Articles tagged with "saudi arabia"
We are used to expecting that more investment will yield more output, but in the real world, things don’t always work out that way.
In Figure 1, we see that for several groupings, the increase (or decrease) in oil consumption tends to correlate with the increase (or decrease) in GDP. The usual pattern is that GDP growth is a little greater than oil consumption growth. This happens because of changes of various sorts: (a) Increasing substitution of other energy sources for oil, (b) Increased efficiency in using oil, and (c) A changing GDP mix away from producing goods, and toward producing services, leading to a proportionately lower need for oil and other energy products.
The situation is strikingly different for Saudi Arabia, however. A huge increase in oil consumption (Figure 1), and in fact in total energy consumption (Figure 2, below), does not seem to result in a corresponding rise in GDP.
At least part of problem is that Saudi Arabia is reaching limits of various types. One of them is inadequate water for a rising population. Adding desalination plants adds huge costs and huge energy usage, but does not increase the standards of living of citizens. Instead, adding desalination plants simply allows the country to pump less water from its depleting aquifers.
To some extent, the same situation occurs in oil and gas fields. Expensive investment is required, but it is doubtful that there is an increase in capacity that is proportional to its cost. To a significant extent, new investment simply offsets a decline in production elsewhere, so maintains the status quo. It is expensive, but adds little to what gets measured as GDP.
The world outside of Saudi Arabia is now running into an investment sinkhole issue as well. This takes several forms: water limits that require deeper wells or desalination plants; oil and gas limits that require more expensive forms of extraction; and pollution limits requiring expensive adjustments to automobiles or to power plants.
These higher investment costs lead to higher end product costs of goods using these resources. These higher costs eventually transfer to other products that most of us consider essential: food because it uses much oil in growing and transport; electricity because it is associated with pollution controls; and metals for basic manufacturing, because they also use oil in extraction and transport.
Ultimately, these investment sinkholes seem likely to cause huge problems. In some sense, they mean the economy is becoming less efficient, rather than more efficient. From an investment point of view, they can expect to crowd out other types of investment. From a consumer’s point of view, they lead to a rising cost of essential products that can be expected to squeeze out other purchases.
In January 1995 there was a total of 1738 oil and gas rigs drilling globally (excluding the former Soviet Union (FSU). By February 2012 that number had more than doubled to 3850. Global C+C+NGL production grew from 68 to 84 million bpd (24%) over the same period.
Global drilling for oil and gas is dominated by North America, in particular the USA. In January 1995 there were 737 oil and gas rigs drilling in the USA, 42% of the world total. By October 2011 this figure had grown to 2010 rigs, 55% of the world total.
Proportionally, the USA has increased it's drilling effort compared to the rest of the world and currently benefits from lower oil prices, significantly lower natural gas prices and higher economic growth than many OECD peers.
Does the rest of the world need to wake up and to drill baby drill?
Figure 1 Global oil, gas and total rig counts from Baker Hughes compared with global crude+condensate+NGL production from the EIA. Note that Baker Hughes does not include data for the FSU.
The overall structure of the global rig count data is controlled by North America. The fall in drilling activity in 1998 was due to chronic low oil prices less than $10 / barrel; the fall in 2001 was due to recession in wake of the dot com bust and the fall in 2008 was due to the financial crash. The annual cyclicity in the data comes from Canada, where drilling is reduced during the Spring thaw. The near term peak of 3850 rigs was in February 2012 and it remains to be seen how the fall in drilling activity since then pans out. It is possible this is linked to a realisation that drilling shale is not profitable. The huge switch from gas to oil drilling post-2009 is discussed below the fold.
Oil Watch posts are joint with Rembrandt Koppelaar.
Posted by Euan Mearns on November 28, 2012 - 3:45pm
Tags: algeria, angola, crude oil production, ecuador, iea, iran, iraq, kuwait, libya, nigeria, oil watch, opec, qatar, saudi arabia, spare capacity, united arab emirates, venezuela [list all tags]
OPEC is currently pumping at close to near term and historic highs of 31.2 mmbpd of crude oil. Outside of Saudi Arabia, the majority of spare capacity is deemed to lie in Iran and Nigeria. Iran could certainly pump more if permitted to do so by the international community. It is doubtful that Nigeria could. The UAE Kuwait, Qatar, Libya, Algeria and Venezuela are all pumping at close to capacity levels. Saudi Arabia alone has meaningful spare capacity of 2.1 mmbpd.
Embedded in the production stack (Figure 1) is an intriguing tale of general strike, international conflict, civil war and sanctions combined with masterly control of oil supply that has kept global markets in balance.
Figure 1 Monthly crude oil production for 12 OPEC countries. All data published in this interim report are taken from the monthly IEA Oil Market Reports.
