The Forest and the Trees -- the Oil News Imbalance
Posted by Dave Cohen on September 20, 2006 - 7:26am
Topic: Supply/Production
Tags: angola, bp, kashagan, kazakhstan, nigeria, russia, sakhalin, thunder horse [list all tags]
A chronic pitfall for economists is that the daily deluge of data often obscures more meaningful long-term trends...Let's look briefly at the forest, not the trees. There's plenty of bad news.It's that old adage of not seeing the forest for the trees...
With oil now in the low $60 range, many economists are rethinking their assumptions of last year...
The problem in all this is that the peak oil theory isn't about $78-a-barrel oil. And the price of abundance isn't necessarily $63.
BP had originally scheduled startup for the end of 2005 and this latest slippage will make it harder for BP to hit production growth targets in the coming years.Project slippage is nothing new. However, "Thunder Horse has been repeatedly delayed but as of late July, BP still expected production to begin in the middle of 2007." In 2007, will we be told Thunderhorse will begin production in 2009?The delay will also call BP's skills at overseeing complex projects into question at a time when its management of Alaskan oil fields and pipelines is the subject of intense scrutiny.
BP said in a statement that tests carried out over the past four months revealed metallurgical failure in components of the subsea system and it now "plans to retrieve and rebuild all the sea-bed production equipment" from Thunder Horse.
In the year 2000, the Kashagan discovery in Kazahkstan was announced. Heralded as the largest reserves addition from a new field in 30 years, the operator consortium Agip KCO has pressed forward to get it onstream. Fast forward to the fall of 2006. Eni's Kashagan oil field start may be delayed to 2010.
The commercial production of the Kashagan oilfield, of which Eni SpA is the operator, could be delayed to 2010, the daily Il Sole 24 ore reported citing Kazak energy minister Baktyjoka Izmukhambetov.In Confident Despite Delays from Petroleum Economist (page 3), we are told that "Agip KCO has not yet revealed exactly what has gone wrong at Kashagan." What is at stake? Skrebowski's 2006 Megaprojects Update lists Kashagan Phase 1 as providing 0.450/mbpd in 2008 and an additional 0.450+/mbpd coming onstream in 2009 from the phase 2 addition. It is likely that no oil from Kashagan will flow until 2010. This prediction may be optimistic.Production could be delayed from 2008 to 'end of 2009, beginning of 2010,' the minister was quoted as saying.
The Kashagan field is one of the world's largest oil fields, with estimated reserves of 45 bln barrels, of which between 8-13 bln barrels are currently considered recoverable.
Could the delays at Kashagan be predicted? Absolutely. These are deep, high-pressure reservoirs in the shallow North Caspian Sea. "Temperatures can fall below -20°C in winter and a coating of ice, several metres thick, forms in this part of the Caspian Sea for many months of the year" (from the Kashagan link above). Finally, Kazahkstan's leader Nursultan Nazarbayev, the Sultan of the Steppes, is playing each potential operator (AGIG KCO, CNPC, KNOC, Petronas, ONGC) off against the others, asking for exorbitant terms for E&P in Caspian Sea development blocks.
Everyone knows that new oil production is subject to long lead times, as Daniel Yergin is fond of telling us. The meaning of the word "long" is a bit slippery in the Brave New World of oil E&P. Between them, Kashagan and Thunderhorse, designed to produce 0.250/mbpd, account for well over a million barrels per day of global supply that was supposed to be onstream by 2010.
There's more unsettling news. Russia is trying to take over Sakhalin II.
Shell said it was continuing to work on Sakhalin, but admitted the removal of its environment permit might lead to more delays and further cost overruns.The production challenges facing phase 2 of Sakhalin II (0.120+/mbpd due onstream in 2007) are at least as daunting as those at Kashagan—even without the Russian political interference.
In Nigeria, Shell May Delay 480,000 BPD Output due to continuing political violence. To be sure, there are some success stories like Azerbaijan. A closer look at others, like Angola, reveals a geopolitical accident waiting to happen. Also look at the optimistically framed Angola won't go back to war. Perhaps they won't. Meanwhile, declines like those at Cantarell will continue no matter how many horizontal wells they drill.
