The Oil Drum | Revisiting the barrels per rig issue

Revisiting the barrels per rig issue

Posted by Heading Out on November 4, 2005 - 1:43am

The discussion about the rising costs of rigs, and the support equipment that goes with them has caused me to go back to an earlier source which pointed out, about a month ago, that Saudi Arabia was planning on doubling its drilling rig fleet from the current 55 to around 110. As part of this effort some deep wells will be drilled into the Arabian Gulf.

"We will be using very specialized equipment for this operation," said Tom Emmons, Ensco 76 drilling engineer. "That's because the target wells will be some of the most challenging that Saudi Aramco has ever drilled due to the high temperature and high pressure of these wells.
"The Karan-6 location is actually one of the shallower prospects," said Mulaik. "Several of the locations will require more than 6,000 m of drilling. However, the Ensco 76 can drill up to 9,000 m."
A second exploration rig will join the Ensco 76 during 2006 in drilling deep exploration prospects in the Gulf. The two rigs will drill 11 prospects scattered through Saudi territorial waters. The entire project will last from five to six years. This reflects a substantial investment by Saudi Aramco to discover new gas fields.

At one time I had tried to calculate how many wells it would take to meet the new goals for Saudi increased production. Some of my assumptions were a little off, but by going back over the past few years, using the OPEC Annual Statistical Bulletins, the number of wells that a rig can drill appears to average around 10. So that if we consider that Aramco need to produce around a million bd a year to match current well declines, and that they are promising to add about 400,000 bd per year to world supply, then an initial simple calculation would suggest that this would give an average required yield per well of around 1,270 bd.

Now it must be said that Saudi plans include that some of these wells that are to be drilled are going to be for gas, that some will be used for water injection, and also that in fact not all rigs are working at one time. For example, a quick check with Baker Hughes shows that of the nominally 55 rigs mentioned above some 37 are currently drilling on land and 1 offshore. (Remember also that while Aramco had decided to rent five more offshore rigs, one of those sank while still in the GOMEX, and two are apparently damaged). And while these were earlier reported to be going out for gas exploration, the Business Week story mentions that they will also be used for oil exploration and for reworking old fields.

In the Middle East in general Baker Hughes suggests that about 20 - 25% of the wells will be for gas, and perhaps 5% might be for other purposes (such as water injection), but even when these improvements are made, it does not lead to a very high assumed number for anticipated new oilwell production in the future. Bear in mind that in their presentation in defense against Matt Simmons comments, they had said that MRC could generate flows of up to 10,000 bd.

The current arithmetic is given more concrete numbers again by the BW story

According to one industry source in the region, the Khurays field, the largest expansion planned, will need an estimated 400 wells drilled to produce the target of 1.2 million barrels. If each rig drills six to seven wells per year, that would require some 20 rigs at the site for three years. The field will also need 2 million barrels per day of water injection, facilities to process the water, and pipelines.

This gives an average of 3,000 bd/well. This is a bit lower than the numbers I have used before, but the number of rigs that are being sought suggest that it is the new reality.

At the same time, with the shortage of rigs internationally, it is not certain that the number needed will be available. However Drilling Contractor notes