From May 2007 to August 2010, Rembrandt Koppelaar published an e-report called Oil Watch Monthly that summarised global and national oil production and consumption data from the International Energy Agency (IEA) of the OECD and Energy Information Agency (EIA) of the USA. This is the second in a series of new Oil Watch reports, co-authored with Rembrandt and details crude oil production data for 12 OPEC countries (includes Angola and Ecuador, excludes Indonesia) as reported by the International Energy Agency. Earlier editions:
Posted by patzek on November 19, 2012 - 1:26pm
Tags: condensate, crude oil, demand, destruction, efficiency, energy, gain, independence, lpg, natural gas, petroleum, product, refineries, russia, saudi arabia, security, self-delusions [list all tags]
[Editor's comment: This article is by Dr. Tad Patzek, chairman of the Department of Petroleum & Geosystems Engineering at The University of Texas at Austin. Dr. Patzek's research involves mathematical modeling of earth systems with emphasis on multiphase fluid flow physics and rock mechanics. He is also working on smart, process-based control of very large waterfloods in unconventional, low-permeability formations, and on the mechanics of hydrate-bearing sediments. In a broader context, Patzek works on the thermodynamics and ecology of human survival and energy supply schemes for humanity. He has participated in the global debate on energy supply schemes by giving hundreds of press interviews and appearing on the BBC, PBS, CBS, CNBC, ABC, NPR, etc., and giving invited lectures around the world. This article first appeared on Tad's blog Life Itself.]
Before I discuss the logic behind negating a peak of production of anything, let me sum up where we are in the U.S. in terms of crude oil production. According to the Energy Information Administration (EIA):
The United States consumed 18.8 million barrels per day (MMbd) of petroleum products during 2011, making us the world's largest petroleum consumer. The United States was third in crude oil production at 5.7 MMbd. But crude oil alone does not constitute all U.S. petroleum supplies. Significant gains occur, because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and we have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.6 MMbd in 2011.
Let me parse this quote.
The latest OPEC Monthly Oil Market Report (MOMR) foresees that demand for OPEC crude oil will decline over the next year by about 300 kbd. This is largely in anticipation of additional production from elsewhere:
Non-OPEC supply is forecast to increase by 0.7 mb/d in 2012, supported by the anticipated growth from North America, Latin America, and FSU. In 2013, non-OPEC oil supply is expected to grow by 0.9 mb/d. The US, Canada, Brazil, Kazakhstan, and Colombia are expected to be the main contributors to supply growth, while Norway, Mexico, and the UK are seen experiencing the largest declines. OPEC NGLs and non-conventional oils are seen averaging 5.9 mb/d in 2013, indicating an increase of 0.2 mb/d over this year.
Overall, OPEC sees demand staying below 90 mbd over the remainder of this year, with total growth in demand lying at 1.01 mbd.
Much has happened since the late Matt Simmons and Nansen Saleri got together back in February 2004 to debate scenarios for future oil production in Washington. While Matt had developed his research that led into the publication of “Twilight in the Desert”, this was the meeting where Aramco pushed back to explain that there would not be a global problem for at least fifty years. As this series of posts on Saudi Arabia comes to a conclusion and moves on to other countries, it is perhaps of some value to look back on the presentation by Mahmoud Abdul Baqi and Hansen Saleri to remember what was said. Back in those days, oil demand was expected to steadily rise with increasing rates to reach 100 mbd in 2015.
Saudi Aramco has stated that it designs the well layouts and extraction patterns from its oil fields so that they effectively decline at a rate of 2% per year.* If one divides 100 by 2 it yields 50. If one subtracts 50 from 2012, one gets the year 1962. Even for those with poor math skills, these are not difficult operations, and they lead to the conclusion that those fields which came into production in the early 1960’s and earlier are now reaching the end of their productive lives. They are not there yet, since production took time to ramp up, and some fields have been rested over the years when production was cut back, or even mothballed. But this gives you some perspective on the overall scope of the situation, without the need for complex mathematical modeling.
(*The IEA apparently believes that the figure is closer to 3.5%) (H/t Matt) Saudi Arabia states that, without using advanced recovery techniques and “maintain potential” drilling sites – often not in the same field as that being depleted – the rate would be 8%.(h/t Darwinian ).
This is a guest post by Stephen Sorrell, senior lecturer Science and Technology Policy Research, Sussex Energy Group, and lead author of the UKERC Global Oil Depletion report, and Christophe McGlade, doctoral researcher at the UCL Energy Institute. This post was slightly revised by the authors and updated here on 25/07/2012. Please see paragrapghs 8 and 9 below the fold for the updated text.
