 | A little snippet that may not be as good as it sounds | The Oil Drum | Oil execs speak to the Senate today |  |
A closer IEA look at Saudi Arabian production
Posted by Heading Out on November 8, 2005 - 1:43am
They see a peak in non-OPEC conventional oil production between 2010 and 2015 (page 140) but global oil production will not peak until after 2030. Since there is a tad much information to squeeze into a single post, let us therefore begin by looking just at the predictions for Saudi Arabia - with the beginning note that Ghawar (of which they consider Haradh III a part - p 510) will continue to increase in production until 2010, when it will start a decline, but at a rate that takes it down to 3.7 mbd in 2030. They point to a Saudi statement that their wells naturally are declining at around 6%, which is approximated to the 600,000 bd that Rembrandt asked about earlier today (p 146).
Saudi Aramco has already allocated the majority of its feedstock supply and no new round of supplies is expected before 2007. Liquids extracted from any non-associated gas discovered by international oil companies in partnership with Saudi Aramco under recent deals will not be available before the end of the decade. Associated gas from the planned development of oilfields in the eastern region will similarly not become available until the next decade.Since ten plants are in construction (page 496), the IEA notes that these are going to have to be converted to use another feedstock. And in passing it notes that the aquifers may not last more than 15 to 20 years at current rates of extraction (page 500).
In discussing the projected oil performance natural gas liquids (NGL) are included at around 1.3 mbd and 0.3 mbd from the Neutral Zone (which SA shares with Kuwait). Interestingly the IEA does not include production from Abu Sa'fah which is shared with Bahrain.
If reserves are indeed as large as official estimates show, production increases will depend critically on the pace of investment, which is largely a matter of government policy.The current spare capacity that SA retains is seen as being at Safaniyah, Zuluf and Marjan, all three offshore and producing medium or heavy crude. They note that Shaybah (the oilfield in the Empty Quarter) and which can produce 600,000 bd had helped offset most of a drop in production from Ghawar and Safaniyah in the 1990s.
And I will note that the report says
It has a very conservative approach to managing its reservoirs, generally aiming for fairly low depletion rates - less that 5% a year - in an attempt to maximize long-term recovery factors.The difference between this and the 6% natural decline rate is being overcome, by maintenance and drilling additional wells (p 511). The use of water flood to maintain reservoir pressure has been changed so that instead of using a "five spot pattern" where production and water injection wells alternate, Aramco uses a perimeter flood where water is only added at the edge of the field, forcing the oil up and in towards the center. They also point out that the industry, on average, produces four barrels of water for every barrel of oil (p 513) and that "in mature provinces such as the US and the North Sea, many oil fields have a water cut of more than 90%." I wonder who that was aimed at ? (Grin).
They list four projects to come on stream between now and 2010 - Haradh-III at 300 kbd (2006); Khursaniyah at 500 kbd (2007); Shaybah 300 kbd (2008) and Khurais/Manifa at 1.2 mbd in 2010. It is the last of these that is also a clarification. At present the Manifa oil is not refinable and thus part of the wait on this will be for a refinery to be built in Saudi Arabia to handle the oil, which has a high metal (vanadium) and H2S content. Khurais will also need a heavy water flood program. They list four other fields Abu Hadriyah; Abu Jifan; Fadhili and Harmaliyah that are currently mothballed and that could be brought back into production at low cost. Their list of current production (at least 2004) is also a little different from other lists I have seen. It goes
Abqaiq . . . . . . .434,000 bd*
Abu Sa'fah. . . . .189,000 bd
Berri. . . . . . . . . .213,000 bd*
Fadhili. . . . . . . .50,000 bd
Ghawar. . . . . . . .5,772,000 bd
Ghinah. . . . . . . .41,000 bd
Harmaliyah. . . . .28,000 bd
Hawtah. . . . . . . . .26,000 bd*
Hazmiyah. . . . . . .59,000 bd*
Manifa. . . . . . . . . .50,000 bd
Marjan. . . . . . . . . . .223,000 bd
Qatif. . . . . . . . . . . . 100,000 bd
Safaniyah. . . . . . . . .1,728,000 bd*
Shaybah. . . . . . . . . . .492,000 bd
Umm Jurf. . . . . . . . . .10,000 bd
Zuluf. . . . . . . . . . . . . .407,000 bd
Others. . . . . . . . . . . . .530,000 bd
Those marked with an asterisk show less production in 2004 than in 2000. The most critical being Safaniyah, which shows around a 300,000 bd drop.
There are some 70 fields that are currently not developed, holding about 10% of the country's proved and probably reserves. Of these Nuayyim, may be the next to be developed with a production of around 100,000 bd.
I have not dwelt on the fact that their "rosy"scenario will only come to pass if the world invests $17 trillion in research and exploration - something which seems to be less likely, but which also an opportunity for a later post, or comment.
