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DrumBeat: December 3, 2006
Posted by threadbot on December 3, 2006 - 10:59am
Topic: Miscellaneous
Good forecasts/bad forecasts: how does the US DOE/EIA come out?
Forecasts are only of value if they are reasonably accurate. In that regard, I decided to look at an analysis I made in 2001, “Analysis of the IEO2001 Non-OPEC Supply Projections” In the document, I analyzed the U.S. Department of Energy/Energy Information Administration’s (US DOE/EIA) International Energy Outlook 2001 (IEO2001) and compared their forecast to my forecast for selected non-Organization of Petroleum Exporting Countries (non-OPEC).
Exxon puts £200m North Sea oil assets up for sale
As the region's production has declined, the majors have started to look elsewhere for new production; squeezing the last few drops out of an oilfield is often not worth the effort for a large company. Instead, the majors have made way for smaller independents.
Listed Oil Juniors Hitting Success in Africa
In the coming years, Africa will show a growing commitment towards taking advantage of the knowledge and risk-taking structure of the respective gas and oil juniors. The time that majors were ruling the Dark Continent is over, especially due to the fact that the search for new elephant fields has shown little positive results.
Blowing the Whistle on Big Oil
Bobby L. Maxwell’s lawsuit says Big Oil cheated on royalties it owed and that the government did not want to hear about it.
Nate Hagens on "The Reality Report" (downloadable audio)
Former Wall Street researcher and investments manager Nate Hagens discusses the recent Association for the Study of Peak Oil and Gas USA conference in Boston, Mass.
Iran calls for new cut in OPEC oil output
TEHRAN (AFP) - Iran's OPEC envoy Hossein Kazempour Ardebili has called on the oil cartel to agree a new oil output cut at its next meeting to counter an oversupply of crude."Some factors like the decrease of world economic growth and accumulation of oil and stockpiles of its by-products indicate that the market needs a cut in OPEC oil output again," Kazempour Ardebili said, according to the official news agency IRNA on Sunday.
Venezuela’s Economic Boom Buoys Chávez
Often lost in the campaigning between Mr. Chávez and his electoral challenger, Manuel Rosales, is that Venezuela, with the largest conventional petroleum reserves outside the Middle East, is having one of the most significant oil booms in its history. Economic growth this year is set to pass 10 percent, making Venezuela the fastest-growing economy in the Americas.
Russian-European Energy Hysteria
Russia's tight grip on energy fuels fears in West
For the West, the threat from Moscow was supposed to end with the collapse of the Soviet Union 15 years ago. But Russia's growing energy clout is generating renewed cause for anxiety.
Even Putin concedes: 'This golden era... can't last' - Spending spree in Russia is fueled by its oil and gas
Nepal introduces new rural energy policy
The Nepali government has introduced a new rural energy policy aiming at providing access of clean energy to the rural population and reducing their dependency on traditional energy sources including woods.
Oil lubricates Beijing-Caracas relations
CARACAS - As its trade with Venezuela increases, China's political influence in the Latin American country also grows, which may well serve both countries' interests.
India: Double whammy for oil companies
Domestic oil companies will have to contend with lower refining margins as well as the negative margins in marketing now following the retail price cut.
With Norway's petroleum era beginning to wind down, attention is being turned to the potential of thorium as the next power adventure for the country.
State action needed now to avert a Connecticut energy crisis: Soaring electricity costs will hurt businesses, residents; slow state economy.
Stalled subdivisions leave Metro homeowners on barren blocks home alone
In some half-finished subs where neighbors aren't moving in, blight is. Vandals and thieves have smashed windows and stripped copper pipes from the abandoned Taylor Meadows condominiums across from the house where [subdivision resident Christopher] Lightfoot lives.
How to build intelligent suburbs
The urgency of climate change makes the rebirth of our cities crucial to the planet, and its people
Heinberg: Exploring the Connections between Energy Descent Plans and the Oil Depletion Protocol
NASA: alternative fuels for aviation
Methane quashes green credentials of hydropower
Some of the latest findings point to a disturbing conclusion: that the global-warming impact of hydropower plants can often outweigh that of comparable fossil-fuel power stations. If that's correct, current energy strategies, particularly in developing nations, will need to be rethought.
