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Saudi Arabia's Crude Oil Production Peaked in 2005
Posted by ace on March 3, 2009 - 10:24am
Saudi Arabia's historical crude oil production indicates a peak of 9.6 million barrels/day in 2005. In 2008, crude production was 9.3 mbd. In 2009 it is forecast to be 8.1 mbd followed by an increase in 2010 to 8.5 mbd. Unfortunately, after 2010 a steady decline is forecast.
The forecast production profile assumes that Saudi Arabia's ultimate recoverable crude oil reserves (URR) are 185 billion barrels (Gb). However, it is possible that Saudi Arabia could have an additional 25 Gb from discovered undeveloped fields and future discoveries. A higher URR of 210 Gb implies that the additional production increment could decrease the total decline rate from about 2015 as shown by the dashed line in the chart below.
The URR estimates in the chart above are made by using secondary data sources. In this time of economic crisis, it would appear appropriate for Saudi Arabia's oil fields to be publicly audited. The full disclosure of total remaining reserves, by field, would enable more effective future oil production and consumption planning in this post peak oil age.
Saudi Arabia's Crude Oil Production Forecast
Production from the Kingdom of Saudi Arabia (KSA) between February and April 2009 is forecast to be just less than its target of 8 mbd as other OPEC members are unlikely to fully comply with announced OPEC production cuts. This source says that KSA produced 7.95 mbd last month and also that OPEC-11 has complied with 81% of announced production cuts of 4.2 mbd from September 2008. I am also forecasting that oil prices will increase this year, assuming that demand does not fall further. Consequently, it is assumed that OPEC will slowly increase production to take advantage of higher prices and that KSA will increase production starting from July 2009 until early 2010 (Fig 2).
The recent KSA production falls are probably a combination of field decline and voluntary cuts. The green line in the chart below shows the annualised depletion rate of remaining oil reserves, sometimes referred to as the extraction rate. In July 2008, the depletion rate was above 5%/year implying that KSA's 9.7 million barrels/day (mbd) production in July 2008 was probably at its maximum capacity. Depletion rates should be less than 5% for good reservoir management of large fields.
KSA's capacity could be treated as a function of its remaining reserves. If it's assumed that KSA has 65 billion barrels (Gb) remaining crude oil in 2009, then a reasonable production capacity for 2009 would be an annual depletion rate of 5% applied to 65 Gb giving 8.9 mbd. This implies that current KSA spare production capacity is about 1 mbd while keeping the depletion rate below 5%/year. As KSA produces oil, its remaining reserves decrease which causes capacity to decrease.
The depletion rate of remaining reserves is forecast to be an average of 4.4% from January 2009 to July 2009, shown by the dashed green line. This depletion rate is the same as the average from January 2005 to December 2007. As the current depletion rate is less than 5%, this indicates that KSA has the ability to increase production back up to 8.75 mbd early next year. It is assumed that KSA's depletion rate returns to 5% in early 2010 which indicates no surplus production capacity.
The long term KSA forecast is shown below. KSA, including half of the Neutral Zone, produced 9.6 mbd in 2005. In 2008, crude production was 9.3 mbd. In 2009 it is forecast to be 8.1 mbd followed by an increase in 2010 to 8.5 mbd. Assuming KSA ultimate recoverable oil reserves (URR) of 185 Gb for forecasting purposes, this implies that the dark blue line is the production profile to 2080. Additional recoverable oil reserves from discovered undeveloped fields, future discoveries and technology advances should help to decrease the decline rate but the 2005 peak would remain.
The declining production forecast scenario after 2010 is much less than the forecasts made by the International Energy Agency, US Energy Information Administration, and Cambridge Energy Research Associates. The main reason for this difference is that these three energy organizations accept Saudi Aramco's unaudited oil reserves numbers. Matt Simmons has been deeply concerned about the true reserves and production capacity of KSA for years, giving many presentations. In this 2005 presentation, he said: "Once Saudi Arabia reaches peak oil, so will the world". Matt Simmons is right as the KSA 2005 peak for crude oil production probably occurred in the same year as the peak of world crude oil production.
Saudi Arabia's Oil Reserves
A critical forecasting assumption is that the ultimate recoverable crude reserves (URR) for KSA, including half of the Neutral Zone, are 185 billion barrels (Gb) relating to producing fields. KSA may have an additional 25 Gb reserves from future discoveries and from the 65 static (discovered undeveloped) fields in the chart below giving a higher URR of 210 Gb. As oil production from these additional reserves would not start until at least 2015, the decline rate should decrease but the 2005 peak would not be exceeded. The production from these additional 25 Gb of reserves would have only a very small impact on future world crude production. This discussion of KSA URR provides support for the higher URR of 210 Gb. More detail about Saudi Arabia's URR split by field is in last year's forecast.
All of KSA's new projects of Nuayyim, Khurais, Manifa, Shaybah and Khursaniyah are either workovers or expansions of fields which have already been producing. The chart below shows the producing fields by red vertical bars. The OIIP of these producing fields was just less than 500 Gb in 2005. One method of assessing the reasonableness of the URR 185 Gb is to assume that if this URR relates only to producing fields, then the recovery factor would be an average 37% for these producing fields (185 Gb/500 Gb). This is well above the world average of 30% based on 9000 fields from the IHS database. Given that some of KSA's fields would have high recovery factors, the higher KSA average recovery factor of 37% appears acceptable implying that the URR of 185 Gb is reasonable.
The chart above is from Jack Zagar's 2005 ASPO presentation which states the following about the higher Aramco estimates for OIIP trending up to 700 Gb in 2004:
These same ARAMCO contacts hint that the OIIP growth is perhaps a P3 or Probability P10 type estimate; statistically, this means that the higher OIIP number has perhaps a 10% chance of occurrence.
With the most likely OIIP estimate still in the 600 Gb range. Only time will tell if this additional OIIP will translate into additional oil in the tank.
The chart below is an annual crude Hubbert Linearization (HL) plot showing a sudden increase from 2002 to 2005. If this sudden increase is due to additional oil reserves, then the HL URR would be about 185 Gb relating to producing fields. However, I believe there is a strong possibility that this sudden increase is only temporary. In this case, the data points for 2009 and 2010 could fall back to the HL URR 160 Gb trend line. This sudden increase could be the result of using high technology horizontal oil wells, enabling higher extraction rates, rather than additional oil reserves. The oil is extracted faster and the temporarily high production rates would falsely overestimate the HL URR prediction. This would imply that the HL URR for existing producing fields is 160 Gb. Adding another 25 Gb for discovered undeveloped fields and future new discoveries gives 185 Gb.
For comparison, Jean Laherrere also estimated the URR using an HL plot and arrived at a similar number of 180 Gb from his 2005 ASPO presentation. Laherrere's 2008 estimate was URR 250 Gb which includes discovered undeveloped fields and said this about Saudi Arabia oil data: "There are many uncertainties in liquids forecasts mainly because of the poor quality of the data. Saudi Arabia should improve the quality of these data in order to manage the coming crisis".
I carefully selected monthly data points which indicated realistic production rates for KSA's fields which were close to capacity. For example, the April 2003 data point was used because it represented a high production rate, with little surplus capacity, during the invasion of Iraq. Also note that the monthly HL line goes through the months of June 2004 to August 2006, a time period for which many analysts believed that KSA had little spare capacity. A URR of 185 Gb, relating to producing fields, is predicted by the HL method shown below. The HL method only gives a rough approximation, but until KSA allows its fields to be publicly audited there remains uncertainty over KSA's true reserves.
Many readers will question the validity of my URR estimates, shown in Figure 1, thinking that the true KSA URR must be higher. A perceived high URR is in the national interest of KSA because it needs its customers to continue their demand for oil leading to sustainable high oil prices for KSA. If customers thought that KSA had less than 100 Gb of oil left then conservation and switching to alternatives would increase. KSA has been creating this perception of overabundant oil reserves for at least sixteen years because it believes that this will maximize the price of its remaining oil.
Mr. Naimi, pictured below, has said on many occasions that the KSA can add another 200 Gb of reserves. In December 2004, Naimi said that reserves could be bolstered by another 200 Gb. In an April 2008 speech, Naimi was still talking about adding the same 200 Gb to increase remaining recoverable reserves to 464 Gb. In April 2008, cumulative crude oil production of KSA was 114 Gb which means that the his total potential crude URR is about 578 Gb which represents an impossible recovery factor of 96% based on Zagar's estimate of oil initially in place of 600 Gb (Fig 4).
It is time for Mr. Naimi to tell the truth about remaining KSA reserves. As the true remaining reserves are probably much lower than Naimi's claimed 260 Gb, a full disclosure of KSA reserves, by field, would not only allow more effective future oil production and consumption planning but might also help increase short term oil prices which would be favourable to all OPEC members.
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Needless to say, no argument from me.
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
[ED: This is a guest post by westexas...]
http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-futur...
Based on Khebab’s superb mathematical modeling, I estimate that Saudi Arabia in three years, 2006 to 2008 inclusive, shipped about 20% of their post-2005 cumulative net oil exports (middle case scenario). In other words, our middle case is that the post-2005 Saudi Net Export Fuel Gauge is only 80% full, after only three years. (Edit for math error)
Note that the post-1996 Indonesian Net Export Fuel Gauge was only 56% full, after only two years, at the end of 1998, when they showed a year over year increase in net oil exports (actual EIA data, not an estimate).
If Saudi Arabia had maintained their 2005 net export rate, they would have (net) exported about 10.0 Gb in three years. I estimate that they shipped about 9.1 Gb in three years. (To put this volume of oil in perspective, the largest Lower 48 oil field, the East Texas Field, produced about 5.5 Gb over several decades.)
I seem to remember its a linear decline so does this mean they go to zero in 3 x 100%/20% = 15 years at this rate??
2024... but of course things get well sticky LONg b4 then...
I can't understand why the oil price is so low, they only have a few handfuls of years left and they are giving the stuff away for free...
Nick.
You are mixing apples & oranges--cumulative remaining net oil exports versus annual net export rate.
The net export rate tends to approximate a linear decline, approximately a fixed volume, although mathematically the volumetric decline tends to decline slightly with time. This is of course an accelerating decline rate.
The point about the cumulative number is that the bulk of the post-peak cumulative oil exports occur at high export rates near the peak. Our middle case is that the top five will have shipped about half of their post-2005 cumulative net oil exports in the seven year period from 2005 to 2012, with the other half being shipped from 2012 to 2031.
Have you (or Khebab) had any thoughts on when the critical threshold will be reached when countries begin withdrawing from free -oil- trade? I suspect somewhere like Russia might be the first to do this. It operated as a sort of 'closed economy' for much of the last century and as it becomes clear what a pickle we are in I can see it reverting back to this model 'with an iron fist'.
Wouldn't bode well for European Gas supplies either...
Nick.
Although I don't think we have come close there is a maximum in oil prices.
This is reached when further price increases drive away customers faster then production declines.
In my opinion for this to happen you need to see fairly wide spread economic collapse at the individual consumer level.
Thus a 1% increase in price forces say 10% of the current consumer population to decrease their oil usage by 30% or more.
For your typical American consumer this implies that it becomes cost effective to simply abandon their auto's and spreadout homes. Some argue that EV's will help fill this gap but I'd argue that the real problem is that most suburban housing would become worthless in a high oil price environment. So its far more likely that we will revert in general to traditional small towns and city living. With that said it also makes sense that a wide variety of approaches to living in and expensive liquid fuel environment. I don't see EV's being important enough to "save" suburbia but they will play a role along with the reforming of town centers etc etc. The key is that as we move from effectively a monoculture suburban lifestyle to a rich variation exploring ways to save energy and live with less we rebuild the elasticity of the system. Once the the system becomes elastic then attempt to raise the oil price simply causes more people to opt for one of the new lower energy lifestyles.
At this point I think with oil prices no longer increasing and faced with spiraling extraction costs oil producers will finally try to strangle their consumers. Depending on how things go and how fast we convert this could well be enough to seriously damage the nascent move from oil.
Before we reach this point I think that ever increasing oil prices will serve for some time to ensure that oil producers can and will produce at capacity so I think that these pull back will happen towards the end of the oil age.
However you can see that we will reach a point on the back side where we have another dangerous or unstable point where whatever is left of our economy is moving off of oil how ever it can and producers are cutting supply to try and further increase prices. Because I believe we will only transition at the last minute when we have no choice one can suspect the situation will become very strained as we need the last remaining oil supplies to make the transition.
When ?
Dunno probably ten years from now after the depression has run for a while and we have had several years of very high oil prices. Figure that it would take at least 3-5 years for oil prices to hit crippling levels of 400-800 a barrel then a further 1-2 years at least for people to seriously begin moving off then maybe 1-2 years of a transition period your looking at 4-9 years before we hit a sort of second critical point on the backside where oil loses its critical status for our economy.
Whats interesting is most people focus on the consumer nations but if you look at oil producing nations and my scenario no way in my opinion can they transition their societies off of depending on oil exports. At the end of the day its the oil producers that are more addicted to oil then the consumers. So after the dust settles its probably the oil producing nations that actually crash back to a very low level of civilization while the consumer nations may fragment but still maintain a fairly technical civilization.
Mexico could prove to be a good model for the future of many of the oil producing nations.
Memmel,
happy 3rd year anniversary with TOD.
"Thus a 1% increase in price forces say 10% of the current consumer population to decrease their oil usage by 30% or more.
For your typical American consumer this implies that it becomes cost effective to simply abandon their auto's and spreadout homes."
You have often talked about a possible oil price of $300/barrel, if this translates into $10/gallon, what does this really mean for a suburban driver?. If the average US suburban worker is driving 50miles a day, and allowing that ALL of this is work related(probably only 50%), presently this average person will be using 2gallons/day(25mpg); cost $4 plus car payments of $20 per day.
At $10/gallon that would be $20/day for gasoline plus $20 per day car payments but a number of options; abandon house in suburbs, and rent in city, keeping car but not using for work(2)trade in 25mpg for a used 37mpg car, cost now $12/day( <1hours wages) plus $20 payments(3) sometime in future buy a PHEV, pay $1.20 per day electricity and $30 a day car payments( more due to more expensive batteries).
