Because Matt Deserves His Own Open Thread....eh?
Posted by Prof. Goose on November 2, 2006 - 7:28pm
Topic: Supply/Production
Tags: aspo-usa, matthew simmons, peak oil [list all tags]
"Data always beats theories. 'Look at data three times and then come
to a conclusion,' versus 'coming to a conclusion and searching for
some data.'" [The former will win every time.]
--Matthew Simmons, ASPO-USA conference, Boston, MA, October 26, 2006
Some time soon I will add a post about some of his conclusions at the end, relative to a different Conference I was obliged to go to for my day job.
HO
I think Simmons, Deffeyes, SS, Khebab & Westexas, and Darwinian do a better job of incorporating the 'intangibles of unknown unknowns' than the other leading theorists. I think they have a better hunch of Peak Everything feedbacks forcing the decline.
From declining grain supplies, water shortages, soil degradation, global warming weather effects, world debt levels, rising violence, infrastructure corrosion, pollution and waste, decline of technical expertise due to FF worker retirement, rig shortages, continuing overpopulation..... on and on, it all feeds back into the overall effectiveness of detritus energy extraction.
An aging cheetah just can't hunt as effectively as a young cheetah in it's prime.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I'd followed peakoil form a distance for many years and the commodities Bull Run, your book, and the May correction this year, followed by chance email correpsondence with Westexas led me here.
In Boston I only asked one question, and that was to Richard Heinberg - who said, amongst other things, that he read TOD every day - so I was wondering what your view is of The OIl Drum?
I'll be back later on with some data.
Cry Wolf TOD UK Contributor
I'm off to Drumbeat to Beat the CEO.
CW
I think Simmons may underestimate the Saudi Arabian reserves located in a few hundred fields which I often refer to as "all the rest". He makes the point well that most of Saudi production has come from 6 giant and super giant fields and from a petroleum geology perspective we just know that there will be hundreds of smaller fields around that have yet to be devloped and discovered. I don't think this will make any differnce to KSA peak but may have a profound effect on the down curve - if the Saudis are able to discover and develop these remaining resources.
I also think he is a bit harsh on the Saudi history of reservoir management. For sure, they didn't know much of what was going in Ghawar for much of its early life - but at that time I don't think anyone else would have done much better. The Saudis, after all have withheld and restrained their production for decades - which is in fact good husbandry of reserves - much better than for example UK, Norway and USA who just pumped as fast as they could - as it turns out at very low price, which has contributed to the near destruction of planet Earth.
I also think he should pay a bit more attention to the growing producers - Kazakhstan, Azerbaijan, Angola and Brazil - these countries have large and new reservoirs with full reservoir potential. However, it may turn out to be the case that unexpectedly high depletion rates in the North Sea and Brazil wipe out any gains from these new areas.
Simmons has done a great job publicising the peak oil threat - it is just a question of getting the balance right - and not just focussing on all the negatives, all the time.
I said I'd be back with some data - so here is the HL for the UK, all oil fields incluidng the Atlantic margin. So what if KSA production has a similar dog leg pattern?
So Matt - I know you're out there - what do you make of the UK HL? The fact that the UK has had a punctuated production and discovery history may infact have strong parallels with the unfolding KSA production and exploration history.
Saudi Arabia is not all of the Arabian Gulf basin. It sounds like some may want to pick and choose data to prove a technique to prove a point?
The fact remains that the North Sea and the Lower 48 peaked at the same point. Today, the world was where the North Sea and the Lower 48 were at when they started declining, and the world is showing declining crude + condensate (C+C) production (EIA).
Matt - still hopeful you may call by with comments.
These were all factors in Texas production, which is why I think that Texas peaked later (as a percentage of Qt) than did the overall Lower 48. And as I have noted, KSA is now at the same point that Texas started declining, as a percentage of Qt, and KSA--like Texas--is showing lower production even as drilling activity picked up.
Also, Texas, as one would expect, had a sharper post-peak decline rate than did the overall Lower 48. I expect to see a similar pattern regarding KSA and the world, probably compounded by the fact that KSA is so dependent on their largest oil field.
Hothgor,
I have frequently cited the example of Texas, where, after oil prices went up by 1,000% from trough to peak in the Seventies, the industry responded with the biggest drilling boom in history, which increased the number of producing wells by 14%, which resulted in a 30% drop in production.