There may not be too many more new contracts coming from Saudi Aramco, however. The company said that most of those rigs have already been contracted. Other rigs contracted in the region were also brought in from other areas. Precision Drilling has four land rigs working in Saudi Arabia, with two additional units being refurbished in Kuwait that will begin working in Saudi Arabia in November. Those two rigs were mobilized from Precision's Venezuelan fleet.
Another rig that will be available in the region in 2006 is Thule Drilling's Thule Power jackup. ODS-Petrodata in Houston reported that this rig is currently being reactivated after having been idle since November 2002. In fact, the company said, the rig, the ex-Arabdrill 19, sank in 2002 and was declared a total loss. The rig is expected to be available for contract in mid-2006.
It is also likely that several of the jackups under construction in Singapore will fulfill rig requirements in the region. Of the approximately 40 or more jackups under construction or on order, nine are scheduled for delivery in 2006 and another 17 are set for delivery in 2007. . . . . . .Saudi Aramco is reported to have tenders out for three additional jackups to begin in the second quarter 2006. ODS-Petrodata also reports that Khafji Oil & Gas is expected to tender for at least one more jackup in the Kingdom. Additionally, ENSCO International's jackups ENSCO 76, 95 and 97 are scheduled to begin working offshore Saudi Arabia under long-term contracts this year.
Dayrates for these rigs also indicate that Saudi Aramco is willing to pay the high day rates necessary for equipment. The ENSCO 76 is contracted in the low-$100s while the ENSCO 97 is in the low-$80s. . . . .Onshore is a similar situation. For example, Nabors Drilling has 22 land rigs in Saudi Arabia, all working for Saudi Aramco. Nabors has two rigs contracted to Lukoil for a drilling program slated to begin in the Kingdom in early 2006. . . . . . .To fulfill onshore rig demand in Saudi Arabia, rigs would likely have to be reactivated or new units built. As far as Nabors is concerned, it has several rigs in the US that could be reactivated and refurbished but due to rates increasing in the US, day rates in Saudi Arabia and other countries likely would have to rise as well to entice those rigs.

As some of those commenting here have noted, US prices may limit foreign ventures, as the article observes:

Additionally, according to Mr Smith, drilling contractors are beginning to see term contracts in the US, making it even more difficult to entice a contractor to move a rig to international areas.

Which may mean that while Aramco may be able to meet it's short term needs for rigs, the world demand and shortage of supply may make this a growing issue in the not-too-distant future.

Revisiting the barrels per rig issue

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26 comments

george in vermont on November 4, 2005 - 10:25am Permalink | Comments top

"Randell Mills, a Harvard University medic who also studied electrical engineering at Massachusetts Institute of Technology, claims to have built a prototype power source that generates up to 1,000 times more heat than conventional fuel. Independent scientists claim to have verified the experiments and Dr Mills says that his company, Blacklight Power, has tens of millions of dollars in investment lined up to bring the idea to market. And he claims to be just months away from unveiling his creation."

Has anyone heard about this yet? Could this be true? The full article is on the Guardian website: http://www.guardian.co.uk/renewable/Story/0,2763,1627425,00.html

Leanan on November 4, 2005 - 10:47am Permalink | Parent | Comments top

Don't get too excited. Sounds to me like it's right up there with abiotic oil, or cold fusion. There may be something there, but it's not likely to be anything earth-shaking.

http://en.wikipedia.org/wiki/Hydrino

sekiyu on November 4, 2005 - 12:27pm Permalink | Parent | Comments top

Yes, if there was something there it should have swept the media by now, as Mills has been doing his tests for years. It doesn't look good that his patents have been pulled. We should keep an open mind about stuff like this, but that doesn't mean lobotomizing yourself.

On the other hand, maybe this is the power source for those hurricane-controlling ray guns that some posters were going on about during Wilma...

By the way, speaking of lobotomies, Japan's respected Asahi newspaper ran a story today about peak oil and concerns over Saudi output constraints. They cite the USGS survey that there's oodles of oil left, so basically cast doubt on peak assertions. Still, it's a series piece with another installment tomorrow. Maybe their frontal lobes will heal overnight.

Leanan on November 4, 2005 - 12:47pm Permalink | Parent | Comments top

Asahi Shinbun is covering peak oil? Interesting. Sounds like Japan is in denial, though. I heard some other Japanese newspaper recently did a similar story, basically dismissing peak oil.

I wonder how Japan is going to make out. As Jared Diamond points out in Collapse, Japan has done a lot of things right; few countries as industrialized as Japan have managed to keep almost 80% of their forest intact. And the extremely low birth rate many Japanese politicians fret over may turn out to be a good thing in the years to come.

