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13 comments on Update on the 2007 CERA projects

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Stuart Staniford on October 14, 2005 - 4:30pm Permalink | Subthread | Parent | Comments top
I would say my subjective impressions are roughly as follows:
  • The bigger the project, the longer from commitment to first oil.
  • The bigger the project, the longer from first oil to peak production
  • The bigger the project, the longer production will get spread out over. Ie small projects ramp up fast, have a very brief plateau, and then decline fast. Big fields are likely to be produced with a longer depletion profile.
  • Delays are as much or more about political issues as about technical ones. If the industry has free rein, it is a pretty well honed machine for deciding how much oil is in a place and exploiting it. But the great bulk of the new projects are in politically challenging environments. The industry faces bureaucratic restrictions, arbitrary changes in rules, corrupt governments, environmental restrictions, and requirements to use home country personnel and contractors who may be less experienced than internationally competitive subs. Technical issues primarily seem to arise when the industry is first trying to do new kinds of projects, or encounters conditions it hasn't seen before.
  • It does seem to me delays and difficulties are likely to get worse. The current generation of oil projects is coming primarily from deep water off the coasts of Africa, Brazil, etc, as well as Russia, the Caspian, and the Middle East. Once the deep water is mostly produced, it seems like everywhere else is going to be either politically or technically very challenging - there's a lot of oil in the Russian Arctic, but there's no infrastructure up there, lots of ice, and the Russian political environment seems very challenging. Russian projects seem particularly likely to incur delay in the recent past. There may be oil in deep water off the US coasts, but the industry faces the considerable influence of the US environmental community. There's a lot of oil in Iraq, but good luck producing it.
  • Doing this analysis is definitely given me a slightly awed sense of respect for the oil industry. They deliver dozens of new projects a year and each of those is a massive multi-billion dollar engineering project in enormously challenging conditions. And all they get from the rest of us is bitching and whining if they screw up in any way. We are very spoilt.
  • The gap between discovery and peak production seems to be going down. I will analyze this statistically at some point, but my sense is it's now under a decade from discovering a field to reaching plateau production of it (unless it's particularly undesirable to produce for some reason - tiny or lousy oil/rocks, or it's in an especially inhospitable political environment (Sudan, Iraq, Iran).
  • In general, hardly any of our new oil is coming from a politically stable place with clean government and tolerably happy and free citizens.
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mw on October 14, 2005 - 4:45pm Permalink | Subthread | Parent | Comments top
Doing this analysis is definitely given me a slightly awed sense of respect for the oil industry. They deliver dozens of new projects a year and each of those is a massive multi-billion dollar engineering project in enormously challenging conditions.

Bravo!

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Jerome a Paris on October 14, 2005 - 5:08pm Permalink | Subthread | Parent | Comments top
Oh yeah. Kashagan (in the Kazakhstan part of the Caspian sea) is going to be a textbook example for years to come of the complexity of these projects (not sure in which year you put it in, but 2007 is possibly it)

  • extraordinarily high field pressure
  • very high sulfur content
  • located in shallow waters that are alternatively frozen, liquid (10m or so) or mud
  • the nearest town is 400 km away, and the nearest international airport 1,500 km away; winter lasts 10 months and summer is worse (mosquitoes and stifling heat)
  • you need to cross at least 2 countries to get the oil to any market
  • the sponsors include Shell, Exxon, ConocoPhillips and Total (plus others) as minority non-operating shareholders
  • China, Iran, Russia and the USA (well, the West) want the oil to come to (or via) them.

Should be fun to watch.
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Stuart Staniford on October 14, 2005 - 5:18pm Permalink | Subthread | Parent | Comments top
Yes, and then there's the political environment in Kazakhstan itself. I have Kashagan for 2008 but the risks are considerable as you note. It is enormous, however.
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Dave Cohen on October 15, 2005 - 6:49pm Permalink | Subthread | Parent | Comments top
Re: "the nearest town is 400 km away..."

It's not for nothing that the whole region is sometimes called pipelanistan....
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