If you are not sure what people would do, just look to Europe where they have $10/gallon gasoline, still lots of private vehicles on roads, suburban homes still have some value, people living in city still have cars, but drive slightly less.
The problem is not directly the cost of gasoline but the fact we have based our suburban housing supply on inflation of the money supply and ever more exotic loans to support rising prices. Rising transportation costs and also rising food costs with a stagnant economy brings this economic model that underpins suburban society to a end.
Its not the direct costs of either that are the problem but the effect they have on the financial underpinning of suburbia.
This is not to say that we won't keep some form of suburbia for those they both enjoy and can afford the lifestyle but most Americans can afford a depreciating house and a depreciating car at the current price levels.
Europe to some extent is different since it has a range of living styles people can fairly easily choose to live without a car and if they do choose to have one they have options as to how much they drive. Its difficult to compare the US and Europe since we don't have the choices most Europeans have. And of course taxes make up a large part of your fuel costs so again its difficult to directly compare the two.
Its important to understand the shear magnitude of the pickle we have gotten ourselves into in the US.
I think this is a fantastic article that show the shear size of the problem we face.
http://www.housingbubblebust.com/HM/HM-Main.html
The bottom line is that for housing in the US to return to sanity would require a drop in prices of 50-75% at the national level. This is Great Depression levels or worse. Not to mention elimination of inflation or even allowing persistant deflation to ensure a stable economy as it converts to a new low energy form.
If we had sane housing prices then transportation would not be a issue and I'd suggest that we could naturally move to lower or transportation needs and develop rail higher density housing in the cities and real villages surrounding a rail terminals in the country. I've said several times that EV's and other forms of transportation make a lot of sense as options around a rail based core transportation network.
What I see as impossible is not EV's and suburbia its conversion to EV's with their expenses coupled with saving our housing bubble we probably can't save it anyway and certainly trying to convert to EV's to support people living in houses that are falling in value as their expenses are increasing and their credit is drying up is a bit of a stretch.
This does not even get into the retirement of our baby boomers unfunded pension liabilities falling wages etc etc etc.
A pullback in consumer spending in a society that now depends on borrowing and spending. A rapidly degrading road network etc etc etc.
The number of assumptions your making in your EV calculations is enormous. If you consider a switch to EV's as we are forced to deal with our financial train wreck and the underlying loss of cheap liquid fuels at the same time then I think you will realize that at best they will be toys of the the wealthy. The reality is most Americans actually are poorer than the poorest people in India we are just now balancing the books.
We are going to be lucky to put in electric rail and keep our society functioning I'm simply saying we don't have the luxury of simply switching to EV's and going along our merry way. If we had not blown our housing bubble on top of our credit bubble if we funded sane pensions and if we controlled our medical costs and if we built decent houses thousands of ifs then it might simply be the problem your describing but its not.
This is why I'm actually of the opinion that peak oil right now threatens our very civilization we have gone so far beyond sanity that the added burden of dealing with a dwindling energy supply on top of all the other problems we will be forced to face including longer term stuff like global warming makes it a probably unsolvable problem even worse since it basically ensures we have no exit. Inflation simply does not work when basic commodities are in short supply without inflation we are dead. With inflation spiraling energy prices ensure the debt bubble will keep imploding.
The only way out that I can see is to offer people the chance to live a decent energy frugal lifestyle and let suburbia and EV's make it if they can. By giving them a chance to live at least part of their lives using little energy and saving money and further more limiting inflation so savings actually works we can build up the monetary base to invest in paid for EV's and suburban houses without a massive credit scheme. If thats what people still want. Some will some won't.
Finally I think we have to do it that way. I think high energy lifestyles can no longer be subsidized but have to be paid for with cash by those that can afford it. We simply can't wast our credit resources lending for EV's or suburban houses we need every penny we have as an society to fix all our other problems and fix our energy supply. We simply can't afford as a society to lend that much money to support the old suburban lifestyle EV's or not. Bottom line we simply don't have the money right now already at the society level and its rapidly expanding to the personal credit level and it will only get worse as peak oil continues and the baby boomers get older.
And wow its been three years. It looks like the comments archives don't go back that far.
Interesting.
So if they're talking about adding 200 Gb in reserves for over 4 years, why hasn't it been done by now.
Admire your work ace, thanks. (but it should read "click to scale down" by Al-Naimi's picture)
Saudi continues to say that they have 2 mbpd "spare" capacity.
If they do, then the peak would be closer to 12 mbpd?
We know OPEC manipulates production to control price (they think?).
http://globalpublicmedia.com/transcripts/2647
Using this definition and I've read the original definition but did not find the link in my quick search.
Someone should be able to post it.
Saudi Arabia certainly has significant spare capacity. The practice well rotation to prevent coning these wells could all quickly be turned on. They also still have some heavy oil they have difficulty selling at the price they want.
Next they had a fairly large strategic reserve of refined products that could be used internally allowing oil to be exported. I've done my best to follow sales of the lower grade refined products such as asphalt to see of they are using this reserve since the reserve does not contain cheaper products such as asphalt.
In any case Saudia Arabia is certainly capable of flooding the market with between 30-180 million barrels of oil over a 90 day period this is not sustainable. The logistics of hiring the extra tankers and filling them then waiting for them to return will result in a number of humps in production with each progressively smaller. At least 2 and maybe as many as 4 before production returns back to sustainable levels. Next they probably would actually drop production slightly lower to allow field recovery.
My opinion is this is exactly what happened during the second half of 2008 this would suggest that current Saudi production is probably only slightly below long term stable production levels probably by only 500kbd at the moment.
I expect them to cut and additional 1mbd at least to allow them to hide the obvious signature of geologic decline. By cutting production well below capacity the can stair step down production and use various announcements to hide the real situation. And they will be able to flood our just in time systems with about 1 days supply of oil for quite some time.
As long as they can keep stable production at least 500kbd below capacity and pump conservatively such that they have at least 1mbd of short term production capacity and last this is combined with various storage games Saudi Arabia should be able to overwhelm our oil storage systems and transport systems if needed. Combined with the SPR's in the US and China and coordination with consumer countries they should be able to hide a real oil shortage for one maybe even two years.
Finally given we might not know when Saudi Arabia surges into unsustainable production we can expect that real Saudi production give the above will be a sort of sawtooth pattern downwards with plateau's followed by excellent reasons for a steep cut. These plateau's can readily be somewhat obscured by shorter term rises followed by steeper drops. In general however if the Saudis are playing the game I think they are playing they will stair step oil production down leaving a capacity cushion at each step to ensure they can surge however briefly to hide the true decline situation.
That would be contrary to all past evidence though, if I'm not mistaken. Post-peak nations have always pumped flat out, yes? Maximizing the economics. Poorer nations will be passed over first as well, which buys a year or two - someone should quantify this.
People will undoubtedly demand political solutions when peak is passed and shortages begin to appear; I think this would force KSA's hand in any case. They won't be able to coyly insist they're having pipeline problems darn it when talk radio is abuzz with demands to send in troops - or warheads - to seize oilfields.
I'd suggest that Saudi Arabia is fairly special in this regard. They also have substantial cash reserves outside of just oil and its very much a monarchy.
Certainly they have constraints they are stuck in WT exportland model and they have to ensure the local economy continues to grow to maintain power but they both don't have to pump at their maximum rate and they have such a draconian form of government that they can enforce slowing production.
This should be blatantly obvious just looking at their production history. Obviously they ran for decades well below capacity.
The key given my scenario is is Saudi Arabia stair stepping production down if they are then they peaked. The games they play on the way down just that games to stave of having to admit to peaking. Internally this is probably the most explosive issue that Saudi Arabia faces its not absolute production but if the populace becomes aware that Saudi production capacity is declining.
They will do everything they can in my opinion to ensure that they never look like they have hit the wall for production.
Buy buffering with spare capacity they can control the timing of production cuts to coincide with plausible announcements.
As far as 40 dollar a barrel oil being to low for Saudi Arabia.
http://www.energybulletin.net/node/205
Obviously back in 2004 $40 dollar oil was considered expensive I cannot believe that Saudi Arabia's cost have risen dramatically over the last few years that they can't make money on 40 dollar oil. In fact they should be just fine in the 20-30 dollar range since they pumped a lot of oil at those prices.
If they really had what they claimed a 12mbd capacity and the ability to grow to 14mbd or beyond then what they should be doing is driving oil prices down into the 20-30 dollar range by opening the taps. This would play a big role in reviving demand and more importantly would smash the competition. They would have as much market share as they wished if they just drove prices down for a year or two. Longer term it would be a huge win for KSA and short term they can readily afford it.
If oil hit 20-30 then it would have to spend years over 100 before we would see real investment in expensive production.
The Saudi's could readily cut back from their "AWESOME" 12mbd and just the threat the would open the taps again would be enough for them to ensure they would get top dollar for their oil for decades to come.
They are not doing this instead they are passing on the one chance they have to take complete control of the worlds oil markets for decades to come.
Why ?
Because they can't instead they use the current situation to announce some more cuts to rebuild a fairly small spare capacity cushion so they can hide behind it to confuse their real situation.
Draconian form of govt? How?
Lets see how they govern:
(1) No taxes at all
(2) No inflation at all, they have same prices now that they had in 1980s
(3) Very precise, well known and extremely stable laws. Consider for example hudood laws.
(4) Lowest crime rate in world
(5) Involvement in no wars to save people's lives
(6) Absolutely free health care from bottom to up and for everybody
(7) Free education
(8) One of the cleanest air and water
(9) Per capita income equal to usa and europe in terms of purchasing power (PPP)
(10) Budget surpluses. They never had a budget deficit.
(11) Absolutely no debts. They actually have a large cushion of cash which is close to their GDP
(12) A very stable and reliable govt
(13) A very deep pocket and fast hands when it comes to help needy people around the world
(14) All this in extremely little amount of work done per person
You americans and europeans think nobody other than you know how to rule the land. You think you are the best, you think whatever you do is the best and the only way to do things. You think all other on surface of earth have no culture, no wisdom and no ability to make use of what they have.
Total GDP of saudi arabia is just 120 billion dollars. They have a population of 20 million. Usa has a population which is 15 times higher but GDP of usa is 100 times higher. Therefore an average american is on average 7 times richer than an average saudi, but where is all this wealth? Even at a vampire level of taxation (28%+) usa govt is not able to provide any relief to the common man. Forget about relief usa govt is not even able to carry out its own expenses without foreign aid. Where the hell the money of usa goes? That is what you get when you follow a financial system that revolve around interest-based debt. Allah had clearly told in quran that whoever takes interest on loan should get prepared for a war with Allah and His prophet.
Usa govt takes a vampire level of tax plus a large amount of money in foreign debts plus tax its people with inflation (printing money) plus tax all people of world with inflation (printing money) but is still unable to provide any of the benefits that saudi govt provide to its people.
Saudi govt takes no taxes, not impose any inflation, not take any debts and yet is able to provide its people with free education, free health care as well as support 2 million hajis every year as well as provide a lot of help (in billions of dollars) to palestine, pakistan etc.
Who is better govt? Not hard to understand.
Another question for you to think is where the hell usa's money is going? Its not just wars. The costs of war are well known and is a relatively recent addition. The bulk of money is going somewhere else. First take a look at the amount of money:
Usa govt tax its people at a minimum rate of 28% though it also return some of the money later on (after eating interest on it for months). Lets say that roughly the amount returned is equal to the tax gathered above 28% rate so we reach a 28% level. Now add sales tax of atleast 7%. Add property taxes which I don't know is how much but lets say it takes 3% of GDP (i can guess its a very conservative estimate). Total all this and you reach a 38%. I know there are other taxes too but I don't know their rates and where they apply so I roughly say they are 2% of GDP. So altogether it makes 40% of GDP. At 12 trillion dollars it is 4.8 trillion dollars. This means per american 16,000 dollars. Yet usa take more debts every year.
In comparison, saudi per capita income is 6,000 dollars. Ofcourse govt can't consume it all, people have to eat, buy cars, travel, make property etc. Anybody who has spent time in saudi arabia can tell that a minimum of 1,000 dollars is needed per year per person to live. Ofcourse people are kept at a flexible level so lets say 2,000 dollars. The people high up in ladder demands higher salaries so lets say 2,000 dollars go there. We are left with 2,000 dollars. In my estimate the expenditure on health and education would not be more than 1,000 dollars per person per year. It is still 16.67% of GDP, I think the highest in world, yet is 16 times lower than the per capita income of usa govt. Yet saudi govt provide far better services to its people.
Did I miss something? Oh yes, its the expenditure on military. In saudi arabia it is a staggering 25 billion dollars per year. Oh, and they must be able to save a lot each year that they have such a high cushion and so many investments abroad. How are they able to manage it all in just $6,000 per capita GDP. Think about it. Its called barkat. Its called help from Allah. They are blessed because they have hijaz, the mecca and the medina.
Now, the crime rate. When usa has 7.3 million people in jails or on parole, three times its number of soldiers, saudi arabia has no people in jails except a few hundred of political prisoners. The very clean, practical and natural laws of islam ensure that punishments are strict enough to keep the crime rate close to zero. The amount of suffering a few dozen rapists get by being stoned to death per year is atleast thousands of times less than the amount of sufferings millions of rape victims will otherwise get and a few months prison multiplied by a few hundred thousand times. Still the islamic laws are not fully implemented that is why they still have a few hundred political prisoners.
Another thing about laws of saudi arabia is that they are not humanly made. They cannot be changed by humans. They are very stable, very precise and very well known. They are same for all and no judge can deny them. Not only that but the interpretation of those laws is not left to the judges as in the western judicial system. In an islamic court the interpretation of laws is also well known and well followed. Even a poor can expect equal treatment because there is no need of a lawyer, therefore the rich not get any superiority of a better lawyer. The judge himself knows what to ask and what to pay attention to.
Why on earth do you assume I think that the US is good or has a good government for that matter ?
Your comparing one crappy corrupt and horrible government with another.
I find both equally distasteful personally.
And I believe I have the personal right to find both disgusting.
If you don't agree with my belief that I have the right to dislike both would be difficult to discuss this further.
