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35 comments on Update on US GOM from MMS, EIA and Scout Data
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35 comments on Update on US GOM from MMS, EIA and Scout Data
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In my mind whats important is not the rise of deepwater production but the end of shallow water production.
Exploiting offshore fields made up for the bulk of new production from the 1970's onwards generally with these fields brought online reasonably close in time. I believe up to 40% of the worlds oil is from shallow offshore fields. If the shallow GOM is gone then we can suspect that most of the worlds offshore production outside of deepwater plays is also in very bad shape.
I don't think globally deepwater production tops 1 million barrels a day certainly its less than 2 million.
It very expensive and often late. Its not going to help a 30 million barrel a day problem from shallow water production much less land production issues.
Good point memmel. Even folks in the oil patch that aren't involved in the GOM tend to be surprised when they see the decline of the shelf plays and how the Deep Water has contributed so much to the appearance of some stability in OCS production. The decline in shelf would have been even steeper had it not been for the rise in relatively small operators. Not like the "mom & pop" operators onshore but small compared to the big established independents or majors. Since 1990 or so many new small GOM operators have come into existence solely to fill the gap left by big guys who found the shelf play a quickly diminishing return. Given the general decline of exploration opportunities both onshore and in the GOM the only course for growth by these startups was the acquisition and redevelopment of offshore properties. And we did work them to death. Often projects were approved not because of the potential for a satisfactory rate of return but to just push the stock up. The biz plan was simple: drill and establish new reserves (real or imaginary) or die.
The only remaining potential (not counting the off limit areas) on the GOM shelf is very deep (20,000’+) NG. Folks have been trying to find such a trend for at least the last 10 years with very little progress seen. Even NG has its limit on how hot it can survive.
The real shock for the public will be the rapid decline in the GOM in the next 10 years or so. The rapid expansion of Deep Water rates has hidden the shelf decline. But you know how much quicker those rates decline compared to the old shallow water fields. I doubt DW operating expenses will allow the industry to beat out the last little bit of reserves as has been done onshore and on the shelf. The rapid decline rates will hit the high fixed operating expense wall very hard. As you know I am a proponent of expanding OCS drilling operations as long it’s done soundly. But I also believe that such an expansion may only act as another short term buffer for the national decline rate. But even if that works it won’t do much good if it’s taken as a sign that we can continue BAU.
I agree with Rockman and memmel. The DW reserves depend very much on a high price to be available (because they have low EROI). Those reserves may or may not be real. In some sense, one needs to calculate reserves at various price levels. The shallow water reserves are mostly gone, and these were more at a low price level.
Oil companies have to show something on their books. They are booking reserves that are illusory, unless there is a high price of oil. If the world's financial situation is such that we really can't support high priced oil, these reserves will simply disappear, and production drop off much more quickly than expected.
In a way, GOM reserves show the limitations of using past techniques to forecast future production, when the "world" is changing, so that reserves become less and less representative of actual future production.
I just don't understand this line of reasoning. If we need the oil, and it has a positive EROI, why wouldn't it eventually be produced?
I understand that a slowing economy puts downward pressure on oil prices because of demand destruction. Therefore more expensive oil shuts in and only easier oil is produced. But eventually that easy oil will be gone, driving the price back up, no?
In my mind, EROI matters for production, price not so much (over the long haul). Maybe we can't afford to use high-priced oil the way we have used cheap oil, but I'm pretty sure we'll find some use for something so valuable. In absence of complete and total collapse, I can't see useable oil not being used.
Well there are two problem net energy i.e EROEI and absolute volume.
You can go to a lower EROEI resource as long as you can say double the volume to keep the net the same.
Say twice as much of a 5:1 resource as you had of a 10:1 resource.
However when you have declining EROEI and declining overall volume i.e absolute declines things get sticky fast.
Not to mention export land model hitting you from the other side even as your own production declines.
So what we face is a lot lower production rate and a lot lower net energy and declining imports.
And probably rapidly increasing decline rates.
Have a nice day :)
In some ways, I don't think we really know how close were are to the minimum EROI that will keep society going. We may already be very close. It seems to me that It is really the financial markets that show us where we are. If demand cannot stay high enough at a price of say $80 for very long, it seems to me that may be telling us that oil which cannot be profitably produced for less than $80 has too low an EROI to meet society's needs as they stand now.
Perhaps if we get to more of a subsistence level economy, we can spend more of our income on oil. Then it might be that in this example, demand will be able to stay high enough at $80 (in this example), but not at $90 a barrel.
