Where Supply Increases Come From
Posted by Stuart Staniford on October 4, 2005 - 2:14am
Clearly, it's not accurate to say, as some do, that if Saudia Arabia was declining then the whole world would have peaked. However, it probably would be true that if Saudia Arabia and Russia were both declining to any great degree, the whole world would be declining.
At Dave's request, here is a bigger picture with everything on, that is just about guaranteed to cause eyestrain. For some people, following the link to the PDF might be better.
Here's what BP says total production was from 1998-2004.
Note the dips due to the Asian crisis in 1998, and the slowdown in 2000-2002 following the tech-crash in the US and 9/11. Then the very strong increase of 2002-2004. I made the country plot from 2001-2004 as a balance between not wanting to weight the freak events of any one year too much, but also wanting to stay in the near past (on the theory that the near future will not be utterly different than the near past).
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(hey, I thought we dodged a bullet... guess it could have been worse!)
63 offshore platforms destroyed by Rita
Tue Oct 4, 2005 02:06 PM ET
WASHINGTON (Reuters) - A total of 63 offshore platforms in the Gulf of Mexico were destroyed by Hurricane Rita and a further 30 fixed platforms were damaged, the U.S. Interior Department said on Tuesday.
In a briefing on the damage done by Rita, the department also said that 13 offshore rigs were adrift, one was destroyed, 10 were damaged and three rigs were unaccounted for.
Rita hit the Texas-Louisiana border on September 24 with winds of 120 mph.
Shell's Mars platform to be down until 2H 2006 - Enbridge
HOUSTON (MarketWatch) -- The key Mars oil and natural gas production platform in the Gulf of Mexico probably won't be back on line until the second half of 2006, an executive with Enbridge Inc. said Tuesday.
The platform is majority owned and operated by Royal Dutch Shell PLC (RDSB.LN), but Enbridge pipelines move the gas produced there. Two other nearby Shell platforms - Ursa and Mensa - will be back up in November, said Doug Krenz, vice president for gas transportation at Enbridge.
"We expect to have the production back up in November at Ursa and Mensa," Krenz said in a presentation to investors. "Mars is a little longer-term fix, probably second half of next year." http://www.marketwatch.com/news/story.asp?siteid=mktw&dist=moreover&guid={76E323E6-E597-4DD1-98E8-88AA7E05354A}
WASHINGTON (Reuters) - A total of 108 low producing oil and natural gas offshore platforms were destroyed by hurricanes Rita and Katrina and likely will not be rebuilt, Interior Secretary Gale Norton said on Tuesday.
She said the destroyed platforms account for about 1.5 percent of oil output in the Gulf of Mexico and 0.7 percent of Gulf natural gas production.
Separately, the head of the Minerals Management Service said the damage done to underwater pipelines by the two hurricanes was not as severe as the damage done from mudslides caused by Hurricane Ivan last year.
"We don't think we have as much damage," said MMS director Johnnie Burton.
http://electricity.doe.gov/documents/gulfcoast_report_100405.pdf
Point of interest: the "to-date" cumulative shut in for the two recent storms now exceeds that of the entire period of Ivan shut-in from September 04 through Feb 05.
... and the shut in levels are still way-way ...
But how do we know that the figure's supplied to BP aren't also qouating some element of past production? After this appears to have happened in the 2004 review with around 300 billion barrels of OPEC oil being over-reported because past production had also been added to the equation.
It appears that SA (Saudi Arabian) production has now plateaued which is the reason we are seeing such a huge effort on their part to secure new equipment in order to drill more wells using teriary recovery methods, especially in ghawar, to shore up falling production and keep up appearances. What this does to overall depletion rate only time will tell, although it probably won't be a pretty picture.
I can't comment on Russia which will retain much geopolitical strength far into the future by virtue of her reserves, but I also wager that it cannot replace SA as swing producer, which means as SA peaks so does the world.
Regards,
SaturnV
http://www.prime-tass.com/news/show.asp?topicid=0&id=385156
Now, its written by equity analyst, not the government, but you can imagine the giddyness in Russian govt. of the prospects.
Nary a word about reserve life or depletion.
Meanwhile, Iran:
http://www.payvand.com/news/05/oct/1023.html
95, eh? How nice.
But some in Iran see renewables as important:
http://www.payvand.com/news/05/oct/1029.html
Matt Simmons Has a handle on this topic for some time now.
