Wednesday, February 04, 2009

Drill, Drill, Drill: 100 Million Barrel Discovery

HOUSTON CHRONICLE -- The Houston-based independent explorer and producer Anadarko announced a discovery at its Heidelberg prospect in the Gulf of Mexico. The field, in about 5,000 feet of water, is near the company’s Constitution oil and gas platform about 190 miles southwest of New Orleans. The well’s total depth reached about 28,500 feet, the company said. The Heidelberg discovery likely equates to a discovery of 100 million barrels of oil equivalent.

Anadarko said the discovery well in the Heidelberg field increases its understanding of the surrounding deepwater rock formations under a thick layer of salt. The company has drilled seven successful exploration wells in that area, known as the Miocene trend.

The news comes less than a month after Anadarko announced that a test well in the Jubilee field offshore Ghana indicated it could eventually deliver 20,000 barrels of oil per day. Also, Houston-based Mariner Energy, one of Anadarko’s partners on the Heidelberg field, announced drilling successes on two other Gulf wells, including one much closer to Louisiana’s shore in 60 feet of water.

MP: Doesn't this report suggest that new oil discoveries are still being made on a regular basis, that there's plenty of oil available, that new technologies increase the probability of future oil discoveries, that we have plenty of domestic energy resources available, that we're nowhere close to running out of oil, and that oil prices will remain low for decades?

Update
: As Colin points out in a comment, "And policies designed to promote the use of expensive alternative energy sources when plenty of crude oil remains will only make us poorer."

35 Comments:

At 2/04/2009 10:50 AM, Blogger Colin said...

Yep. And policies designed to promote the use of expensive alternative energy sources when plenty of crude oil remains will only make us poorer.

 
At 2/04/2009 10:56 AM, Anonymous James said...

I work in Houston in a field related to the Oil and Gas Industry. One issue with cheaper oil is that there will not be as much incentive for the E&P companies to drill wells such as this one. It is much more expensive to get oil from under the ocean than from the ground in the Middle East. I do agree that there are a lot more domestic oil resources than what we have now. This recent well being one example.

 
At 2/04/2009 11:39 AM, Blogger spencer said...

No, what you have to do is compare the rate of discovery and the rate that old oil pools are used up.

All the professional estimates of future oil supply build into their studies that significant amounts of new oil will continue to be discovered.

The real point is that the US on shore and off shore regions have been extensively explored and exploited for many years and the oil that can be developed at low prices has been and is being used up rapidly. To expand total output we will have to replace the old cheap oil we are now using with very, very, very expensive oil that we have yet to develop-- largely because it is too expensive to develop at current market prices.

 
At 2/04/2009 12:00 PM, Anonymous richard said...

100m barrels is slightly more than 1 days of consumption.

You need to discover 100m barrels every day, just to keep floating.

 
At 2/04/2009 12:05 PM, Blogger Steve said...

"Doesn't this report suggest that new oil discoveries are still being made on a regular basis"

Yes, but it doesn't discuss the relative size or production capacity of the new finds, or what the finds mean for total global oil supply & demand.

"that there's plenty of oil available"

No, this report says nothing about that. You find 100 units of a commodity. What does this tell you about the total supply of the commodity? Nothing at all.

100mm barrels, the estimated total size, is just a little more the DAILY global demand. Or U.S. demand for 1 week.

"that new technologies increase the probability of future oil discoveries"

Probably so. We should all be thankful for that.

"that we have plenty of domestic energy resources available"

The report can't tell you that, if this new find isn't compared to total domestic supply and demand.

"that we're nowhere close to running out of oil"

No, this article says nothing about that. No mention of new findings as a percentage of total proven reserves, no mention of new findings compared to slowdowns in existing major oil fields, and no mention of this find compared to ongoing demand.


"and that oil prices will remain low for decades?

That is quite a intellectual leap. I hope Prof. Perry's logical and conclusions in his economic research are more rigorously developed.

Although every little bit helps, this individual find is rather meaningless on its own. It represents one week of U.S. oil demand.

 
At 2/04/2009 12:10 PM, Blogger Colin said...

True enough, a single field of 100 million barrels won't cut it, which is why we need continuous exploration efforts around the world. You can bet, however, with the current price of oil that exploration efforts will be scaled back -- it's simply too cheap.

The amount of future supply is a constantly moving target. In years past people have warned that we only had X years of proven reserves left. However, what has occurred is that improved technology has made new sources of oil easier to discover and exploit. Further, technology also improves our ability to exploit existing fields and suck out more of the oil.

 
At 2/04/2009 12:15 PM, Blogger Yossarian said...

I worked in the oil/gas industry for 30 years. We don't have oil shortages; we have fewer or greater price incentives to explore, and we don't price oil to reflect its political cost component. Oil isn't a problem at any price, but underpricing oil ultimately causes problems. More importantly, we have no real substitutes for oil & gas so that when energy demand increases, the price curve on oil will become very steep again. Lacking substitutes for oil suggests a three-pronged energy approach to US energy policy: one, end US drilling restrictions; two, price oil to reflect its political cost --- a bbl from Venezuela or Saudi Arabia ultimately costs us much more than a bbl from Canada, Mexico or Norway, and three, promote nuclear power investment to build an energy supply base that over time will help us withstand oil demand shocks.

 
At 2/04/2009 12:24 PM, Anonymous Anonymous said...

A 100 mmbbl find is modest by offshore standards, especially compared to the finds in the 80's and 90's. In oil/gas exploration, the theme is always the same: we're spending more to get less.

 
At 2/04/2009 12:59 PM, Blogger misterjosh said...

"he Heidelberg discovery likely equates to a discovery of 100 million barrels of oil equivalent."

what does this actually mean?

oil equivalent... huh?

Is this the recoverable amount?

What's the cost per barrel on oil more than 5 miles down on the ocean?

 
At 2/04/2009 1:24 PM, Blogger Marko said...

But but but . . . Peak Oil!

I guess not. So, the sky is not really falling?

I still think a small nuclear reactor in every town is the way to go though.

 
At 2/04/2009 1:37 PM, Anonymous karakfa said...

Regardless of new discoveries it's not a renewable resource. It will eventually become uneconomical to drill for the remaining drops. Crude oil has other uses that just burning for energy. This scheme reminds me killing whales to make candles from their fat.

 
At 2/04/2009 2:02 PM, Blogger Bloggin' Brewskie said...

Anadarko has 2.4 billion barrels of proven reserves as of 2007. They’re a feisty independent company.

As for oil… there’s plenty of oil left to be discovered: Brazil can find oil under your couch; East Siberia is largely unexplored; Saudi Arabia has a few plays left; Iraq is soaked in oil, plus recent evidence suggests it has much more oil than previous estimates; offshore is future, the technology is constantly improving, and America has awesome offshore potential (if the government allows it to happen); and there’s unconventional sources of oil, such as tar ands and extra heavy crude, though they come with an environmental cost. (Links will be posted to all but the unconventional oil sources later; far too busy right now.

On top of this, we will use other energy options, too. Natural gas is coming more and more onto its own, nuclear is becoming a viable option world wide. Wind is sprouting up. And next-generation biofuels, such as cellulosic corn and algae, aren’t too far down the road and have tremendous promise.

As for alternatives… yes, it’s true that many of them aren’t cost competitive right now, especially compared to cheap oil and coal, but their future integration is being written as we write. Solar is expected to become cost-completive with fossil fuels by next decade. Decades down the road, various alternative/renewable sources of energy will make oil and gas obsolete as fuels.

The world is destined to use more energy, not less of it.

 
At 2/04/2009 2:05 PM, Blogger QT said...