Again with demand you have to treat it as a continuous curve demand for fuel for the military is probably the least likely to change followed say by usage in the food industries then say the medical industries then for work on up to picking the kids up at soccer and going for a summer drive.
Some of this demand produces useful goods some does not. Its better to consider it as what kind of demand can be met with what volume of oil. Obviously if oil is scarce the summer drive demand declines etc. Also absolute contraction of the economy i.e more people unemployed causes demand decline.
This is simply supply vs demand and has little to do with price directly. However obviously price is what causes the summer drive demand to decline. I.e there is a certain price which causes decline in certain types of demand.
In my opinion the concept of a price thats "too high" for demand simply does not make sense. At a certain price point certain types of demand are reduced depending on how easy it is to reduce the demand.
Thats not to say that in certain conditions certain types of demand may be large enough that when they decline they could decline fast enough that a surplus develops and prices fall. I've argued for some time that a lot of the recent demand collapse was coming from the collapsing housing industry not from other source. VMT tends to stall its increase in every recession in concert with slowing construction. This makes sense given a large amount of both people and materials are moved to build houses and commercial buildings. And generally this demand stays suppressed for some time. The other probably source was a pull back in summer or holiday driving. Holiday driving seems to make up about a 3% difference in US demand between summer and winter and Housing demand seems to represent and additional 3%. However housing demand is weighted to truck traffic and thus distillate use. Thus its say 3% of overall demand but say 6% or more of distillate demand. Something like that the point is one is weighted towards distillate use and one towards gasoline use.
However after the housing industry has drawn down its hard to foresee another industry that can collapse rapidly and cause supply and demand to result in and excess of supply. Its pretty much a one shot situation.
We may find another case where past a certain price point a certain type of demand collapses rapidly leading to a surplus. But the collapse itself would also have to be of a form that made recovery of that type of demand slow.
I.e once the price dropped did not matter that source of demand was stopped from growing for other reasons.
We will see but treating demand as some sort of well defined entity that has a fixed price point is probably not the right way to look at it.
It seems to me that there is quite a bit of potential for deep (20,000'+) gas on the Texas shelf, but no one is looking seriously.
The problem is that both the risks and the costs are high, and at current gas prices the rewards are too low. The risks are high because even the best seismic data gives ambiguous discrimination between gas and water at these depths, because the geology is largely unknown, and because high pressures and temperatures make drilling difficult. The costs are high because high quality wide-angle non-exclusive 3D seismic data is not available over much of the shelf area (therefore you have to shoot your own), and because drilling to over 20,000 feet is just expensive, even if it is in shallow water. I've known a 20,000 foot well to take over a year to drill, and another three months to complete.
This could (with prices high enough) produce a new cycle for the creaming curve, but I can't see it adding more than 10-20TCF to the ultimate.
It seems like deep gas would be expensive gas. If it made sense to drill deep gas for $4 mcf, I expect there would be a lot of it being drilled. But if drilling costs are relatively high, and shale gas is cheaper than deep gas, it seems like deep gas will stay in the ground for a long time.
A handful of ultradeep GOM shelf wells have now been drilled; some hype from certain quarters, but no plans to develop yet. The gas is probably there, but the costs (>$200mm/well), over a year to drill a well, inability to conventionally evaluate or complete at high temps and pressures in addition to likelihood of very tight reservoir make this play extremely challenging when compared to onshore shale gas. Wide azimuth seismic ain't the issue, many structures are well-imaged and you're not going to see DHI's at those depths. Someday...
Hello Memmel, WHT, Sam, and other TOD math gurus:
I avidly read your postings about the shock model, dispersive discovery, and other tech-arcana, but I don't often comment on the postings of you gents as I don't have the math & statistical 'chops' required. So what follows may be entirely useless, OR it might help move the discussion forward. :)
I was musing on the theory of how EOR tends to move the Peak: up in volume plus earlier in time, as per your discussion a few days ago in Rembrandt's monthly update thread. Memmel seems to logically argue that we are headed into a severe 'shark fin decline' as exemplified by his agreement with the heavy bottom red line in the earlier graph:
http://www.theoildrum.com/node/5489/511573
Ok, here goes, and I hope I can explain this in adequate detail to jumpstart synaptic wildfires in your math-minds:
When an deepwater undersea quake first happens [think '04 Boxing Day], the resulting Peak dynamics of the later land-falling tsunami [tidal wave] are totally fixed at that point in time by the Laws of Physics [Let's say an avg 10 ft tall wave breaking on land sometime later]. The long wavelength of the incoming wave is harmless in deepwater, only when the wavelength starts to contract in shallow water is it dangerous as it start to rise up in height as it comes ashore.