Biofuel plant 'could be anti-green'
A biofuel production plant to be built in Scotland with £9 million of taxpayers' money is in danger of becoming a "major green con" and could increase rainforest destruction, environmentalists warned yesterday.
Australia: King coal under siege
Honda Establishes Solar Cell Subsidiary Company
Honda Motor Co., Ltd. today announced plans to establish a wholly-owned subsidiary, Honda Soltec Co., Ltd., which will produce and sell the next-generation thin film solar cell independently developed by Honda. The new company will lead Honda to make a full-scale entry into the solar cell business.
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Well, we know you cannot be proven wrong as ARAMCO is the only organization with the data needed to make the proof and I doubt they will release it just so we can post it on TOD. So lets try another approach.
We know that oil sold for an extended period for $20 a bbl. Since this was "old" oil from established fields the lifting costs were likely around the $5 estimate that you quote. And we know that during this period KSA ran up huge deficits. If you have 4,000 princes to support and they all need new 747s to transport their fleets of vintage Bentleys well, soon you are into real money.
Today oil goes for $60 a bbl. Another thread on TOD worked some numbers and derived an estimate of $19 per bbl investment for each bbl of new oil. All those rigs don't come cheap.
Then we have "lifting" costs for all that old oil. Taking millions of gallons of seawater, running it through a treatment plant, inject it into the field through hundreds of new injection wells, extract it at a 40% water cut and then run it through a series of separation plants - that is not be a cheap form of "lifting". That process uses a lot of energy and the opportunity cost of that energy is three times higher than it was 5 years ago. So we will double your $5 figure and call it Operating costs of $10 a bbl.
At $20 oil the KSA royalty was around $15 and this still put them in deficit. Playing with the numbers suggests they need around $25 a bbl royalty. If the graph shown elsewhere on this thread is correct then $60 oil gives them enough to operate the Kingdom and also pay down their foreign debt.
Total the above estimates and we get:
Capital costs per bbl $19
Operating costs per bbl $10
Needed royalty per bbl $25
Estimated Costs per bbl $54
Not all of KSA production is Saudi Light. More of it tends toward heavier fractions and must be sold at a discount. How much of a discount? For the sake of argument we'll set the discount at $6 a bbl. So KSA costs of prodcution are around $54 a bbl and the selling price of their oil is also $54 a bbl. I think this is the reason they need to ensure a scarcity of oil and want to see the world price back up above $60.
If the price drops much below the current price, then KSA is faced with a difficult set of decisions. Do they ask the 4,000 Princes to forgo the new 747? That will not make for happy times in the Kingdom. Do they make the ordinary citizens pay market prices for housing, health care, water, energy, and stop subsidizing job creation? That will not make for happy times in the Kingdom. Or do they stop the investment in all of the new fields and projects that they have underway? That will not make for happy times in the future Kingdom.
My take on all of this is that the KSA leadership read Twilight in the Desert, looked at the numbers, and realized they have a big looming problem. So they are now spending like mad to ensure the discovery and production of all that CERA theoretical oil. And given the structure of the Saudi state they cannot afford NOT to look for it. We think of Iraq, a state failing due to internal contradictions, as a violent intractable problem. Just contemplate what would happen if KSA started to implode.
I know there are a lot of people here who argue that they have peaked. However, put yourself in the shoes of their government for a moment. Imagine that you still control enough oil to influence the global price, and that you have been getting $70/bbl for your product. Now you see the price sliding. I can tell you that what most businesses do in a case like this - if they control enough production - is take some product off the market. Refiners don't run their refineries as hard in the winter. Why? Demand is down, and doing so would flood the market and crash the price.
So, putting myself in the shoes of the government of KSA, I would do what I could to prevent oil prices from crashing. It wasn't so long ago that price were $40/bbl. This is a nonrenewable resource - once it's pumped out and shipped, that's it. So I want to get as much as I can for it while it lasts. If I think the price will be higher in the future as supplies dwindle, I am certainly not going to pump all I can now to ensure that everyone has cheap oil.