Misterjosh,

FYI: Definitions for tonne of oil equivalent and barrel of oil equivalent, units of energy used in the resource industry...not sure if the answer makes it any clearer.

Perhaps, one of our oil industry folks can give an idea of drilling costs?

Youssarian,

How do we control the world price for oil or stop other countries like China from buying oil from Venezuela? China's expanding strategic oil reserves also put upward pressure on world oil prices.

U.S. domestic producers aren't the only ones who need higher prices to make exploration and extraction economically viable. Refining costs for heavy crude from Venezuela are also high and heavy crude typically sells for less than sweet crude. Estimates are that Venezuela needs a world oil price of at least $60/barrel for its oil sector to be profitable. (have read this but can't find a link)

Most recent news out of Venezuela indicates that Chavez is angling for agreements with foreign oil companies whose assets he previously nationalized and the national oil company is falling behind on its payments to international contractors. Russia is also
facing problems due to the fall in world oil prices.

 
At 2/04/2009 5:01 PM, Anonymous Anonymous said...

Wow, 5 days supply of US consumption, if they pump a single barrel. Wow! When are they gonna pump!pump!pump!

 
At 2/04/2009 5:25 PM, Blogger TStark said...

This is great, however, 100 million bbls is 15 million bbls more than ONE DAY OF GLOBAL DEMAND. Assuming Anadarko is above average on extraction and produces 50% of the Original Oil In Place (OOIP) then this discovery is less than a day of demand.

 
At 2/04/2009 5:29 PM, Blogger jeppen said...

No, Mark, the report doesn't suggest that at all. US oil production peaked at 10 million barrels a day in 1970 and it has now slumped to 5 million per day. This trend will continue - ten years from now, domestic production will be down to 3-4 million barrels per day.

 
At 2/04/2009 5:30 PM, Anonymous Anonymous said...

q-tippy, you have come a long way. Five htmls in a single post. What the hell did Putin and Chavez have to do with another deep well (did Anadarko stock price jump on the news or did they just forgot to tell the analysts on the day before conference call ?) drill in hurricane alley eludes me.

Do me a favor. Get that Peak Trader to learn your newly acquired skills.

 
At 2/04/2009 6:23 PM, Blogger QT said...

Anon,

In answer to your question, Chavez & Putin have nothing to do with a deep well discovery in the Gulf.

Just adding a bit of global perspective around the issue of high domestic production costs vs. low world oil prices raised by several posters. Many other international producers face the same challenge.

Not sure if you're pulling my leg there, Anon. but thanks all the same. ;-)

 
At 2/04/2009 6:26 PM, Blogger VangelV said...

"Doesn't this report suggest that new oil discoveries are still being made on a regular basis, that there's plenty of oil available, that new technologies increase the probability of future oil discoveries, that we have plenty of domestic energy resources available, that we're nowhere close to running out of oil, and that oil prices will remain low for decades?"

Your conclusions could not be further from the truth. What this shows is that the easy oil has been found and that we are now looking at very small fields (100 million barrels is tiny) at extreme depths that will take billions to develop and will require prices that are well north of $100 per barrel.

Fields like this take a very long time to develop, will never produce a large amount of oil per day and will deplete very rapidly. At the same time, the existing, larger fields are depleting at about 6% per year and we need to develop new production of around 5 mbpd just to have production stay flat.

The Peak Oil subject is actually a very simple one to understand. The data to support the argument is actually very easy to find and verify. I suggest that you pay attention because the dangers that face us are extreme and those that can't see them will be hurt much more than those that took the time to understand the issues.

 
At 2/04/2009 6:51 PM, Anonymous Anonymous said...

Not sure if you're pulling my leg there, Anon. but thanks all the same. ;-)

You wear the pantyhose q-tippy. :-)

My problem is that Anadarko stock pumped 4.95% today on the news release today which was not news to the board of directors. Did the board issue restricted stock to themselves and the executives yesterday while the conference call was in motion?

The XLE only moved 1%.

Well the SEC has been out to lunch for years, so what's the big deal.

 
At 2/05/2009 12:02 AM, Blogger Bloggin' Brewskie said...

Okay, here’s the previously promised links.

Some of the goodies listed in Foreign Policy magazine are:

Iran's Ferdow, Mound and Zageh fields - 38 billion barrels, located in the Persian Gulf, off the coast of southern Iran; Kashagan, located in the Caspian Sea, 38 billion barrels;
West Qurna Field, Iraq, 15-21 billion barrels.

Moving onto other things, Saudi Arabia has a few worthy gems - Al Kharais, Khursaniyah, and Manifa. East Siberia is largely unexplored; some believe it may hold 110 billion barrels (if it’s half as wealthy as its western sibling, Russia will have plenty of oil for a while). And there's Brazil. Yes, Brazil truly can find oil under a couch. Analysts believe Brazil’s offshore oil reserves may be roughly 80 billion barrels (some believe it may be 100). They recently hit another discovery: Hess, which may hold 10 billion barrels. These boys have been striking it so rich, it's getting boring.

Among other things... there's the untapped potential of Iraq (if it can hold together). Some speculate Iraq may have considerable more oil than previous estimates. There's also America's Jack Oil Field located in the Gulf of Mexico. Discovered in 2006, this field may hold 3-15 billion barrels of oil.

 
At 2/05/2009 12:34 AM, Anonymous Anonymous said...

as a consulting engineer who assists in developing deepwater oilfields - and makes a very handsome living doing it - i thank god everyday for the greens. if it wasn't for those luddite eco-morons we'd be using nuclear for most of our energy generation and oil would probably be $5/bbl (and i wouldn't have a job)

 
At 2/05/2009 2:46 PM, Anonymous Jim said...

Hi Mark ... the world is running about 85 million boe/d consumption, 1 billion boe approx. every 12 days, or 2.5 billion boe every month ... so while 100 million boe is nice, we should keep the discovery in context ... we need more, a whole lot more, a whole lot more of everything ... conservation, nuclear, solar, wind, natural gas, oil, coal ... and don't forget that APC is drilling 'sub-salt', 5 or 6 miles down ... temperatures, pressures and caustic environment are challenging to say the least ... the problem is not $100 oil; the solution is $100 oil

 
At 2/05/2009 6:31 PM, Blogger VangelV said...

Bloggin' Brewskie wrote

"Iran's Ferdow, Mound and Zageh fields - 38 billion barrels, located in the Persian Gulf"

"Kashagan, located in the Caspian Sea, 38 billion barrels"

"West Qurna Field, Iraq, 15-21 billion barrels."

"Saudi Arabia has a few worthy gems - Al Kharais, Khursaniyah, and Manifa."

"East Siberia is largely unexplored; some believe it may hold 110 billion barrels (if it’s half as wealthy as its western sibling, Russia will have plenty of oil for a while)"

"Analysts believe Brazil’s offshore oil reserves may be roughly 80 billion barrels (some believe it may be 100). They recently hit another discovery: Hess, which may hold 10 billion barrels. These boys have been striking it so rich, it's getting boring."

"Among other things... there's the untapped potential of Iraq (if it can hold together). Some speculate Iraq may have considerable more oil than previous estimates."

"There's also America's Jack Oil Field located in the Gulf of Mexico. Discovered in 2006, this field may hold 3-15 billion barrels of oil."

Let me begin with Jack. The hype that came with the 'discovery' of Jack seems to be going the way of PEMEX's Noxal discovery. Like Jack, Noxal was seen as very large and at one time claims were that it was bigger than Cantarell. But when reality set in PEMEX wrote down the size of the discovery by more than 95% and as things stand the field in unlikely to be developed at less than $250 oil.

