Koppelaar: Peak Oil, Separating Facts from Fiction
Posted by Prof. Goose on October 25, 2006 - 10:28am
Topic: Supply/Production
Tags: oil discoveries, oil supply forecasts, peak oil [list all tags]
In the discussion about the date of peak oil production there is often a lack of a common framework. This makes it difficult to compare arguments concerning the date of peak oil / liquids production. In this post I outline a set of clear suppositions that, I hope, will help to understand the issue better.
#1) Liquids Production has not increased since the 4th quarter of 2004.
This is a very simple observation shown in the chart below.
Liquids production can be subdivided in five sources:
a. Conventional crude oil (including lease condensate recovered from associated and non-associated gas production)
b. Natural Gas Liquids (NGL): (liquids or liquefied hydrocarbons recovered from natural gas in separation facilities or gas processing plants.)
c. Non Conventional oil (Tar sands, bitumen, extra heavy crude, oil shale)
d. Processing gains (backflows to refineries returned from final consumers to refineries for processing)
e. Alternative liquid sources (coal to liquids / biomass to liquids / gas to liquids). The first streams of coal to liquids have been planned in China to start around 2011/2012. A few Gas to Liquids projects are underway, mainly from Shell. Both sources will not provide more then a few million barrels per day at maximum by 2020. Biomass could provide a significant amount of liquids by 2020, at the moment however, this seems unlikely to happen.
#2) Current World conventional oil + NGL production is declining at an approximate annual rate of 4%. For 2006 this means that 4% of 81.76 mb/d (added sum of world conventional oil + NGL production) needs to come on-stream from new liquid sources such as oil fields under development to keep production steady.
It is important to define what decline rate means, especially when reading figures from other people/institutes. In general for an oil field, there are two divisions between production declines:
Gross decline rate - the drop in production that would occur if oil companies would not try to halt declines, or the natural decline level. Decline can be halted by introducing new techniques / workovers / drilling more wells and so forth.
Net Decline rate - the drop in production that occurs when the efforts by oil companies to halt decline are included.
There are at least three methods to determine the rate at which new production needs to come on-stream to offset declining production in peaked fields and peaked countries.
a. By estimating the reserve base of all oil field/countries and combining this with the production rate. With the help of mathematical formulas this can deliver the right depletion rate (decline rate of reserves) and therefore decline rate (decline rate of production). A very difficult method, due to the uncertainty of oil reserve figures worldwide.
b. By combining decline rates from literature / oil companies press releases per oil producing country and other sources to give the added sum of the world decline rate for oil production.
c. By calculating the total amount of new oil production coming from oil fields under development for a given year (say 2006) and comparing this with actual production figures for that year. The difference between both figures gives the approximate decline rate.
Personally I work with method b and c due to the huge uncertainty involving reserves. In the latest ASPO NL Newsletter I have come to an approximate net decline rate of 4% by means of method C.
I have tried to see whether my analysis is correct by using method b. From various sources I have obtained gross decline rates for nearly all large oil producing countries in the world. This varies between 4% and 10% depending on the country and the type of production (onshore / offshore / deepsea).
Two examples:
By combining these gross decline figures with new techniques / workovers / drilling more wells and so forth one can determine the net decline level. When separate decline rates from various countries are taken together, they give an annual net decline rate for world oil production at the order of 4% to 5%. An illustrative example is shown below, which gives the expectation from the Indonesian government for their oil production.
#3) The increase in world liquids production from current developments in the oil industry is sufficient to offset declines until 2010 plus an increase in production to meet low to medium demand.
There are various publications that confirm this supposition. By gathering data on oil projects / oil field developments one can estimate the amount of production that comes on-stream in the near term future, necessary to offset declines and meet demand. There are three such works that are available in the public domain: The International Energy Agencies Medium term oil outlook, Chris Skrebowski's Mega Projects report from Petroleum Review and my own estimates for which the latest data (until 2007) is available in the ASPO Netherlands newsletter #5.