If We are in the midst of the Peak Like Ken Defayes(sp) Has predicted for the Thanksgiving week 2005. Then By this time next year we will see some really fishy things coming out of the Arabian Pennisula.
If the Political Fallout of the Higher than Normal heating season doesn't rock the Oil world enough, Something else is bound to happen before next OIL reports have to be filed.
Charles,
Acorns, The larger the better, Soak, peel, boil (get the bitter taste out) , and then roast makes a great flour or hot mash meal.
It would be interesting to see just the 2004 figures, as I'm sure it would not be as positive as for the 3 years.
My guess is that some of the countries with overall production increases over this time may have even declined in 2004. It would certainly reduce the 'rest of the world' increase.
Thanks for your work on this.
Total Petroleum Systems of the Paleozoic and Jurassic, Greater Ghawar Uplift and Adjoining Provinces of Central Saudi Arabia and Northern Arabian-Persian Gulf
http://en.rian.ru/russia/20051004/41593159.html
Russian oil output this year is expected to fall by 2.4% this year. This takes the bottom blue bar from 750 on the positive side to off the scale on the negative side at -222
I recall seeing that article. But it appears to emphasize insufficient economic and political incentives for production far more than the effect of "dwindling geologic resources." The former are certainly important, but are there any hard facts on the latter? Both China and Japan are eager for Russian oil. The Japanese are so keen to block Chinese access that they attached this condition to a proposal for funding a pipeline from Siberia. Having these two big powers fighting over your oil is great for business, perhaps most especially if you and the rest of the world are at or nearing peak.
(Here's a Feb 2005 CRS Report for Congress on Northeast Asia energy competition)
http://www.fas.org/sgp/crs/row/RL32466.pdf
There is more to be read into this graph however. How about the list of those 6 or 7 countries with the greatest increase in production during this period:
Kuwait
Iran
Algeria
Canada
Kazakhstan
Saudi Arabia
Russian Fed. (does anyone know if this is mainly from Caspian region?)
Anybody care to map these countries against recent US foreign policy and top national security interests? (maybe evn why the US tolerates Chavez in Venezuela as much as it has to date?)
I know: Invade Canada!
(why else do you think the PTB made such an (at the time) politically unpopular move?)
http://www.sice.oas.org/trade/nafta/chap-22.asp
Of course, that's never going to happen, at least not over the sale of oil. The US can buy all it can afford.
But, if I start to see Bush and Cheney painting us as terrorists, I will properly get nervous.
I see that we have substantial positive contributions from Angola, Nigeria and Equatorial Guinea. On the negative side, we're down small amounts in the Congo, Gabon and Cameroon.
There's a nice article by Big Gav out today about "Africa: US Oil's New Target", a German documentary. There's commentary in the film from Yergin, Klare and Barnett. Here's a quoteThere's also reported sightings of American troops in Sao Tome. Stay tuned....
The only way they can move forward is to use more and more of their energy for their own purposes. Eventually... in a peak or peaking oil world, they will look inward not outward.
Quoted here -- 15 bbo proven deep water reserves (2003)
Quoted here -- The West African oil province (the so-called Ecowas region or Gulf of Guinea) holds 33.8 bln barrels of proven oil reserves, 3.1% of the global total
Quoted here -- Besides the countries neighbouring the Mediterranean, Africa's "Oil-Dorado" encompasses the Gulf of Guinea, with reserves estimated at up to 60 billion barrels of crude oil.
But hey, as reported by worldpress.org United States Eyes West African Crude , so, who's counting?
Here's a serious document Gulf of Guinea Geology (pdf, reprinted from Oil & Gas Journal, Feb 16, 2004). It covers the "Golden Triangle" including Nigeria, Equatorial Guinea and Cameroon (and excluding Angola, others).
I think of this entire region, including onshore Nigeria and Angola, as just like the UK/Norway North Sea and predict it's Hubbert linearisation (as discussed in Stuart's posts) will have almost exactly the same pattern (eventually) as Nick's plot of the UK.