From what I see, work on Jack is not proceeding very quickly. The earliest date for any possible development that I have heard of is 2017 but that would require extensive drilling and development work that will not happen unless oil price get at least four times higher than the current levels. And that is no guarantee of anything because there is not enough data to tell us anything significant about the size of the oil reserves or how much of the oil could be lifted economically. People forget that it takes a great deal of energy to lift oil thousands of meters and it does not take very long until the energy required to pull out a barrel of oil is higher than the energy that the oil will provide.

If anyone were to put a gun to my head and ask me to predict how much oil is really available to extract economically I would guess less than 1 billion barrels and that would probably be stretching it given the current state of the technology.

Let us move to the Ferdow, Mound and Zageh 'discovery.' From what I have read there hasn't been enough drilling to make any statement about how much recoverable oil, if any, there might be in place. And let us not forget that we are talking about the same country that managed to double its reported reserves and at a time it was not doing exploratory drilling because it was in a middle of a war. Even if the announced reserve estimates for the new fields were accurate, which is unlikely given the lack of development wells, it would not be sufficient to offset the reserve inflation in the 1980s and the subsequent failure to write off production from stated reserves.

What is true of Iran is also true of Iraq. Saddam restated his reserves in the 1980s and they doubled in size even as he was fighting a war with the Iranians and nobody was drilling. And just as with the rest of OPEC, Saddam magically seemed to replace all of the production with new reserves without drilling. So you will excuse me if I ask that someone prove to me the claims made in FP. I can tell you that few people who actually work and understand the industry would accept the article as being even close to accurate.

A perfect example about how things work should be the Kashagan Field. It was discovered in 2000 and was supposed to be producing oil by now. Yet, the field has suffered through many delays and we are now hearing about reaching 75,000 barrel a day production in three to four years and slowly ramping up until the field maxes out at 1.5 mbpd by 2020.

Let me put Kashagan in perspective. Its daily output will only replace the natural depletion that current fields will reach in 100 days. You read that properly. Existing fields are depleting at about 6.5% per year. That means that we need to find about 5.5 mbpd of new production just to stay flat. I hate to bring up the obvious but all of these claims of ultra deep water fields mean low production volumes that will not come on line in the next five years or more. That means that we will be producing far less oil in 2015 than we do today and that prices will be sharply higher.

The days of telling ourselves fairy tales with happy endings should come to an end if we are to move through the transition as painlessly as possible. The simple fact is that most energy producing countries have peaked and the biggest ones peaked a long time ago. Dreams of new Siberian or Saudi discoveries won't help because the easy oil was found a long time ago and the new discoveries are much smaller and much harder to develop. From what I see it is time to face up to reality and plan accordingly.

 
At 2/06/2009 1:47 AM, Blogger Bloggin' Brewskie said...

VangeIV,

The Jack Oil Field’s production is scheduled to begin in 2012-2013 (actually Jack itself has an estimated 500 million barrels; the lower tertiary formation Jack lies at is estimated to possess 3-15 billion barrels).

Sure, Noxal was a bust, but its reserves were retracted months after discovery, where as the same hasn’t been said about Jack (or the lower tertiary), and Brazil’s offshore fields. Petrobras is moving ahead confidently and plans to spend heavily, despite oil’s downturn. About Noxal… hey, mistakes happen.

Iraq is an ocean of untapped oil. Sanctions and two wars have prevented it from realizing its true potential. There’s only a rough 2,000 operating wells in Iraq - America has around 500,000 (Texas has an estimated 1,000,000 holes drilled), and Iraq‘s production costs are pittance (sure, it‘s a rat hole, but if things get better…). Industry insiders believe it can be ramped up to 6 million barrels per day.

I’ve been aware of Kashagan’s difficulty for years. In fact, Foreign Policy makes mention of this. It’s still a wonderful find, it will get developed. This goes with the fact that plenty of oil is out there, plenty of oil will be found; and along with other sources - natural gas, nuclear, biofuels and other alternatives - the world will only increase its energy usage over time.

It will be added that Nigeria is in the offshore business. It’s developing projects that will add 1.5 million barrels to daily production (unfortunately, Nigeria discovered last year that its offshore works are not immune to MEND’s meddling).

Iran’s Ferdow, Mound and Zageh have faced stalled progress due to sanctions and mismanagement; I haven’t read anything that doubts the potential. Does this contrary information come from the Oil Drum?

As for OPEC’s sketchy details on reserves… let me put it this way. In 1975, Armaco estimated Ghawar’s recoverable reserves were 60 billion barrels - a number surpassed in 2005. The Saudi giant was producing 5 million barrels per day last year; the kingdom’s production costs remain among the lowest in the world. Ghawar’s greatest production occurred in 1981 at 5.7 million barrels (later scaled back for market reasons) - this was before the field’s southern portion was developed in the 1990s.

Technology’s progress has long had skeptics who know little about technology themselves - authors, journalists and “snooty” social critics are not engineers or scientists. Until recently, many intellectuals feared America’s natural gas production would face an irreversible decline; some believed it was going to “fall off a cliff” this decade! Certain skeptics completely shot down shale gas and other unconventional sources, claiming: extraction is too difficult and expensive… the technology doesn’t exist or needs further improvement… production will only yield marginal results and won’t contribute much overall. The proof in the pudding occurred last year.

As for alternatives, wonderful next-generation biofuels, such as algae - which is cheap and easy to produce, and will produce wonderful yields - are within the foreseeable future and will prove useful in making fuel. As for electricity production, we have geothermal projects popping up, solar improving by leaps and bounds, and natural gas as a rising star. And there’s plenty of natural gas.

 
At 2/06/2009 2:01 AM, Blogger Bloggin' Brewskie said...

Iraq correction: three wars instead of two.

 
At 2/06/2009 11:30 AM, Blogger VangelV said...

Bloggin' Brewskie worte:

"The Jack Oil Field’s production is scheduled to begin in 2012-2013 (actually Jack itself has an estimated 500 million barrels; the lower tertiary formation Jack lies at is estimated to possess 3-15 billion barrels)."

Is it? Where are you getting these numbers from? The oil companies have cut deep water development investments to the bone and can't make an adequate return from Jack unless prices go up by a factor of three or four. I also don't understand where you get the 3-15 billion number from because there have not been enough tests run to make any such conclusion possible.

"Sure, Noxal was a bust, but its reserves were retracted months after discovery, where as the same hasn’t been said about Jack (or the lower tertiary), and Brazil’s offshore fields. Petrobras is moving ahead confidently and plans to spend heavily, despite oil’s downturn. About Noxal… hey, mistakes happen."

From what I hear Petrobras has cancelled its deep water rig contracts and has no intention of spending a lot of money to develop its latest find until prices head to much higher levels. At these prices it makes much more sense to concentrate on lower cost production instead.

And you have not heard anything about Jack because there has been no follow-up work to provide any data. That leaves Jack as a big unknown as far as reserves are concerned but the knowns are terrible when it comes to the ease of development. The field is in the path of hurricanes for several months out of the year and located in very deep water where shut-downs and start-ups are lengthy and expensive. It requires all kinds of systems to cool the oil, separate and contain the natural gas and requires that the oil be lifted thousands of meters from its source. The infrastructure required to make production viable is extensive and expensive. That means that you will not see anything in the way of significant production for a decade or more, if ever.

"Iraq is an ocean of untapped oil. Sanctions and two wars have prevented it from realizing its true potential. There’s only a rough 2,000 operating wells in Iraq - America has around 500,000 (Texas has an estimated 1,000,000 holes drilled), and Iraq‘s production costs are pittance (sure, it‘s a rat hole, but if things get better…). Industry insiders believe it can be ramped up to 6 million barrels per day."