As far as Islam goes I happen to be 100% behind the decision to ensure the Koran is only in its original Arabic
however I don't know Arabic and the English translations are suspect to say the least so I really have no hope in getting involved in any good argument about Islam. In fact I recently pointed out that Christianity probably made a terrible mistake by not keeping the original texts in the original language readily available and teaching people to read them.
I'm not the worlds ultimate religious scholar and I found that the English translations of the Koran where very difficult to understand so I can't comment on Islam nor am I a good study of Christianity since I cannot read the original Greek and Hebrew texts. However since your effectively brought up the concept of law derived from God not man I can say even with my limited understanding I don't see that these to religions differ substantially in fact I think I could show you different Christians sects that have larger differences than between the Moslem religion and a particular Christian sect.
This extends to what both interpret and laws from God not man. If you expand to include the two religions over time the argument is even more compelling and you can readily find by comparing across time that strikingly similar communities developed regardless of the underlying religion.
I can offer that in my opinion the Mennonite branch of Christianity and Islam as I understand it from the Koran have a lot in common. http://en.wikipedia.org/wiki/Mennonites
Many from this group happen to live in the US and Europe which strikes a bit of a blow to your generalization.
Also I'd offer that my viewpoint on life if you will is much closer to theirs then other groups in the US.
And I'll let you know that I spent many summers as a child living with Amish in Missouri.
And last but not least I'd offer that my dislike of both the Saudi culture and general US culture is based on what I learned living with the Amish.
And last but not least I'd offer that just as the Amish live in the US and don't fit your preconceived notions of how Americans and Europeans think I'd offer that I'm certain that my generalization about Saudi Arabia is not generally true.
But I'm quite willing to concede that the majority of the people in our culture and especially our rulers are seriously messed up. As far as Saudi Arabia goes no way I can say I'd have to live there to determine what the real majority viewpoint was. You simply can't tell from the outside. I feel they are messed up because my own beliefs in personal choice are at odds with what I know about Saudi Arabia. My opinion is its very difficult for someone from Saudi Arabia who is unhappy with how the government and culture work to leave or find a subculture that better suites them.
Thus my dislike for Saudi Arabia is focused on and interpretation of the Koran which I freely admit I simply don't have the skills to make on my own.
Vs this probably overly broad interpretation.
http://women.rationalreality.com/
I might add I think the second interpretation may be a bit overboard vs what the Koran really says. And I don't care much for this taking of verses out of context for any reason. Regardless my underlying belief is that a person should always be free to leave any situation if they wish. This does not say that they are free to go without reasonable repercussions such as taking care of their children or resolving joint property issues etc but this is a civil/code law matter not a freedom matter. I'll add that the whole status of Women and property is a big issue inside the Islamic community so you can't accuse me as and outsider of bringing up something thats settled and well understood.
I'm simply saying that I find this single interpretation of the law to be sufficient for me to dislike Saudi culture.
At the minimum a women should be able to go to a cleric to determine if the man failed in his duties to his wife or vice versa.
The problem is simple the husband himself may not completely understand both his rights and responsibilities under the Koran and Sharia law. Although I don't know Islamic law that well but to my knowledge nothing prevents anyone from seeking the advice of and ruling of a cleric on any aspect of the law.
Next moving to the US in general our problem is far more serious. For Saudi Arabia it was a simple matter of the choice to leave for the US its worse. We have for some reason decided that we deserve to rule the world as we see fit. In general.
And we have the weapons and power to basically do as we please. Only the thinnest veneer of civilization keeps us from degrading to be as bad as the worst regime you can imagine. You mention some of our excesses but I'd suggest you missed a lot more. Our sickness runs much deeper then a interpretation of a few verses that causes real problems for some people who live with others that don't fully practice all the laws of their religion. I'd argue that the problems in Saudi Arabia is a simple matter of fully enforcing all the Sharia laws with balance. My understanding makes me believe that if you followed the code in a balanced manner then abuse by people ignorant of their own laws and religion would not happen.
This is completely and utterly different from the sickness thats infected the US. We have thrown out any attempt to balance any laws in favor of simple greed. Not only have we rejected our religion but we have undermined even our civil and moral codes of laws that give us our freedoms and responsibilities. I'm not talking about things like abortion and homosexuality which are side issues at best and generally totally irrelevant these are red herrings. At some point in the progress of western civilization we like the Romans our culture descended from threw out the the basic concepts that makes a real democracy work in favor of one based on greed.
Regardless any culture that chooses to strip its members of the chance to choose has taken the wrong path. I actually don't disagree with you overall viewpoint. I'll argue that inside our western culture that we still have enough freedom that more and more people are choosing to reject our vile decision to be rulers of everything. I can't say it will be enough to make a difference the rot is deep. And as far as Saudi Arabia itself goes it does seem to be slowly moving to take care of the abuse problems that have crept into its culture and as I said I think the problem although real can be fixed within the constraints of the culture. Ours is a bit more problematic and in my opinion require rejection of our current culture for the most part and building a new one based on the best bits from older variations. This includes for example embracing the Sharia banking laws from the Moslem culture. We had quite similar usury laws in the past but they where forgotten.
http://en.wikipedia.org/wiki/Usury
The underlying revulsion to usury in the past turned out to have a very sound reason and we are finally seeing the effects today. I think now we have finally reached the point that the problem of usury in a society thats not capable of real growth have become obvious. Without growth or minimal growth usury becomes a serious problem fast. I also suspect you can easily see that Western society has one hell of a serious problem. In fact our past problems with usury provide the underpinning for the eventual Nazi killing of the Jews in Europe on top of a long string of atrocities. Our lack of Sharia like banking laws seems to have repeatedly brought out the worst in our culture. The latest variant is a final orgy of excessive credit and greed but its been a problem for our culture for centuries. And last but not least our addiction to usury which eventually resulted in the Nazi's also caused the long centuries of generally good relationships between the Jews and Moslem's to be broken with the establishment of Israel. I don't want to expand on this but simply to point out that underlying a lot of the problems in the world today are the historical problems that Western/Christian society seems to have with money. Our weakness for money can often be found to be the heart of a enormous number of problems for centuries. This hopefully gives you some idea of how deep our sickness is and its not clear that our culture can or should survive for much longer with this sickness its probably time for it to reinvent itself and cure this disease.
Memmel wrote:
What is your definition of "sustainable" and "long term"?
I think people ignore al Husseini's coments on this their peril. In '07 and since he has talked about world reserves being 300 billion barrels too high due to reserve inflation in the Gulf. At the same time, he also says KSA *can* get to 12m b/d. Of course, as years roll by and reserves are depleted, this becomes more doubtful.
However, as the swing producer in a world where oil demand is rising (which might have changed forever...), they need that capacity to control prices. I don't think KSA *has* the capacity, but I think they can get very close in a fairly short period of time. At least for now.
11.5 or so doesn't seem out of line. There was a report last year that they could currently hit at or near that number, iirc.
Cheers
I think people ignore al Husseini's coments on this their peril. In '07 and since he has talked about world reserves being 300 billion barrels too high due to reserve inflation in the Gulf. At the same time, he also says KSA *can* get to 12m b/d. Of course, as years roll by and reserves are depleted, this becomes more doubtful.
However, as the swing producer in a world where oil demand is rising (which might have changed forever...), they need that capacity to control prices. I don't think KSA *has* the capacity, but I think they can get very close in a fairly short period of time. At least for now.
11.5 or so doesn't seem out of line. There was a report last year that they could currently hit at or near that number, iirc.
Cheers
Thanks, Tony.
I sometimes wonder whether calculations of this type are best estimates of where production might be in the years ahead (with amounts possibly higher, and amounts possibly lower, leading to averages you show) or likely upper bounds for production in the years ahead (with production likely no more than the amounts shown).
As I think about the situation, it probably depends on your estimates of ultimately recoverable crude reserves (URR). If your estimates of these are correct, then it seems like your forecasts of future production are likely upper bounds, especially for close years. I say this, because it is unlikely that production will be more than 5% of URR for very long. It could be lower, if there is a revolution, or it international war breaks out, or Saudi Arabia decides to cut back production because prices are not high enough, or if financial problems impact world markets. In time, after production is lower because of factors such as these, production could rise above your forecast, because the remaining URR would be higher in the "out-years", if production is lower now.
If there truly are advances in technology--say more heavy oil can be extracted--this might make your URR higher. I would think that the likely impact if this type of thing would be higher production in the out-years. If there is more recovered, it will likely be recovered more slowly than the 5% ratio you are estimating.
Combining these observations, my impression is that your estimates are likely upper bounds for production in the 2009 to 2015 period. After that point, there is some reasonable possibility that production will fall more slowly, especially if actual production in the 2009 to 2015 period is lower than you forecast.
Saudi production saw that peak near 10 MBD in 1980, then tanked to around 3 MBD in '84 or '85. Then we see that 9.6 MBD peak in 2005, along with the claim that it's THE peak. Maybe it's going to tank again, then shoot back up to a new peak, like it did a decade ago. Who knows? What with the secrecy & poor quality data, it's anyone's guess. My point is that the peak's coming sooner or later and obsession over exactly when it arrives is futile. Maybe the '05 peak will be the all-time peak, maybe it won't. Aspiring to more precision than the data can supply is a fool's errand.
I think that the logistic (HL) method is an invaluable tool for coming up with a plausible estimate of URR, using the two numbers we have the most confidence in (annual production & cumulative production to date). In any case, here is the conventional wisdom regarding Saudi Arabia:
The Economist Magazine, in an article about Saudi Arabia published in August, 2006, had the following remarkable statement:
I thought it was interesting that the writer did not even consider domestic Saudi consumption to be a factor (an interesting omission given the fact that the US went from finding its largest Lower 48 field and from major exporter status to zero net oil exports in only 18 years).
Flat (Total Liquids) Saudi production versus rising consumption:
http://www.theoildrum.com/files/image008.jpg
Look at figure 5 in Ace's post. In 1980 cumulative production was roughly 43 billion barrels. It is now around 110 to 120 billion. There has been a lot of depletion in the last 28+ years. Do you really think production will shoot back up to a new sustained peak?
No, I don't think that it will, but the data doesn't rule it out. I'm just saying that it's too early to call Peak yet.
You are correct, November 1980 represents the all-time peak for KSA production at 10.4 MMBPD. The nproduction fell off (for a number of reasons).
What is worth noting is where one selects the "beginning" for the HL process. If you select (as I did) monthly data from January 1991 to present day as the beginning of KSA's recent return to production after the 1980's "oil crash" then the KSA has been humming along towards the 210 GB URR for quite some time. It makes only a little difference if you use annual production data or monthly.
The recent downturn in production, as a result of production cuts will, over time begin to turn the HL curve to something short of 210 GB, but the 215 data points currently used to create the linearization currently hold greater weight than the downturn. We all recognize that this method is not absolute, but it does give us some measure of where we are headed.
For all the proclamation of an additional 200 GB (or more), there is no easy logistical scenario that supports that. We are being told "Trust us, there is another whole Saudi Arabia (or US equivalent) that we haven't even tapped yet and put into production."
The above graphic for KSA uses monthly EIA data for Crude plus condensate from Jan 1991 through Sept 2008 for the regression and the high and low lines represent the 95 % confidence interval. URR is 197 GB for KSA based on this data. Starship Trooper, was your HL Plot based on C + C + NGL?
It would seem to me that the NGL should be excluded because that depends more on NG production than oil, but I am not an oil man or geologist and may be mistaken. I agree that the HL method gives only a rough approximation.
Only C+C (from the EIA). I track NGLs separately. I also track crude less condensates since condensates do not count towards OPEC member's production quota (also from the EIA). In the case of the KSA lease condensates are a small fraction of the reported to volume of C+C.
Data is available through November 2008 EIA Monthly Energy Review (International Production)
Thanks ST. Leaving out the condensate makes little difference for KSA. I realize now that there are many reasons why our regressions point to slightly different results. To determine cumulative production one needs to find data prior to 1960 for KSA. I used data from the OPEC website to get cumulative crude prodution up to 1959, then I used EIA data from 1960 to September 2008. I haven't updated my regression recently, but I don't think the two data points from Oct and Nov would change things substantially. My guess is that the difference in URR is the due to the cumulative production numbers and how we arrived at those numbers.
I see what's happening. I want to go long oil NOW. What is a good ETF or fund or way to go long oil? I don't know anything about buying oil futures contracts and don't really want to get involved in that.
Try ETF:OIL. Avoid ETF:LOIL (leveraged Oil) unless you day trade -the volatility can wipe you out even as oil stays level, only pile into this one when a trend is clear... There's also an ETF:SOIL (Short OIL) for the way back down after the next "Simmons Cuppa-Peak" :o)
You might also want to consider other 'high oil price' plays. In the 70s the oil service companies did well: TransOcean (RIG) or Schlumberger.
Commodities like Molybdenum will also probably do well in the next decade (oil and gas pipelines, heavy oil cracking catalyst).
Gas stocks are dirt cheap IF there is an upcoming gas crisis. You might want to bag a few Uranium stocks: Cameco perhaps.
Renewables are a mixed bag -as we have seen a recession tends to wipe out these stocks as oil falls and these solution look 'expensive'.
Gold will 'preserve stored value' if the Dollar plunges as Inflation bites. ETF: GLD.
...and if things get really sticky buy some agricultural land, a kilowatt of PV, ?an electric tiller? and some seeds... ;o)
Nick.
P.S. I'm writing a report on this if your interested in hedging against PO.
CCJ is interesting, but their Cigar Lake mine problems are significant.
Also, GLD is "paper gold," having that kind of defeats the purpose of owning gold IMO, although it does make trading relatively smooth.
Generally agree with RIG or SLB, but who know how they'll act. Unless something big confirms Peak Oil in the minds of those in the industry (terrorist attack? nasty war in the middle east knocking out massive capacity) there will probably be a significant lag between increase in oil prices and increase in price for service providers.
noutram, anyone
Any thoughts on the Barclays ETN, OIL on the NYSE ?
I'm losing money hand over fist in DBO and USO. When oil goes down, they go down. When oil goes up, they stay flat.
Not saying you should do this, but you may want to look at:
DXO, DIG or USO - DXO buys futures, is double leveraged. USO is not leveraged, and buys a month out (generally). DIG buys oil "related" shares, not the oil itself.