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Another thing is that they are still way optimistic on discoveries, maybe you should note the amount of discoveries they are counting on from Saudi Arabia... (and the entire world, its USGS again!)
And they are less optimistic on reserve growth then in the 2004 report...
I think the depletion rate is way too conservative. And for them to go to 90% water cut will require them to drill how many new disposal wells? Which are probably not included in their drilling program...unless they dump the salt water in their desert, like they do every other bit of trash and refuse in their country.
It seems to me that whenever there are new numbers, they always support the current "dream scenario" put forth previously. But the 90% water cut statement was hilarious...too bad they chose to only include that and not the increased depeltion rates seen in the US and North Sea!
In any case, we're looking at either a steep decline beginning now, or an extremely steep decline beginning in a few years. North Uthmaniyah has already declined sharply, while Hawiyah and Haradh will decline much later than Ain Dar, Shedgum, and South Uthmaniyah.
Aramco insiders are actually saying that reservoir models indicate a "catastrophic" decline at Ghawar in 2008 or 2009.
The 500,000 bpd Khursaniyah project is not just Khursaniyah. It includes Abu Hadriya, Harmaliyah, and Fadhili.
If refineries cannot refine, and OPEC has been raising production as they claim, why doesn't crude collapse? Where would the excess output go? It is not that speculators can buy crude and store in their backyards.
If refining bottleneck is in the USA, why can't we import from other countries and why can't new refineries built?
I think we use 25% of world's oil production, what percentage of global refining capacity do we have in the USA?
Refineries are expensive, require extensive permitting, and are faced with political opposition from local neighborhoods. Furthermore, to be profitable they must amortize over many years. If oil is peaking the numbers for a new refinery may not work.
Most new oil discoveries will be a lower grade, heavier and more poisonous stuff requiring different refinery setups than for light, pure crude.
It makes some sense for countries like Saudi Arabia and Venezuela to build refineries and capture the refining profit. They know exactly what refineries they will need for their crude. They have no permitting hassles or local opposition.
Why should the U.S. build additional refining capacity for oil coming from abroad? Here today, gone tomorrow. I'd much rather see those investment dollars be spent for alternatives such as nuclear, wind, solar, and battery research.
Now that the driving season is over and people stay more at home, there is something like a timeout in the demand. The high heating oil and the next driving season will be far more critical.
This is the nature of the markets - every temporary glut/shortage causes huge variations.
On balance it realy doesn't matter if production is still rising at the moment in total because only the ligt sweet crude counts in the global energy picture... By the time refinieries are up and running I suspect we may have peaked in both heavy and light oil grades and therefore although the overall oil peak may not yet have arrived it is quite likely that the refineable oeak is here now...
IEA is "an intergovernmental body committed to advancing security of energy supply, economic growth and environmental sustainability through energy policy co-operation" for the OECD nations. The OECD coutries represent the world's oil consumers, MENA countries represents the largest part of the world's oil suppliers. No MENA country is a member of the OECD.
Although the nitty-gritty of the report is certainly interesting--for example, the apparent conclusion that Ghawar (of which they consider Haradh III a part) will peak in 2010 just as the non-OPEC production peaks and then exhibit the slowest decline rate in the history of oil production--the idea that this is merely a technical report is completely misleading in my view. To wit:
- The MENA countries are Islamic, OECD countries are secular or Christian. Like or not, this is a clash of civilizations.
- The Middle East is among the most politically unstable regions in the world (also, the Caspian Sea region, West Africa) but it is vitally important to America's (and other OECD members) interests because that's where most of the oil is. This will be especially true as non-OPEC declines set in.
- IEA wants MENA countries to end the NOC monopolies and open up E&P there to foreign investment by OECD controlled IOCs. Not so subtle blaming (and perhaps threats) seem implicit in the language of their press release. However, the $17 trillion number is plainly absurd and sets a goal that can never be met.
- Needless to say, many Friends of Osama do not want OECD oil companies, accompanied by their militaries to guarantee security, running around drilling wells in the MENA countries.
- Any forecasts concerning MENA oil & gas production out to 2030 in a volatile region like the Middle East is akin the predictions of Tim LaHaye or Nostradamus.
Andrew J. Bacevich wrote an article entitled The Real World War IV (Wilson Quarterly, Spring 2005) that talks about this. Unfortunately, it's not online but there's a review of Bacevich's book The Imperial Trajectory by Jerry Woodruff that discusses it. (Neoconservatives think that the Cold War was World War III, lasting from 1947 to 1989 and now the War Against Terrorism is World War IV). Bacevich believes that the real World War IV, following the Carter Doctrine, is really the fight to control the oil supplies in the Persian Gulf region and elsewhere. I agree.In my view, this real "World War IV" is already failing now in Iraq and the more general campaign to secure the MENA oil supplies out to 2030 will very likely also fail. I can't predict the future, but let's simply say the odds are pretty long. Weirdly, IEA's report builds the rationale for fighting this more general war but rationalizes our failure ahead of time. This failure will not be due to peak oil considerations but instead will be blamed on the recalcitrance of the MENA countries toward allowing sufficient foreign investment. Moreover, our inability to build "stability" and install "democracies" by military force in the region will be blamed on those terrorist Jihadist elements or Islamic fundamentalists who unreasonably believe that the OECD nations have no right to occupy their countries in order to secure their own oil supplies.