As you read about all of the shorter term "good news", remember that the perilous longer term supply-side trend reported here at The Oil Drum remains the same. The current enthusiasm for dismissing peak oil concerns misses much of the big picture.
That's one of the best posts I've seen here yet. There's actually been far more bad news than good news over the last month, but since oil prices are falling nobody wants to talk about it. They'll talk about it in a few months, though.
As we speak, oil is down over a dollar on news of Oil CEO's obsession with Paris Hilton.
I also agree that this is a very good post.
We have credible reports that the four largest producing fields are declining/crashing.
Saudi production is down.
World production is down.
World net oil exports, from the top 10 exporters, are going down.
As outlined above, new fields are delayed (as Matt Simmons predicted).
Chinese oil imports are up 15% year over year. There are reports that the rate of increase in world demand is slowing, but not reversing, i.e., demand is going up, albeit at a slower rate, at least for now.
However, I think we are feeling some strong deflationary winds. So, it is entirely possible that we will see an actual falloff in consumption, but I predict that there will not be an increase in production.
"With world production down, world demand still going up" and US inventories high are we drawing down inventories from other parts of the world?
http://www.rigzone.com/news/article.asp?a_id=36156
Is this desperation exploration? This reads as a lot riskier and even more expensive than the Jack oilfield.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Did the conversions: 2,400 meters of seawater = 7,874 feet, 7200 meters of drill depth = 23,622 ft or 4.47 miles. The hopeful potential of 6-8 billion barrels is approx 1/2 of the optimistic potential of the 15 billion barrels of Jack. Ideal working conditions in the GoM vs the cold, wet weather off Newfoundland. My guess is that if icebergs come down this far: tugboats will have to lasso them, then drag them away to prevent a berg from hitting any platforms.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Check out this link on towing icebergs. My guess is that this is extremely energy intensive because 90% of the berg is underwater. Tugboats are basically dragging a huge underwater mass through billions of gallons of seawater--they won't move easily. In rough seas, the berg may want to rock & tumble making it nearly impossible to keep the towline on. The tugboat & berg have to move faster than the current they are both floating in to have any measureable effect if the current is headed towards an oil platform. The tug operator also has to compensate for wind drift too.
How would you like to have the winter job of floating in a boat in frigid, tossing seas sledgehammering or hot-water spraying off the ice forming on the underside of an oil-rig?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Tell you what, Bob. You come up here and help me guard the gardens in the summer and I'll come down there and watch the fire tornados rage through Chandler in the winter with you.
We might as well have some fun with this!
Oil export slowdown endangers Russia GDP aim, official tells MPs
Excerpt:
Who the heck ever said that prices were controlled by only supply and demand? The news has mentioned repeatedly in recent weeks how much a fear of war or terrorism, or concern about a possible hurricane in the GoM was helping to push up crude prices.
An earlier poster already brought up the topic of Quantum Marketronics.
But let's recap.
There are 5 fundamental particles (aka the digits of the Invisible and Brainless Hand):
- The Price Nucleus: This particle is the largest and most visible. It moves in an ether of currency, shifting to lower levels, even negative ones, but never to positive infinity. Often governments will print more ether in an effort to keep the Price Nucleus colloidally suspended at artificial levels.
- The Infotron: This particle carries information energy in two flavors, positive and negative.. It orbits the Price Nucleus, causing the nucleus to move up or down based on the net polarity of infotrons spinning around the nucleus. If there is net negative news, the nucleus is propelled downwardly by bombardment of negative infotrons. If there is an overexuberance of net positive news, the Price nucleus is lifted to dizzying heights before leveling off due to counter drag by reality.
- The Dis-Infotron: This particle carries dis-information forces of two flavors, cornucopian and doomer/gloomer. It orbits in a higher valence band than the Infotrons and therefore often obscures them. It is very difficult to tell the difference between Infotrons and Dis-infotrons. It is said that Infotrons triumph in the end, but that is true only in a civilization that manages to survive. It is believed that collapsed civilizations exhibit an excess of Dis-Infotrons just prior to their collapse. Recently, on Easter Island, scientists found a monolith. It said "Dump wood, buy rock." There were no engravings after that.