Historically, past the 50% of Qt mark in a given region, increased drilling, while it may be profitable, has not led to increasing production.
Again, the basic premise is that we find the big fields first, whether it is Texas, the Lower 48, Total US, Russia, North Sea, or KSA. The smaller fields that we find past the 50% of Qt mark have historically not been able to make up for the declines of the old, larger fields. That is why the current world C+C decline, at the same mathematical point at which the Lower 48 and the North Sea started declining, combined with the near certain decline/crash of the four current super giant oil fields is such a compelling argument for the "Yes, we have peaked" position.
Westexas, how ya' been?
Even more down to the "pocketbook" issues, for those who use the low price now as an indicator that "peak cannot be close at hand, take a look at the histroy of U.S. oil prices.
http://en.wikipedia.org/wiki/Image:Oil_Prices_1861_2006.jpg
Note that in real dollars, on the EVE OF U.S. PEAK, our oil prices dropped to an inflation adjusted level not seen since the dark heart of the Great Depression, and not seen before that since the birth of industry! It's astounding to think about, the ABSOLUTE LOWEST PRICES were within monthes of what we now know to have been the ABSOLUTE PEAK of American production. The roads were full of big block power rockets, the lakes were full of sexy fast boats, the air was full of the jet set, oil was as CHEAP as it had been in a lifetime, and peak was within monthes.
We were then, as we are now, RUNNING BLIND. For the public at large, there was, and will be NO WARNING, at least none we will listen to.
Roger Conner known to you as ThatsItImout
Then there's the junk mail. Today there were three (3) different full-color, heavy cardstock flyers featuring images of oil derricks and jack pumps. All from the Democratic candidate for U.S. Representive, trashing the incumbent Republican for taking money from evil oil companies and giving them tax breaks. "Putting Big Oil ahead of our families!"
Wonder if it was planned before gas prices went down?
I told my boss today that this would reinforce everyone's conspiracy theories.
I posted this a few days ago, but no replies.
Recall that Aug is traditionally the start of the peak hurricane activity, so any fanning of fears would help jack up oil prices.
Johnny Carson & the national toilet paper shortage:
http://home.nycap.rr.com/useless/toilet_paper/
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It actually all started as a joke. Johnny Carson was doing his typical NBC Tonight Show monologue on December 19, 1973.
Heeeere's Johnnnnnny....
Of course, Johnny, like most talk show hosts, had a staff that helped write his monologue. His writers had heard earlier in the day about a Wisconsin congressman named Harold Froehlich. Froelich claimed that the federal government was falling behind in getting bids to supply toilet paper and that "The United States may face a serious shortage of toilet tissue within a few months".
His writers decided to include a joke based on this quote in Carson's monologue. He said "You know what's disappearing from the supermarket shelves? Toilet paper. There's an acute shortage of toilet paper in the United States."
Too bad they couldn't see the consequence of this statement. You may not be aware if you are young, but the early 1970's was a time of shortages - oil in particular. The next morning, many of the 20 million television viewers ran to the supermarket and bought all the toilet paper they could find. By noon, most of the stores were out of stock! Stores tried to ration the stuff, but they couldn't keep up with demand.
Johnny Carson went on the air several nights later and explained that there was no shortage and apologized for scaring the public. Unfortunately, people saw all the empty shelves in the stores, so the stampede continued.
Scott Paper showed video of their plants in full production to the public and asked them to stay calm - there was no shortage. The video was of little help. The panic fed itself and continued.
They finally got the shelves restocked three weeks later and the shortage was over. It is the only time in American history that the consumer actually created a major shortage (I don't think that the "shortage" of Barbie or Power Ranger dolls at Christmas time could be classified as a real shortage!).
And to think that it all started as a joke.
Useless? Useful? I'll leave that for you to decide.