In addition there are also several publications that are available for a large fee or clients only, such as CERA's liquid capacities report, Merril Lynch their oil supply analysis (12 october 2005) and Credit Suisse oil supply analysis (15 march 2006).
All these publications confirm supposition number 3; they disagree on the point of future oil price predictions and on long term oil production levels.
#4) The Peak in world liquids production is mainly influenced by new discoveries and non-conventional production increases, not by increasing the recovery factor of an oil field.
This point often leads to a large discussion between "the early and the late peakers". Can technological innovation such as the "smart wells" from shell which influence the recovery factor postpone peak?
One needs to think in terms of production not reserves to understand supposition four. Basically we know that 22 of the 50 large oil producers (more than 100.000+ barrels per day of production) have peaked for sure. (This excludes countries such as Iran due to the large uncertainty of their reserve base and therefore peak production). The production in these 22 countries is declining every year. At best the production in these countries will stay stable for a few years or have a short production increase after which the relentless decline goes on. In order to postpone the world production peak, other countries need to offset this decline every year.
The other 28 countries that still manage to increase their production do so mainly due to new fields coming on-stream and/or non-conventional production. Thanks to technological advancement, more oil from a given field can be produced, but in general this only helps to lower the decline rate in an already peaked field.
There are various cases such as the Cantarell complex in which nitrogen injection helped to push the oil production of the complex to very high levels before peaking, but these are not the standard. New techniques are introduced in most fields when the peak has already occurred, causing a slower decline or at best a temporary increase in production. Some examples:
In order to increase production at the scale that is necessary to offset declines, a significant amount of new fields needs to be put on-stream annually, next to the introduction of techniques that help to produce non-conventional reservoirs. An old example of the latter is the Duri oil field in Indonesia (18 to 20 degrees American Petroleum Gravity or medium to extra heavy oil). This field reached high production thanks to steam injection, which greatly enhanced the oil flow.
#5) Oil Discoveries have been declining since the `60s. We are currently producing three to four times as much oil as is being found.
This observation was first clearly published by the well known Dr. Colin Campbell, one of the founders of ASPO International. The chart below, which is adapted from his work, shows the trend for conventional oil (excluding NGL and non-conventional oil).
The same observation is confirmed by the largest database company on oil & gas in the world, IHS Energy, for annual liquids discovered.
#6) Conventional oil production will likely peak in the beginning of the next decade.
The amount of nations that can increase production from their conventional resource base (including deepsea) is declining every year. As said before, 22 of the 50 large oil producing nations have peaked. Some of the largest producing nations such as Brazil, Russia, Angola and Algeria are expected to peak/ reach a plateau at the beginning of the next decade. The only producers that might have the possibility to increase their conventional oil production at the scale needed in the beginning of the next decade will be the countries in the Middle-East. However, it is very unlikely that they can do so. Most of the supergiant to giant fields in these countries are at or near the end of their plateau production. To give an example, the largest oil field in the world, Ghawar in Saudi-Arabia, will start declining in the coming five years (if it has not already happened). The International Energy Agency expects this to happen around 2010 (World Energy Outlook 2005).
The only way that conventional oil production peak can be postponed, is by making various giant to supergiant discoveries in the coming years, which is very, very unlikely.
#7) The increase of non-conventional liquids production has it's limits due to scalability effects.
Many tout the advancement of oil sands in Canada and other unconventional sources as a wonderful source of new oil. The basic idea behind this is shown below in a graph from the Resources to Reserves report from the International Energy Agency. This graph is often used by the IEA, oil company CEO's and sometimes journalists as "proof" that there are plenty of reserves out there. Based on this assumption they conclude that there is no peak in sight.
The point that the IEA makes regarding reserves is partially true, in the case of non-conventional oil. However, it totally misses the notion that the limiting factor for non-conventional oil is not the reserve base, but the extraction rate. Comparing conventional and non-conventional liquid sources as done in the graph above is
like comparing apples and oranges.