But they are both (DXO, USO) very complex instruments, so dont buy it unless you understand all the risks. The main one with DXO is that it is a Deutsche Bank "note" so if DB goes bust, DXO goes bust too.
For the record, I own both.
Hi sirbikesalot
Oil ETF's work by buying and rolling futures contracts. And there is a BIG problem with this at the moment - the contango in the oil price. This means oil for future delivery is trading at a higher price than oil for immediate delivery. So every time the contract is rolled forwards the ETF takes a hit equivalent to the difference in price between the contract purchased and the one sold. For as long as the contango persists the fund will take the hit every time it rolls forwards. The ETF, CRUD, for example rolls every 2 months. Currently oil for delivery 2 months out is trading at a premium of about 10% to spot. That's potentially a 10% hit every 2 months. If the oil price fails to rise then you can see that it won't take long before you are effectively wiped out!
The leveraged product LOIL is potentially even worse. Not only does it also suffer the contango effect (it is linked to the same index as CRUD) but it also suffers from volatility. To understand this you need to look at what happens over time to a product whose price changes as 2X the daily % change in oil. The best thing is to play with some numbers on a spreadsheet to see how volatility erodes your wealth in such a product.
I'm not saying you can't make money from oil ETF's, just that you need to be very careful and to fully understand exactly what you are buying beforehand. They do not give you a simple 1:1 tracking of the oil price.
TW
Dear ace,
thanks for your presentation.
However I don't think that from the data we have we can deduce the cause why KSA production fell since 2005. It may be that this is because KSA cannot produce more due to geological constraints, but it may as well be that they simply don't want to produce more in order to keep the oil price up (or rather prevent even lower prices).
In fact we are looking at a black box and we cannot see from outside what is controlling the oil flow in there.
And as for the Hubbert method I think that it is too irregular and the after peak period too short to provide reliable information.
So as long as no information has leaked out from there I fear that we only can pray to Mecca...
Peter Wells, using the IHS data base, gave an "optimistic" talk on world reserves at ASPO-USA. Historically, North Ghawar has been Saudi Arabia's single largest source of crude oil. Wells said that in his opinion North Ghawar would be effectively watered out by the end of 2010, and the bulk of Saudi Arabia's remaining production comes from a group of old oil fields.
Regarding the HL method:
http://graphoilogy.blogspot.com/2007/06/in-defense-of-hubbert-linearizat...
In Defense of the Hubbert Linearization Method (June, 2007)
WT -- You mentioned the Wells' comment on N Ghawar "watering out" the other day. Did he it would be depleted in 21 months or is that a typo? What's the latest production number you have for N Ghawar?
The quote is all I have. It was in response to a question, probably from Alan Drake, but this is pretty much consistent, at least qualitatively, with the detailed work that Stuart, et al, did on North Ghawar. I don't think that production from the north end is broken out separately, and it's hard to even get total Ghawar data. But, as you know, and as Matt Simmons described it, a lot of our large fields produce what is best characterized as "Oil stained brine."
I think that the onset of the final North Ghawar decline, probably in 2006, is to Saudi Arabia as the onset of the final East Texas decline was to Texas, in 1973. My personal theory (based on Simmons' work) is that a sharp fall in oil production and a large increase in water caught the Saudis by surprise, in much the same way that the Yibal Field decline in Oman caught Shell by surprise.
With all of the horizontal wells in place, it seems like decline could suddenly be very quick, when the water level gets past a certain point. Horizontal wells can make things look quite good for a while, but the end is not very nice. It doesn't Hubbert Linearization would pick this up very well.
That's exactly right Gail. What can be even more misleading is that an operator might shut in high water cut vertical wells as the horizontals come on line. Thus they more then offset the lost production, reduce operating expenses and greatly improve the oil/water ratio. In other words, it sudden looks like a virgin reservoir has come on line and can badly skew production forecasts. And, as you point out, when the water level reaches the horizontal well(s) the decline can go from 100% oil to 90%+ water in just 6 months...or less. That's what makes predicting future rates/URR difficult for Ghawar Fld dangerous. I've never seen a written report but I've heard from expats that the KSA had a major horizontal re-development in the field in the late 90's. I have no idea how much of current production might be coming from such wells but if it's significant the next high water cut phase (and decreased net oil rate) could occur much faster then anyone is projecting. Granted, this is all speculation but if the KSA hasn't replaced a large number of the vert. wells with horizontals it would be a world class blunder. And the KSA just doesn't make such mistakes IMO.
Rockman
What is your opinion on this from schlumberger
"cresting can be more difficult to control than coning"
My take is once those horizontals go, they really go fast
Neven
Neven,
Actually "cresting" is a new term to me but I gather it's the same phenomenon you see in vert. wells called coning. Both are a result of pressure draw downs near the perforations whether vert or horz. This pulls the water towards the perfs. This is a real killer. The ability of oil or water to flow through rocks depends upon the saturation of the particular fluid. When coning, or cresting, increases the water saturation at the perfs the ability of oil to flow through this interval of rock is greatly reduced. This is one of the big problems with producing the heavier crudes: they are much more prone to cone. There may still be a large portion of oil recoverable from the reservoir by new wells. As far as controling coning or cresting there is still only one good method: reduce the production rate of the well before it happens. Once a well has coned it can be almost impossible to increase the oil cut even if you reduce the total rate.
But this is very different then the situation when the water level in the entire reservoir reaches the horizontal wells. This is the end of the road for any significant oil rate. And there may be a short period of “cresting” as this point is reached but it’s not very relevant at that time. But the reservoir might produce commercial (but small) volumes of oil for many years afterwards. Even at today’s low prices many fields producing 2% oil and 98% water can still be commercial.
BTW: this also works in a similar fashion with the N2 gas cap at Mexico’s Cantarell Fld. If they pull the wells too hard they cone the N2 downwards towards the perfs. Also as the oil is withdrawn the N2 level lowers towards the wells and will eventually “gas out” those wells (as opposed to “water out”). It’s probably been a combination of these two factors which has brought about the recent rapid decline if the field’s oil rate.
Assuming that the numbers by Ace are on target and that your ELM is on target, can you give me any numbers/dates for the probably decline in Air Freight and Airline Passenger service, particularly in the USA?
I would be most interested in when you expect terminal decline to take hold (past? present?future?) and what the rate of decline might be.
At what point might the decline start to affect the supply/quality of fresh fruits/vegetables in the local grocery store?
At what point might it get lower cost to ship fresh fruit (with the higher loss ratio) by boat/rail (like they used to before air freight/trucking got cheap) than by air freight/truck?
Thanks
Concerning rail transport of fresh fruit and vegetables, rail transport was very common from the early 1900's to the 1950's. I was born in Magnolia, MS about two hours north of New Orleans and remember the Panama Limited would pass through town northbound and southbound daily. It was so named because it carried bananas from the port of N.O. to Chicago, along with passengers and mail. As this was an express train our mail bag was snatched from its holder by an arm that extended from the train.
I now live near the Alabama gulf coast not far from where a rail branch extended down through Foley AL where all sorts of fresh vegetables and satsuam oranges were grown for shipping to northern markets. The rail line is no longer in service, and I do not recall seeing any remaining tracks. However, the main line is an hour or more north, so it is possible to truck produce to that point.
My guess is that when oil production starts declining faster than the current demand destruction, there will be a rush to convert to rail. However, we will face shortages of track, rails, crossties, locomotives and railcars. Gasoline will be rationed, either physically or through price.
Now that we're in a depression it's easy to forget that demand ran up against supply in 2008. Depressions are powerful destroyers of demand, so it may be several years before we get back to last year's situation.
When the shortages happen next time look for strong government intervention in the form of a declaration of national emergency. Everyone will know it is the beginning of the end of oil.
Note that Wells is an oil bull, and believes KSA will just ramp up their other fields to compensate for Ghawar's decline. Rumours of peak for KSA will be filed in the Mark Twain greatly exaggerated file.
This is the graph he provided at ASPO 2008:
Taken from Technosanity #13: Peter Wells at ASPO-USA 2008 | Seven Generational Ruminations. Wells is an IHS database customer (ca. $100k investment) and believes world peak will be in the 2017-2023 time frame. Even this is under the gun for Hirsch's decade long transition period but doesn't warrant much discussion, which is something I find puzzling about late peakers - they will quite soon find themselves in the position that Simmons or Heinberg are in now. People are irrevocably stuck in these short term time frames. Or they believe the likes of Al Gore that we can divest ourselves of hydrocarbons overnight if we're in the mood, thus it's a non-issue.
Thanks for the link, this is really a great presentation by Peter Wells, the use of stochastic methods (Monte-Carlo) is the way to go in my opinion. However, I find his uncertainty intervals on his results rather small given the singificant errors bars at all levels of the model.
Hello Sam,
Is there any chance you might answer the question I'm asking further down about CERA's database? (and related questions).
I use Monte Carlo occasionally to check the probability results, but why use Monte Carlo when you have the probability density functions at hand? Wells says he has these available.
Re: why use Monte Carlo when you have the probability density functions at hand?
Depends on the quality of your pdf, I would say especially when you have a rough estimate of the pdfs on some key parameters, MC sampling can help you derive an estimate on the output pdf and get an uncertainty range.
You can listen to his reply on this podcast:
http://www.7gen.com/blog/20081026/24961-aspousa-2008
You can also download this through iTunes.
I think it's about 11 minutes before the podcast ends that this question is asked and answered.
His answer is complex, so I would not want to summarize it here.
Thanks for the heads up! The only thing I remember when I first heard this podcast was "Ah HA! So that's how Ghawar is pronounced!" :-)
In case (for whatever reason) it does not work, I do have a back up copy on my hard drive.
One of the interesting things about Peter Well's presentation is that the way they derived their model. They used historical production data to derive parameters for fields with similar geological conditions. They then ran their model on the source fields to see how well it worked. It was accurate to about 1%. While that is not a indication of future results, it is the only large scale effort that I am aware of that actually tested their model on historical fields, rather than on historical predictions (EIA, etc.) I asked him afterwards when he thought peak oil would hit, and he felt 2018 to 2022, with peak C+C around 2022. He also said the difference between his estimates and others were his assumptions that KSA would find about 4MB/day more production between now and 2022. Since they used CERA's database with enhancements from other sources, you might be able to assume that his 2022 date is at the upper end. Thus the date for PO would be then now to 2022, depending on how demand goes over the next several years.
Hi Pragmatic,
Thanks and could you possibly fill in a little bit? (I'd like to understand in more detail, and realize that most others here probably already do.)
re: "They used historical production data to derive parameters for fields with similar geological conditions."
Is this data proprietary? So, that's part of the "CERA's database"?
re: "While that is not a indication of future results, it is the only large scale effort that I am aware of that actually tested their model on historical fields, rather than on historical predictions (EIA, etc.)"
Can this effort be easily duplicated? Why or why not?
re: "He also said the difference between his estimates and others were his assumptions that KSA would find about 4MB/day more production between now and 2022."
Did he give any reasons and/or evidence for this assumption?
Is this assumption also a function of a proprietary database? Hence, it cannot be easily challenged?
re: Does the US DOE have access to CERA's database? (I ask this because I've seen writing that leads me to assume "yes", but then, not sure I'm getting it.)
If so, does this mean that it is not really proprietary, or how does this work?
If so, then can this exercise be run through again by outside "others"?
re: "other enhancements".
Can you possibly specify examples?
Yes, the field database (coming from former IHS and bought by CERA) is proprietary and a lot of people are using it (USGS, CERA, IEA and even Campbell). The issue is the garbage-in-garbage-out pitfall, a model result is as good as its inputs. Why the IHS should be more accurate as far as the Saudi fields are concerned? I don't think IHS got access to field-by-field database provided by the Saudis. I had access to partial discovery data from IHS, and my conclusions were that Ghawar URR was probably too large by at least 20 Gb:
Saudi Arabia: An Attempt to Link Oil Discoveries, Proven Reserves and Production Data
Hi Aniya,
Did Peter/NEftex use proprietary data?
The data Peter Wells/Neftex used was purchased from CERA (Cambridge Energy Research Associates - Owned by IHS). They purchased it at a substantial discount for $100,000 and then augmented it with data from additional sources, plus Peter said he had personal contacts in KSA that enabled him to make what he felt were reasonable assumptions about their future spare production capacity.
Can Neftex's analysis be duplicated?
Duplicating their effort would require substantial manpower, programming expertise, oil/production expertise and money. So, no it would not be easy. That said, it would be interesting to hear from some of the members who have done projections to hear just what it takes in terms of time, money, software and knowhow. My own worry is that we are all constrained to use the same basic sources of data, which are IHS, EIA, BP. Whenever a prediction is posted, most of the discussion revolves around the data source and the assumptions made to analyze it, and not the actual method used. That said, most of the predictions that use "known" reserves and depletion data (not market predictions based on past demand/supply production) seem to settle on 2005 to 2015 as the date for peak crude, with Peter's prediction of peak liquids around 2022. Crude, however, is what the world runs on, and what we need for food. Any peak date that’s closer than 30 years out indicates very rough times ahead.
KSA's 4 to 4.5 Mb/day extra capacity - where did this come from?
His told me this after the presentation and he said was based in "inside" knowledge of what KSA felt they could find and bring on-line to make up for declining production from their existing fields. He could not elaborate beyond this due to the confidentiality of the sources.
Does the U.S. have access to CERA's data?
The EIA purchases data from them. So for example, if you wanted to investigate how seismic analysis has affected the accuracy of prospecting (hit vs. miss) over time (hit vs. miss ration), you discover that the EIA's is not broken out enough. The EIA tells you to call IHS. And my experience with HIS was not good. They asked why I wanted the data, became evasive, and almost immediately stopped responding to me. Not sure why, but I could not even get a cost guesstimate out of them. Perhaps one of the ASPO members might be able to help you here.
Hi Pragmatic,
Data quality about Saudi Arabia URR from IHS and Wood MacKenzie (WM) has shown a huge variation. Jean Laherrere obtained IHS and WM data which he discusses on pages 24-29 in his ASPO 2005 presentation.