This is a nice narrative that assumes that past geologists, who found most of the world's biggest and most productive fields were idiots. They actually weren't and we have a great deal of knowledge about Iraq and its potential.

What you keep quoting are statements that are being put out by companies trying to peddle geological data to exploration companies but what you need to come up with a valid statement is real data from real exploration activity.

"I’ve been aware of Kashagan’s difficulty for years. In fact, Foreign Policy makes mention of this. It’s still a wonderful find, it will get developed. This goes with the fact that plenty of oil is out there, plenty of oil will be found; and along with other sources - natural gas, nuclear, biofuels and other alternatives - the world will only increase its energy usage over time."

But it does not go with the fact that there is plenty of oil out there. That is the point. If we took the claims at face value we still see that the full production out of Kashagan would only offset the amount of depletion from existing fields over the next 100 days.

Mine is not a difficult argument to grasp and only requires a simple knowledge of mathematics. Take existing production of 85 mbpd and look at the depletion rate of 6.5%. That requires you to add as much capacity every three months as Kashagan will produce at its peak. Well, three moths later you will need another one. And three moths later you will need another one. And so on and so on.

"It will be added that Nigeria is in the offshore business. It’s developing projects that will add 1.5 million barrels to daily production (unfortunately, Nigeria discovered last year that its offshore works are not immune to MEND’s meddling)."

Nigeria will be needed to help offset depletion. But Nigerian production is not cheap, is not reliable enough and its growth profile is not sufficient to offset depletion.

"Iran’s Ferdow, Mound and Zageh have faced stalled progress due to sanctions and mismanagement; I haven’t read anything that doubts the potential. Does this contrary information come from the Oil Drum?"

No. It comes from the lack of data. We can say many things about potential but what you need is understanding of the geology to make any claim. And sanctions are not much of an issue because the Chinese, Indians and Russians are more than willing to step in and help Iran develop its reserves.

You also fail to mention that Iran will be running out of oil and needs new fields to offset current production and its own growing need for energy. Like the US, Iranian production peaked in the 1970s and will never get back to its previous levels because not enough new oil has been discovered to replace past production.

"As for OPEC’s sketchy details on reserves… let me put it this way. In 1975, Armaco estimated Ghawar’s recoverable reserves were 60 billion barrels - a number surpassed in 2005. The Saudi giant was producing 5 million barrels per day last year; the kingdom’s production costs remain among the lowest in the world. Ghawar’s greatest production occurred in 1981 at 5.7 million barrels (later scaled back for market reasons) - this was before the field’s southern portion was developed in the 1990s."

Correct. Ghawar, the king of oil fields is now in decline. It only produces as much as it does because the Saudis are careless and allowed massive amounts of water injection to keep reservoir pressures high. But by doing so they allow oil to be trapped behind. In effect, they traded future production for current production. But if you know anything about field production profiles you will understand what happens when water levels rise to the horizontal well levels. We saw this in Yemen, when production fell off a cliff and are seeing the same type of thing in Cantarell, where nitrogen was used to get the oil faster instead of water.

"Technology’s progress has long had skeptics who know little about technology themselves - authors, journalists and “snooty” social critics are not engineers or scientists. Until recently, many intellectuals feared America’s natural gas production would face an irreversible decline; some believed it was going to “fall off a cliff” this decade! Certain skeptics completely shot down shale gas and other unconventional sources, claiming: extraction is too difficult and expensive… the technology doesn’t exist or needs further improvement… production will only yield marginal results and won’t contribute much overall. The proof in the pudding occurred last year."

You missed the point. It has been technology such as horizontal drilling, injections of nitrogen or water that has permitted production levels to stay high. But using technology to suck out oil faster does not produce more oil. While you can get some more oil out of old reservoirs by using technology or develop uneconomical marginal fields that can only happen if production declines drive prices higher.

"As for alternatives, wonderful next-generation biofuels, such as algae - which is cheap and easy to produce, and will produce wonderful yields - are within the foreseeable future and will prove useful in making fuel. As for electricity production, we have geothermal projects popping up, solar improving by leaps and bounds, and natural gas as a rising star. And there’s plenty of natural gas."

Actually, most alternative schemes are con jobs. Ethanol, bio-diesel, algae, etc., cannot compete with fossil fuels and in most cases use up more energy to produce than the product contains. Governments subsidize alternatives by asking consumers to pay more because they make no economic sense. Of course, governments cannot make an energy losing process work so the end for most of the scams will come to an end as soon as voters and consumers have had enough and turn on the political elites who hand out taxpayer cash to their corporate friends.

It is time to grow up and see reality as it is rather than as you imagine it to be.

 
At 2/06/2009 9:46 PM, Blogger Bloggin' Brewskie said...

On Jack… your challenge proved positive:) Chevron announced a new discovery in the Gulf of Mexico that may rival the Jack prospect yesterday. The expected year of Jack’s production was announced the day of its discovery. Offshore fields don't take 10 or 11 years to develop: Chevron's Tahiti and Blind Faith fields are proof of this. As for skepticism of its reserves… it takes time to adequately scan and test a well to better assess prospects; they’re currently giving an estimate of what’s believed down there. Over time, with better analysis, reserves often increase - just look at Ghawar. Back in the 40s and 50s, America's oil reserves were estimated far lower than what's otherwise been proven.

On Brazil… nope, Petrobras is barreling ahead. They recently announced plans to spend $174.4 billion over the next five years. Cancelling their projects? No, Tupi is in development, and they recently brought on line the first Brazilian made semi-submergible offshore drilling rig.

Yup, “Ghawar is in decline,” that’s what many in the peak oil community have been declaring for years. That’s until last year, when they stood by - slack jawed - as production increased. You really can tell when an oil field is in decline by the consistently low production costs.

Why do you keep doubting Iraq's potential? What do you think was one of the biggest reasons for invading Iraq (fucking Cheney)? Three wars and sanctions is going smash any oil industry; Russia's oil industry - which no, was not hampered by war but was dehabilitated during the 90s, as a result of the Soviet collapse, and the cheap oil that ensued throughout the decade - saw its production slide to 6mbpd, and only came back from the dead earlier this decade. Why the skepticism about Iraq’s reserves? What's the reasoning?

The listed Iranian discoveries have been fairly recent. The listed projects Saudi Arabia - Al Kharais, Khursaniyah, and Manifa - have been known for decades (Manifa since 1957) and have only recently been put in the pipeline. The oil industry knew of oil in the North Sea since the early 1960s, but that didn’t pick up steam until the late 70s (largely because of technological hurdles and expense). Russia and China both provide aid to Iran, but that hasn’t prevented economic malaise, nor the sky high inflation and unemployment experienced during last year’s oil boom year. Like Venezuela, Iran is a top-down, command-style economy that has brought malaise to its oil sector, and economy through gross mismanagement.

“The oil companies have cut deep water development investments to the bone and can't make an adequate return from Jack unless prices go up by a factor of three or four(?)”
Oil was in a boom last year: demand for labor and the high price of commodities shot production costs through the roof. Now that everything has cooled, productions costs are coming down. Sure, some projects have been scaled back, but others are barreling ahead. Petrobras said last year that their Tupi production is competitive at $40 a barrel - that was when oil was doing its sky high death march. Yup, that’s the same field the naysayers have been picking about: the deepwater formation that lies at depths of 2000-3000 meters under water, 2000 under meters of rock, and some 2000 meters below salt; and will require pipes that can withstand a huge variance in temps. - 4 degrees Celsius up to 100. Is his an arduous undertaking? Sure; but this is relative to the time. Three decades ago, drilling in the North Sea was an arduous undertaking: it was expensive, a great engineering feet which cost hundreds of lives. Now this is pulled off now without batting an eye; and contrary to what the peak oil community said in the late 80s (these guys have been around for a while), North Sea production didn’t scale back, but rather soared through the latter half of the decade, and throughout the 90s… until its peak.