As an example, we take the most promising non-conventional source, the tar sands of Canada. The optimistic predictions from institutes such as the Canadian Association of Petroleum Producers state that a production of 3 to 4 million barrels per day around 2020 is possible from the Canadian tar sands. At the same time, conventional production is declining at an annual rate of 4%, which means a decline of more then 3 million barrels each year.
To summarize: The most promising source of non-conventional oil in the world cannot postpone liquids peak for more then a single year.
#8) Liquids production will probably peak in the next decade.
Given the arguments above I do not see how liquids production peak can be postponed much further then the end of the next decade. The increase in production from the conventional resource base (including deepsea) + NGL will probably plateau/peak at the beginning of the next decade. At this point, non-conventional sources may postpone a total liquids peak for a few years, but not much longer. At this moment, I see no reason to change my peak/plateau prediction for all liquids, which stands between 2012 and 2017.
From your last peakoil report, you were predicting between 85.781 and 86.456 mbpd for 2006 (All liquids). The last 7 months EIA estimate is 84.33 mbpd. Have you tried to analyze what went wrong in your last forecast?
This suggests that the decline rate is not constant but increases with time. Have you ever tried to model the decline from the 22 declining countries using a logistic model instead of an exponential decline? the use of a logistic model will give you a decline rate that will slowly increase after the peak.I just wanted to say, excellent work, I really like the ASPO newsletter, as well. I like the mega-projects section at the end. It is something I have been working on, and am glad to see you've beat me to the punch. You certainly lit a fire under my ass.
Skrebrowskis and CERA's layouts are frustrating to say the least. I like how you have grouped things.
I do have one serious question, though.
You say 22 have peaked out of top 50. I have reviewed the top fifty and have come to a different conclusion.
I can only verify 12 peaking. I have 24 that have not peaked. I add to this the other 14 as "unclear"(is what I call it). I will submit that "unclear" amounts in essence to "not peaking." To me this says, 12 and 38 - or if you want to slpit the difference, 19 and 31. Not 22 and 28. I'm not intested in arguing. I'm fascinated by where we disagree.
I realize that these definitions, how they are calculated, and what they mean are highly problematic and subject to much debate.
I can submit a list here and we can talk about it(an idea I like since it would subject us to peer review), or we can continue this privately. I have no inherent interest in conducting any discussion publicly. You tell me. But for the hell of it, can you just name the 22?
I have detailed numbers and analysis regarding each of these 50 producers. I can email you information presently, but within a few days, I should have produced a comprehensive PDF, and hopefully will be able to direct you to a private website archiving this data.
I would seriously appreciate your input and analysis.
Sincerely,
Oil CEO
Rembrandt, Chris & Colin all engage in bottom up analysis. Their methodology lends itself to inherent upward revisions due to the lack of medium and long term production announcements by the oilco's. Most announcements are 3-7 yr timelines. As these companies see refinery enhancements in the 2012-2017 year time frame, imenent announcement of new and/or expanded projects will be forthcoming and with those, the annuan revisions to the above three models.
This has been the background to the merging of our twelve models over the past seasons. There is no evidence that a seachange is ahead in the next decade. The merging will continue and continued revisions in URR imply a Peak in the 2020-2030 era at earliest (subj to refinery capacity expansion) based on the history and magnitude of upward revisions by our conservative Models in the past three years ...
Conventional Oil reserves peaked in 1979 and have been falling ever since.
Peak oil has a number of factors, including an increasing recognition that burning oil at such massive volumes is a problem, in itself. This potential restraint to production is never considered by people who argue that oil production will increase, possibly because the entwining of the two subjects is just not clean enough - it is possible to accept the geology of peak oil, and its engineering aspects, but the entire framework of human society, including recognition that the short term must be balanced by a longer term? Too complex - and besides, people who think burning fossil fuels idiotic need to prove their position, while we all accept that economic progress through increased economic activity is in and of itself a public good beyond dispute. I have read there is some real cheap land available in West Virginia and Alberta - I wonder why people keep moving away from coal and tar sand mining operations, since cheaper land would seem to be the sort of economic benefit which would attract people, not repel them.