This is tantamount to discovering a new oilfield or all the present oilfields in summation over time, but keeping the applied extraction tech 'Exactly the Same Level' until the field or all fields are finally abandoned. So linear extrapolation of oilfield production seems logical.
Obviously, we now know that tech-extraction advances are applied to oil & natgas fields ASAP when the tech becomes available and economically viable--thus the 'simplified' Tsunami Model becomes invalid regarding Peakoil. Is there a better, non-linear model?
How about the 'Rogue Wave Theory' applied to the one-time occurring Hubbert Peakoil Tsunami Tidal Wave and EOR-extraction tech?
http://en.wikipedia.org/wiki/Rogue_wave_(oceanography)
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Rogue waves (also known as freak waves, monster waves, killer waves, and extreme waves) are relatively large and spontaneous ocean surface waves that are a threat even to large ships and ocean liners...
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Doesn't this link to the Drauper Wave look just like the classic, long timeline, but giant single-pulse Peakoil Spike? Compare the two links below:
http://philhart.com/images/peak%20oil/hydrocarbon_age.gif
http://en.wikipedia.org/wiki/File:Drauper_freak_wave.png
From the above Rogue_Wave Wiki:
---------------------------------
..Such waves were said to consist of an almost vertical wall of water preceded by a trough so deep that it was referred to as a "hole in the sea"..
..Nonlinear effects — It seems possible to have a rogue wave occur by natural, nonlinear processes from a random background of smaller waves.[6] In such a case, it is hypothesised, an unusual, unstable wave type may form which 'sucks' energy from other waves, growing to a near-vertical monster itself, before becoming too unstable and collapsing shortly after. One simple model for this is a wave equation known as the nonlinear Schrödinger equation (NLS), in which a normal and perfectly accountable (by the standard linear model) wave begins to 'soak' energy from the waves immediately fore and aft, reducing them to minor ripples compared to other waves...
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So even the earliest tech advances [even way back to Drake's oilfield?] only helped to grow the Hubbert Spike and our present-day EOR mini-waves are also energetically 'soaked up' into this one-time for us humans Rogue Hubbert Spike.
http://en.wikipedia.org/wiki/Nonlinear_Schr%C3%B6dinger_equation
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..For water waves, the nonlinear Schrödinger equation describes the evolution of the envelope of modulated wave groups. In a paper in 1968, Vladimir E. Zakharov describes the Hamiltonian structure of water waves. In the same paper Zakharov shows, that for slowly-modulated wave groups, the wave amplitude satisfies the nonlinear Schrödinger equation, approximately. The value of the nonlinearity parameter к depends on the relative water depth. For deep water, with the water depth large compared to the wave length of the water waves, к is negative and envelope solitons may occur...
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http://en.wikipedia.org/wiki/Soliton
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In mathematics and physics, a soliton is a self-reinforcing solitary wave (a wave packet or pulse) that maintains its shape while it travels at constant speed. Solitons are caused by a cancellation of nonlinear and dispersive effects in the medium. "Dispersive effects" refer to dispersion relations between the frequency and the speed of the waves.
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What we need are equations, not for a soliton, but for a 'Hubbertiton' [my invented name to honor M. King Hubbert] that constantly self-reinforces and GROWS it shape ever taller and steeper from applied EOR; as ever increasing backloaded EOR helps ramp the Peak plus moves it time-forward so it subsequently will decline fast.
Of course, at this time I am hopelessly lost in math application... but maybe the following speculative example might help you math-wizards visualize my thought process:
Again, picture the Boxer Tsunami occurring, setting off the initial wave with wavelength 10X. But now, as the original deepwater rogue-wave moves toward the beach: imagine a series of additional earthquakes happening as the wave passes overhead-- each additional [EOR]quake adds to the TOTAL Hubbertiton deepwater wavelength...10X + .01X [vertical wells] + .5X [waterdrive injection] + 1X [nitrogen injection] + 2X [millions of nodding horseheads] + 5X [MRC horizontals]... + 1X [fracing fluids] + .05 [Tarsands] + .01 other EOR,etc.
