% it does not take long for the entire export situation for a country to markedly change, which in turn will have a significant effect on those that import that oil. And yet while individual fields such as Cantarell, Yibal, and the North Sea have shown these higher decline rates are not uncommon, their impact on total world production declines has not been widely remarked. Stuart and Khebab wrote about this in complimentary pieces last November, in analyses more detailed than this. I don’t agree with some of their conclusions, but do believe that this is a critical question that requires some more detailed consideration than it is currently getting,
The evidence seems to be pointing to an overall increase in the global decline rate for existing wells. What this means is that, if world production is around 86 million barrels a day, then to replace existing declines next year, an additional new production of 4.47 mbd at 5.2% decline, instead of the 3.87 mbd required at 4.5% decline, will be needed just to stabilize supply at a fixed level. If the rate is accelerating this difference of 600,000 bd will increase and drop the top line of the curves such as those that Khebab and others have so carefully assembled.
This increased decline rate is already being reported, and thus the potential peak in 2010 that the graph shows is already at risk and we may struggle to get much above the numbers that we are at today. Bear in mind that decline rates are cumulative over the years, and that outyear production must be that much greater to sustain supply, relative to today’s production.
At present there is still considerable complacency about how the oil supply situation will play out. There is an implication that this is just a difficult period to get through, and that, in a relatively short time the situation will get better. Sadly I would suggest that even our current thinking here is largely overly optimistic, and that instead it is going to be much more difficult, faster than we expect. But also, in light of peoples’ expectations about oil really being there at a reasonable price, the greater the dangers of civil unrest, as it occurs without proper public education as to the reason that “there is no more” signs start to spring up at gas stations.
Great Article.
Please keep it up.
Excellent subject, HO, I'm glad you brought it up. I'm posting this upthread since very little of the discussion below was actually about the media's failure to ask tough questions. Here are three articles for your consideration:
The Speculation Explanation: Framing the Energy Crisis - AlterNet, June 28
If you scroll about halfway down, past the **** separator, he gets into a smart discussion about framing (referencing George Lakoff's work, of which I am a huge fan) and how the media has deliberately used the speculation frame to deflect attention away from the real problems with energy.
Faustian economics: Hell hath no limits - By Wendell Berry - Harper's Magazine, May 2008
A typically excellent essay from Berry on the "doctrine of limitlessness."
Peak Oil Confusion - A Game Whose Time Is Up
My new article, which takes Investor's Business Daily to task for its truly awful May editorial on peak oil, in which I assert that they are deliberately distorting the issue.
thanks for the plug - sorry u didn't like the first half
ExxonMobil put the decline rate from existing wells at between 4% and 6% per annum. If we take the higher end number, which is below what some sources have cited, and look the EIA 2005 annual total liquids rate of 85 mbpd, we need about 5 mbpd of new total liquids production every year, to maintain constant production. So, from 2005 to 2015, we would have needed to add 50 mbpd of new production, or the equivalent of about 10 Ghawar Fields, based on production in recent years.
Of course, I think that the key driver is the ongoing, and accelerating decline rate in net oil exports.
And how is the weather today?;-)
Cloudy--with a chance of declining net oil exports.
Hi WT,
Would you expect the decline rate to be a steady number say 6% = 5mbpd every year or would it be 6% of the reduced figure? e.g. in the second year would you expect to see 79 - 5 (6% of 85) or 79 - 6% of 79?
If we were able to maintain flat production, we would need to add about 5 mbpd every year, assuming a 6% gross decline rate, but the point is, IMO, that Peak Oil is basically the story of the rise and fall of the big oil fields, and once the big fields start declining, we can't offset the big field declines with new smaller fields, which is what the Texas & North Sea case histories show:
http://www.theoildrum.com/files/TexasAndNorthSea.png
Matt Simmons defines the gross decline rate as the decline rate from existing wells and the net decline rate as the decline after new wells are put on line. Basically, with stable or growing production from the big fields, we tend to have increasing production. When the big fields roll over, we tend to have a net decline rate. Texas has shown a long term net decline rate of -4%/year, while the North Sea has shown -4.5%/year.