Commentary on: Oil: 'The Next Revolution: The Unprecedented Upsurge of Oil Production Capacity and What it Means for the World' - Leonardo Maugeri, Belfer Center for Science and International Affairs, Harvard University
Summary Maugeri's analysis and conclusions are critically dependent upon the decline rates applied to existing and future fields, and yet he does not explicitly say what these decline rates will be. However, Maugeri’s assumptions can be derived from his Table 2, which projects gross and net capacity additions over the period to 2020. Doing so suggests he uses an average annual decline rate for all fields of 1.6% over this period, which is less than half of the IEA and CERA estimates for 2008 (4.1%/year and 4.5%/year respectively). The discrepancy is even greater since the IEA and other analysts project an increase in average decline rates over the 2011-20 period. If we replace Maugeri’s 1.6% decline rate assumption with the IEA estimate of 4.1%, the projected loss of production capacity over the period to 2020 increases from 11 mb/d to 26.5 mb/d. In turn, the projected global production capacity in 2020 reduces from 110.6 mb/d to 95.1mb/d (a reduction of 14%). Since average decline rates would be expected to increase over this period, this projection must be considered optimistic.
Posted by Heading Out on July 9, 2012 - 9:40am
Tags: abu sa'fah, dorra, ghawar, hawtah, hout, khafji, khurais, khursanuiyah, lulu, najd fields, nuayyim, qatif, saudi arabia [list all tags]
Fom the viewpoint of those who suggest that there is no problem, the discussion that swirls over the future of global oil supplies often seems to focus on the large volumes of oil that still remain in place around the world. The critical point, however, is not that this oil exists, but rather the rate at which it can be recovered. This is perhaps most obviously pertinent to the discussion of oil coming from the Bakken formation in North Dakota, where the rapid decline in individual well performance means that a great many wells must be developed and remain on line in the out years to sustain any significant flow past peak. As I noted last week, it is a point that clearly was missed by Leonardo Maugeri, and equally by George Monbiot, who has finally been swayed to the side of the cornucopians, after years of doubt.
But the issue of individual well flow rates are an increasingly critical factor when future oil production in oilfields around the world are considered, and this holds equally true when the fields in Saudi Arabia are discussed.
The history of oil production from Saudi Arabia has largely come from individual wells that produced in the thousands of barrels a day. In order to sustain that production over decades, it has been necessary to ensure that 1) the pressure differential between the well and the rock are sustained; 2) that the rock has an adequate permeability to ensure that flow continues at a steady state; 3) that the oil itself is of relatively low viscocity and is thus able to easily flow through the rock; and 4) that there is a sufficient thickness and extent in the reservoir to allow such sustained production.
All of those factors came together in the giant fields that provided high levels of production over many decades, most particularly in the northern segments of Ghawar.
Yet those conditions are less commonly congruent in the fields that Aramco must now exploit to address the coming falls in production from the historic sources. These “best of the rest” (as the late Matt Simmons called them) must now increasingly carry the burden of sustaining Saudi production fail, individually, on differing grounds from meeting those earlier parameters. Collectively and in the face of Ghawar’s decline, they will only be able to sustain production to their original targets and will not provide replacement production as the oldest and larger begin to fade. I would remind you of the curve that Euan put up back in 2007.
In recent posts I have been looking at the potential for the historically high-producing Saudi oilfields at Abqaiq, Berri and Ghawar to sustain or even to increase current levels of production into the future. This is particularly important when one considers the historic main oilfields in production within that country. And of these, the largest not yet covered is the offshore field at Safaniya, today's topic.
There is a growing impression being given in the discussion of oil and natural gas supplies that the world is moving into a period where there will soon be such a plentiful sufficiency of crude that the US may consider exporting some of its production (h/t Leanan). But if one looks behind the headlines, and particularly at the current status of the largest oilfield contributing toward this rosy picture - the Ghawar field in Saudi Arabia - that optimism becomes more evidently built on a very transient set of data that, as this series of posts seeks to show, will not be sustainable for any significant period into the future.
The three major oil producers (i.e. those producing more than 5 mbd each) are currently seeing surges in production as the world moves to an overall production of 90 mbd. The OPEC June Monthly Oil Market Report (MOMR) notes that this has brought Russia to 10.33 mbd in May, some 100 kbd over the same period in 2011; and Saudi Arabia is reported to have averaged 9.917 mbd in May, up 40 kbd over April. The United States is running at 6.236 Mbd of crude (from the EIA TWIP), while importing 9.117 mbd. The MOMR reports US oil supply at 9.66 mbd on average, but counts more than just crude in this value. The gain over the past year is around 600 kbd. It is interesting to note, in regard to OPEC production the continued difference between the volumes that OPEC reports from direct contact with the suppliers, and that when the numbers are obtained from “secondary sources.”