But they are very oil dependent now. Oil was the reason for WWII. Tokyo probably won't be a fun place to be in an energy crunch.

sekiyu on November 4, 2005 - 1:41pm Permalink | Parent | Comments top

You're right about the denial. I work in an economics faculty at a good university in Tokyo. I asked a colleague what he thought about peak oil and other oil-related stuff, and he said he found it boring.
On the other hand, now that PM Koizumi has basically picked the even crazier nationalists Abe and Aso to fight over succeeding him next year, maybe some extreme tension with China and elsewhere will make oil less boring for him and many others.
Many people here still figure pissing off the Chinese is basically cost-free, because a lot of Japanese don't grasp what's at stake and how weak their position is. In the stand-off over oil deposits in NE Asia, I should think China has the better hand in the game. The US is unlikely to step in if an Abe or Aso regime provokes a determined and unilateral move by the Chinese. The issues concerning international maritime boundaries over here are too murky to sell bodybags to the US public and the Iraq debacle is likely to make people want to stay out of stuff the isolationists (in the US) could blame on the Abe-Aso-Koizumi approach. In a real stand-off, the Japanese would almost fold first, as most people wisely would not have the stomach to risk this going to a fight. Rich countries only go to war if they're sure they can wipe the floor with the enemy. So the nationalists here dream they're holding a royal flush when in fact their so-called buddies the Bushies have merely plopped their hand in a pot of lukewarm water. Waking up is so hard to do...

wkwillis on November 4, 2005 - 2:12pm Permalink | Parent | Comments top

China exports coal and Japan imports coal. If China wants to screw up Japan, it just has to stop exporting coal and watch the price soar.
In military terms, though, Japan can basically shut down China's infrastructure because the Japanese technology base is so much higher. They have far more fissionable materials, too.
An all out thermonuclear war between China and Japan would not cause a nuclear winter crop failure problem if it starts now, though, because it is already winter. We would just have a much colder than usual winter and a late spring. Maybe shift our farm crops a little south.

Leanan on November 4, 2005 - 2:22pm Permalink | Parent | Comments top

Japan would probably lose. They are basically de-militarized. We forced it on them after they lost WWII, and in return promised to protect them. Some credit this as one factor behind their economic success. They had no need to spend money on defense.

Now, we are trying to get Japan forget the pacifist stuff and take responsibility for defending themselves. But they know a good thing when they see one, and are resisting.

davidsmi on November 4, 2005 - 3:33pm Permalink | Parent | Comments top

Japan is far from demilitarized. They are third in total military spending ( see http://www.cia.gov/cia/publications/factbook/rankorder/2067rank.html ), some would argue second as they believe the US numbers for China are overstated for obvious reasons. And according to this site (http://www.nationmaster.com/graph-T/mil_arm_for_per) they have the 20th largest standing army. In short, it is a high tech military that goes by the name of "Self Defense Force." It is one of the best militaries in the world.

I've also read elsewhere (I'd look it up, but it makes perfect sense, so I'll leave that to doubters) that given the Japanese technological infrastructure they are probably only about six weeks away from being able to produce nuclear weapons.

Just thoughts to chew on.
David

Leanan on November 4, 2005 - 4:23pm Permalink | Parent | Comments top

Japan spends 1% of their GDP on the military. China spends over 4% of their GDP on the military. (We spend about 3% of our GDP, FWIW.)

I've no doubt Japan could build nukes if they wanted to. It ain't that hard (unfortunately). Plus, Japan made lots of weapons and sold them to all sides during past conflicts, and they launch satellites and such, so they have the expertise. And due to their nuclear power plants, they have the materials.

But Japan was on the wrong end of nuclear weapons, the only time they were ever used. It's been 60 years, but they're still kind of squeamish about nukes. I don't think they'll be arming themselves with nuclear weapons any time soon.

sekiyu on November 4, 2005 - 3:45pm Permalink | Parent | Comments top

Japan has a fairly potent military, ranking among the global top 5 in total defence budget. But countries don't go straight to a shooting war, and especially a nuclear war, without lots of steps before that. So maybe it's more realistic to think of which of the two countries, China or Japan, has the stronger capability to convince the other that it's willing to fight it out. Like America, the Chinese have fought plenty of wars over the past few decades (eg, with India and Vietnam) and so can probably sell war as an extension of politics. It's also a dictatorial regime with tight control of the media. And to top it off, the population at large has a strong sense of historical grievance against Japan.

