<Obama's Energy Policy: Listening When We Disagree The Oil Drum DrumBeat: November 13, 2008>

40 comments on IEA World Energy Outlook for 2008 Is Out - The Oil Drum Analysis Will Begin Soon

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ROCKMAN on November 12, 2008 - 12:47pm Permalink | Subthread | Parent | Comments top

As far as the IEA making an accurate appraisal of future oil production capability we’ll have to wait for “Part B of the OUTLOOK to discover their exact methodology. But I do believe I’ve read between the lines of the Executive Summery correctly and now understand their method. The most supportive statement they make of my conclusion was that the bulk of future oil production will come from reserves AS STATED BY THE OPEC PRODUCERS WHICH MORE THEN DOUBLED IN THE PERIOD IN THE 1980’S. You may recall this period: OPEC had changed the production allocation rules to take into account each country’s PROVEN RESERVES. Throughout the 80’s we saw those reserve values grow tremendously even though no new significant drilling was done. The OPEC countries just sat down with a new sharp pencil and found many billions of barrels of oil that were there all along but that they didn’t know about them.

We’ll have to wait for the details but it appears the IEA’s great new analysis of remaining oil reserves is based upon numbers supplied by OPEC and other producing entities for the most part. In other words, they haven’t studied one producing field themselves to determine a global reserve base. They just accept the numbers provided and ASSUME sufficient investments will be made to produce this “proven” reserve base. Another telling point is made by the IEA regarding decline rates of mega fields: they’ll have the lowest decline rates of all field size categories because of their huge reserve base. One little problem with this assumption: it doesn’t work with Cantarell Field. According to the IEA assumption, this field should be experiencing a 5% or so decline rate now that it has passed its peak instead of the 35%+ decline rate PEMEX has last reported. Rut row…could this be a faulty assumption? Another assumption I find very dangerous: enhanced oil recovery techniques can increase ultimate recovery and thus provide sustained high flow rates. The water injection at Ghawar and the N2 injection at Cantarell have certainly done that. But that wasn’t the primary goal of either effort or most other similar projects. These techniques were employed to maximize production rate. This actually shortens the production of every field. Again, Cantarell is a perfect example. The N2 injection program kept rates high and probably increased ultimate recovery 2 to 3 three fold ( such pressure depletion fields typically have a very low ultimate recovery…..10% to 25%). But these techniques eventually generate much higher decline rates then would be encountered if these reservoirs were allowed to decline naturally. Had not the water injection at Ghawar been implemented its max production rate would have fallen long ago. But when the water level starts hitting the majority of the producing wells the max rate will decline much faster then the IEA assumes. This not my opinion: this is the late stage decline rate seen in every water injected reservoir in the world. Water injection essentially accelerates natural water drive seen in the fields. But this also accelerates the decline phase also. Again, not my opinion, but a fact taught in every petroleum engineer school in the world.

Again, to be fair, we have to wait for the full report to confirm their methodology. But for now it appears they are making the same assumption as they have always made: future oil production rates will be dependent upon demand and not upon the actual physical capability to produce oil. There will always be enough oil to develop to meet demand for at least the next 30 or 40 years. But they do hedge their bets a little by saying any oil rate increases may be hampered by insufficient investments. But not by lack of opportunities.

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VK on November 12, 2008 - 12:53pm Permalink | Subthread | Parent | Comments top

I'm no law expert but I reckon that there's a case to be made that someone should sue the IEA, EIA and World Governments for criminal negligence. The fate of billions of people are in the hands of a few who have the decision making power to influence politicians and investors, the truth has been distorted for long enough IMO. OPEC countries should be made to fess up and allow independent audits of their reserves.

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thewatcher on November 12, 2008 - 1:32pm Permalink | Subthread | Parent | Comments top

Why should they? They are sovereign nations with their own resources. If they choose to sell those resources to willing buyers then good luck to them. If they choose to husband them for their own growth then that also is their choice. To demand they usher in external auditors is quite frankly ridiculous. If we want energy security then we should go about getting it without relying on other countries to provide it for us.

Quite apart from the question as to who has the legal or moral authority to 'make' OPEC do anything they don't wish to! Our fate is in our own hands not in the hands of others. To believe or behave otherwise is to go back to kindergarten.

TW

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PeakOil Tarzan on November 12, 2008 - 1:44pm Permalink | Subthread | Parent | Comments top

If we want energy security then we should go about getting it without relying on other countries to provide it for us.

Amen. Amen. Amen. I frequently hear/see the opinion expressed (on TOD, too) that the oil exporting countries owe it to the oil-consuming world to be honest and realistic in reporting their reserves. I say baloney. If we are fools enough to build our entire economy atop a resource over which we have little control, then we have no one to blame but ourselves when the well turns up dry.

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Stuart Studebaker on November 12, 2008 - 1:50pm Permalink | Subthread | Parent | Comments top

I'm no law expert but I reckon that there's a case to be made that someone should sue the IEA, EIA and World Governments for criminal negligence.

HAHAHAHA!!! That's a good one. Sure. go for it.

The aggrieved: "Hi there IEA,EIA, and UN! you guys didn't tell us about how nasty this was going to be, so now we're going to sue you. Sure - it was a collection of industrial corporations and state enterprises that fucked it all up, but, hey - the CCCP doesn't exist any more, and GM, Dow, VW, Toyota, Ford, Fiat, US Steel, and all those other guys - well - they can afford better lawyers, so we'll sue YOU, the governments, because you didn't rat them out, even though there's a flea's pube difference between you and the corporations. so, we're suing."