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http://www.cnn.com/2005/SHOWBIZ/TV/01/23/your.memories/index.html
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I come from a family of night owls. In my early teens, I remember sitting up one night watching Johnny. One of the jokes in his monologue had to do with an alleged toilet paper shortage. It was just supposed to be a joke, but it seems that most of America (including my mother) took him seriously, which caused an actual nationwide toilet paper shortage for a day or two. Being a Mormon family, mom decided that along with our year's supply of food storage, we should also start keeping a year's supply of toilet paper. Johnny Carson was one of the last clean, classy, and truly talented entertainers on TV. He will be greatly missed. V. Robison, Waco, Texas
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I was working at a grocery store when this happened--I distinctly remember people freaking out over the thought of being caught without toilet paper. We had a very difficult time restocking the shelves. When the shelves had no toilet paper, people bought large amounts of Kleenex and dinner napkins as emergency backup.
Couldn't someone have profited immensely by doing the same thing by fanning fears of oil futures, then when Goldman Sachs revised their index, make another killing as the crude price declined? As mentioned before--No Proof, just speculation.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Oh, sure. Have you ever spent any time on any of the Yahoo stock message boards? Shorts are always trying to cause a panic, and longs are always talking of big news that's about to come out. But, to really affect the market, the person fanning the fears has to have credibility with the market. The leader of Iran has the power to influence the market (although less than he once did). The leader of Togo, not so much. :-)
Thxs for responding. Heinberg and his inside source [whoever that was?] was not credible to the Peakoil crowd and the market makers? Recall how many posts on TOD, and how many other blogs and websites picked up on Heinberg's comments in early AUG. Recall the accuracy of TODer SAT later warning that prices had gotten way too high and needed a correction. As mentioned before-- No Proof-- just speculation on the madness of crowds.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Middle East at a crossroads
by Richard Heinberg
Published on 4 Aug 2006 by MuseLetter / Energy Bulletin. Archived on 4 Aug 2006.
...
A New Oil Regime in the Middle East?
There is considerable danger that the smoke and fire from these three geographic flashpoints--Iraq, Iran, and Lebanon--could converge in a larger regional conflagration. In light of all this potential for apocalyptic mayhem, a discussion of the oil business may seem almost frivolous. But it is important to remember that, historically, the drawing of borders in the Middle East; the establishment of British, French, and later US-backed puppet governments in these faux nations; and the rise of a radical Islamic fundamentalist movement to challenge the Western-backed regimes, have all been fueled by the wealth produced by oil, and by the need for oil on the part of importing countries.
For decades there was a petroleum status quo of sorts in the Middle East: the capacity for production exceeded demand, and OPEC worked to restrain exports in order to keep prices from collapsing; meanwhile big producers like Saudi Arabia served as the world's petroleum bankers, maintaining the solvency of the system. On only one occasion--the embargo of 1973-74--did the swing producers withhold needed oil flows for political reasons, or cause prices to reach levels unacceptable to consumers (the other major post-1970 oil shocks, due to wars or revolutions, were beyond OPEC's control).
Now the status quo is crumbling--not so much for political reasons (though those are certainly imaginable, given the situations outlined above), but for reasons of geology.
Questions about the real size of Kuwait's oil reserves have emerged in the Kuwaiti National Assembly, leading the opposition party to call for production cuts. Remarkably, Kuwait appears to be groping toward implementation of the Oil Depletion Protocol, without ever having heard of it. However, from the standpoint of nations that want to keep the oil flowing so the global industrial party can continue, this is bad news.
Even worse news, potentially, comes from Saudi Arabia, where oil flows have shrunk by some 400,000 barrels per day over the past few months, despite astronomic prices. No one knows for sure what is going on. The Saudis themselves say the production cuts are due to lack of demand, but this hardly seems plausible, unless the kingdom is only able to deliver unwanted heavy, sour crude to market--but even in that case, one would expect flows to increase, with a price discount factored in for resource quality.
At the same time, the Saudis are hiring just about every spare drilling rig in the world, resulting in a dramatically falling rig count in the Gulf of Mexico--a place that would otherwise be seeing an increasing count, given the fact that Mexico's giant Cantarell field is in now in steep decline, with dire implications for the nation's economy.
Matthew Simmons (Twilight in the Desert) has been insisting for the past few years that Saudi production is close to peak and that Ghawar, the world's biggest field, may be in decline. Now many others are speculating that this is the real reason for the falling production figures.
What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline. At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.
Disturbing Trajectory
While these events in Kuwait and Saudi Arabia are not front-page news, they are in their way every bit as significant as the ongoing violence in Iraq and Lebanon, and the ritualistic war dance of the American and Iranian leaders. The Israel and Lebanon situation seems to be about religion, terrorism, and land; the US-Iran situation seems to be about nuclear proliferation. But if one looks beneath the surface, nearly everything of significance that happens in the Middle East is at least partly about oil.