My $0.02 for now. I am sure we will get into this a bit more in my debate with Jeffrey.
RR, you are absolutely right on this one, and despite what some folks will say, that's no conspiracy theory that's just plain good business....just because the oil production chart tails down for a few months, people believe it's because the world has PEAKED!! Look backward down the chart at the dozens of times the production has dropped....and especially look backward to 1979 to 1982, almost a half decade of MASSIVE drop in oil production.
The Saudi's will only crank production back to max if (a) They see alternatives gaining fast and risking destroying demand (b) they seem some other country find enough oil to start pumping and snatch their markets or (c) They have cash trouble and run the risk of default or internal unrest. Otherwise, they talk, talk talk, but they will sell oil at the maximum price they can get...and we would do the same....
RC known to you as ThatsItImout
Wouldn't it still be called "peak oil"?
Isn't "peak oil" the top of the production curve...no matter what makes the production go down from the top?
Rick
The problem with calling those other issues "peak oil" is that they can come back online and cause production to rise. A geological peak can't. So I don't consider those other factors a peak. If they happen at the same time as a geological peak, then you will see that peak earlier than you otherwise would have. If not, it will be a false peak.
Of course then we have the situation where supply/demand tightens up as excess capacity is used up. This causes prices to rise as supply is rising, but can't keep up with the increases in demand. This is my Peak Lite scenario.
It seems to me that the peak could be caused by a voluntary reduction (plus other factors). Then when the time of the ramp up comes, the production increases, but it does not ever again exceed the peak caused by a multitude of factors (including geological).
I guess what I am trying to say, is that I believe the peak will be (or has been) reached and caused by a multitude of causes, with the geology just being one of the causes.
Rick
Right, but if those other factors happen in the abscence of a geological peak, then production may rise again. No doubt when the geological peak occurs, there will be areas with shut-in production. But unless you can get a production decline from the other factors that is not permanent if you aren't pushing up against "The Peak."
Does anyone have access or a larger summary of the Nature article on methane and hydropower?
Try going in via this link (at the bottom of the page).
The gist of the layman's article is via the release of organic materials flooded by the dam. Wonder how background, "normal" releases and loss of terrestial photosynthetic capacity were handled, also the aquatic reservior production of carbon lost to the sediments over time. Interesting study potential.
Does not seem to address smaller scale hydro projects, either with penstocks or disbursed microhydro.
RR,
Good explanation. Thats always been my point about the difference between "geological" or true peak, and "logistical" or peak caused by logistical factors such as lack of manpower, lack of machinery, political instability, lack of investment capital, lack of demand, etc, etc. Logistical peak can be recovered from, as in the 1980's. But "true geological peak" can never be.
Westexas makes the great case of this in regards to Texas and lower 48 U.S.
There was no war, the technical talant was as good as anywhere in the world, there was plenty of money, and there was the best machinery in the history of the industry....but when Texas went into it's "geological" decline, no amount of money, no amount of effort and no amount of drilling could reverse it.
When that happens, EVERY OTHER FACTOR becomes moot. That is the question we are all asking: How close is the world to that point? Because once it happens, looking for alternatives, and restructuring consumption downward has got to happen FAST. If the U.S. peak was any indication, we will get no advance warning, and the price signal will tell us nothing. American oil was as cheap as it had ever been (inflation adjusted) at the time of the U.S. peak, and everyone was living large. Only months later, we were over the top and starting the long, long decline.
Right now, if you factor in inflation, oil is still relatively cheap (taking a price between $58 and $62 per barrel) when compared to inflation on everything else since the early 1980's.
Even the optimists know this: Light sweet liquid crude, and that prestine natural gas are one shot deals. We may be able to find alternatives, synfuels, etc., but the time of pulling this miracle elixer out of the ground and out of the ocean floor can only happen for us once on this Earth. That first time was a "freebie" in a way. All the rest we will have to design ourselves, at great cost and effort. If we are too lazy to get off our lazy arses and start now, we will have only ourselves to blame for using up the last of a miracle of nature as great as natural water or the giant tropical forests, there will be no "store" to run to and buy what is the only GEM of nature and God of the likes of this planet ...there will be no putting the toothpaste back in the tube.
