<And the world gets 4mbpd from these guysThe Oil DrumOne must expect dissent . . . .>

72 comments on Midweek Open Thread

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Typhoon on October 27, 2005 - 2:57pm Permalink | Subthread | Comments top
I think it would be interesting to discuss the plausibility of the idea that we've already peaked.  Bakhtiari created a model called WOCAP that was predicting a peak in 2007, but Bakhtiari claims that we are likely past Peak Oil.  He also says that production is really about 82 mb/d, even though "some institutions try vainly to push 2005 statistics towards 83 and 84 mb/d".  Simmons is saying just about the same thing.  He emphasizes how he speaks of sustainable peak production, not instantaneous peak production, but from some of his drastic predictions you would think that he truly believes that the exact peak is now.  

I've done a lot of research lately.  IMHO, there is a 25% chance that we have passed peak.  The peak will likely occur by 2007 if it hasn't already.  I used to think that it was a safe bet that the peak won't happen until the next decade.  Projections by Koppelaar and Laherrere suggest this.  However, when I look at Koppelaar's report, I can't help but think that he's way too optimistic about decline rates.  He also slightly overstates the amount of new production that will be added, particularly in the Middle East.

I think we can look at two useful smoking guns.  #1 is how Dr. Sadad Al-Husseini said on September 20th that the best case Middle East capacity in 2025 is 25 mb/d.  The current capacity from the Middle East is 21-23 mb/d.  Keep in mind that as Al-Husseini makes this prediction, he is confident that Saudi Arabia will easily produce above 12 mb/d.  Therefore, he is saying that production from the Middle East (best case) will remain flat.

#2 is how ExxonMobil predicts a non-OPEC plateau beginning in a few years.  They are quick to add that OPEC should be able to greatly expand production with necessary investments.  

If you add these two together (ExxonMobil says that OPEC is the only hope for expanded production in the future, but Al-Husseini says that OPEC can't do it), then I don't see how a hypothesis of an imminent peak is doubtful.

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Rembrandt on October 27, 2005 - 4:47pm Permalink | Subthread | Parent | Comments top
Interesting,

why do you think decline rates are way too optimistic in my report?

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Typhoon on October 27, 2005 - 6:03pm Permalink | Subthread | Parent | Comments top
I was the one on peakoil.com who commented that you listed Upper Zakum as a 650,000 bpd increase even though it is only 200,000 bpd.  I think your report is great.  You've done good research and you have the best tabulation of future projects that I can find.  

Maybe "way too optimistic" is an overstatement, but I say that the decline rates are a little too optimistic.  I agree that oil could peak around 2013, and then rapidly decline because next decade we'll have a much harder time adding new supplies.  You made a good comment in your report when you said, "It appears that the existing reserve base is rapidly being brought into production."  I'm just concerned that despite that, we'll still see a peak much sooner due to higher decline rates than you suggest.  I could give several detailed examples, but I don't want this post to be too long.  

If you were to listen to Simmons, you would not increase Saudi Arabia's production by any amount, not even a million b/d.  Simmons also thinks that Nigeria won't increase by much because declines will almost offset new fields.  On the other hand, one doesn't have to believe Simmons.  You think Nigeria's decline will be 2%, which is small compared to the amount from the new fields.  Therefore, you add 1.25 mb/d to Nigeria's production over the next five years.  

How do you estimate the decline rates?  That is very important.  In some countries, the current decline rate would work well.  For others, won't the declines accelerate?  It seems hard to determine, but I know that you did a lot of hard work to put together your report.  

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step back on October 27, 2005 - 7:37pm Permalink | Subthread | Parent | Comments top
I think it would be interesting to discuss the plausibility of the idea that we've already peaked.

IMHO it may not be as simple an issue as asking when, geologically speaking, we as a society reach the point where our oil extraction rate at the rig-site is at maximum.

It may be more complex than that.

Maybe we should look at the whole oil-utilization infrastructure?