It may be pure coincidence that, just as the world's biggest oil producers are reaching a historic turning point signaling the end of the energy regime that has held since the end of US production dominance in 1970, a war has erupted between Israel and a militant organization supported by a nation the US plans to attack anyway in order to maintain dominance of world oil supplies going forward. History is full of such coincidences. But coincidence or not, it will be difficult to keep these unfolding realities from rebounding off one another, undermining attempts at a peaceful resolution.
Some commentators speculate that we are seeing the slow-motion commencement of World War III (or IV or V, depending on who's counting). I have no interest in fueling apocalyptic speculations. My strong wish is for a quick and peaceful resolution of the Israeli-Hezbollah-Lebanese conflict, a US stand-down from confrontation with Iran, and a speedy, voluntary US exit from Iraq.
In his talk at the ASPO conference, Terence Ward repeatedly said that America's bombing of Iran would make the work of petroleum depletion analysts easier--presumably because skyrocketing oil prices would force everyone to acknowledge that Peak Oil is a reality. On this point I disagree. If the scenario Ward outlined comes to pass, the public's attention will be fixated on military developments and casualties, with horrific news footage dominating nearly every moment of every television news broadcast. Oil prices will indeed soar and everyone will feel the economic pain from a crashing global economy--but few will look to geology as an explanation. Instead, they will point to the obvious proximate causes--attacks and counterattacks disrupting oil shipments, with speculators pushing prices even higher than they would otherwise go.
We have many reasons to hope that events are not spinning out of control.
http://www.energybulletin.net/18904.html
awesome post.
Thxs, but it was never disclosed precisely who divulged this info to Heinberg; no other corroboration from another party--that should be the first clue to get the alarms ringing. IMO, Heinberg, if he realized how explosive this info could have been, should have sought confirmation from another source before going public. If not, he should have never mentioned it.
I think Heinberg was just the messenger; the unwitting conduit-- but I think it would be fascinating to know who talked to him.
I am on R-squared's side: IF this person was just an influential market-trader looking to make a financial killing on the sly, or an agent hoping to effect prices & timing for the election, and NOT an IOC oil executive. It has all the makings of a PR disaster for the IOCs if prices start rising after the election. I would think even the IOC oil execs would want to know.
If this was an internal IOC action, similar to BP's clowns manipulating the propane market, then the public's attitude could get real ugly in the future. IF this key person was a KSA ARAMCO executive--I am unsure if any US laws apply, but if those so-called "production rumors" prove false--his name is mud, and Heinberg should point him out as never to be trusted again. Just my two cents.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Just to remined everyone, depending on what the Saudis were actually producing of late, their fourth quarter production will be down by between 600,000 bpd and up to 1,000,000 bpd from their production level when Matt's book was published. Also, note that the Saudis were unable to ramp up their production in the fourth quarter of last year to make up for the hurrican damage. In fact, that is when production started falling.
I would further remined everyone that Ghawar is now at about the same stage of depletion at which an analogoue field, Yibal, started crashing--much to the surprise of the Shell Oil Company, which was in the process of upgrading their surface facilities to handle an expected flood of new oil. Instead, Shell got a flood of new water.
Let me summarize.
There was clearly at least a perceived need for more oil following the hurricanes. The Saudis promised more oil. Were they able to deliver? No. Instead, it required a large coordinated release of emergency inventories.
KSA is now where the prior swing producer, Texas, started declining. Is KSA showing falling production? Yes.
Ghawar is now where an analogoue field started crashing. Is Ghawar declining or crashing? Who knows? We do have what Heinberg reports as a credible source that Ghawar is crashing. And there have been other reports circulating that the water cut is up to 50%.
But fundamentally, the problem is this. KSA--and the world--are highly dependent on one rapidly aging oil field, where the remaining oil is in a rapidly thinning oil column between a rising water leg and an expanding gas cap. From thir point forward, Ghawar--like Cantarell--can have high short term production rates, or higher remaining recoveries, but not both.