First-generation biofuels are a crap, and a scam. Second-generation biofuels - algae, jatropha, cellulosic ethanol - are much better and will give much more productive yields; some like algae and jatropha won‘t compete with food supplies. Have doubts about solar? Check out this recent breakthrough. Solar still needs to make some progress, but its occurring at fantastic speed. It’s future is very bright.

Look, I don’t know what influences your thinking - perhaps it’s the Oil Drum, the Energy Bulletin, Matt Savinar, James Kunstler (the world’s most comical and shittiest forecaster, btw) or whatever… - but I can tell you the idea of “peak oil” is not a new concept, and again, many of its proponents seem to fail grasp the progress of technology (by technology, I’m not just talking about horizontal drilling or nitrogen injection - which are old hat techs., btw - but in other areas such as solar, hydrogen, smart grid, geothermal, batteries, nanotechnology and more). One peak prophet, Mathew Simmons, author of Twighligh in the Desert, is a good investment banker, but not a petroleum engineer. Many in the peak oil community persistently cherry pick facts to fit their views, or ignore conflicting evidence altogether.

A good example is the Oil Drum, which I periodically check out for the same reason I occasionally check out Rush Limbaugh: idiocy is entertaining. Like many in the peak oil community, the Oil Drum was at the forefront with “America’s imminent decline in natural gas production,” shooting down any prospects of alterative sources, or technology saving the day. They continued this preposterous claim even as shale gas was going gangbusters. Finally, when the evidence was clear, the Oil Drum ‘fessed up, stating, “We guess there was a technological breakthrough.” (Duh…) They’ve spent years spouting that Ghawar is in decline. Last year, they made suggestions early in the year that Russia’s production peaked (it later went up; Russia‘s official peak was the late 80s at 12.5 mbpd); and lately, they made a suggestion that non-OPEC production has peaked (Russian and Canadian production have down been lately because of the downturn in the economy, and slackened oil demand). Come to think of it... the Oil Drum's analysis of the Jack 2 discovery stated production would likely begin 2013-2014... so maybe I shouldn't be spouting its production date… hmmm? (I'm not going to bother posting the link.)

Here’s a 60 Minutes video about the speculative greed that drove up last year’s oil prices. My advice is to check out all sides of the issue; after all, I check out the Oil Drum, plus people like Mathew Simmons and James Kunstler (the man has a remarkable ability of somehow not seeing the future!); and even as a fairly liberal person, I enjoy reading Mark Perry’s blog, even though I don’t agree with everything he posts. I’ve read a few “doom and gloom” books over the years… none of them have come true, not even close. To be fair, prophecies from the techno-cornucopians (like Raymond Kurzweil) are off the mark too, though they usually hit a little closer.

Remember, the majority of oil used is for transpiration purposes - almost 70% is burned for transportation. Solve this dilemma, and we’ll have more petroleum than we’ll ever need to make cheap beef jerky makers found at Wal-Mart. Yum, yum…

 
At 2/07/2009 9:40 AM, Blogger VangelV said...

"On Jack… your challenge proved positive:) Chevron announced a new discovery in the Gulf of Mexico that may rival the Jack prospect yesterday."

Let's stop here. You wrote in a previous post that Jack, "may hold 3-15 billion barrels of oil," but Bloomberg's story claims, "the second-biggest U.S. oil company, made an oil discovery in the Gulf of Mexico that may rival the 500 million-barrel Jack prospect found in 2004." From what I see, the decline from 3-15 billion barrels in reserves to 500 million barrels is not very good news.

Let me point out here that I do not really know how much, if any oil can be produced economically from Jack, but the point is that you don’t either because Chevron does not have the data to let anyone make an accurate statement.

"The expected year of Jack’s production was announced the day of its discovery."

Here you go again. At the time of the 'discovery' Chevron had insufficient data to make any prediction estimates. We really don’t know when the field will be developed and how much it will be able to produce. What we do know is that we will need many Jacks just to offset depletion of existing fields.

"Offshore fields don't take 10 or 11 years to develop: Chevron's Tahiti and Blind Faith fields are proof of this."

Jack is a much harder development for Chevron than Tahiti and Blind Faith were. When Tahiti and Blind Faith development was funded there were plenty of rigs and people in the market and oil prices were looking to be increasing. That is not the case today because even though oil prices will rise significantly it is not clear that the economic returns that are necessary can be justified.

And let us take a look at Blind Faith. After eight years and billions of investment in cutting edge technology crude oil production the field is only going to produce 65,000 bpd. It took eight years and a massive investment to be able to produce enough new oil to offset the depletion that we will see over the next seven hours. Tahiti will do slightly better and at its peak its production will be enough to offset depletion for 14 days.

As far as I know the company still does not have sufficient data to make a call on the Jack project. I know that the second appraisal well was supposed to be drilled off but the company has been very silent about the results. That does not bode well for the future of the field and I suspect that we will be looking at much more time than what is expected.

"As for skepticism of its reserves… it takes time to adequately scan and test a well to better assess prospects; they’re currently giving an estimate of what’s believed down there. Over time, with better analysis, reserves often increase - just look at Ghawar."

Let's stop here. You are right, it does take a lot of time and we won't know until the results are in. But from what I have seen the reserves have already been scaled back from the initial claims. And Jack is no Ghawar.

"Back in the 40s and 50s, America's oil reserves were estimated far lower than what's otherwise been proven."

We are not in the 40s and 50s. First, most of America’s fields were already discovered and reserves were increased because newer technology permitted us to understand what was in place better, particularly as more development activity was funded. Today we have already had major advances in technology that have permitted us to understand the geology of reservoirs better than ever before and can find deposits that would have been missed before. That technology has permitted us to find many fields that were uneconomic before because they were too small. But that does not help us offset all of the natural depletion. For that we need a new Cantarell, Burgan, Daqing or Ghawar and Jack, Tupi, or Blind Faith don’t cut it.

 
At 2/07/2009 10:13 AM, Blogger VangelV said...

"On Brazil… nope, Petrobras is barreling ahead. They recently announced plans to spend $174.4 billion over the next five years. Cancelling their projects? No, Tupi is in development, and they recently brought on line the first Brazilian made semi-submergible offshore drilling rig."

Brazil is being hit by the credit crunch problem. While it has to spend a great deal to try to increase its oil production it has been hurt by the credit crunch. Some rig contracts have been allowed to expire because the rigs were inadequate. The problem is that the rigs that were supposed to replace them and used for the ultra-deep water exploration and development cannot be financed. At $600 million a pop the current oil price makes lenders weary of taking the risk.

http://www.rigzone.com/news/article.asp?a_id=69049

And please note that the most positive assessment of Brazil’s increase in output is insufficient to offset depletion for existing fields. The most optimistic claims for Brazilian output increases by 2020 will not be enough to even offset the depletion that we will see over the next six months. This means that you need to come up with other fields that will be coming on line just for us to stay flat.

"Yup, “Ghawar is in decline,” that’s what many in the peak oil community have been declaring for years. That’s until last year, when they stood by - slack jawed - as production increased. You really can tell when an oil field is in decline by the consistently low production costs."

Actually, Ghawar is in big trouble. The Saudis are pumping million of barrels of water to maintain reservoir pressures and are paying a huge price in terms of a rising water cut.