Forecasting production from discovery, ASPO Lisbon May 19-20, 2005
http://www.peak-oil-crisis.com/Laherrere_PeakOilReportMay2005.pdf
The table below shows the Saudi Arabia URR for crude and condensate from IHS for 2004 and 2005. The difference between WM 2004 and IHS 2005 is a huge 159 Gb! Peter Wells used a URR figure of 393 Gb (115+278), which almost the same as the IHS 2005 URR, to justify his optimistic Saudi Arabia forecast and surplus capacity.
In Laherrere's presentation, he estimated that Saudi Arabia HL predicted 180 Gb URR. Laherrere also said that:(bold is mine)
Another table from Laherrere's presentation shows Aramco's unaudited estimates of field URR from Feb 2004 accompanied by this statement: (bold is mine)
drillo,
I rarely post, but I felt compelled to reply to your comment. It is true that there is always uncertainty in reserve estimates, but it is definitely not a black box. I also agree with you that the secrecy of Saudi Arabia adds greatly to the uncertainty. However, I think it is reasonable to assume that Saudi Arabia was producing nearly all they could between 2005 and late last year, and that their production rate was actually at or near geological and operational limits.
In regard to the “black box” statement it seems like there is quite a bit of geological information available on Saudi Arabia. After all, the bulk of Saudi Arabia’s oil was discovered prior to the nationalization of ARAMCO, so the major fields were discovered and evaluated by western oil companies. Furthermore, there are still expatriates that work there and some information gets out. Ace referenced the presentation by Jack Zagar that has some excellent information in it. Do we know exactly what the OOIP for the field’s were? No way, this is an unknowable quantity. (I have worked legacy fields for major oil companies that have been under production for over 70 years and there is still uncertainty about OOIP.) Do we have reasonable estimates? I would argue yes. I would also argue that we have a reasonable estimate of what current cumulative production is, and a decent understanding of what the depletion mechanisms are for the major reservoirs. Therefore, I think Ace’s forecast is completely reasonable and worthwhile. Will it be proved wrong? Of course, pretty much all forecast are.
Ace, I would also like to add my appreciation for your work. Post like this are why I still follow this web site.
jimb,
thanks for your comment. Don't get me wrong, I also highly appreciate postings like this. However I am always thinking about how to argue this matter with people sceptical about PO.
And one of the main point concerning production declines like this is that these are due to "above ground" factors, e.g. a national policy to support higher prices, like what OPEC is doing. This policy "risk" (IEA wording) is one part of the black box, the other is the URR number (also Zagar wrote "The truth is we just do not know what the Saudi reserves are.")
But of course if ace's URR number is at least roughly correct then obviously pretty soon the only way for KSA production will be down.
I understand what you are saying. The Saudi Arabia production curve is definitely skewed because they are the swing producer and have held back production in the past. There are, however, many individual field curves that can be used to illustrate peak production. (Slides 7 and 10 in Zagar’s Powerpoint are good examples.) There are also many countries like the US that are well past peak production that could be used as examples. Finally, I think the plots of oil discoveries over time such as figure 4 in Ace’s post above and slide 21 in Zagar’s Powerpoint file are pretty convincing. They don’t necessarily indicate when peak production will be, but they are pretty sobering.
Hi Khebab,
Thanks for your summary chart!
The version of Ace (2009) corresponds to my URR 185 Gb from Fig 1. If the dashed line is used from Fig 1, URR 210 Gb, it seems to be even closer to your logistic.
Your estimate of the URR for your logistic is 201 Gb. Do you think that might be a bit low?
The HL is bascially the same as the one shown in the comment above (http://www.theoildrum.com/node/5154#comment-477988) but yes it's probably low.
Bakhtiari & Campbell stock rising... I seem to remember that your posts show the former is also closest to the target on world production.
It would be pretty easy to show Campbell's 'curve'...
Thanks for your continued work.
Hello Ace,
I just love your posts!
What could induce KSA to agree to a full audit? Obviously, this could be the most important resource assessment ever done on the planet; KSA would want a fair exchange. What if for the next three years: all factory fresh-produced PV panels were sold directly to KSA @ a 50% discount, with the rest of the world paying for the other 50%?
Then, when the audit is complete and globally released: if KSA was telling the truth all along--the world rebates another 25% of the cost.
If it turns out they lied and fudged the numbers for decades [resulting in TSHTF scenario], then KSA has to pay back quadruple damages by drastically curtailing their internal FF-consumption, then shipping out much more of their depleting reserves as exports.
Or some variation of this idea...
Well, if KSA chooses to accept the deal, we shouldn't do it... Now, if KSA refuses the deal, we should accept it.
I guess I need a name for anti Nash-equilibrium points at game theory.
With Prince Walid bin Talal propping up Citigroup this is probably the wrong time to twist the Saudis' arms.
If someone else was willing to pay for it, I don't see why they would have any problems with an audit.
Unless, of course, they've been lying all along.
My thxs to all who replied,
What I am trying to do is create a forward win-win situation as the massive amounts of PVs can only help KSA to flip WT's ELM; their internal consumption reduction creates more exports. If the audit news is bad: even the average KSA citizen will be looking to drastically reduce further their FF-addiction to help keep exports up so that they can get food imported. IMO, full-on Global Peak Outreach can do much to foster this situation.
Recall that KSA is moving towards shutting down much food-growing because of FF-powered desalinized water's rising unaffordability, plus kaput ancient aquifers. Strategic KSA Reserves of I-NPK won't help wind-drifting sand dunes to suddenly sprout fields of veggies & fruit.
Unfortunately, a couple of reasons come to mind.
The first is simply that it would be insulting. Having the West come along and say "we're worried you're mismanaging all that oil of ours, so we're going to check what you've been up to with it" may be seen as too patronizing and too much of a loss of face to be acceptable to one of the leading countries of the Arab world.
A second reason is that they may believe that being a little mysterious gives them more power. As a key player in oil supply, everyone cares about their production and reserve numbers; if they control information about the latter, then everyone needs to pay attention to what they say. It may well be gratifying for a small, non-Western country to have the West worrying and trying to glean information from their proclamations. It may also give them more leverage to influence prices if nobody knows quite what they can and can't do.
From a purely selfish perspective, I can't actually see why Saudi Arabia would be interested in allowing an external audit.
Thanx ace.
A true resource.
James
Ghawar in Arabic means Mystery: a mystery with a miraculous connotation, almost like a miracle.
Kevin Walsh
Chicago Peak Oil
Unfortunately, that sounds a great deal like "I carefully selected data points which gave the answer I wanted". How can a reader have confidence that your manual selection process is valid?
In particular, why did you select Nov08? It's 2 standard deviations away from the mean of the rest of the year, so - as pure data - it looks like an outlier and a strange choice. Oil prices had fallen 60% from their Jun/Jul08 highs by then, so why would we expect that month to represent capacity production?
A line between Apr03 (your start point) and Jul08 (the recent peak) also goes through those months, and in fact seems to be a better fit (based on holding a ruler up to the screen and estimating, at least). What's the R^2 for your line vs. that one for those months?
If we assume that the Jul08 peak was capacity production, HL gives a much higher URR estimate - off your graph, in fact - of around 220GB or so.
Fundamentally, though, HL relies on the assumption that production is determined by geological constraints. That assumption does not hold for Saudi Arabia, so it's not clear how reliably HL will estimate its reserves.
If we put your two sentences together, it would read as follows: "Saudi production is not determined by geological constraints." So, the Saudis could produce 100 mbpd, 1000 mbpd (to infinity and beyond?) if they wanted to?
In any case, as Hubbert pointed out some time ago, a one third increase in estimated Lower 48 URR only postponed the projected Lower 48 peak by five years, from 1966 to 1971.
I think Pitt's assertion is not that Saudi production wouldn't be constrained by geological constraints if the Saudi government policy was to allow max production possible. It's that the constraints have been political rather than geological. The assertion is that (unlike in the US?), production has been artificially limited by government policy. It seems like a plausible assertion, although I don't feel qualified to argue about it strongly one way or the other.
It does further seem to me that HL is largely predicated on the assumption that production will generally rise close to the maximum geologically possible at any given time. IOW, no meaningful political constraints. But you know more about HL's assumptions than I do.
Hmm I think that your misunderstanding the way HL works its a empirical heuristic attempt to slow production only change the timing of the peak and result in broader HL curve. The double HL work on Russia which seems to be working quite well is and example.
The intrinsic if you will assumption that HL makes is that the amount that can be extracted in the future is dependent on the amount that has been previously extracted and that the extraction profile is roughly guassian.
The details of the function are not all that important. What is important is during the initial development phase that the exploitation follows the curve through the first inflection point. Until you have at least one inflection point you can't model the curve correctly and this one must be reasonably well fitted.
Any changes from this initial point serve only to inflate the HL estimate making it to high for Saudi Arabia for example the estimate could be 30-40% to high. A very conservative estimate of the URR of Saudi Arabia is about 100-120GB the lower 100GB estimate discounts Ghawar's production because of the early use of water drive but does not add back additional recovery because of this so a safe low end estimate is probably 120GB. This is actually very close to the amount they have produced to date. This of course makes the current production rate suspect using this extreme example.
However it could well not be all that far off the reason is that 50% of Saudi Arabia's production comes from a single field
and field production tends to follow more of a square wave like curve with production close to the maximum level till well past the 50% URR point. The Ghawar effect if you will. This is further supported by the fact that the rest of Saudi production comes from a handful of large fields so one can expect the real Saudi production may well be better modeled as a square wave past the initial inflection point.
The point is you can make a very reasonable argument for a lower bound on KSA's URR thats not all that much higher than what they have already produced. To justify the current levels using this sort of large field argument one need only add and additional 20GB or so of reserves to provide the minimum level needed to support the current production level.
I have a sort of rule of thumb that 1mbd can be supported by 10GB of initial reserves thus using that one gets again about 100GB for Saudi Arabia. Its really rough but it works for a lot of fields.
Finally given that about 30% of the oil in the URR is produced in the long tail of production and the concept of export land and some knowledge of Saudi politics the last 30-40GB extracted are of no real interest. For Saudi Arabia this would mean using URR's of 180GB in the current estimate that Saudi production after 2020 is of no real interest since by the time they are down less than 6mbd it will be obvious that they peaked and above ground political factors will determine future production and future exports.
This leaves us interested in production over about the next 10 years and here variations from my example of a reasonable minimum and the various other methods becomes both important and impossible to discern since depending on the assumptions you make you have almost a 50% spread in URR's which gives effectively any answer you want.
However right now my best guess is that Saudi URR is between 140GB and 160GB and HL is coming in just a bit high because of some distortions from Ghawar.
Now with all that said as you go into the long tail region and practice very aggressive extraction eventually HL may prove to be low but if you look you will see that this really only happens in very mature provinces that are extracted at razor thin profit margins. The reason that HL can eventually become a low end estimate is that the recovery factors in HL come from the initial expansion phase and they can underestimate the amount of work during the tail end of the extraction curve and even a change in recovery of a few percent.
Regardless we have no reason to say that HL is a minimum estimate in fact until you get into the final recovery phase it generally is at least a middle range or high end estimate of the recoverable reserves in my opinion. You can readily construct a result that is less than that produced by HL as minimum estimate of URR using some known above ground extraction rates vs URR common in many fields in the world. Its actually difficult to put together a collection of fields where HL works to be a low estimate.
I've not seen it done on the oildrum but you can see this by simply taking say 200-300 fields and generating random collections of fields regardless of where they happen to be located I think you will find that the URR estimates from HL are not the minimum and if HL is low the reason will be more often then not because of extreme recovery attempts in the tail of the fields production not in production during the first 70% of the fields lifetime.
The reason I'm asserting this without proof is simply because real fields tend to follow more of a square wave production pattern not a Guassian the time distribution of discovery is what creates the Guassian. If all the fields in the world where developed simultaneously with the most advanced technology then HL would over estimate the final URR. Adding time back in reduces this overestimate but does not easily result in HL becoming a lower bound ignoring that it can fail in the tail its a medium to high estimate of URR. I'd argue that for the global peak in production and for countries where exports are the most interesting factor that this tail is of no real interest.
Just to finish Khebab posted a article using a similar method thats basically what I do.
http://www.theoildrum.com/node/3221
If you make my assumption of 120-140GB its pretty obvious that my minimum is asserting that this simply equation is off by 50% for the realistic cases. Indeed for the world we have 2.6 Tb (Fringe), 2.7 Tb (Small Fringe) from Kehbab's paper
while a number of papers have come up with lower estimates.
http://www.mkinghubbert.com/files/NationalGeographicJune1974.pdf
Hubbert himself came up wit 2TB or about 25% lower then this simple linear equation.
My minimum URR is really what I would call fast oil its the oil we can produce at a production rate close to todays.
I'm basically asserting that our current estimates are inflated by 25% primarily because of technical advances leading to over extraction on the front side and then that the final 25% or so of production in the long tail is simply not relevant to our civilization. So HL yet again comes in as a mid range to high URR estimate with the simple linear equation coming in higher and assumption that production will not be symmetric but distorted coming in about 10-25% lower depending on how you want to weight technical advances and discount regions that peaked early like the US.
So finally we can see that HL is bounded and for at least the range where we are interested i.e the first 10% drop after global peak its probably not a minimum.
One final good paper on this.
http://www.theoildrum.com/story/2006/1/22/04219/1102
And you can see that my "minimum" can be extracted using the early production data i.e the first inflection point has only been crossed for a small amount of the world and technology has not gone wild. Thus the easy oil/fast oil minimum URR estimate is in good agreement with HL using the minimal dataset generally this minimal case is not presented as the HL result by most people that use HL.
One final thought.
Percentage change in average annual oil production from one year to the next according to various estimates. Click to enlarge. Believed to be all liquids, except API line is crude only. EIA line includes refinery gains, others do not. Sources: ASPO, BP, and EIA.
This graph is really important in the original article it was interpreted to mean that large new fields where no longer coming online but you could just as easily interpret it to mean that oil technology was progressively evolving allowing higher extraction rates reducing the change year over year (the large field argument holds only at the beginning). The argument is that technology is applied only once decline sets in on a particular field in and attempt to reverse or slow the decline since its expensive and the investment is made as late as possible. Using this concept and a sort of Moore's law for oil technology then you would say that over time advancing technology gave a lower and lower return on investment.
Exactly.