Then when the only Hubbert Peakoil rogue wave hits the beach==>it is now a towering Tsunami 10 times as high as the [original oilfields]Boxing Day tsunami; a 100ft Hubbert Spike that quickly declines like the Drauper Wave above or the 'Red Line' like in Memmel's linked graphic.
This is due, IMO, in direct opposition to what occurs in a soliton [the Cancellation Effect]. Because there is NO cancellation of nonlinear and dispersive effects in the oil extraction industry or medium--it is actually an 'Amplification Effect' in a Hubbertiton. "Dispersive effects" refer to dispersion relations between the frequency and the speed of the waves, but in this case freq. & speed of the EOR-waves SUM into the ROGUE total.
Hope you guys find this helpful. Please feel free to elaborate further or flame away in scientific refutation.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
If you guys plus Jean too, can advance my brief concept: it would seem to help scientifically and statistically validate Jay Hanson's fast-crash Thermo/Gene Collision, Maximum Power Principle [MPP], and Duncan's latest Olduvai. How you go about doing this task seems quite daunting unless you can program a large software program to crunch the numbers...
I don't have the math or physics chops to dive (no pun intended) into this question either, however I think I understand enough about the basic physics of wave theory to grasp that constructive interference may indeed create a gigantic rouge wave out in the ocean somewhere. This being a real physical phenomena.
However, while your analogy is intriguing, I can't quite grasp how you intend to equate a shark fin decline depicted on a graph, granted it is depicting real physical phenomena as well, with the physics of forces acting on water molecules.
Perhaps your analogy has flown over my head? Feel free to slap me down and put me in my place but aren't you comparing apples and oranges here?
Hello FMagyar,
Consider Nate Hagens' writing on MPP which basically says: "I want it All, and I want it Now!"--then extend that to global FF-extraction.
Finding an oilfield is like the unleashing of the deepsea earthquake, but the contribution to the later, total Global Peak tsunami is unforeseen at that time. According to Rogue Wave Theory [as I feebly understand it], the subsequent global EOR exploits does not necessarily mean 'smaller tsunamis' unleashed later [a series of time-sequenced solitons], but a tendency to time-condense into a Hubbertiton that GROWS and time-shifts forward==> a sharp & steep peak [shark-fin] versus a less tall, but gentle roller curve of the same volume.
From the Wiki:
----------------------
The spatio-temporal focusing seen in the NLS equation can also occur when the nonlinearity is removed. In this case, focusing is primarily due to different waves coming into phase, rather than any energy transfer processes...
----------------------
I would argue global society is Thermo/Gene evolved to 'focus' on getting it now as per Nat Hagen's writings. If we had fully grasped Hubbert, Malthus, Erlich's 'Population Bomb', Club of Rome's "LTG", and Carter's Sweater Speech way back then: the Hubbert Spike would have been more like a gentle roller hitting the postPeak beach.
My understanding is that rogue waves can't be explained by constructive interference, nor can they be explained by classical hydrodynamics. I guess the way you look at it is that it is a non-linearity in some of the equations (think of it like a power-series expansion in some of the equations - the first order term dominates, and gives you classical waves, but under certain conditions the higher order terms in the expansion come into play). That's the take I got on it by watching some program on TV about rogue waves..
Anyhow, that's a diversion. In a sense we are all struggling trying to find a good analogy that the general public can easily understand. Given that it is only an analogy, the specifics of how it all works isn't quite as important how it really works, but it is important that the general public have some idea what the heck you are talking about.
An analogy that I was thinking of is to say that oil is like steroids on the economy, but I don't really know if that gets us any closer to anything useful either.
In the end, I am not sure how much it matters. Those who don't want to hear the message will deny that the analogy is applicable.
I stand corrected though I did say I didn't have the math or physiscs chops to really dive into this.
Though I should know from real life experience of many years out on the ocean that real waves out there rarely if ever behave in a simple linear fashion. The ocean is turbulent.
Though in the analogy department I think this might make it clear, or not...
http://www.sydesjokes.com/pictures/s/shit_hits_the_fan.jpg
For those wanting to know more about Freak or Rogue Waves, a 5-part series from the BBC on Youtube [part 1 below]:
http://www.youtube.com/watch?v=o8ZstKoyc9I&feature=related
-------------------
Freak Wave (1 of 5) 9:55
-------------------
The other segments can be found in the right sidebar.