And production of conventional crude did not go up last year. To get the numbers as much as possible the industry has started to count NGLs, unconventional sources, refinery gains, etc., as part of the total. The data clearly shows that production of light sweet crude peaked in 2005 and the peak is unlikely to be reached ever again. While we could squeeze out some more accounting gains and add some new unconventional sources to make the numbers look promising the news on the both fronts is quite bad. The recent price decline has caused plans for new unconventional oil development to be delayed or cancelled and has caused many OPEC producers to rethink their own production plans. That means that we will continue to see natural depletion of existing conventional fields but that the decline won't be offset by new production from tar sands, shale oil and other unconventional sources.

"Why do you keep doubting Iraq's potential? What do you think was one of the biggest reasons for invading Iraq (fucking Cheney)? Three wars and sanctions is going smash any oil industry; Russia's oil industry - which no, was not hampered by war but was dehabilitated during the 90s, as a result of the Soviet collapse, and the cheap oil that ensued throughout the decade - saw its production slide to 6mbpd, and only came back from the dead earlier this decade. Why the skepticism about Iraq’s reserves? What's the reasoning?"

I doubt the optimistic scenario for Iraq because I know a lot of energy industry people who understand the geology and the exploration history. I also know that many of the claims that you keep posting are coming from companies trying to sell technical data and not coming from explorers who have real test data that will allow for a legitimate statement to be made. While there is potential in Iraq it won't help offset the depletion picture. From what I see, you keep missing that last point.

And it is good that you brought up Russia. The Russians have a serious problem with ageing infrastructure that will cause their production to decline in addition to the depletion issues they face with their older fields. Because I am an optimist I expect that Russia will actually attract some serious investment to help it develop some of their smaller new fields but that will not permit the country to come even close to its previous peak. At best, Russia will stay flat or show a minor increase from current levels in a few years if it can attract a $trillion or so in new investment.

"The listed Iranian discoveries have been fairly recent. The listed projects Saudi Arabia - Al Kharais, Khursaniyah, and Manifa - have been known for decades (Manifa since 1957) and have only recently been put in the pipeline. The oil industry knew of oil in the North Sea since the early 1960s, but that didn’t pick up steam until the late 70s (largely because of technological hurdles and expense). Russia and China both provide aid to Iran, but that hasn’t prevented economic malaise, nor the sky high inflation and unemployment experienced during last year’s oil boom year. Like Venezuela, Iran is a top-down, command-style economy that has brought malaise to its oil sector, and economy through gross mismanagement."

First, there is not enough technical data to allow us to come up with any meaningful guess about how much economically recoverable oil is in place in the Iranian fields. To get oil out to the market economically you need many things to go your way and without the data we have no clue about what the Iranian fields can produce. And as I said, Iran's existing fields are very old and the country needs new discoveries to avoid becoming a net exporter as Indonesia became and as the UK will become soon because of the North Sea production collapse. From what I can tell new Iranian oil won’t be even flowing by the time that Cantarell becomes a minor player and Mexico stops exporting oil to the US because it will need all it has for its own domestic use.

“Oil was in a boom last year: demand for labor and the high price of commodities shot production costs through the roof. Now that everything has cooled, productions costs are coming down. "

But with lower prices for oil companies are cutting back their capital budgets and are not going to be in a hurry to go out and spend. Stop living in a fantasy world and start paying attention to what is really happening.

"Sure, some projects have been scaled back, but others are barreling ahead. Petrobras said last year that their Tupi production is competitive at $40 a barrel - that was when oil was doing its sky high death march."

I pay attention to the markets and have yet to hear this wopper. Tupi will need a number of $600 billion dollar rigs for its development and will need some cutting edge technology and infrastructure. That means that Petrobras needs oil to be well above $100 per barrel to make the economics work. The same is true of Tahiti, Jack and the other deep water wells.

“ Yup, that’s the same field the naysayers have been picking about: the deepwater formation that lies at depths of 2000-3000 meters under water, 2000 under meters of rock, and some 2000 meters below salt; and will require pipes that can withstand a huge variance in temps. - 4 degrees Celsius up to 100. Is his an arduous undertaking? Sure; but this is relative to the time. Three decades ago, drilling in the North Sea was an arduous undertaking: it was expensive, a great engineering feet which cost hundreds of lives. Now this is pulled off now without batting an eye; and contrary to what the peak oil community said in the late 80s (these guys have been around for a while), North Sea production didn’t scale back, but rather soared through the latter half of the decade, and throughout the 90s… until its peak.”

The North Sea development was very easy because the fields were not in ultra deep water and the drill depths were manageable. The fields that we are talking about now are orders of magnitude harder to develop.

The problem for your case also comes from the North Sea example. Smaller fields deplete much faster and by the time a Tupi is developed the North Sea will be a minor player as the UK becomes a net exporter and Europe has to find a new source of oil. By that time production from Burgan, Ghawar, Daqing, and Cantarell will be down by more than the most optimistic scenario would have all of the ultra deep water fields produce. Once again, for you to have lower prices you will need to depend on a massive collapse in economic activity that destroys demand. But if you make that assumption you will not have development of ultra deep fields. The math and logic are against you.

”First-generation biofuels are a crap, and a scam. Second-generation biofuels - algae, jatropha, cellulosic ethanol - are much better and will give much more productive yields; some like algae and jatropha won‘t compete with food supplies. Have doubts about solar? Check out this recent breakthrough. Solar still needs to make some progress, but its occurring at fantastic speed. It’s future is very bright.”

Sorry but I see no argument that makes algae a viable and competitive alternative as long as oil is selling for less than $500 a barrel. Solar is also a big scam, which is why it needs massive subsidies to survive.

 
At 2/07/2009 10:53 AM, Blogger VangelV said...

”Look, I don’t know what influences your thinking - perhaps it’s the Oil Drum, the Energy Bulletin, Matt Savinar, James Kunstler (the world’s most comical and shittiest forecaster, btw) or whatever… - but I can tell you the idea of “peak oil” is not a new concept, and again, many of its proponents seem to fail grasp the progress of technology (by technology, I’m not just talking about horizontal drilling or nitrogen injection - which are old hat techs., btw - but in other areas such as solar, hydrogen, smart grid, geothermal, batteries, nanotechnology and more). One peak prophet, Mathew Simmons, author of Twighligh in the Desert, is a good investment banker, but not a petroleum engineer. Many in the peak oil community persistently cherry pick facts to fit their views, or ignore conflicting evidence altogether.”

My thinking is influenced by mathematics and logic. There certainly is no need to cherry pick any facts because the mathematics are clear for anyone with a grade 5 education to follow the back of the envelope calculations.

We start by noting that we have about 85 mbpd of production and a depletion rate of around 6.5% from existing fields. That 6.5% number assumes that we continue to invest at a reasonable level in those fields. Please note that I do understand that some of the production comes from refinery gains, NGLs, unconventional production, etc., but that does not change the argument materially because those sources require much more investment to keep production from falling so I will treat the total number without doing the breakdown.

We need to find 5.5 mbpd of new production this year just to keep production levels flat. But we have not been finding enough oil that can be developed economically to get 5.5 mbpd of new production this year. All we can do is to keep pumping up reservoir pressures, drill more horizontal wells and use some other measures if the economics make sense.

Of course, the economics don’t make sense so many companies have cut their capital budgets to the bone. This means that the new production that was supposed to offset depletion won’t be coming on line and that we are never going to exceed the production peak that we saw in 2005 for conventional crude.

A good example is the Oil Drum, which I periodically check out for the same reason I occasionally check out Rush Limbaugh: idiocy is entertaining. Like many in the peak oil community, the Oil Drum was at the forefront with “America’s imminent decline in natural gas production,” shooting down any prospects of alterative sources, or technology saving the day. They continued this preposterous claim even as shale gas was going gangbusters. Finally, when the evidence was clear, the Oil Drum ‘fessed up, stating, “We guess there was a technological breakthrough.”