The near certain decline of these two super giants (plus the certain decline of the other two super giants), combined with the HL model, is why I am in the "Yes we have peaked crowd."
http://www.stickergiant.com/Merchant2/merchant.mvc?Screen=PROD&Product_Code=wipes&Category_C ode=bp
Crisis, real and imagined
"It is the only time in American history that the consumer actually created a major shortage (I don't think that the "shortage" of Barbie or Power Ranger dolls at Christmas time could be classified as a real shortage!)."
Great post, but as to the sentence above, I am not sure that's correct. The energy crisis of 1978-79 comes to mind.
While there was a supply disruption due to the Iranian revolution, no one could make the numbers add up. The small amount of disruption of Iranian oil, which had already been down due to political instability in Iran preceding the actual revolution there, it was certainly not enough to create a crisis. However press coverage every night greatly exaggerated the scale of the Iranian disruption, and was predicting the possible closing of the Strait of Hormuz, therefore cutting off ALL Persian Gulf oil. People panicked, and raced out to fill the tank, of not only cars, but also farmers topped up farm tanks, tractors, construction firms topped up construction equipment, and truckers topped up Diesels, and some real doomers even were storing gasoline in 1 gallon milk jugs and 5 gallon cans in garages, closets and bedrooms. This became such a fire hazard that some cities made it a crime, because there were some fatal fires in apartments and houses related to it.
Some called the "fill up" of America the "rolling reserves", and pointed out that the difference between half full tanks and almost every tank in America being completely full was a very large amount of refined oil product. Needless to say, the same thing was actually happening in Europe, Canada, Japan and other Asian developed countries. Few people now realize the absolutely dire shape Europe and Japan was in during the 1970's energy crisis, Europe having not yet developed the liberating North Sea (this should give us a hint of what Europe soon faces as British/Norwegian North Sea decline accelerates).
The long and short of it is, that word of a real crisis can create a real crisis, even though in fact the crisis does not yet exist. This leaves us with a question:
Why didn't this happen after the hurricane year of Katrina?
The fact is, with the "doom side" projections running at over $100 per barrel, it SHOULD have happened. Adding to this, the Israel-Palastinian conflict, the Prudhoe Bay pipeline "crisis", and the Iranian/Venezuelan crisis, oil SHOULD have went easily past $100 dollars somewhere in the last 2 years or so. It didn't? Why? The answer is discomforting:
Frankly, the American people have become burned out on "crisis". Beginning in the aforementioned 1970's, one after another crisis has been hurled at them. I can recall off the top of my head *the cold war, *Watergate and *the collapse of America after Vietnam, The *1973 energy crisis, the *1978 energy crisis, the *"national debt" crisis, the *S and L crisis, *AIDS, *the family crisis, the *"war" of "values", the *militia and "domestic terrorism, the *coming ice age, but then, *global warming, *the Y2K crisis,*9/11/01 (already a half decade ago? !!) the *"terror crisis, and now, the *bird flu, the coming *housing crisis, and of course the *peak oil. the Iraqi war now seems like small beans to most folks, when only a few years ago, a full blown war of years duration in the Persian Gulf would have been viewed as a nightmare scenario. We have become desensitized to crisis.
The demographic shift of America makes it even worse. One of the traits of getting old is the view that "hey, I've seen it all before. If no one has noticed, America is now a gray country, almost a giant indoor outdoor old folks home.
These folks are jaded and cynical to the extreme, having had the press blast crisis after crisis at them, but they actually have lived VERY well compared to the prior generation. Their main crisis is now the biggie...father time. They know that mortal crisis can only affect them for a short time longer, and that aging, declining health and lack of relevance are the now the real enemies for them.
This is why, for those who keep asking, Peak oil has not "caught on". The young, in the meantime, are optimistic, "transformers" who view themselves as power rich, personally and culturally. To them, doom sayers are losers who need to get out of the way. There is no problem that cannot be "fixed" with enough money and effort. They view the use of technology as always "good", and nothing to be frightened of. They have no intention of going back to a natural "hippy" youth of flowers, softness, "peace, love and understanding". They play the power game, and if the old folks cannot accept, they need to get out of the way, and cough up their wealth to the ones who actually are "doing things".
Almost everything can be commoditized in America, packaged as a product, a cause, a marketable organization on a nationwide scale. Every concern can be turned into a marketable commodity, from loneliness a