Simply saying that it will be possible to pump that much is not enough. Which I don't quite imagine will happen anyways - both the Gulf and the Russians have been throwing some real wrenches into scheduling over the past few years, while the Nigerians are just being typically unstable, over the last few years - and as for Iraq, well, you can decide whether production is likely to go up or down in a society which seems to be increasingly violent and riven. But decline is real, and neverending in places like the U.S.A., Great Britain, Norway, and well, at some point, that list will include every oil field on the entire planet.
I am not sure that such heroic measures of oil recovery will be as acceptable in five years as they are among the brave pioneers at the frontiers of human technology making us all observers in a world wide, real time lab experiment to empirically see what happens when CO2 is re-introduced to the atmosphere on a geologic scale in a timeframe which has nothing much to do with geology, but an awful lot to do with our and our children's lives.
Consider how much production has been lost in the past 5 years due to non-geological, non economic forces. Imagine if you could graph that, and model it into the future.
My guess would be that, because of the impending defeat in Iraq, unrest in Nigeria, and Putin's actions, etc., there will be greater losses in the future than there have been in the past.
Thus, "peak 2010" might become "peak 2007" because of forces which would be difficult to anticipate, let alone graph.
Actually, that is pretty insightful, as long there is some recognition that some production can be quickly restored (freezing in winter) while other production is gone (sunk in the Gulf).
Not likely?
The reference to Alberta was to an article detailing how a family farm is shutting down due.
Based on the figures that I have in my database yes. It's simple mathematics with plus and minus. Figure out the decline rate, figure out the new oil production coming on-stream. These figures say that the plateau that we are on at the moment is only a temporary one. If you want to know where it will come from in 2007 look here, this is as detailed as it gets:
http://www.peakoil.nl/wp-content/uploads/2006/10/asponl_newsletter_5_2006.pdf
The appendixes in this newsletter give all the oil projects that i have in my database which have been obtained and doublechecked from a variety of sources (mainly oil companies but also other oil project reports for instance).
This method is simple and reliable. It is ofcourse always possible that several countries in the middle-east will not inrease their production because of political or because of geological reasons. One cannot predict that this will happen. Since it is very unlikely that this is the case (to my opinion) I am not integrating this in my prediction.
Very good post, but I suspect your 2007 figures of production may not be correct. If one is wrong, others must be too. Chinguetti, in Mauritania did not produce at all in 2005 but was supposed to come onstream in Feb 2006 at 75,000 per day but so far has only achieved 33,000. I am a shareholder in Woodside Petroleum and that is why I know of this information. Also a 4% decline wood likely be exponential over a few years and rise above this percentage, Schlumberger says 8%.
Look at Ghawar, producing a little over 5 million barrels per day in 1981 with water injection of 4 million barrels of water and now below 5 million and water injection of 9.5 million per day. That water increase tells the story.
Interesting regarding Chinguetti, I am not saying that all the figures I have are correct, since I don't have access to very expensive databases who doublecheck all the data.
Some will be in error, others will not be included, which matches out probably.
"Also a 4% decline wood likely be exponential over a few years and rise above this percentage, Schlumberger says 8%."
I don't see why this would rise exponentially, what kind of decline are we talking about? Schlumberger their 8% figure is that net or gross decline?
The questions with Ghawar is how slow or fast the decline will go... not when it peaks because it will soon peak.
Sorry to take time to reply. Firstly, nothing I posted was a criticism of you but merely pointing out that many of these reports don 't measure up when production finally starts. Schlumberger's statement was 8% net. Over the past three to four years Exxon's has been around 10% worldwide. Further investigation shows Mutineer/Exeter in Australia will be below 90,000 per day and reserves will be downgraded.