At $12 natural gas you can get a lot more of it from shale for quite some time. But you certainly won’t see shale gas contributing at $4.50. If you pay attention to the conference calls the shale gas explorers have been crushed and are no longer investing in new production.

But there is no new technology that will help us replace all of the oil that was already extracted from existing fields. The technology only helped us get the oil that was in place out faster. Given the fact that the oil in place was limited, you will have a problem coming up with arguments for an optimistic scenario.

(Duh…) They’ve spent years spouting that Ghawar is in decline.

Saudi Arabia has yet to produce much more oil than it did in the 1980s and Ghawar is in decline. The water cut issues are very troubling and there is plenty of worry in the country.

Last year, they made suggestions early in the year that Russia’s production peaked (it later went up; Russia‘s official peak was the late 80s at 12.5 mbpd); and lately, they made a suggestion that non-OPEC production has peaked (Russian and Canadian production have down been lately because of the downturn in the economy, and slackened oil demand).

Russian production did peak in the 1980s. Non-FSU production is also in trouble because most of the world’s producing nations have peaked. We only have Brazil, Algeria, Nigeria and a handful of other players who have little in the way of economic reserves.

Come to think of it... the Oil Drum's analysis of the Jack 2 discovery stated production would likely begin 2013-2014... so maybe I shouldn't be spouting its production date… hmmm? (I'm not going to bother posting the link.)

OK. They accept Chevron’s claim that Jack 2 will be producing by 2014 if prices hold up as they believe. It still does not help the mathematics you need to argue your case. American production will still be lower by 2014 than it is today because you are on the back end of Hubbert’s Peak.

Here’s a 60 Minutes video about the speculative greed that drove up last year’s oil prices. My advice is to check out all sides of the issue; after all, I check out the Oil Drum, plus people like Mathew Simmons and James Kunstler (the man has a remarkable ability of somehow not seeing the future!); and even as a fairly liberal person, I enjoy reading Mark Perry’s blog, even though I don’t agree with everything he posts. I’ve read a few “doom and gloom” books over the years… none of them have come true, not even close. To be fair, prophecies from the techno-cornucopians (like Raymond Kurzweil) are off the mark too, though they usually hit a little closer.

LOL. You claim to look at all sides but think that the 60 minutes piece is a good source of information. Well, let me point out a few fact that the piece missed.

One thing that was missed was the relationship between supply and demand. You would think that 60 minutes might want to consider the fact that the world economy expanded at the fastest pace in many decades at a time when oil suppliers were unable to keep up. As demand for oil rose at around 4% per year Non-OPEC supply growth slowed down and OPEC's spare capacity declined. This made the markets vulnerable to supply disruptions coming from extreme weather, unexpected infrastructure shut-downs or geopolitical events.

The 60 minutes piece never really looked into the depletion problem facing producers. I did not hear much about the 6.5% depletion rate that rises to 9% once fields move beyond peak. I did not hear much about the acceleration in depletion rates due to the use of enhanced recovery techniques that stripped existing fields of their content much faster than the historical average.

If you want to argue your case effectively stop paying attention to narrative and provide an answer to the following simple questions.

1. How can you keep production increasing if we have been producing more oil than we have been finding for more than twenty years and we have been producing about 4 times more oil than we have been finding since 2000?

2. Where will we get the new production to offset the 6.5% annual depletion decline?

 
At 2/08/2009 1:04 AM, Blogger Bloggin' Brewskie said...

First, put down the peak oil calculator, we’re not there yet. According to the IEA’s study released last year, based on the world’s largest 800 oil fields, peak is expected at 2020. Throw out the pamphlets that declare it’s happening now, or in 2010. Any information passed along about particular fields in decline is not something I don’t know already.

Why are people so shocked, so appalled about water being injected into Ghawar? This is standing operating procedure for oil production, has been for decades. Yes, as a field ages, water cuts rise; but Ghawar’s water cut, between 30-40%, is for the time perfectly acceptable. Texas oil production - which peaked at 3.4 mbpd in 1972, and now produces somewhere over 900,000 today - averages a water cut over 90%; Alaskan production, which peaked in 1988, is well over 80%. Ghawar has a ways to go.

The Ghawar NGL “flick of the wrist…” First, its pretty difficult to pull off, especially if the field is dropping 8% annually as some claim have claim for years now, certainly if it “only has 821 days of oil left” as some stated in 2006 - and especially if gas production is dissipating as Mathew Simmons claims! I’ve never seen, heard nor read anything about this trick; I decided to take you up, take a little time, look around. Nothing.

Besides Ghawar, peakers declared for years that Saudi itself was in decline - until last year, because of Bush’s whining - it opened the spigot and blasted out an additional 500,000 barrels of crude per day - bumping production past its 1981 record! Some decline.

In terms of Saudi’s bad management… if the Saudis did as the Americans pleased - that is, open the tap completely so we could fly in delight in our personal star destroyers - sure, Ghawar would have peaked years ago and would be in decline; but the Saudis, like many in OPEC who are dependant on a non-renewable resource for income, moderated production. OPEC’s conservative approach, along with other factors, are the reasons why “Hubbert’s Peak II” bombed - which predicted a production peak at 33 mbpd, btw.

Saudi Arabia doesn’t assume oil will last forever, nor have they been hiding the fact. The kingdom has taken steps to diversify its economy, such as building steel mills and diversifying its energy sector, to prepare for a future when oil production will slide down the slippery slope, when they will need to depend on other sources for income. They’ve stated hints that their oil production will be sliding after 2020.

Brazil is experiencing economic problems, the Real is in the shitter. It’s global trade to the rescue. When there’s oil, when there’s hungry powers looking for it, deals can be brokered. “Good times are good and bad times are better,” says the wise investor. Petrobras can get aid from the government, it’s issuing 10-year bonds, and its willing to give multi-nationals stakes in its fields. Another example, Venezuela, has deplorable finances and a result, Hugo Chavez is hinting hey may welcome back the oil multi-nationals he kicked out. Russia, will likely need help, too. all oil is expensive to extract - whether the price it will fetch is expensive or not. You’d be amazed at how expensive the lowly West Texas drilling done by small independents can be.

About Tupi being profitable at $40 a barrel? Here’s another bit. Want to know where I got the first story? It appeared on the Oil Drum’s Drumbeat - a cherished peak oil website=) Maybe I am full of it for “checking out all sides…”

Yemen’s example doesn’t apply to all fields. Offshore sites, such as Cantarell, tend to die quicker - because, at least for now - it’s more difficult to maintain production once it enters depletion. Kuwait’s Burgan is in decline, but that’s not dropping like a rock. Horizontal drilling has been used in Alaska’s North Slope for eons, but its decline has never crashed.

No, it’s not the Jack Oil Field that possesses 3-15mb of oil, it’s the lower tertiary formation its located at. I admit that I mislabeled Jack’s quantity in the second post; I indicated the restatement in the first response to you. Is the lower tertiary a Cantrell? No, but potentially not shabby either. If reserves end up on the optimistic side, it’s a Prudhoe Bay, a field that peaked at 1.5 mbpd; Cantarell peaked at 2 mpbd. If you want Cantarells, consider Caricoa or Kashagan (when it picks up). Anyways, where’s your evidence that says Chevron’s discoveries are duds, and for that matter, Iraq? There seems to be a lack of contrary evidence. Why do you think America embarked on its Iraqi clusterfuck (Mathew Simmons advised under Cheney’s energy task force) ? Again, Noxal bombed, but risks and mistakes are apart of exploration. The oil industry is not for wussies. In the early 20th centuries, petroleum geologists were certain the land, of what now comprises Saudi Arabia, couldn’t produce dirt for oil, even though they found oceans of the stuff in Iran and Iraq prior. Texas oil potential was dismissed in the early ages of the oil industry.