Simmons has "The Oil Pyramid" chart in Twilight (Appendix B) showing that of about 4100 significant fields, the 14 largest put out 20% of our oil. I don't know what percent of these old elephant fields have had horizontal well production, but if they all have the 10% variety of sudden decline, this forces all the rest of the fields, over 4000 of them, to increase production 2.5% each year just to offset the 14 big fields' decline rate after water flood of the horizontal wells. That's a non-14-big-field global production increase of 2.5% each year just to keep production flat and falling behind demand.
Westexas wrote:
Small point but it is in fact an error to apply an estimated decline rate to "all liquids". Instead, it refers narrowly to conventional crude oil.
And that's the way it's used in reports from the IEA, for instance. The reason behind this is that oil sands, natural gas plant liquids production, biofuels etc. have very different output constraints from conventional crude.
For example see page 23:
http://www.iea.org/textbase/speech/2008/eagles_mtomr2008.pdf
And natural gas plants get their gas from what source? ExxonMobil was talking about a 4% to 6% decline rate in oil and gas wells worldwide. So, it would be more accurate to say that is is the production decline from conventional wellbores worldwide. But unconventional production is not exactly setting the world on fire right now. Last year, both Venezuela and Canada showed declining net oil exports.
When I mention peak oil, most people reply that it is overstated, and that they will just stay at home more.
They think oil only effects how much they drive.
How can we bring more awareness to the true impacts?
People think that it is a scare tactic, and do not understand what is really going to happen.
Write lots of Letters to the Editor in your local paper. Run for office on the issue. I did both, and now the paper has me on as an ongoing columnist for "Energy & Ecology"
Call your local representatives and ask them to send someone to the ASPO conference. People never talk your word for something that they don't want to hear. They have to go through the process themselves.
One of the problems is that Environmentalists have cried WOLF way to often and the public is naturally sceptical of another 'the Sky is Falling' scenerio. They won't believe peak oil is real until a chunk of sky takes out their house.
They don't know how to create a need.
Environmentalists seem exclusively focussed on climate change's impact on other species [ie saving the polar bear] or impact on foreigners [Pacific climate refugees] or impact on future people [by 2050 or 2100]. Which is too bad for them. They could have rallied a LOT more Americans to their cause by mentioning peak oil too: "oh by the way, since your food is no longer going to come in a wrapped package from out of state and there's not enough local food to go around...got a fishing rod? Oh that's right the remaining fish [outside the dead zones] have cancer.... Got orchards? Oh that's right they've been sold it off to developers....Got some good soil under your lawn? Oh that's right it was replaced with clay and chemicals.... Got back up water supply? Oh that's right it has all been going down the sewers.
...Well, don't you think we should make some changes around here so you won't starve whenever the trucks stop pulling up to the Safeway?"
they would have thought the environmentalists were even more delusional if they heard that.
that's simply not true. some recent developments in the suburbs may have that problem but not all. anyway where did the soil go? it went to the store. you can just buy soil. you can compost.
Vacant Lot Becomes a Garden
http://www.treehugger.com/files/2008/07/vacant-lot-becomes-garden.php
I am in the business of converting vacant lots to gardens.
Thank goodness we do have soil sources in stores right now and we have time to learn how to compost right now. When TSHTF, it will be much harder: You won't be able to just buy soil at a store.
There is a phenomena called PEAK SOIL, a result of irresponsible treatment of our soil resources on both farms and in residential areas. You could learn from studying the concept. [But as we all know from your prior posts, you are not here to learn, you are here just to argue for Business As Usual.]
1. peak soil? ok...did hubbert model that?
2. I have never ever in my life argued for BAU. not even close. BAU is ever increasing SUV sales when I've said we're moving to electric cars, conservation and et. electric cars are not BAU.
Perhaps you can go to the store and buy some 'thinking out of the box' in a box.
Speaking of "In the Box" thinking.
Infinite growth is impossible, but that does not mean that infinite collapse is inevitable. Try a bit of out of the box thinking yourself. Fossil Fuels enable BAU, but there's a whole lot of unusual ways to do business.