In Japan, on the other hand, war is associated with defeat, deprivation, destruction and so on. For good reason, I might add. The threat of war would almost certainly cause a lot of today's nationalists to recalculate their positions. The hard-core nationalists would try to shout down dissent (as the Bushies did in the US), but that's hard to do in a media-saturated world.

So Japan would likely blink first. Let's hope these twits in charge here have run through the scenarios themselves, and know to avoid more pointless provocations. There are times when you have to fight, but only an amoral sleaze picks a fight and then sends other people's kids to die.

Nick Rouse on November 4, 2005 - 12:21pm Permalink | Parent | Comments top

I don't know why this has made it into the Guardian today. It is an old story. He first mooted the idea of a lower than standard ground state for hydrogen in 1991. He has written a 1000 page theory of it. According to some that have reviewed it, parts of it are good and original. Sadly the parts that are original are not good and the parts that good are not original. That is, there are lots of gross blunders interspersed with passages cribbed verbatim from others without attribution. If it were true not only would if trash the whole of standared quantum mechanics but also relativity as well as his theory is not Lorentz invariant.

Leanan on November 4, 2005 - 12:38pm Permalink | Parent | Comments top

I think it's because he (or his pals) are spamming the Internet with this stuff. They did it to PeakOil.com, and I suspect they are doing it elsewhere, too. Maybe they see high oil prices as a chance to promote their ideas. Or maybe they're trying to get funding.

astronomer1 on November 4, 2005 - 4:44pm Permalink | Parent | Comments top

Quantum mechanics has been so successful, with many calculations of transition probabilities agreeing with experimental data, that it is hard to understand how this idea of the hydrino can be correct. It's a geat pity that the Guardian doesn't give references to the professional articles published about this nonsense. Reminds me of the time a less distinguished astronomer asked a VERY distinguished astronomer where he should publish a new idea. The answer was "Punch", then the leading British humour magazine.

joule on November 4, 2005 - 1:21pm Permalink | Comments top

The article in the Guardian said nothing about how one goes about making this 'super hydrogen', so one can't really assess the amount of energy that needs to be expended in making it.

Even if it gives off substantially more energy than normal hydrogen when oxidized to produce water, the important question is: how does that energy output compare with the required energy input?

These type of extraordinary claims of new energy sources by independent inventors pop up every several years, and most of them soon fall apart when held up to scrutiny. It reminds me of all the wasted effort during the 19th Century to come up with a perpetual motion machine.

Still, it's important to keep an open mind and to not dogmatically dismiss all such claims without a fair examination. Scientists and engineers have a bad habit of dismissing many new ideas 'by inspection'.

However every single method for extracting useful energy entails some entity going from a high energy state to a lower energy state and releasing useful energy in the process. The theoretical maximum amount of useful energy that can be obtained in such a process in the relative difference in energy between the two states. Unless one finds a way around the laws of physics as we known them, there is no way around this fundamental constraint.

GreyZone on November 4, 2005 - 4:45pm Permalink | Parent | Comments top

Quantum nucleonic reactors is a topic most here ought to familiarize themselves with. It's not a "free lunch" as you correctly observe that releasing energy always involves state transitions from higher to lower. And that's exactly what makes the quantum nucleonic reactor interesting. It's so interesting that the US Air Force is considering prototyping drone planes using that power source as a way to keep the drones aloft over a battlefield for days or weeks at a time.

After learning about quantum nucleonic reactors, I've always thought they would be an ideal way to power a rebuilt heavy rail system in the US.

Everett on November 4, 2005 - 6:29pm Permalink | Parent | Comments top

These reactors are really an advanced form of battery. You have to excite or create the Hafnium nucleus to it's isomeric state. About the only way I can imagine getting an isomer Hf-178 is to soak Lutetium or Ytterbium 176 in a nuclear reactor and wait for a couple of neutron captures and one or two beta decays. Hopefully, there is a decent probability of the product nucleus falling into the isomeric state. I don't have the decay scheme to say for sure. However, the fact the isomer has so much angular momentum probably means it has a low production cross section..