The defendants: "OK. Fine. So we fucked up the planet. What do you want? Money? A new Planet? Some select bunch of us strung up from a gibbet? Sorry, but the money's worthless and the planet's toast and stringing people up isn't going to "make it all better". So, OK, sue us. Win your case. Now - what did that just prove? What could such a multimillion/billion dollar case possibley do to justify such an expense of time and resources?"

The Aggrieved: "Well... YOU SHOULD BE PUNISHED!!!! Justice must be served!!!"

The defendants: "What difference does it make? Why bother? If it's a fucked up as it seems to be, punishing people isn't going to change it. That's not justice, that's just revenge, and after all is said and done, the planet is still melting and you've just decapitated your societies of one group of people who are in a position to do something. Good move ace. Let me know how that works out for ya. Oh, that's right - I won't find out, 'cuz I'll be dead. Great. Have a nice apocalypse, ya boneheads."

The Aggrieved: "buh buh buh YOU SHOULD BE PUNISHED!!!"

The defendants: "Oh STFU, and get over it. Meanwhile, we need to talk amongst ourselves to figure out how to fix or at least reduce the consequences of this catastrophic blunder. So, don't bother me punk - can't ya see I'm tryin' to get some thinkin' done here?"

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cjwirth on November 13, 2008 - 12:03am Permalink | Subthread | Parent | Comments top

The defendants will say, BS, there is plenty of oil still down there, the problem is :technological development and too many wimps squawking instead of pitching in to help drilling, and not to worry.

The public will be bamboozled even after the Last Power Blackout.

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JonFreise on November 12, 2008 - 1:56pm Permalink | Subthread | Parent | Comments top

We’ll have to wait for the details but it appears the IEA’s great new analysis of remaining oil reserves is based upon numbers supplied by OPEC and other producing entities for the most part.

Right. Here is what they claim in the summery:

Ultimately recoverable conventional oil resources, which include initial proven and probable reserves from discovered fields, reserves growth and oil that has yet to be found, are estimated at 3.5 trillion barrels.

That is more optimistic than the US Geological Survey.

There are multiple lines of evidence to support the view that will never happen:

We have the IHS database (petrologistics) of discovery showing slightly over 2.2 trillion ultimate (of which half is produced). This is well analyzed in the Energy Watch Groups Oil Report.

We have Logistic fits of current production showing 2.1 trillion ultimate.

3.5 trillion more will never happen, so the primary conclusion of the report is a fantasy. What will be interesting about this report is the field by field study of the largest fields and how that compares to Robelius' Doctoral Thesis on Giant Oil fields. The IEA sounds more pessimistic.

Stuart has a good paper on the danger of Ghawar watering out just as you (Rockman) discuss. There is a simulation showing the oil heading for the top of the reservoir. I will try to find it ("water in the gas tank" maybe).

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noutram on November 12, 2008 - 2:26pm Permalink | Subthread | Parent | Comments top

I'm not sure I understand the relationship between giant fields reserves and decline rates and why this should be so but the implications sounds v. important.

-If they are making a relationship then am I correct in assuming that if only smaller finds are to be found then these -by implication- would have much faster decline rates? I.e. even if we found "4 new Ghawars" worth but in the form of 10,000 small fields they would peak and decline much quicker than if we found 4 giant fields...

[Edit] OK, I just had a look at slide 7 of the press release: smaller fields declining very fast with average of 14% (!!) in 2007 for non-OPEC and the AVERAGE rising from 6.7 to 8.6%... (I can't wait for the TOD analysis 'cus these look like some scary numbers to me...)

Regards, Nick

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ROCKMAN on November 12, 2008 - 3:39pm Permalink | Subthread | Parent | Comments top

That’s Ok noutram. I’ve been a petroleum geologist for almost 34 years and I’m sure I understand them either. I can offer a couple of points though. Enhanced recovery techniques do require a minimum mass to be practical. Very small fields might not have such measures taken. But I suspect the real basis for this “relationship” is that mega fields are just so big that there are an insufficient number of wells to deplete them as fast as smaller fields.

But the decline rate of any field is a function of the energy driving the oil to the producing wells. Two main types of drive: water drive (water pushing out the oil that floats on top of it) and pressure depletion (like shaking warm bottle of soda and cracking it open real fast). In water drive reservoirs like Ghawar the KSA has been pumping billions of barrels of water into it for decades in order to improve recovery and maintain high flow rates. Thus a field may show little of no decline for many years. But eventually the water level will reach the perforations in the producing wells and a very rapid decline will begin. This is the natural process and will occur whether a field produces 1 million bo or 10 billion bo. That’s not just my opinion: its physical law taught in every reservoir engineering school in the world.

And it happened in another mega field (Cantarell in Mexico). A huge pressure depletion reservoir which maintained a high flow rate thanks to PEMEX pumping huge amounts of nitrogen into it. But it is now showing a 35%+ decline rate according to PEMEX. And that’s how the late stage depletion grows in all such projects regardless of the original reserve size.

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WebHubbleTelescope on November 13, 2008 - 12:32am Permalink | Subthread | Parent | Comments top

Not trying to put you on the spot but as a practicing geologist can you explain why oil reservoirs show a probability distribution that is 1/Size2?

Or do geology schools never teach or theoretically discuss why a certain statistical distribution comes about?

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ROCKMAN on November 13, 2008 - 8:55am Permalink | Subthread | Parent | Comments top

Web,

Explain "1/Size2" please.

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WebHubbleTelescope on November 13, 2008 - 9:34am Permalink | Subthread | Parent | Comments top

That is telling. The volume size probability distribution goes as 1 divided by the square of the size of the reservoir. That means that for reservoirs that are 10 times larger than a particular size, they are 100 times more rare.

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40 comments on IEA World Energy Outlook for 2008 Is Out - The Oil Drum Analysis Will Begin Soon

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