Come up with one new idea to do something you depend on with no FF input. Or dig up an old way to do it. Not every improvement in technology since 1850 requires oil, coal, or natural gas. That's 150 years of new ideas.
Crying Wolf - Wrong analogy.
If you remember the story, the child LIED to get attention.
Peak Oil, Climate Disruption, Species Annihilation, Acid Rain and Oceans, Ozone depletion, Pollution and Poison are not lies. Some of these topics have long lead times that present focused individuals have denied these problems and their consequences. As a rhetorical tactic they respond by citing the story of the "Boy who cried wolf". The truth is that the wolf really was there, but it was off on another hill and each time the boy cried, the wolf was closer.
Now the wolf is about to eat the sheep and the child.
Do you have a link for that?
The media, Congress, the presidential candidates are currently working themselves into a frenzy over oil speculators and the regulation of commodity markets. The public's attention is constantly being diverted to the wrong set of problems (speculators! those OPEC bastards! Iran!) and the wrong set of solutions (corn-based ethanol! gas tax holiday!).
Beyond that, how are people in general supposed to prioritize an impending oil supply crisis against a fairly stark set of current, immediate and more salient problems, like the bear market, job losses, stagnating income and the housing downturn. It's the "that sounds awful, but I don't have health insurance for my kids and my house is worth less than the two mortgages on it and I have $25,000 in credit card debt" syndrome.
It's not the case that we're facing a looming crisis. We're in the middle of a mounting globally scaled economic crisis with a myriad of intersecting causes and effects, of which energy is but one part.
Agreed. People are too absorbed with their own personal crises to see that we're facing an over-arching crisis that we all need to tackle together. Namely, that the underlying economic and political systems we've become accustomed to are falling apart in the face of peak oil and global resource limits.
There's also a religious belief in the "power of the market" - namely that the price of energy will rise and that new technological solutions (some named and some yet-to-be-named) will step in and the supply side of the equation will be solved. And the 'life of the world may move forward into broad, sunlit uplands' in our electric cars.
I have a simple challenge to the Friedman-esque faithful that we give the markets 'six months' to figure it all out for us : "Did the 'market' put a man on the moon? Did the 'market' defeat Hitler and Tojo's Japan?"
believing in the markets is like believing in gravity and science. if you don't believe in markets it's akin to being a climate change denier or that the earth is at the center of the universe.
I read the Prius news today and the market is literally moving away from the Highlander SUV and towards the Prius because of high pas prices. the markets are working. gasoline demand is at a 5 year low.
John, I would posit that the move to the Prius is an incremental change that market forces can provide, so we up the average mileage on the American road from 15 to 35. Ok that buys a few more years..... then what? The transportation and energy production and consumption markets have to be fundamentally changed to resolve PO.
Maybe an example illustrates the power and also the limitation of the market. In 1939, if you wnated to get anywhere in the US, you used a train. Your car was a short range vehicle foe the most part, the roads, such as there were were spokes out from major population centres served by rail.
Then along came WW2 and Eisenhower's highway program. The transportation market was turned on it's head: all of sudden there were lots of cars and trucks being made cheaper than ever and more importantly roads to drive them on, great roads that could cross the country. The passenger train was done. Was that the market that did that? Or was that two major forces that accidentally or deliberately changed the market?
I heard on tv that for every mile increase in fleet MPG in the US it's like finding a well that produces 300,000 barrel per day. a Prius uses half as much gas as the Highlander so that is very good news. the Prius is just the beginning. then it's a plug-in prius. then it's a PHEV Prius with solar panels. then it's an all-electric Prius and so on. don't forget we don't need technological innovations like the Prius, we can always just drive less and walk more. there is always car pooling.
We could probably back calculate that.
US uses 22 MBPD and 60% of that goes to transportation let's say.
Average mileage of the fleet is 20 MPG let's say, so 1 MPG increase pulls back 5% of that 22 MBPD.
That's going to be nearer 600,000, John, unless I messed up somewhere. Anyone given this more thought?