RR did some stress-testing of HL a while back, and showed that in at least some situations with artificially constrained production, HL can be expected to vastly underestimate URR.
Moreover, he examined the HL data for Texas, which had also had production constraints similar to Saudi Arabia, and found that HL gave very different predictions at very different times. He looked at the HL for 1960, 1970, 1980, and 2006, and the URR was higher each time, with a false peak indicated in 1960.
HL is quite good at confirming a past production peak, in part because post-peak regions are less likely to artificially restrict production, but it doesn't seem reliable as a forecasting method.
The recent Saudi HL data points are far more stable than the pre-peak Texas data, which I admit is a little bit of a circular argument, since it requires us to know that Saudi Arabia was close to a peak in 2005.
However, the argument I made in early 2006 was that if we look at the total Texas plot, we could find out at what stage of depletion that Texas peaked, and then if we take the fairly stable Saudi HL plot, we could then hazard a guess as to when Saudi Arabia would peak. Based on this methodology, I concluded, in January, 2006, that the likely Saudi peak was around 2005. And Saudi Arabia has shown three years of production below their 2005 rate, at about the same stage of depletion at which Texas started declining.
So, the question is not whether a noisy pre-peak HL data set can predict a peak. The question is whether a fairly stable HL data set can approximately predict a peak.
Define "stable". When are points "stable enough" for HL to be reliable, and when aren't they?
The problem with just eyeballing it and saying "good enough" is that it's all too tempting to use another circular definition, saying the data is "stable" if it leads to the "correct" HL answer. That, again, is not useful for prediction.
But their production profile has been very different from what HL would predict. It declined year-over-year in 2006, then again in 2007, then increased sharply in 2008, back to almost its 2005 level and above its highest 2005 monthly level.
If 2005 was a geologically-mandated peak, 2008 would have been after three years of exponential declines. Yearly production will come in at about 9.3Mb/d vs. 9.55Mb/d in 2005, or an average yearly decline rate of just 0.9%, and only that high because demand collapsed in the second half of the year.
It's possible that 2005 was a geologically-mandated peak for Saudi Arabia, but the evidence for that is not very strong. Their production is not following a Hubbert Peak-style pattern, suggesting it may not tell us much to force a HL model onto the available data.
Well here is the link to our May, 2006 paper, which is a followup to my January, 2006 article on net exports. People can judge for themselves.
http://www.energybulletin.net/node/16459
Texas and US Lower 48 oil production as a model for Saudi Arabia and the world
The Texas & Saudi Graph:
http://farm1.static.flickr.com/55/145186318_27a012448e_o.png
Regarding the three years of Saudi production below their 2005 annual rate--at about the same stage of depletion at which Texas started declining--many post peak regions, e.g., Texas, Lower 48, Indonesia, Russia, etc., have shown post peak year over year increases in production. The question remains as to whether Saudi Arabia will ever again exceed their 2005 average annual crude production rate of 9.6 mbpd.
BTW, in March, 2007, in response to Stuart's "Nosedive Into the Desert" post, I suggested that we would see a future rebound in Saudi production--because the decline at that point exceeded what the HL model predicted--although I did say that the rebound would be to a level "well below" the 2005 rate. In any case, I believe that the post-2005 cumulative production--which is what the HL method is really best at--has been quite close to what the HL model predicted.
Edit: My comment was in Stuart's prior post on Saudi Arabia, on March 2, 2007. Here is the link, his comment and my response:
http://www.theoildrum.com/node/2325#comment-165011
Pitt the Elder Said: (emphasis added)
This is one of the most insane comments I've ever read at TOD. Oil is created by a geological process. It's currently contained by geology because it's in the ground. Geology IS the bottleneck for pumping the oil out of the ground. Stating that oil anywhere is not bound by geological constraints is bad enough, but implying that Saudia Arabia is special and is outside the bounds of geology is just patently absurd.
TS
That's not what Pitt said though. Khebab did an analysis of many fields once a long while back and while we saw good fits for the HL method often, sometimes we did not. And if we investigated, for many of those fields where the HL fit was not as good, we found that production was not constrained just by geology but by political factors. If you read Hubbert's original paper, one assumption made is that once oil is produced it is produced at the maximum rate economically allowed. However, with KSA this is clearly not the case. The crash in the 1980s was as much politically driven as anything else.
HL curve fitting is a tool but it's still just a tool. It is not holy sacrament from on high. It gives us estimations but it is not perfect. When we know that there are deviations from maximum production rates, as is the case in KSA, we should not rely solely on HL curves. Of course we should not dismiss the curves either but instead use them as one of many tools we have available to assess questions like URR.
Strange, I read it several times and that is exactly what Pitt said. It was, after all, a simple copy and paste from Pitt's post. Regardless of what Khebab's analysis indicated, Pitt said that geological constraints do not hold for Saudi Arabia. That is patently absurd!
While it is true that Saudi's 80s reduction was not due to geological constraints, geological constraints would still have held had they tried to increase production instead of cutting production. Geological constraints holds true, not just for oil production but for the production of any resource in nature. Sometimes people voluntarily cut back and sometimes they produce everything they can possibly produce. But the upper limit of what can be produced is controlled by geological constraints.
Ron
He could have been more clear, to be sure, but he really didn't say "exactly" what you said he did. He did not say that "geological constraints do not hold for SA". He said that "the assumption that production is determined by geological constraints...does not hold for Saudi Arabia." The words "determined by" do not logically imply any lack of "upper limits" determined by something that didn't determine production.
Defending Pitt somewhat. The Logistic curve, which is the basis of HL, comes about from oil discoveries. Its essentially the envelope of the discovery curve and it is largely spatially determined with the growth provided by exponentially increasing advancements in search efficiency. On the other hand, projection can be throttled on and off on a whim, so you get that jagged SA production curve. SA uses oil like a political and financial axe so the production curve is not geological, but the discovery curve is. You will find the cumulative discovery curve matching a sigmoid and thus generating at least a qualitative HL. The problem with this however is that you never know exactly what the discoveries are until they get updated. The URR is spotty in this case.
projection = production :)
I love it when I catch someone else error.
I agree with you about production but historically at least few countries seem to have throttled production back until after they had peaked or gotten very close. In general it seems that at least now we are using HL to predict URR on regions that have already passed peak production or are very close. Close enough that the error in the method probably does not really matter. I.e simply time shifting the discovery curve gives almost exactly the same results.
For Saudi Arabia just simple shifting gives a peak at about 1985-1990 at between 10-12mpd if they had developed out production following the discovery curve.
A variant using you shock model is here.
http://www.theoildrum.com/node/2945
On the political front I've always wondered why the US gave up so quickly and allowed the Saudi Royal family to take over in Saudi Arabia. Certainly in Iran and Iraq we where a lot more conniving. I've always felt we walked away from Saudi Arabia way to easy. For some reason we have never felt it was worthwhile to play the same political games in KSA that we played in the rest of the region even though I suspect we could have forced the overthrow of the Saudi royal family many times in the past. I've always been very suspicious of the real Saudi reserves levels because of this. Given everything else we have done in the region it just seems like we have never acted like KSA was a prize we had to control.
One would imagine that after the fall of Iran for example that we would have looked into a regime change in Saudi Arabia to ensure massive military bases in the region instead of the Iran/Iraq game. From a military geopolitical whatever perspective I've always wondered why we never did the obvious and put a real puppet into power in Saudi Arabia.
The only answer that I can come up with is that despite the blustering of Saudi Arabia they really did not have the oil they claimed to have. Given the US actions it would then make sense that the long years of cuts in Saudi production could have been more to conserve a limited resource and not for the reasons they claim. If you look at the financial history of Saudi Arabia they actually have spent most of the time in pretty dire straits.
This is a snapshot but the bottom line is overall Saudi Arabia has had a very tough time profiting from its oil.
http://www.photius.com/countries/saudi_arabia/economy/saudi_arabia_econo...
Until the last few years they really only pumped what they had to to keep the economy from failing.
Thus in my opinion neither the Saudi's nor the US has ever acted like Saudi reserves are even as large as we project.
Then you might want to read it more slowly, as that is not what I said. Let's compare:
Note the difference between determined and bound. These are different words, and mean different things.
It is quite possible for production to be bound by geology but not determined by it; geology binds Saudi Arabia to some maximum level of production, but they are free to politically determine any level of production between that upper bound and zero.
Fundamentally, it's ridiculous to say that geology determines production; the geology of Ghawar was much the same in 1900 as in 2000, but production was rather different. Geology is one factor that affects production, but many others also play roles, including technology, effort, and choice. An example of effort/choice would be Cantarell, which had its production profile substantially changed when gas injection was added.
Geology determines how much oil is there and how it will react to efforts to get it out, but it says nothing about what efforts will be made. It's not the only variable, so by itself it can't determine anything.
***
Seriously, Ron: if you think someone has just said something deeply stupid, do you not stop and think for a moment that maybe they didn't say what you think they did?
This forcast only goes to 2080
I really need to know KSA for 2153 - June
can you help?
Ace
First, I always read your posts with great interest. Thanks for your efforts on these confusing issues.
ASPO thinks production will continue at 9mb/d for years while other PO pundits have been and continue to predict a decline. ANd, ASPO thinks URR will be 275G vs your guess of around 200... why do you think ASPO has higher estimates? Certainly Colin has been closer to the mark in predicting 9Mb/d for years... do you think his estimates are based on HL? And, looking at figure 6, if I pick the highest points I get a URR of around 220... that is, if this technique works at all for SA.
ALso, your recent curves better follow what has happened than your prediction in 2007... have you incorporated new information other than actual production? What is the difference between assumptions used in previous vs. current predictions?
I remember reading Stuart's postings with great interest, e.g. 'dive into the desert.' Production did not follow these earlier pessimistic estimates... have you come to some conclusion as to where the extra oil came from? For example, did some major announced projects come on line earlier than expected? Or, do you think they heroically produced a large and final amount using last ditch horizontals?
I'm sure that, in retrospect, SA overproduced in 2008. Prices had gone up for quite some time, I would have thought they would have been producing every drop possible by end 2007. Did new projects come on line 1H08? Do you think they overproduced fields in a blind panic to bring down price on account of their fear of substitutes?
I would love to see a post that looks at past estimates and makes an attempt to explain why they were too pessimistic. If we don't know how SA produced so much more oil than the community expected in past estimates then we don't have much basis for expecting an eminent decline... or even questioning SA statements regarding future higher production.
In my opinion Aces oil production forecast forms the upper bounds of what happens if the economy recovers but may dramatically overstate the actual level of global oil production in the next 5-10 years. There are trajectories that could take us well below 50 mbpd and even below 25mbpd if global economy falls apart (of course, there are some very improbable scenarios that take it to zero..) Unfortunately, all of us here believed oil supply was limited before fractional credit system grew beyond its energy constraint. Since its collapse is not ostensibly linked with the inability to grow energy production, the world is now none (or hardly) the wiser on our limits - most politicians are focused on fixing the financial crisis when sharp depletion with a positive feedback kicker looms right over the horizon.
And I think those calling for $200-$300 oil are totally missing the bigger picture of what has happened to global financial/trust system. $300 will only be possible in future if it is in non-inflation adjusted dollars - no way OECD/China/India will ever afford $300 in 2009 dollars, let alone $147, though that price is at least conceivable again some day in the future.
" fractional credit system grew beyond its energy constraint."
Nate, what the heck does that mean? If the economy hits a BTU limit, how does it "grow beyond" it?
We didn't grow beyond an energy constraint, we just borrowed too much from oil (and Asian) exporters, using bad collateral.
If oil exporters are smart, they'll just insist on T-bills in the future, and keep accepting them until their oil runs out (or gets replaced).
Nick - ANYTHING is possible in the short run if people believe in and create an abstraction to represent something real. Our institutions replaced expensive real BTUS with cheap digital dollars, a scheme that got so large it went beyond the ability of real system to pay it back. If you back out the earning of financial companies (which for the most part in retrospect were phantom), the financial markets peaked some time ago. In sum, we DIDN'T grow beyond it, we just thought we did.
"replaces expensive BTUS with cheap dollars"
How do you replace a BTU with a dollar??
Energy is either there, or it isn't. If you have btu's to run your engine, it runs. If not, it doesn't. Your money supply, or foreign (or domestic) borrowing doesn't seem relevant.
The world didn't grow beyond an energy supply constraint, nor did the US. The US borrowed too much from oil (and Asian) exporters, using bad collateral. It happens all the time to countries, like the UK after WWII, and Thailand in the 90's.
That's very different from the " fractional credit system grew beyond its energy constraint." That phrasing seems to give a fuzzy, mystical meaning to oil.
If oil exporters are smart, they'll just insist on T-bills in the future, and keep accepting them until their oil runs out (or gets replaced).
If oil prices get very high, you certainly have the potential for economic problems like the mortgage crash due to the stresses of rapid change and wealth transfers from consumers to suppliers, but the economy certainly can keep growing by becoming more efficient and switching to substitutes.
Debt doesn't magically allow us to function without energy. It arises because of mis-matches between suppliers and consumers.
Think of it this way: if everyone had a tiny oil-well in their backyard, that started to decline, it would be relatively easy for everyone to gracefully adapt: start driving a bit less each year, move to more efficient vehicles, then EV's, etc.
The problem is the mal-distribution, that stresses the economy.
Youre kidding right? US peaked in 1970 and in mid 1970s we needed to import more and more oil - we did so by replacing our own BTUs (oil) with dollars. More recently, in era of global peak (and I have argued for a long time that peak in net oil production happened before peak in gross production, and that dollar break even for oil/gas in aggregate would happen before energy break even), we didn't have enough dollars for everyone in society to 'afford stuff' (meaning grow) so we started giving out no-doc loans, lowering interest rates, pumping up housing sector with 10x fractional banking system, etc. All of this was replacing real physical activity with leveraged digits. A quick thought experiment of what the entire system would have looked like with 100% reserve requirments and no leverage on wall st and you can see the picture (I hope)
huh? That sounds like a bad strategy to me, but I'll take your word for it because I don't want to take up Aces thread with another 9 comment Nate/Nick thread..Cheers
"we did so by replacing our own BTUs (oil) with dollars"
No, we replaced our own BTU's with imported oil, paid for with dollars. That's very different.