There are other dynamics beyond the crusade mentality: the OECD countries have highly developed economies, generally low birth rates, high per-capita energy consumption. A lot of Western Europe is in sharp population decline.
MENA have developing economies, high fertility rates and booming population, lower average per-capita energy consumption. Simmons' Twilight in the Desert goes into the issues this poses for Saudi Arabia, with the birthrate outstripping economic growth, leading to sharp per-capita GDP drops. This creates unhappy campers, and even more instability. And this will amplify the cultural divide.
I'd make a couple of safe predictions:
Heavy invesments won't be made: a) the MENA countries that have money are buying Treasury bills to keep their biggest customer afloat, as are the Chinese and Japanese. If they invest in oil infrastructure instead, there is fallout as the US dollar and economy take a dive. b) Nobody has $17 trillion to invest anyway, unless they want to print the money.
The fungibility of oil will erode. Iran subsidizes their domestic prices, has burgeoning domestic needs, and may become a net importer of oil in the next decade. Think they have much interest in supporting the US? Their oil will stay home if they need it. The Chinese aren't buying oil and gas everywhere to sell it: they want to secure it for themselves. And the oil sword may be wielded again.
We'll see how this is going long before 2030. There has been some feeling that the "terror premium" on crude has remained high because of the abject failure of the US in Iraq. We can topple a regime, but that's very different than keeping the oil flowing.
1) exported oil / total oil production
for each of these countries? You mentioned Iran and the IEA mentioned the other MENA nations (in the aggregate) as well. Demand at home is presumably met first, exports to generate revenue follows afterwards. But see below.
Obviously, when exports hit zero, all oil production is being used to meet domestic demand and imports follow based on how much of a shortfall there is in
2) total oil production / total oil demand
I think the interesting thing is the decline rate in ratio 1) since it shows how fast a nation's consumption is overtaking its total production and therefore is an important factor in how fast it is entering into meaningful depletion with respect to world demand, thus allowing a year on year view that depends on the domestic demand changes due to economic conditions in the producing countries. Indonesia comes to mind. Generally, I think it is too simplistic to just say a country has "tipped over" into Type III depletion without considering its domestic consumption growth rate. Theoretically, a country could be producing more oil but have less and less for export because of its rising internal consumption. . We could call that "Type IV" depletion. On the other hand, if the country is producing less over time but still exporting lots of oil because it is--well, economically poor and corrupt--that is a kind of Type III depletion but it's still a net supplier on the world market, isn't it? Mexico is a "classic example" of Type III depletion now--declining production, rising demand and therefore rising imports in the future.
Maybe I've overlooked something important here, so perhaps somebody will point that out or comment otherwise. Depletion may be modelled as "net exports", not "total production".
The usual take on production and depletion is local and geological: where is the oil, how much is there, what's the rate of production and the future outlook. Add it all up and you get the aggregate global supply.
Considering exports versus total production begins to put it into a local market-driven context. The sum of those local markets gets you to an amount of "available oil" and that's more useful for predicting the broader economic and social impact.
I assume you're going to the conference. Have a great and useful time.
One of the reasons for the riots is that French leaders have been absolute bastards towards allied people in Algeria, leaving them to die and then trying to ignore the ones who fled to France.
These problems are not simple and one dimensional.
this is text from my every2weeks column due late night. want to explain more to folks.
---
Oil & Nat-Gas Prices
As of Nov. 8: Oil closed at $59.71, down about $2.70 from two weeks ago. Local Duluth gasoline checks in at $2.24, down 10 cents from two weeks ago. "NYMEX Henry Hub" natural gas price was at $11.79 MMBtu. This is down about $2.50 from two weeks ago.
http://home.entouch.net/dmd/ghawar.htm
from that same page:
One of the things to keep in mind as you look at the model below is that the original oil column was 1300 feet thick. Today, the green layer is less than 150 feet thick. One must draw the necessary conclusions that most of the oil has been removed from Ghawar. The original article can be found at http://abstracts.seg.org/ease/techprog/downloadpaper?paper_id=817&assigned_num=762
and:
You can see for yourself, that the area occupied by oil is not very large compared with where the initial injectors were placed. One friend, a reservoir engineer, to whom I showed this picture said "It's over! Kiss your life-style goodbye!"