Forgive us, we do take it so for granted don't we?
Roger Conner known to you as ThatsItImout
I wonder how much of the total US economy is auto based? Road building and maintaining machines, parts and repairs(street lights, signals), auto parts stores, insurance, law enforcement, tort, hospitals, (Houses with) attached garages, war in the ME, vacation, the list is endless.
How much do we spend paying for cars?
How much effort was spent feeding and maintaining a horse or ox?
Is it possible that the "logistical peak" in the '80s was easily recovered from because we were not at "geological peak"???
The "geological peak" you describe is some imaginary value and date.
Production of oil is NEVER devoid of logistical factors such like "lack of manpower, lack of machinery, political instability, lack of investment capital, lack of demand, etc, etc."
The world is not a test-tube where all of these "logistical" factors of Production can be controlled.
The theoretical peak may be any date you choose but once the geopolitics intervenes this TimezUp we will not have the same luxury of bountiful easy oil to recover from this "logistical peak", like we did in the 1980s.
This "logistical peak" is not likely to ever be recovered from again.
Resolved: World Net Oil Export Capacity is Now Declining Because of Involuntary Reductions in Production and/or Because of Increases in Domestic Consumption in Major Oil Exporting Countries
A Guest Post by Westexas (Jeffrey J. Brown)
To what extent do you and I debate the topic in the comments section following each post, or do we just see how it goes?
Roger, as you know the argument is that the world, mathematically, is at the same stage of depletion that other large producing regions started declining, such as the Lower 48, Mexico and the North Sea, or were close to a decline, such as Texas, Russia, Saudi Arabia, etc.
The decline in world production supports the HL (logistic) model. The argument is not that just because we had a decline, we are post-peak, the argument is that the decline fits the mathematical and historical models.
In further support of this argument is the near certainty that all four of the current super giants are almost certainly in decline or crashing, while the only super giant on the horizon--Kashagan--won't hit peak production, at best, until about 2020.
Yes, we have talked about that before, and the evidence looks like the rope is geting short, that's true for certain. I am just careful not to underestimate the oil industries abilities, and have no way to know for sure that some of our "trusted" suppliers aren't holding out on us. (My "running in the blind argument). I do accept that given the weight of the evidence, and given my belief that we will get no real warning in the price signal, we should be on almost full "war" type footing on the alternative energy front and on the restructuring front, to reduce consumption and diversify our sources. We should also be building strategic stocks of propane, oil and natural gas to the maximum possible, and building a "post depletion" infrastructure plan, including a shift to rail, barge and warehousing and away from complete reliance on JIT inventory systems.
I am so prone to fear yet, but I do have one major concern: If the decline was very fast and very severe, we could run the risk of losing our ability to modify, by losing what is known as the "four C's": Communication, Control, Command and Coordination. Then, making the technically sophisticated changes would become increasingly difficult as each day passed. That is one more reason I am such a believer in distributed power built into, not in place of, the grid as it exists, so that we get reduncy and distributed technology and know how.
I think we agree that the time to make the "mitigation" changes is NOW, whether we are sure peak is at hand or not, we should behave as it it is already here, in fact, possibly even behind us, and we just don't know it yet. After all, that actually could be the truth.
Roger Conner known to you as ThatsItImout
Roger the time for mitigation projects has long since past. This is now the time to build lifeboats. The bottom line is that when the world recognized Peak production and permenant declines, much of the world's leading exporters will cut or stop exports altogether. It makes no sense for countries to continue to export oil and gas to the west when much of them have their own populations to support. Perhaps some oil will still imported to the US, since the US is the leading exporter of food, but it certainly won't be enough to preserve our standard of living. Whether the US can contine to produce the same volumes of food without plentiful and cheap oil is a big question. The US is now the third most populated nation (300+ million), especially when you consider the rapid deplention of the major aquifers.
Finally to put ones preservation in the hands of the US gov't seems foolish to me. Our politians have been arguing for the past twenty five years on silly stuff, and make poor decisions because it gets the re-elected, (Ie bigger entitlements, new highways, etc). Its likely to take another twenty years before they start making sound policies, unlike the silly energy policies which have only hasten our demise. By then the Union will have all but disolved as states and local gov't realize that Washington isn't going to save them. Thats assuming that they continue to exist and have enough capital to finance projects with.