First, it reflects increased production, but not necessarily increased production capacity. Almost all of the SA, Kuwait, and other OPEC increase came from producing oil that had been held back from production to support prices and keep a reserve, not from new capacity. It does not reflect true new oil supply. That reserve is now gone, and therefore we won't see the increase continuing. The Russian production came largely from working over older largely depleted fields with new technology, which gives a temporary production burst, followed by rapid decline. As this has run its course, again the increase won't be (and isn't) continuing. Mexico is another major contributor to the increase shown, but we know that its major field is in decline, and 2005 production is less than 2004, with decline only beginning to accelerate. Each year new contries join the decline column. Given all this, I wouldn't be too sanguine about the direction things are headed. The chart can be misleading if you don't know the story behind the numbers.
Which reminds me of a question I've been meaning to ask. Production will presumably be nearly flat for several years around peak. But demand will keep going up. Doesn't that mean that scarcity predates peak by several years?
That is not so. For 2005-2007, you have to imagine that all the countries lie first on the 0 line, and then see how they change. The US will have a similar decline (actually greater because of the hurricanes) while Norway and the UK will have greater declines. Now, as you well noted the area of the rest of the world will have to compensate and exceed that for supply to rise. So you don't need "significant declines" in Russia and SA. Just leave them on the 0 change line (witch seems likely), and leave as well all OPEC countries there, together with Mexico. Now, Nigeria, Angola, Canada and the Rest of World have to compensate for the decline in the North Sea and the USA. Add to the decline group Indonesia and a couple of countries more, and I don't see supply being able to rise at all!. So your conclusion that Russian and SA declines are needed to stop supply growth are not correct IMO.
I look foward to further posts by you on the issue, and maybe new graphs with some 2005 data? :-)
Have a nice dayOil peaking or not but no chances for such an over 4% supply growth like last year. Seems that supply is now and next year practically flat, the increase is at most 1% - 1,5%. This shows already in the oil prices. Saudis need not go in decline, it is enough for them to stay flat to virtually kill the world supply growth. This may not be the Peak but...
http://www.peakoil.ie/downloads/newsletters/newsletter58_200510.pdf
I wonder if people will sustain interest that long?
Probably the curve ahead will be bumpy and there will easily be temporary declines, caused by storms, political events etc., before the overall top. This will mean volatile oil prices and - some more years guessing here about the timing of the peak...
I'll bet the next sighting of "the" peak will be wrong too. (I.e. we will see a decrease in total world production for a year or two, then it will climb to a new record high, just as happened in 2000-2003.)
If you are correct that production is about to decrease and then go up again (and you may well be), one difference from 2000-2002 is that the events would clearly be coming from the supply side and not from the demand side.
Why just this weekend, the Shiites and Kurds decided to change the ground rules for the referendum on the Iraqi constitution, a decision which basically disenfranchised the Sunnis. That can't be good for geopolitical stability in the Middle East....
It's almost as though we thought destroying Iraqi infrastructure was our only hope to reduce enemy traffic. That's a very depressing thought...
Simmons has some good points on the OPEC countries population and economy. Taken as a whole there lives well over 500 million people and they are on the average very poor. So they have good reason to develop their econmy, industrialize and add value to the oil they produce. This means increasing domestic oil use and diminishing exports.
Indonesia is a case in point. It is easy to calculate that a combination of increasing domestic consumption and depleting oil resources will have a significant effect on exports and the oil market prices. Iraq had an industralization policy based on energy-intensive heavy industry and petrochemicals. Not any more.
I guess I shouldn't be surprised. New Orleans showed that Americans are now expendable to the U.S. government. Why shouldn't Iraqis be?
But Iraq uses only 1/2 million bpd (though it's climbing fast since the war). Infrastructure destruction could only take out a fraction of that. Is that really worth doing?
http://www.eia.doe.gov/emeu/cabs/iraq.html
See the graph a few screens down from the top.
Chris
The wildcat success rate was just the sort of information I
asking for on the Monday open thread. Do you have a source
for this figure? Are there any figures for other countries
other than those for the UK I quoted?
After I wrote that post I figured someone would like me to provide the source. Unfortunately, I'm having trouble tracking it down again. I haven't given up, but don't have it yet. I read about these issues in so many places. I recall it was a report out of Norway about challenges in (as I recall) their new Northern exploration region. The numbers were provided in a brief accounting of successes and failures in the area and really struck me at the time given how much Norway is relying on that area to produce. The article was 2 - 3 mos ago. I'll let you know when I get the specifics. Generally, Norway talks about around 30% success in wildcats over previous years, which is available in numerous documents if you Google Norway oil exploration.