"All of this was replacing real physical activity with leveraged digits."
No, this is what I mean by fuzzy, mystical implications. All of these loans were means of financing actual physical activity: home construction, iPod manufacturing, etc.
Again, if oil prices get very high, you certainly have the potential for economic problems like the mortgage crash due to the stresses of rapid change and wealth transfers from consumers to suppliers, but the economy certainly can keep growing by becoming more efficient and switching to substitutes.
Debt doesn't magically allow us to function without energy. It arises because of mis-matches between suppliers and consumers.
Think of it this way: if everyone had a tiny oil-well in their backyard, that started to decline, it would be relatively easy for everyone to gracefully adapt: start driving a bit less each year, move to more efficient vehicles, then EV's, etc.
The problem is the mal-distribution, that stresses the economy.
"That sounds like a bad strategy to me"
Yes, it depends on the world economy enduring past PO. I think that's highly likely. You have to give oil mystical power to think it's irreplaceable.
"I don't want to take up Aces thread with another 9 comment Nate/Nick thread"
Well, this seems like an important question, highly relevant to oil depletion. I don't think Ace will mind.
Nate wrote:
Nick wrote:
You're quibbling over semantic permutations. I understand and agree with what Nate was referring to.
"You're quibbling over semantic permutations."
No. Language matters. As best I can tell, there is an idea here that somehow we have substituted credit for energy. Nate says the following in his next comment: "In our currency system we grew using something not physical in a physical world, lived beyond our physical means and exaggerated all this by using leverage."
What the heck does this mean? That's what I'm trying to get at. How could credit ("something not physical") substitute for energy?
As best I can tell there's confusion here between the trade deficit problems of the US and our overall energy problems. The US has borrowed too much. The US is using imported energy as a substitute for declining domestic resources. But that's different.
"I understand and agree with what Nate was referring to."
But are you sure that the above is what you mean to refer to??
Nick, we have had about 30+ exchanges here over the past 4 years, all on the same topic - aggregate energy surplus, and the affordability of energy in an overextended fiat system. In our currency system we grew using something not physical in a physical world, lived beyond our physical means and exaggerated all this by using leverage. In theory if time stood still we could keep everyone in their homes and build out the energy renewables you advocate, and I suspect are employed in. Reality, as events of past 4 years have shown, is different. We fundamentally disagree on the affordability of energy for social democracies in a debasing currency system. I doubt there is anything I could say that I haven't in previous exchanges that would either allow you to understand my viewpoint or change your mind. The inverse is probably also true. While Ace might not mind, I do. We'll have to agree to disagree. I have great hope for renewables (which are ecosystem service based), but the social system needs to be fixed first.
Cheers.
Nate
"Nick, we have had about 30+ exchanges here over the past 4 years"
Nate, don't give up on communication. Just like you, I'm not interested in going around in circles. We can get there. I wouldn't be having these discussion with you if I didn't think so.
"all on the same topic"
Not really. It may seem that way, but the conversation has evolved. For instance, early on it wasn't clear that wind and solar were technically feasible (high E-ROI, high energy surplus, high $-ROI, etc). We've gotten past that.
"In our currency system we grew using something not physical in a physical world, lived beyond our physical means and exaggerated all this by using leverage."
This is an important idea, and I'm confident we can make progess on it. So, let me ask again: how could credit ("something not physical") substitute for energy?
As best I can tell there's confusion here between the trade deficit problems of the US and our overall energy problems. The US has borrowed too much. The US is using imported energy as a substitute for declining domestic resources. But that's different.
Also, it looks like there's a confusion about the US vs the world. The world overall doesn't have a credit problem. The net debt of the whole world is zero: some people are debtors, some are creditors, but the sum is zero.
Finally, I'm not clear about this "fiat" idea. All currencies, whether they're gold, paper or salt, are symbolic means of exchange. As you note, the underlying physical economy is what's important, and I don't see how any currency manipulation can "paper over" problems with energy or other resources. Again, certainly the US has problems (see http://energyfaq.blogspot.com/2009/03/why-isnt-us-competitive.html ), and we're certainly going into debt to the rest of the world, but the world's physical production capability is still there.
"In theory if time stood still we could keep everyone in their homes and build out the energy renewables you advocate"
Well, let's talk about that. I've shown that building them out isn't that big a deal, in terms of cost and resources ($2T for wind, only 1.5% of US GDP over 10 years, and no more to produce PHEV's than for current light vehicles). We could certainly do that in 10-15 years, should we choose to. Are we going to do it fast enough to avoid some disruption and pain? Clearly not. OTOH, we could do it much faster in an emergency (25% reduction in consumption in a matter of months with carpooling, telecommuting, etc, followed by WWII type industrial conversion). That would be painful, but not the end of the world.
"I suspect are employed in"
No, I have no direct personal economic stake at all: I just want develop as clear a view of what's realistic as possible, and communicate it to others. I'm disappointed that you assume there's a bias here.
"Reality, as events of past 4 years have shown, is different."
We've seen recently that our economy continues to be somewhat chaotic, rather like what we saw before WWII. The surprise was that it turned out that we hadn't gotten as much better in managing business cycles (post WWII) as we thought. Actually, we got arrogant, and dismantled some of the regulatory protections that had helped us post-WWII. We got greedy (or Wall Street did).
"We fundamentally disagree on the affordability of energy for social democracies in a debasing currency system. "
But where does this idea of a "debasing currency system" come from? Is there a school of thought, with a name? A website that explains it clearly?
" I doubt there is anything I could say that I haven't in previous exchanges that would either allow you to understand my viewpoint or change your mind."
Again, don't give up. These are important ideas. If you're correct, than you need to be able to explain them to someone who isn't "in the choir". If not, you can learn something.
I'm listening very carefully. Please try again.
sorry I am incredibly busy - I will try and incorporate your questions into something I write here soon because perhaps others have similar questions. Though our threads are always just you and I because we fundamentally disagree. You have never acknowledged fully how important the social aspects of resource transitions are and continually quote kwH levels as proof that we CAN afford renewable energy. If I wasn't somewhat hopeful that we could make a difference I wouldn't still write here, but I have to spend my time doing what I feel is most important and am most interested in. This exchange reminded me how many we've had over the same general theme. I'll do what I can but this sites purpose is not as a 'consensus builder'.
That sounds great.
A further thought:
"Nick, we have had about 30+ exchanges here over the past 4 years"
On reflection....that's not very many. These are complex topics, and it makes sense that they'll take a long discussion.
I think part of the problem is that we try to discuss too many things at a time, and tend not to resolve any of them completely. Perhaps if we try to take one point to resolution?
Hmm. Here's an edit I didn't catch: "If you back out the earning of financial companies (which for the most part in retrospect were phantom), the financial markets peaked some time ago. In sum, we DIDN'T grow beyond it, we just thought we did."
Could you give more info on this? It doesn't quite make sense to me. According to world statistics, world GDP hasn't dropped, and is IIRC 30% higher than it was in 2004, when oil production started to stagnate. That's true with todays statistics, which of course include the crashed earnings of financial markets, and currently diminished real estate and finance sectors.
The past as prologue...
OIl price and consumption declined in 1930 but climbed substantially over the next several years. True, the US car and truck capacity was at that time immature, meaning that the expansion of these vehicles were cost effective even in a deflationary environment. OTOH, equities were more overvalued in 1929 than 2007, IMO we are close to a bottom in equities even though housing has further to go... I see no chance of the current crisis approaching the depth of GD because a) depositors are protected, b) considerable safety nets help those losing their jobs, and c) the administration is fast and furious to act rather than slow and half-hearted like FDR. (As an aside, I don't see current actions as inflationary because the money donated to banks, whether printed or borrowed, is simply replacing disappearing assets i.e. compensating for a portion of the collapsing debt... the money is not circulated.)
The two main points supporting oil demand are a) that Chindia's auto demand is not mature... Tata begins production of the nano this month at $2500 (IMO this event is worth a thread of its own.) And b) price is not at 200-300, or 147, it is at 40. At this price US drivers will continue pretty much as usual, just driving their old cars longer as they avoid new ones like the plague... even unemployed eat and consume energy. Indians will scoop up the nano, doubtless very fuel efficient but, eventually, millions of them will hit the roads, and this will be copied elsewhere.
I do agree that past events showed $150 leads to substantial demand destruction. 80-100 is not so clear...
"I do agree that past events showed $150 leads to substantial demand destruction. 80-100 is not so clear..."
Demand destruction was starting at $80-100. At that price hybrids, PHEV's and EV's are clearly cheaper. Oil becomes clearly too expensive for electrical generation. Only air transport will continue to use oil in the long-run at those prices.
$80-100 oil means a fairly direct path to the elimination of oil.
Hmm tough call on that one. We never did move to motorcycles and small 40mpg cars.
If your right then Europe would have moved to EV's a long time ago.
Taking Europe as a model suggests that a switch to EV's happens sometime well
past 150 a barrel. As far as I can tell at least in Europe EV's have been technically
and economically feasible for several years using the calculations that supporters use on the oildrum.
Which brings up a interesting question of why no EV's in Europe ?
My best guess is that the freedom of a liquid fuel powered car is still far more important
and we are underestimating the value we place on this. This intangible "freedom" carries
a lot of weight.
"why no EV's in Europe "
Because, as you note, EV's are less convenient.
PHEV's would work, but 1) diesel is occupying the high-MPG niche, and 2) European cars are driven less, on average, than US cars, and so it's harder to amortize higher capital costs.
Basically, there were large barriers to entry (billions in R&D and retooling, as well as resistance from ICE oriented manufacturers) for PHEV's, and there wasn't an obvious need for them.
That's changed now: those R&D $ have been spent, and there's enormous pressure for PHEV's from regulators.
There's a large difference between "feasible" and "available". If there are no mass-market EVs to be bought, it doesn't matter how feasible they might be.
It takes a significant amount of time to design, certify, and produce a radically new model of car, as evidenced by the time and trouble it's taken Tesla and GM/Volt. There are also good economic reasons to move slowly into a new market like EVs, as it's not clear to car companies what customers will want in that market, in terms of styling as well as performance.
It's a fairly substantial risk in terms of sunk costs (R&D, retooling, marketing, etc.), so we can't expect an EV to be made available the moment it's feasible.
Memmel wrote:
I agree this statement
Pitt,
From your reply it is not clear whether or not you consider this statement valid or not. Auto makers have had decades to develop electric vehicles, we used to have electric milk floats for starters. Battery technology is 50 (ish) years older than the ICE. Electric cars in the uk were tax exempt in the 1980's if not long before that. Electricity has always been an order of magnitude cheaper than motor fuel in my memory.
Not to the extent you do.
In my experience, many people view cars as nothing more than tools to accomplish a task, rather than embodiments of freedom. For people with such a view, the notion of cars embodying freedom isn't going to outweigh practical concerns such as cost.
True but not relevant. Early battery technology wasn't really up to the task of a mass-market EV, so it's not like there's some kind of mysterious delay.
Indeed, there's debate over whether even current battery technology is good enough for EVs to really replace ICEs. Currently, it seems like they're ready to replace some uses (e.g., most commuting and errands), but perhaps not all uses for a majority of people. With the improvements in battery technology that are reaching commercialization (e.g., long-cycle-life lithium batteries), EVs will become suitable for more and more uses, which will allow them to functionally replace ICEs for more and more people.
My understanding is that that is the reason EVs are only now making their way into mainstream society: it was only recently that technology (especially battery technology) was good enough that EVs could be considered an economic and viable replacement for ICEs for a significant fraction of drivers in Western countries.
***
It's interesting to note that electric vehicles of various types have been taken up more quickly by developing nations. The real stand-out there is electric bikes, with about 20 million sold last year in China, or more cars than Americans have ever bought in one year, although the Indian REVA battery-electric car is also notable as a more-or-less commercial (low-volume) vehicle that has been in production for the last 8 years.
This is potentially not surprising, however, as one could argue that buyers in developing countries might have lower requirements for their vehicles in terms of performance and convenience than buyers in rich nations, and hence improving battery technology should logically be expected to meet these lower requirements first.
So why do people buy "ready meals", takaways, bottled water, crisps etc. when you can buy a 25kg sack of potatoes for less than a fiver and a very large caulifower for 50p from a local farm shop, but 30 gramme crisp packet costs 40 pence.
If cost is such a concern over freedom, then why do we all not cook at home, drink tap water and save a fortune?
Are you saying the technology for Li batteries was beyond the wit of chemists and engineers until now? Personally I doubt it. There was no comercial will to development them, due to cost, is a more likely reason.
Pitt, let me offer a slightly different perspective.
"Early battery technology wasn't really up to the task of a mass-market EV"
Not really - 100 years ago there were 10's of thousands of EV's on the road. GM even made electric trucks about 1912-1918 (they sold very well). EV's just couldn't compete with dirt cheap oil.
"there's debate over whether even current battery technology is good enough for EVs to really replace ICEs"
EV's aren't ready, but PHEV's like the Chevy Volt are (90% reduction in fuel consumption). The perfect is the enemy of the good.
Thankyou Nick, but add "convenience of" to the above quote and it would Probably be one of the most sensible replies ever. The only thing I can't quite grasp is why diesel is not considered for hybrids. I don't suggest the manufacturers are wrong, there must be good reason. If you know please tell me, it may be petrol engines can work harder and thus benefit more than diesel engines, which have better part load efficiency than petrol in anycase.
By implication of your reply, electric vehicles are going to be more expensive than the "ICE and cheap oil combination" we once knew, and I do see that as a problem in terms of affordability. It is the historical "ICE plus cheap oil combination" we have to try and emulate with electric vehicles, but electric vehicles have come out necessity and the goal posts have moved against them (and very much against ICE as well, but these are established so still have the cost advantage at the moment).
I am also suprised at how cheap a Prius is to purchase from new. They are very competitive indeed. Given a new battery pack is £2000 (exchange?) alone, there must be some ingeneous cost cutting in the manufacturing process. The other possibilities are that they are subsidised by other more conventional vehicles to gain market share (lost leaders), or the money is recouped via relatively short service intervals (for a car of its era) and high dealership labour cost. It really is a complex world and establishing the truth is so difficult.