The Peak Wood study offers an interesting parallel:
http://anthropik.com/2005/10/peak-wood/

It wasn't so much that there was no more wood, or that production of wood had maximized in the dense forests...

It was more that the increasingly longer trips out to the deep offshore woodsheds (OK, to the wooded hinderlands) to get the wood was becoming a growing pain for the collapsing society (Cypress, Rome, etc.)

It was more so that supporting the armies to protect the woodsmen who went out to the hinderlands to get the wood was becoming an economic strain ...

It was more so that the uncertainty of every next venture to get the next batch of wood was growing ...

It was more so that supporting the roadways along which the wood was brought back home was becoming an economic strain ...

If you look at the American situtation:
Maintaining our roadways (pipelines, refineries) is becoming a strain in view of changing climate and changing military security,

Maintaining and supporting our armies is becoming a problem as we go out to get that oil (from Iraq, Iran, etc.)

The ROI (Return on Investment) for each venture is becoming more uncertain. Iraq is not paying back like we thought it would (by "we", I mean Cheney & company of course) ...

So it is becoming economically unviable to boldly go out and get more oil in those outer quadrants where no Columbus has gone before ...

You see?

So it's not just about when peaking occurs at a local rig site.

Localized extraction peaking may have been the prime factor for domestic oil in Hubbert's time.

It is no longer the prime limiting factor for foreign oil in our times.

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shez on October 27, 2005 - 8:36pm Permalink | Subthread | Parent | Comments top
Hi Typhoon - I'd been thinking along similar lines and was also interested in Husseini's projections and what it means for the peak (see Simmons thread).

There is a lot more consensus on projections of non-opec peaking around 2010-2015, than there is on world peaking - mainly due to the middle-east being an information-free zone. That's what makes Huseini's view so interesting IMHO.

One such "non-opec" study (Wells, R.A O&GJ Feb 21) appeared in O&GJ recently. He projects non-OPEC peak around 2007-2011. On this basis he shows what OPEC will need to produce to fill the gap for IEA's low, medium and high demand forecasts:

As you wrote above Husseini says at best the ME producers will at best be able to increase from around 20mbd to 25mbd be 2014 and then plateau to 2025. This leaves the remainder  of OPEC to come up ~60-90mbd by 2025 which seems pretty unlikely.

Here is the corresponding non-OPEC forecast from the same O&GJ article.

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shez on October 27, 2005 - 8:48pm Permalink | Subthread | Parent | Comments top
Whhops minor stuff up - the rest of OPEC (outside the middle east) have to find around 20-40mdb (not 50-90mbd as written above) if Husseini's projection is correct. Still doesn't look any more likely though.
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TI on October 28, 2005 - 5:57am Permalink | Subthread | Parent | Comments top
A problem here is, what you mean with oil? Natural gas liquids are now counted in the "all liquids" production, but they are not oil in the proper sense. Besides they are a side-product of natural gas production and follow the Hubbert curve of gas.

Sweet light crude has probably peaked already some time ago. Most new fields are "non-conventional", mostly deepwater. This is oil but behaves a little bit differently in the depletion sense.

And we don't really know what is production level today or even what it was last year: somewhere between 80 - 82 mbpd. 2  or 3 mbpd difference means an 2.5% error margin at least. This is as much as the average production increase in a year. It is quite right to suspect that the peak is already here because we can't know. But remember: oil seemed to peak already in 2000, so we don't know if this it now or not.

But is it important to know the exact date of the peak? It can be known only afterwards when the downwards trend is visible i.e. a couple years or more after the actual peak.  The economic and political repercussions might appear before that, but it will be hard to tell that these were caused by the peak. We should not expect any sudden petrocollapse but a period of uncertainty and strong price volatility.

Those who don't "believe" in the Peak Oil will be as sceptical after that. They just say that the supply problems are temporary and caused by the likely recession and lack of investment. And probably those who expected a dramatic collapse and sky high oil prices will be ridiculed. And probaly I will be wrong with my "grey" scenario...
 

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