Here is another example that is based on pure probability considerations. Laherrere plots fits to his creaming curves using something be calls "hyperbolic" functions. These aren't precisely a form of a hyperbolic curve that I am familiar with, but take on the form y=x/(1+x) or U=U0*k*N/(1+k*N). Check on the fit below that I applied using affine scaling (blue line).
This line can be linearized as I have shown previously if you plot the data as 1/y = 1/x + 1. Perhaps this is why Laherrere calls it hyperbolic, in that there is a reciprocal relationship between the ordinates (I would think hyperbolic would be reciprocal in only one of the ordinates, i.e. y= 1/x + 1, but whatever). In any case, there is a very simple derivation to this curve assuming linear dispersive growth of discoveries. The exponentially accelerating form gives the classical Logistic form for cumulative growth over a large region.
Just like HL, if we plot the reciprocal of cumulative reserves against the reciprocal number of wildcats, you can perhaps make some estimates of the ultimate for a region. The y-intercept of the linearized curve can give you the ultimate:
I describe this more fully here:
http://mobjectivist.blogspot.com/2008/10/significant-no-hyperbole.html
Nothing very complicated about this except for the jumps that we see in the reserve growth curves. These are simply the result of limited statistics on the data set. Yet I claim that we can understand and perhaps accommodate the statistics if we start modeling the growth according to non-heuristic analysis of exactly what is going on. The basis of all this is the application of dispersive growth in search space.
Just like trying to understand something like "rogue waves" via probability we can understand oil reserves with probability. It's just that I am not interested in rogue waves at the moment, I am interested in oil reserve modeling. As Christopher Walken said:
Let's get to work :)
If you want to take this approach then maybe the difference between my argument and others might be clearer.
To go with the wave concept correct a new field is in a sense like and earthquake starting a wave.
What I'm suggesting however is that via technology we are in essence able to create new earthquakes as the old wave peters out we induce a new quake that effectively creates a new wave superimposed on the old wave.
Reserve additions from technology replace the previous estimates its not additive.
Just like a double quake does not add two waves together but superimposes or replaces the oil wave which is not simple addition. In our case the new quake was much smaller and its really a small tidal wave on top of the vestiges of and old tidal wave not the one big wave people claim they are seeing.
On way to look at it is to think of a very large long wavelength wave with many small shocks creating wavelets of higher frequency on top. They might even double the height of the overall wave but obviously they die out faster than the big wave.
You can see how intuitively this tends to be shock like. You start the big wave quite early in time but then you repeatedly force it but all this does is cause smaller waves to run up the back side rising the crest but as your thinking making the wave more shark fin like.
Effectively exactly the same thing happens as the wave approaches shallow water the water in the front acts as a dynamic dam causing the water behind to pile up. For oil its probably clearer to think of wavelets generated on to of a long baseline wave. Basically same result but I hope clearer.
The amount of water is fixed there is no more or less. In a sense these shocklets are stealing water from the front by forcing it to dam up as if it hit shallow water.
And of course for oil the front of the wave is actually the backside production i.e its running in reverse the wave is actually pulling oil from its backside production not pushing.
I think whats important with this sort of thinking is its a simple physical model and it clear that your dealing with a superposition not simple addition since the waves vary in frequency.
http://physics.tamuk.edu/~suson/html/4323/super.html
Effectively I'm arguing a huge mistake has been made because people have incorrectly assumed a single wave of a certain frequency its fundamentally incorrect to treat oil production in this manner.
Its a superposition of several waves with different frequencies and intensities.
A very interesting result is this also invalidates the central limit theorem as applying since it violates the requirement that the parts are independent.
http://en.wikipedia.org/wiki/Central_limit_theorem
They are not independent nor random indeed the smaller waves are created in response to the big wave starting to crest. We went after more marginal oil supplies because the easy stuff was declining. The system is tightly coupled and the central limit theorem is simply not valid.
Good thoughts. Most of the explanation comes about from "fat tail" probabilities. Occasional freak waves come simply from the small probabilities of multiple sequential occurrences (multiplicative and not additive).
The reservoir sizes come about from a simple model of aggregation during their formation. The rates of diffusion follow a model of maximum entropy and they give a characteristic shape. I call this "dispersive aggregation". A limit of maximum size occurs really due to the constraints of the system:
The connected blue dots in the chart above about assumes a maximum size of 3000 and a characteristic size of 50. I eyeballed that and pasted it on the first try using the affine scaling laws of the model. I am not sure how the Parabolic Fractal Model gets derived. It seems to be some sort of heuristic.