Tiof in Mauritania has not even produced yet and 70,000 barrels per day has never been mentioned. So there are three fields in that report which are known to be wrong from a transparent part of the world. I don't believe that many of these fields will produce at the rates stated and in the those time frames, hence the 4% decline is way too optimistic. North Sea is around 15%, Australia is 13% and rising,Mexico rapidly rising in it's decline rate. Sorry, just think 4% is too low
Here's a question for the long-term outlook: Would you say that your research suggests a long-term annual decline rate of 4-5% as something policy makers can reasonably expect once the peak is decisively past?
the decline rate after peak depends mainly on four variables of which three are not very certain.
- the decline rate of onshore countries, which is a quite certain factor which lies at the order of 2% to 5%, on average around 4%
- The decline rate in peaking offshore countries, which we see in the north sea, will be at the order of 10%. When Brazil, Angola and Nigeria peak, these will sharply increase decline rates. Double so because they will be the few suppliers that can increase their production by large amount (millions of barrels) in the coming 8 to 12 years depending on which country. WoodMackenzie predicts that most of these deepsea suppliers will peak around 2012,2013,2014,2015.
- The increase in production from non-conventional sources, this will not be very large due to the timescales involved. Maybe at best 1 million barrels per year. When counting a mass rush towards coal to liquids + biofuels maybe 2 million barrels per year increase
Uncertain:4) the decline rate of the very large fields of Saudi Arabia, Iran and so forth. Especially Ghawar, is not so certain. I can't give you any clue on the decline rate that these fields will have. My personal opinion is that Simmons his claim that there will be huge decline rates is an exaggeration. I do not have any data to back up this opinion, so that's just an opinion.
Overall I would say that when peak hits, there will be a short plateau due to non-conventional sources and price incentives that will bring a few of the good old expensive oil fields that are laying in the cupboard for a very long time on-stream. After that decline will start to decline and will soon reach approximately 5% or 6% per year for a while, after which it slows down a lot due to new production from non-conventional sources and maybe even level off (when including coal to liquids, biofuels and so forth).
By the way, to my opinion the future is mainly electric, much more potential.
From the Canadian experience we can't conclude hard limits on growth in non-conventional oil, particularly since its growth potential is hardly played out yet. When conventional oil depletion becomes obvious, and the oil majors themselves decide that its better to invest in non-conventional infrastructure than to return profits as dividends, the price floor will have been established and the capital shifts will fall with a thundering roar.
I've been championing the cause of chiefly producing electricity with our FFs to power EVs and perhaps PEHV's as a long term trend in reaction to PO. Most people here though seem to feel that we will do away entirely with the personal car. Time will tell though I'm sure.
But we'll shrink it a lot, we'll minimize its use, and we'll drastically increase the number of smaller vehicles serving the same function - microcars, motorcycles, motorscooters, bicycles, etc. At the same time, we'll try to streamline the current form of the automobile, hybridize, electrify, etc. Given diminished use, we'll shift the social role of the automobile to where everyone doesn't have to own one - decentralized car-sharing programs are taking off now, carpooling hookup websites are sprouting up, and taxis are more numerous than private cars in some major cities. And any place that's currently busy enough to require a 4 lane road, we'll mass-transitize by some means.
Or something.
Hothgor said,
"That gives us enough time to moderate the massive economical impact peak oil will have on our society if we start with conservation and an Apollo scale build up of renewables such as wind and solar, and some EV's to boot. One can only hope that we get our act together before then."
Frankly, only if everything goes perfectly. The odds are not good. We are already facing a shortage of skilled technicians, researchers and fabricators across the board in any of the skilled technical trades, and demographically, this shortage is getting worse as the largest generation of "technocrats" are aging out (the boomers).
If we take the optimistic number given in these projections of 2017, that would give us essentially ONE DECADE. That is an astonishingly short amount of time. If we take the shorter number of 2012, that is essentially tomorrow.
The will to make