- The Growth-o-tron: This particle spins about the outskirts of the orbitals of the infotrons and dis-infotrons. As its radius of orbit increases, it induces volumetric expansion in quantity attributes of the Price Nucleus. There are two main attributes: supply and demand. With all else equal, supply and demand can remain proportional to one another as long as growth does not exceed available resources.
- The Collapse-o-tron: This particle spins about the outskirts of the orbitals of the Growth-o-trons. It is very high energy and dangerous. If Growth-o-trons exceed their orbital boundaries and crash into the Collapse-o-trons, all hell breaks loose. The event is otherwise known as WTSHTF.
With all this in mind, you can now understand why the price nucleus of crude oil appears to oscillate in resonance with background noise. It's mostly Brownian movement of the Katrina type. Try to pay attention to real things, like geology and geography. Note that the continental shelf has an edge. When herd animals go over the edge, they usually fall and drown. Pocket change quickens the process,Probably the most fundamental particles of marketonic theory.
DIYer,
Well yes, but now we are getting into Advanced Quantum Marketronics.
The Producions and Consumions are charmed versions of the basic Sapien-Decepticon particles that tunnel through the Forbidden Zone.
As you probably recall from your intemediary QM classes, the Forbidden Zone separates the Belief Core (the center that is populated by the Infotrons and Dis-Infotrons) from the Outer Reality Shell (populated by Growth-o-trons and Collapse-o-trons).
Decepticons tunnel through the Forbidden Zone to occassionally actualize image patterns held in the Belief Core. So sometimes, but rarely, the When-You-Wish-Upon-a-Star phenomenon is observed to transend through the Forbidden Zone and into the Reality Zone due to quantum entanglement.
Entanglement is maximized when the Producions bombard the Consumions with Advertisement-cons, causing population inversions among the Consumions and causing many of the Consumions to tunnel through the Forbidden zone so as to collide with the Growth-o-cons and push the latter particles towards the outer Collapse-o-con orbitals.
But as indicated above, these more advanced aspects of Quantum Marketronics are not suitable for general public discussion.
These are absolutely the smartest and funniest posts I've read at this site yet.
I've fretted most of my life away trying to visualize the subtle influence of the invisible, brainless hand, but it's all clear now. Everything will be alright, and then some.
Most people are deeply troubled to learn of the existence of the Forbidden or Exclusion Zone.
I'm glad that you are able to accept it as a necessary part of our current Standard Model of the Universe.
Albert Einstein was wrong when he said that God does not play dice ... at the same casino table as we do. God loves us to death and that is why he (she, or it) is with us to the bitter end. That is why God quantum meritly exists --and not-- right there deep in the heart of our Belief Core. God is part of our Price-Value-Spirit triune.
Despite all that being said, the Forbidden Zone (or Magic-is-Forbidden Zone as it is more formally known) prevents all mere mortal thoughts from instantly becoming reality. That would be a bad idea as you may know from having watched "Forbidden Planet".
"Price" and "Value" are tightly bound together with "Spirit" in our Belief Nucleus or Core by this incredibly strong force known as the Wisdom-of-the-Crowds. If Price is split apart from Value, or if Value is separated from our Spiritual inner-being, then the Belief Core can become destabilized and this can lead to chain reaction disruptions extending out into the reaches of the Collapse-o-tron outer orbitals.
So yes, Reed. Everything will be all right. Human "Ingenuity" will power us out of this mess as it has done in the past. Together we will merge our ingenuities, cross that Forbidden Zone, climb every mountain, Ford and GM every stream, till we reach our dreams!
May the krell be with you.
Great post.LOL!!!
That is the problem with starting a new world model.
It takes on a life of its own.
And the advancements in the field are so rapid that it is hard to keep up.
Recently, Prof. Barlett has noted an exponential increase in peer-reviewed papers dedicated to exploring the Forbidden Zone and its implications to real world existence and sustainability. Fascinating stuff.
I had a little problem with my Amaranth investment yesterday. Paris and I are out shopping for matching electric bicycles right now.
The money was in CT ..
The trader was in Alberta ..
Triff ..
That piece of news right there might be good for your $57. Isn't that what they call "geopolitics." Warwonger, my ass. George is givin' peace a chance.