"add "convenience of" to the above quote "
Yes, that's important, too. That's why PHEVs are such a good idea.
"why diesel is not considered for hybrids"
Because gas engines can become much more efficient in a hybrid, and the remaining efficiency difference doesn't justify the greater cost of a diesel engine. Also, diesels just aren't as popular in the US. In general, the US is leaning towards hybrids, and Europe towards diesel.
"electric vehicles are going to be more expensive than the "ICE and cheap oil combination" we once knew,"
But no more expensive than ICE's with moderately expensive oil. PHEV/EV's compete quite well once gas gets above $2.50/gallon. That's not so bad.
Given that there are plenty of additional external costs that people are willing to recognize (like the friends and relatives of soldiers in Iraq who want PHEV's desperately), gasoline/oil is no longer cheap, and is extremely unlikely to ever be considered cheap again.
"I am also suprised at how cheap a Prius is to purchase from new."
Yeah. Partly it's good engineering. I wish the US put as much attention to engineering. See http://energyfaq.blogspot.com/2009/03/why-isnt-us-competitive.html .
That makes sense, I had overlooked the extra cost element.
I fully except the ICE's cost advantage will be hit by oil price.
Good point as well, though intangible costs are often conveniently overlooked to the advantage of those who want to overlook them. Another point is we could have vastly reduced the size, weight and power of our vehicle fleet for no extra cost. In general, the opposite has happened and cars have got heavier and faster and more sophisticated. If governments were serious about CO2 they could have imposed restrictions on vehicle energy use years ago.
" intangible costs are often conveniently overlooked to the advantage of those who want to overlook them"
Yeah, those who are willing to recognize such costs are a minority, and therefore are a niche market. OTOH, they'll provide demand during the early years of PHEV's, giving them volume with which to reduce expenses. For instance, there are a lot of people waiting in line to pay a premium for a Volt.
"If governments were serious about CO2 they could have imposed restrictions on vehicle energy use years ago."
Yes. Sigh. This is resistance from people in the industry who's careers would be hurt. This ranges from assembly line workers and roughnecks to automotive to chemical engineers. And, you've got to give them respect and compassion: they're people, and deserve to be helped as much as possible during a necessary transition away from oil.
All I can say is I've driven small economical cars all my "driving life". So I've done my bit. My kids have complained about lack of room, but as is usually the case, I am driving for work with just me in the car. This does not justify owning a 7 series beemer!
I forgot to mention, add to your list of historical electric vehicles "milk floats". There used to be thousands of 'em. Now, thanks to super market competion, they have been replaced by human filled ICE cars driving to the super market to buy milk. Progress eh (and convenience)! I think its ludicrous personally but that's joined up government policy for you.
I read you link, and it rings true fot the uk as well, except we don't have a uk owned motor manufacturer to abandon hybrid development. (I take it the link is your own work!)
"add to your list of historical electric vehicles "milk floats". There used to be thousands of 'em. "
Thanks - I'm glad to see that a few are still around.
Quiet operation in residential neighborhoods sounds very attractive. Why do all newspaper and chinese food delivery cars seem to have noisy mufflers?
I wish there was, for exactly the reason you suggest, they were silent. They only had one disadvantage as far as I was concerned; getting stuck behind one in my overpowered but convenient and polluting ICE! But being serious, they were ideal for the job , quiet operation in early morning and well suited to stop/start operation. But unfortunately they seem to be history, and that is a great shame. The uk government killed off the "milk marketing board" and from that day the milk mans's days were numbered. We drive to the super market if we want milk now. Its all about profit, not sustainability.
There are plenty of EVs in Europe.
They are called "trains."
Amazing technology. Really. No batteries required!
Which kind of tells you the real-life feasibility of EVs-that-are-not-trains.
My answer to this:
Usa should open and improve the quality of accounts statements of its financial institutes in order to help the world to better manage the current crisis (by never putting its money in usa again). Better still usa must open its own federal and state accounting statements (the real ones) to the world, to make the world understand without any doubt that usa is technically bankrupt, that there is no way (except invasion) to get the loan already given to usa by world (in real value, not nominal value), that there is no justification of providing any further bail-out to american govt and people by central banks of china and japan.
Mr Naimi has no problem in declaring the actual numbers to world IF usa learn to stop bullying the world to press them to extract their natural resources to death to satisfy the unjustified and unethical consumption by usa.
I am really fed up of these kinds of articles that create a negative picture of saudi arabia claiming that it is a bad thing it is hiding its numbers. What is the justification of this? Its the right of every country to hide its critical information. Its also right of every country to stop trade with any country though saudi arabia was never allowed to use this right. Since the oil embargo of 1973 the arab nations are bullied by usa and europe to supply them their natural resources no matter the consequences for their own people. Search at google for american planned invasion of saudi arabia in 1973 when shah faisal was told by american president that if he not open the taps in 4 months usa will!!!.
Now, the rest of article. When I was estimating arable land needed per person, optimal percentage of soldiers in an empire etc I found an interesting fact about number crunching. One critical number come in front of you every time you do some calculation. This is actually the number you are looking for, though you may not like the number at first. In the case of the above article I think that number is 185 GB. The lower estimate is 160 GB but in it you know you are missing somethings, when you add those things the number becomes 210 GB, but now you know that you are over-estimating, so you take a mediocre approach and there you go, you got the right, most realistic number, 185 GB. You see what other people have found, and there again, you find a number very close, 180 GB. Every time you play with numbers you get the same number. It is like if you ask a sufficiently large number of people and they say the same thing without knowing what other has said, then there is a strong chance that this is the truth you are searching for. Since there are many lies but only one truth about everything, therefore if multiple researches of the same people, and better still, multiple researches of multiple people reach to the same number, then we must accept this number.
WFP,
I agree that USA should be more open about its economy. It appears the US Government calculates statistics in ways which are favourable to the US Government and not necessarily favourable to US citizens.
Shadowstats.com attempts to provide more accurate economic statistics figures such price inflation, money supply growth rates and unemployment rates.
http://www.shadowstats.com/alternate_data
http://www.shadowstats.com/charts_republish#cpi
Shadowstats.com calculates the consumer price index (price inflation) as just under 8%/year while the US Govt says it's about 0%, big difference.
The group of people in charge of the USA and Saudi Arabia, whether it is called a government or a monarchy, seem to be much more interested in their own interests rather than the interests of their own citizens. Mr Naimi doesn't even tell the reserves numbers to the people of Saudi Arabia, let alone the rest of the world.
I have sent emails to petroleum engineering professors at Saudi Arabian universities. The lowest number that I received from a professor was URR 260 Gb. I,m glad that you think 185 Gb is about the right number. Would you have any sources for that number?
This has been discussed previously, complete with references.
The short version is that Shadowstats claims household purchasing power has fallen by 40% in the last 15 years, whereas official figures claim it's increased slightly. If you take a look at household budgets, spending patterns are basically the same; in particular, essentials such as food took up no more of the household budget in 2005 than in 1990. This is not consistent with a massive drop in spending power, but is consistent with stagnant real wages, meaning empirical evidence supports the official figures.
Oh please. Without following your link, and being sure this was brought up in the previous discussion, not including housing and - what is it, energy? I forget - is just barmy. Truly stupid and misleading. Oh, and steak = hamburger. Brill, that. Something only economists would do.
That's the whole problem with economists: they live their delusions which gives them zero chance of understanding how absolutely useless much of their work is.
Oh, and spending is not the same. It has shifted enormously to those areas that are non-negotiable, thus leaving families more vulnerable to reductions in income. I seriously doubt your '90 number, but also find it ridiculous. When did we go off the gold standard? Try your numbers from '70 to present and see just how bleak the changes are.
Leanan, I believe, linked to a great vid of a lecture on this topic. Probably back in your link, too.
Cheers
"if you ask a sufficiently large number of people and they say the same thing without knowing what other has said, then there is a strong chance that this is the truth you are searching for."
that is the democratic version, i doubt geology is a democratic science.
Dumb Question Time:
My understanding is that a peak is when half the oil is gone. This makes a curve describing the production roughly symmetrical in form, and using the peak as a mirror, the two curves should describe equal areas, as each day's production has a vertical value in barrels of oil. A successive collection of these barrels results in an area value. The area to the left of the peak, should equal the area to the right of the peak.
But in the charts you show, it looks VERY much like the area to the right of your "peak line" is smaller than that to the left, and it is my understanding that you are not talking net (oil production) nor are you talking about oil export values, but simply gross production values.
So, what is it? If there is (x) area to the left of the curve, why isn't that volume found to the right of the curve?
If I'm missing something - cool - I'm more than happy to be wrong on this. But I would like an explanation.
I thought one explanation might be that production values and peak are not directly identical - that one can do a variety of techniques post-peak to keep production near maximum values, and that this would push the "peak oil inflection point" farther into the past, but that is not what you have done.
So, please explain. Thanks! VERY interesting article.
cheers,
S2
S2,
Peak oil is usually defined to mean the peak in production rates. This peak production rate is unlikely to happen at exactly when half the oil is gone. If you look at Russia there was a peak around 1985 when much less than half the oil was extracted. The black line shows Russia's production in the chart from Colin Campbell's Sep 2008 newsletter.
http://www.aspo-ireland.org/contentFiles/newsletterPDFs/newsletter93_200...
Like Saudi Arabia, Russian oil production is forecast to decline.
It's worth noting that the pre-1992 line is actually Soviet production, and that region is essentially back to its peak production and still rising (EIA; just above for all liquids, just below for C+C).
Best estimate (link above) is that ~90% of Soviet production was Russian, giving a peak of ~3.7Gb/yr, vs. Russian production of 3.6Gb in 2006 (9.87Mb/d). With Russian production currently falling, it looks like it may not surpass its prior peak, but the difference is much smaller than the graph suggests - it's overstating the early production, and understating the most recent production.
Based on Khebab's work, the Lower 48 peaked at about 52% depleted, while Texas, the prior swing producer, peaked at about 57% depleted. The difference is reflected in the decline rates, about -2%/year for the Lower 48 and about -4%/year for Texas.
http://graphoilogy.blogspot.com/2006/05/texas-and-us-lower-48-oil-produc...
The 2006, 2007 and 2008 data points are going to pretty much fall along this projected line, which Khebab prepared with data through 2005:
thanks for the clarification. You stated what I thought was correct, (peak is production, no content) I just needed it demonstrated. Much appreciated.
Thanks for the article. Robin Mills' "The Myth of the Oil Crisis" said the Hawtah trend has added 30 bbl to Saudi reserves (p.109-110). The information is based on a website www.pj-exploration.com/aapg.htm. Figure 4 of the article however has a substantially lower number for Hawtah trend. I wonder what your view is about the big discrepancy. Thanks.
Russell,
I had a look at your reference for Hawtah trend adding 30 Gb of reserves which seems incredibly optimistic. Al Hawtah, the main field has about 1.5 - 2.0 Gb reserves.
What's probably happened is that your reference sources have somehow converted older optimistic estimates of initial liquids in place to reserves. The US EIA Jan 2000 country brief stated that "Overall, the Najd fields are estimated to contain 30 billion barrels of liquids and major reserves of natural gas"
http://web.macam.ac.il/~arnon/Int-ME/oil/Saudi%20Arabia%20energy%20oil%2...
In the EIA's Aug 2008 brief there is no estimate of the Najd field reserves, instead saying only that "Since 1994, the Najd fields, which include the Hawtah field and smaller satellites (Nuayyim, Hazmiyah) south of Riyadh, have been producing around 200,000 bbl/d of Arab Super Light."
http://www.eia.doe.gov/emeu/cabs/Saudi_Arabia/Background.html
This article gives alternate data.
SAUDI ARABIA - The Main Fields Producing Heavier Crudes, Nov 1999
http://www.allbusiness.com/mining/oil-gas-extraction-crude-petroleum-nat...
Hawtah Trend (also called Najd fields): "Recoverable reserves of oil and condensates in the Najd area are estimated at 10 bn barrels" which seems high given that the article says that total liquids reserves of the two largest fields are about 2.5 Gb: Al-Hawtah proven reserves of liquids is said to exceed 1.5 Gb and Nuayyim's liquid reserves are almost 1 Gb. Also note that these are liquids reserves numbers which include not just oil but also condensates and natural gas liquids.
My Figure 4 from Jack Zagar is probably based on IHS data which shows the Hawtah Trend oil in place of about 12 Gb. Applying a recovery factor of 30% gives initial oil reserves of 3.6 Gb which is probably closer to the truth than 30 Gb.
The Hawtah trend fields are shown in the bottom left corner of the map below. There are many fields but they have problems as stated from the article above.
(click to enlarge - some of the project start up dates above may need revising)
Thanks for your question as the referenced article said that Nuayyim started producing in 1997. Consequently, the Nuayyim project of 0.1 mbd is also an expansion of an existing producing field which means that all of Saudi Aramco's new capacity additions are expansions of fields which have already produced. I have edited my story to reflect this change as I originally thought that Nuayyim was a new field project.
Given the lack of news about Nuayyim, I wonder if the 0.1 mbd addition is probably less and might only offset existing decline from the Hawtah Trend fields rather than add new capacity.
Ace, thanks for your analysis which helps me to understand the issue better. Robin Mills relies on the 30 Gb reserves of Hawtah to argue that the Saudi reserves of 260 Gb is reasonable. It would seem that the argument is quite doubtful.
Ace,
I was wondering if you could put out a version of the total Saudi Arabia production curve (figure 1 in your post) on a semilog chart?
Thanks,
jimb,
Rather than enter data for the years up to 1964, I just did a simple exponential fit and also ensured that cumulative production to Dec 2003 was 99 Gb (incl half of Neutral Zone) to agree with Saleri's statement from his Feb 2004 Aramco presentation (slide 20).
http://www.saudiaramco.com/irj/go/km/docs/SaudiAramcoPublic/Speeches/Spe...
click to enlarge
Thank you. I always learn so much from your posts and the following comments. Unfortunately the firt time I ever stumbled across this website you had a similar post on world crude and condensate production and I have been reading this site ever since.
Time to rejoice. Most everyone is going to achieve their Kyoto targets WITHOUT A SIGNED TREATY or any unsavory enforcement action. Life is good. Environmentalism has won the day.