This past summer OPEC admitted several times they were pumpint all-out and could do nothing more in spite of the highest prices ever.
So at Peak Production the world still had a small cushion left over consumption and the Market did not get the signal of shortages some expect.
The giant fields continue to role-over and the sauds and others find their frantic drilling can't prevent decline... and the puddles coming online in 2005... ah, make that 2006.. okay, definitly by 2009...
Good luck with your proJecTIONz.
Iran knows it's dayz are numbered (just as the Russians do). Their Window of Opportunity is short.
Iran will be the geopolitical cause once again for the decline - but this time from Peak Production (who cares what Geological Peak Date Woulda, coulda, shoulda been if we lived in a perfect test-tube world where all the kingz horses asses sing Kumbia and share nice, and where planz on chaulkboardz always bear fruit).
But don't worry - the yerginz et. al will likely have another chance to obsfucate the obvious - after the Iranian Mullah's 12th Phantasm fails save to their shiite desperate, moronic and fanatic asses, world oil production will again recover ... maybe... for a few years.
Dec 2005 is the World's Peak Production until proven otherwise by Reality. Until then all you have is prOJectIonz and false hope to deny it.
http://www.strayreality.com/Lanis_Strayreality/iraq.htm
This paper examines how the need to gain unfettered access to Iraq's Extraterrestrial (ET) Heritage has played a critical role in influencing US foreign policy in the Persian Gulf region ever since the Carter administration.Do the Alienz zpeek with a Z lizp?
Of course we have had several drops in production over the years. The one you mention here was caused by the Iran-Iraq war and the tanker wars that sprang from this war. Then there was the collapse of the Soviet Union, then OPEC closed the taps in 99, opeaned them a little the next year before getting serious in 2001 and closing them again.
Only when you have a drop in production when everyone is producing flat out can you suspect we are at the peak. In all the history of world oil production that has never happened.......until now.
Ron Patterson
That does complicate matters doesn't it. Especially for the politically correct and culturally ignorant.
Therefore, the concept of a geological peak, may be a bit misleading in the since that we could have a voluntary peak that is, not strictly speaking, constrained by short term geological considerations.
Isn't it true that the Kuwaitis have decided to not wait until they a decline in production is not a choice?
I think it would be more accurate to say that we may have a peak based upon geological considerations, but not one based upon an absolute inability to produce more in the short term.
I find that highly unlikely. The fact that Saudi has admitted to a 5 to 12 percent decline rate means exactly that. They are declining by an average of around 8 percent. Saudi produced an average of 9.55 mb/d last year. Now is that decline rate voluntary?
A year ago last September Saudi produced 9.6 mb/d. This September they produced 9.0 mb/d, a decline of 6.25 percent. And it can be assumed that they found some new oil, or pumped faster from some old oil patches, to get their decline rate down to 6.25 percent.
But this is all beside the point. IF they are just resting their fields, this does not mean they can go back to pumping a lot more oil later. They are resting their fields because they were overproducing them before. Even if they are just resting their fields, it means they will never likely go back to what they were producing before.
I don't think so. If they are telling the truth when they say their existing fields are declining at 5 to12 percent per year, then they are at geological peak.
No, that is not true at all. The opposition party in Kuwait has discussed this but to no avail. Kuwait is still producing flat out, or was until November 1st anyway.
Well a few countries have yet to peak, Nigeria, Angola, Brazil, the Caspian area and perhaps Russia. But Russia is very close. But I have absolutely no doubt that Saudi Arabia is post peak, as well as Iran, Venezuela, US, UK, Norway, Mexico, Indonesia and about a dozen other major producers.
There will always be some problems an/or conflicts in the world that keep a few nations from producing full tilt. That is to be expected. But right now if Nigeria and Iraq had no problems, we would still have peaked, so far, last December because last December those same problems held back production then as well.
Bottom line, when we peak, or when we peaked, it will be because everyone is producing every barrel they possibly can, or could.
Ron Patterson