Don't feed the trolls
What troll, where?
John and I are debating the finer question of whether or not the market can solve the transportation/cheap energy crisis, caused by PO. John is batting for the market and I'm batting for a New Apollo Project. My thesis, and here's your rebuttal John, is that (1) the market by itself can't change the game, government or some force majeure has to reset the market conditions fundamentally. To get out of PO hock, the road to status-quo for transportation with new energy sources is paved with a massive investment in solar and electrical energy generation. Question is: how do we build the power plants to supply the electricity, and how do we build the plants to make the solar panels - what source of energy will we use to do that? It's an effort that requires the effort of the whole nation: hence the statement 'The market didn't put a man on the moon'.
did we need to go to the moon? a better question should be why didn't the market build the Erie Canal or the Transcontinental Railroad?
The market is reactive, not proactive. With crude oil reaching into nearly every aspect of our modern lifestyles, the scope of the problem is overwhelming. We need proactive policies to deal with peak oil to soften the blow. The world is still driving peddle to the metal over the falling edge of peak oil. We appear to have waited too long.
The market is working like a myopic dinosaur ravaging his food supply. People stuck with gas guzzlers are having difficulty selling them and have to accept an economic loss to dispose of them. The Prius, a parallel hybrid, is about fuel efficiency which some find desirable now due to high liquid fuel prices. No one will want a Prius, it will have no resale value depleting their owner's assets again, when fuel shortages arrive. Waiting in long lines at the gas station to finally arrive at an empty fuel pump preventing the use of the vehicle will drive the demand away from fuel efficiency to different fuels. The technologies within reach today are battery powered cars and for range extension, plug-in series hybrids for those who can afford them. Even plug-in series hybrids may only serve as transitional vehicles to something else, such as hydrogen powered vehicles or mass transit.
The plug in Prius will be able to do about 10 miles on electric.
So it could go to work for a round trip of 20 miles if recharged there.
This would cover the needs of more than 50% of Americans and the rest would just have to reduce their demands.
It would cover most of the needs of far more of the rest of the world.
The premium would be about $4k on a similar conventional car, and Toyota hope to get that down to $2k
The problem is building enough of them quickly enough to make a big difference, but they should help a lot for emergency service vehicles and so on.
EV bikes and trikes will have to do for everyone else.
The cost to convert a Prius to a plug in is currently $10,000 and that is on top of the premium one is already paying for the Prius. Now, if and when Toyota starts mass producing plug ins, the price will no doubt come down, but I don't think we have any numbers yet.
That is conversion costs, not just battery- they will likely have to fool around with quite a few other things to get it to work - the Prius being a parallel hybrid rather than a series hybrid has a complex management system.
This is also the 123 battery if you are talking about the hymotion, which is around $1500/kwh so that would work out at around $6,000 for a 4kwh pack, which should be around the size needed for the specs they give:
http://www.a123systems.com/hymotion
Hymotion :: Enabling the new generation of hybrid owners to maximize their fuel efficiency
Toyota will only need to engineer the car once, not suss out a way of adapting someone else's system.
The specs that are around indicate a 10 mile electric range, which is about 4kwh.
The cost of the lithium batteries is around $1,000kwh currently.
Toyota has said as far as I can recall that they hope to bring that down to around $500/kwh with mass production.
This compares with a likely additional cost compared to an equivalent ICE car of around $16,000 for the 16kwh, 40 mile range of the Volt.
A 10m mile range to work, charging up there, and back again would cover the needs of over half of Americans, so to me Toyota seem to have got the specs right, and GM to have screwed up by over-speccing.
the Prius is listed online though for less than $25,000. that's a lot less than something like an Escalade or a HIghlander. a hybrid is just another option same as a sun roof but the difference is it pays itself back.
and just where is all the electricity going to come from when people switch from heating their homes with oil and nat. gas to electricity?
Wind doesn't always blow, sun doesn't always shine, and rain doesn't alway fill reservoirs. Fossil fuels are unique in it's 24/7 energy availability.
What we are headed for is worse than e-cars will help with.
Buy a bike while you still can.