Stormy on November 4, 2005 - 2:07pm Permalink | Comments top

This kind of stuff is always trotted out to muffle concerns about oil and future energy sources. Maybe someone will hit the jackpot, but time is growing short.

Greenspan mentioned the vast frozen hydrate deposits as one possibility. Yup, those babies pack a wallop. The question is: how to get that stuff to the surface. Greenspan dreams his anti-inflatinary dreams...not much more. Finite resources are not of concern to economists. They would rather discuss "sticky prices."

SlickVaguely on November 4, 2005 - 3:06pm Permalink | Comments top

My question for the oil-industry insiders is:

How long does it take to build a new oil rig?

If the shortage of rigs runs ahead much faster than the time it takes to build a new one, than wouldn't this be a symptom of "peak"? This sort of scenario seems to me to be exactly what the more reasoned doom-sayers have been saying, that there is a "tipping point" where the market is incapable of responding. Or at least responding in any way other than astronomical prices.

Offshore on November 5, 2005 - 11:06pm Permalink | Parent | Comments top

About 2 to 3 years for a jackup, 3 to 4 for a semisubmersible. But there are almost no shipyard slots at the big rig builders so they are telling customers they can't get deliveries before 2009. Some are starting to build at non-traditional places like China.

steverino on November 4, 2005 - 8:37pm Permalink | Comments top

i have a question about the original post by HO...what is not relayed in the info is what these flow rates mean...is 1270 b/d or the later mentioned 3000b/d/well a huge unattainable number or is these kind of yields to be expected from saudi offshore production?...without some insight the numbers are meaningless to the uninitiated.

Heading Out on November 5, 2005 - 12:31am Permalink | Parent | Comments top

Sorry, I should have put this into context a bit better than I did. The average Saudi well in 1995 produced around 6,000 bd. By 2003 it had fallen to 4,700 bd. Some of their recent wells have been producing at around 3,800 bd, which is the number that I have previously been using to get an estimate as to what their true capabilities are. It is a little difficult to get a true number, since one is rarely sure of the realistic state under which some of the wells are operating. Wells in the 6,000 + bd range are possible with multi-lateral MRC operations, where the main horizontal well extends out several miles through the formation. How many of these are currently in place is a continuing question. (They also take just a tad longer to install than your basic vertical well).

Fire Temple on November 4, 2005 - 11:44pm Permalink | Comments top

There is no such thing as "Arabian Gulf." There is Arabian Sea, north west of the Indian Ocean, and then there is Persian Gulf.

It is very strange how American oil men have named the Persian Gulf the Arabian Gulf to appease the sheikdoms of the penninsula. Even Arabs don't call it that. "Khalij al Fars," as it is referred to in Arab maps, means Persian Gulf. I read oil & gas magazines from all over, and it's only the Americans who call it "Arabian Gulf." When U.S. oil managers talk about Arabian Gulf when it even doesn't exist on the maps on their walls, they show how uneducated they are. I expected a little more from Heading Out.

Heading Out on November 5, 2005 - 12:24am Permalink | Parent | Comments top

I was actually trying to paraphrase the article, which refers to the area in those terms. However, if you will check with the reference to the comment, you will see that it claims to be the leading Arabic International Daily. The defense rests.

mikeB on November 5, 2005 - 10:57am Permalink | Comments top

Very nice. Thanks for debunking oil Creationism.

I said on an earlier thread that one of my pet peeves is how the abiotic creationists continually invoke Eugene Island as an instance of an oilfield "regenerating" itself. I found this refutation by Laherrere:

This increase in reserve estimate is so unusual that it led to an article in the WSJ . . . entitled "Oil: a renewable resource?--Odd reservoir off Louisiana prods petroleum experts to seek a deeper meaning," suggesting that oil was coming from deeper sources. . . . It is really nonsense. In fact, the Eugene Island oil and gas field is flanked by the largest and best known fault in the Gulf . . . which puts the reservoir in direct communication with the source rock. Evidently, the rapid depletion of the reservoir dropped the pressure allowing it to be recharged that [sic] oil and gas from the source rocks. But the declines have resumed. . . .