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57 comments on Concerning gas supplies and production analysts

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westexas on January 19, 2006 - 4:22pm Permalink | Subthread | Parent | Comments top
The Lower 48 peaked before serious production even began in Alaska.  In terms of timing of development, geology and distance, Alaska might as well be in the Middle East.  

The key to developing a useful model is to set reasonable geographic limits.  In time, the world--a geographically limited area--will show the same type of production behavior as our geographically limited models--Lower 48; Texas and the North Sea.  

Texas peaked at 54% of Qt (66 Gb), and production has steadily fallen.

The Lower 48 peaked at 48% of Qt (200 Gb), and production has steadily fallen.

The North Sea peaked at 52% of Qt (60 Gb), and production has steadily fallen. Furthermore, the North Sea P/Q intercept accurately predicted that the North Sea would have a steeper decline rate than Texas and the Lower 48.

The peaks significantly before 50% of Qt, e.g. Iran, have corresponded to political problems.

My proposed ground rules are:  (1)  reasonable geographic limits; (2)  decades of serious production and (3)  a Qt of at least 50 Gb.  

Within those limits, has any region shown production increases beyond 55% of Qt?

The multi-trillion dollar question is Saudi Arabia, currently at 55% of Qt.

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Halfin on January 19, 2006 - 4:35pm Permalink | Subthread | Parent | Comments top
It certainly sounds reasonable that once a field has gotten past a certain point, it has not been economical to try to force an actual increase in production. It would probably be possible to do so, if you spent enough money, but it makes more sense to spend that money on newer fields which will give you a much greater return on your investment.

This is why I have urged caution in extending these principles into the environment of a worldwide peak. Once we get to the point where there are no other fields to go to, where the only possibility is to spend more to improve production from existing fields, then incentives will be different and we may well see different results.

In the near-peak and post-peak periods, oil will rapidly increase in value and oil owners will try much, much harder than we have ever seen before to improve extraction from their fields. I don't know how much success they will have, but you can't extrapolate from past failures to resurrect declining fields and assume that this will remain true once we hit a worldwide peak.

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westexas on January 19, 2006 - 4:50pm Permalink | Subthread | Parent | Comments top
Oil companies in Texas have had considerable incentives to increase production from existing fields.  We have tried everything known to the oil industry.  The same thing is true in the North Sea.  In both cases, it's been all downhill once production peaked at around 50% of Qt.  Note that these two peaks were 27 years apart (1972 and 1999).  

The best example of the true problem is the East Texas Field, which is now producing 1.2 million bpd of water, with a 1% oil cut (12,000 bpd).  What can technology do to increase production from a field that has watered out? This is precisely the same problem facing the Saudis in the Ghawar Field.

At Matt Simmons has documented, better technology has primarily given us faster production rates--and faster decline rates once production peaks.

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jkissing on January 19, 2006 - 5:48pm Permalink | Subthread | Parent | Comments top
As we approach peak you would expect to see all available rigs jump out of cold storage and drill for hydrocarbons. That has happened. More money will not provide the world with hardly any more rigs in the near term. Meanwhile, reduced production/ng well has resulted in high prices for ng, which in turn has distracted the US rigs such that 85%, up from 50%, are now drilling for ng. Higher oil prices will just compete with high ng prices for available rigs - total US production will continue declining regardless of price. The same situation exists all around the world - Saudi poached deep sea rigs from our gulf to drill in theirs.
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Gets IT on January 19, 2006 - 8:22pm Permalink | Subthread | Parent | Comments top
I'm pretty sure that if you ask a geologist why the number of rigs drilling for NG is relatively higher, she/he'll say that it is not because they had a choice between drilling either an oil well OR drilling a gas well, but that they (geologists) see a 5.67 times higher successful completion percentage (or would it be 5.67 x the # completions x expected profit/completion?  Anyway...) in recommending that they try drilling for gas rather than try to drill for increasingly scarce oil with holes that have increasing probabilities of coming up dry.
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jkissing on January 19, 2006 - 8:31pm Permalink | Subthread | Parent | Comments top
Its simpler than this. ng companiew bid against oil companies for rigs, and can afford to bid more because ng has increased much more than oil over the bast couple of years.
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Nate Hagens on January 19, 2006 - 8:50pm Permalink | Subthread | Parent | Comments top
Actually that used to be true but now isnt. Since Jan of 2003, Nat gas has gone from $5.10 to $9.20 or up about 80% -(in November it was at $15.70+) During the same period WTI crude has gone from $32 to $68 or about $115%. If price is the switching impetus, expect the # of rigs drilling for gas to decline -
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Gets IT on January 20, 2006 - 5:57am Permalink | Subthread | Parent | Comments top
I thought that somebody would bring that up, which is why I included the semi-formula for maximizing expected returns if gas price had increased overproportionally to oil in recent times, rather than just having left it with the formula based on  choosing X from the total available possibilities, so there was really no possibility of a wrong answer as I kinda' suggested both could be driving factors, but anyway... I know that there's a hellova' lot more gas fields than oil and its a long-held geologist's (shall we say) "superstition" that its always easier to hit a producer (oil or gas) near the ones you already know are winners.  Usually they'll try that unitl its even plainly obvious to the investors that there just aint any more to be found here and they can't trust the geologist's recommendations any longer, 'cause the geologists are still saying to drill the next 40 acres right there, even if the last 10 came up dry.  Nobody's more optimistic than a geologist.  (I don't mean that in a poor way.  I have much respect and know I don't have X-ray vision either.  Just that the continously optimistic production forecasts made it real hard for me to optimize the gathering system when the wells would make 30 MMCFD for 30 days than fall off to 50,000 CFD in the next couple of weeks and stay there for the next 2 years.  Granted, it wasn't the best producing formations they were drilling on either.)

I see there's another one that agrees.

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