The North Sea is easy today; in the 1970s, it wasn’t. Cold, storm-tossed water made exploration and production very difficult, and costed hundreds of lives. In the early 20th century, oil exploration was dangerous work with blowouts, odorless poison gas (such as hydrogen sulfide) seeping out of the ground, equipment breakage and malfunctions, and other accidents. Later inventions, such as blowout preventers and gas monitors, aided oil work greatly and helped save lives. In the 19th century, British coal mining was an arduous engineering feat, with mines collapsing, explosions, carbon monoxide and of course, floods; so, necessity is the mother of invention.

Going on with coal, various incarnations of the steam engine had been around for centuries before (some historians believe the ancient Romans nearly invented it), but there wasn’t a use for it. Well, first came deforestation in Britain, next came coal, followed by that was the mines flooding, and the “ultimate” solution was the steam engine. You know the history. Anyways, getting back to the North Sea, today it looks easy compared to Tupi, but again, difficulty is relative to the time. In the future, mining the moon for resources will make drilling in Tupi look like a high school science project. (Sure, that sounds looney, but the idea of flying, nuclear energy, and Adobe Photoshop would sound looney in 1900. Not as looney as abiotic oil fans - lol=)).

Shale gas exploration has been scaled back in the face of cheap gas… America is tootin’ dimethyl sulfide. Welcome to the “boom-bust cycle“. Last year, America was experiencing the biggest increase in production since the late 50s, so that says something about the potential. And guess what… America may slammed with a greater gas glut later this year (scroll down Matt Perry’s blog; I tipped him on that=)). Europe and Canada are looking to get into the shale game. What about the gas crisis that was suppose to occur this decade? When production fell off the cliff, it went the wrong way.

Algae needs $500 a barrel oil to be productive!? Even that lousy corn-based ethanol doesn’t need anywhere $500 a barrel to “work.” Algae is quick, cheap and easy to grow. Does the arduous work that goes into turning Alberta into “Mordor of the North” need $500 a barrel to work? It’s profitable at $33 a barrel. All of this sounds similar to naysayers saying hydrogen cars won’t work, because “We won’t have enough platinum to make the catalysts (the biggest obstacle will be infrastructure)” Recent research have produced catalysts made of alternative materials, minus the platinum, that are cheaper and will last longer. Sure, further advancements are needed, but they’re coming.

Network-based news might be crap (thanks for the hard-hitting journalism before the invasion of Iraq, “liberal” media), but even they could see the speculative rocket fuel that sent oil prices up. Remember late last summer, when Congress started getting ornery, started declaring they were going to clamp down on speculators? Yup, that’s precisely the moment when the rats jumped the ship, and that’s the moment when oil entered its “Wiley E. Coyote free fall.” Demand was falling last year, even when prices continued to go up - that’s not supply and demand fundamentals. OPEC, Russia and Canada have been scaling back productions as of late, but prices remain low, and demand continues to decline. You’ve heard about the oil glut “sitting out at sea?” Cushings, OK, is a ready to burst. Network news is crap, but its evidently better than peak oil news. Did the peakers see the collapse of oil coming? When oil started its descent, everyone insisted it would never drop below $100 a barrel, that it was taking a breather, and would soon continue its death march to $250 a barrel. Oil insiders, like T. Boone Pickens and Mathew Simmons, made the same claim. Network news failed us with the prelude to the Iraqi invasion, but at least they’re not reporting that we’re in the midst of peak oil.

Any field in depletion is considered to be aging; and again, Russia peaked in the late 80s at 12.5 mbpd and produced around 9.7 mbpd last year. Even though its past peak, its still producing handsomely, and it only uses around 3 mbpd for domestic consumption (America was importing 30% of its oil during peak production of 9.5 mbpd). Again, East Siberia has been mostly ignored, and its claim to the artic circle lies is 2/3rds (yes, difficult to reach oil).


The usage of petroleum as a fuel is entering its twighlight chapters. With the growth of the world economy, sure demand for energy sources will grow. There are many other things we can use to generate energy: nuclear (which are sprouting up all over; hit the snooze button on the uranium peak), solar (which is iffy for now but is experiencing technological advances; its expected to be cost-completive with natural gas by the middle of next decade), geothermal, natural gas, wind (so-so, but every bit helps), and others. Once again, necessity is the mother of invention. Besides conventiontional sources of oil we can use unconventional like tar sands. Though its nasty, difficult and comes with unpardonable environmental costs, are abundant (and I know about the EROEI ratio of its production. Like I said, I doubt there’s anything you can tell me that I don’t know already). Offshore drilling technology is continuing to improve; currently, developments underwater robots to find offshore oil are under way.

Anyways, why exactly are you still into peak oil? Peak oil is dead! Over the past few months, many of the groupies either splintered off, becoming more rationale human beings, or got into the latest “collapse-craze” of the blogosphere - the finance doomers. Since being washed out, the “king of peak himself,” Mathew Simmons, has been acting like a drug addled Britney Spears, making proclamations that we need to “mow the oceans for seaweed by using ‘under water lawn mowers,’” and still sticking to his bet that oil will average $300 for the next year. James Kunstler has been having a meltdown. Back in September, when oil was into its maddening descent, he insisted the decline was a “total fake out, the result paper market’s disintegration,” and that we “will be experiencing oil shortages within a mater of months where, literally, supplies won’t be available.” And one the early decade’s hot acts, Matt Savinar, long ago gave up on posting peak oil news, and switched to financial collapse (I’ve heard his website is for sale). Those poor, once mighty peak oil websites, sites like Energy Bulletin and the Oil Drum. It breaks one’s heart to see them slowly turn into listless acts, posting such hopeful, yet banally-themed articles like “A World Without Money.”

I’ve dealt with many in the “peak army” over the years. Their some of their arguments were just like yours - verbatim talking points from the peak preachers themselves - shooting down the prospect that oil would be cheap again, that speculation was behind the drive in price, new developments in technology won’t save us, that we’ll have to plan for a post-oil society and scale back from our modern way of living (actually, to be fair, not all peakers shot down technology on the spot, and some had faith that improvements could pull us out of oil’s gravity). I made a hard attempt trying to be the uncommon voice - particularly last year, when this collapse-craze was assimilating everyone, including grandmas! I attempted facts and rationality with the peak oil crowd, trying to convince them everything would be okay. I endured much ridicule and many insults; but it was taken as a badge of honor, because in the end, I knew I would have the last laugh. Although the peak crowd has thinned, it’s good to know some still keep the fire, still keep it real.

It’s the weekend. It’s time to go out. Anyway, go enjoy life. Have some fun.

“Don’t find fault, find a remedy; anybody can complain.” - Henry Ford

 
At 2/08/2009 10:07 AM, Blogger VangelV said...

"First, put down the peak oil calculator, we’re not there yet. According to the IEA’s study released last year, based on the world’s largest 800 oil fields, peak is expected at 2020. Throw out the pamphlets that declare it’s happening now, or in 2010. Any information passed along about particular fields in decline is not something I don’t know already."

The bottom line is that the production of light sweet crude peaked in 2005. The reason that total production was not shown to have peaked is because the total numbers include biofuels, refinery gains, CTLs, NGLs and unconventional sources like shale and tar sands. The problem with the latter two is their huge expense; new unconventional production requires over $100 per barrel to justify the economic risk so we are seeing shale investment collapsing and the postponement or cancellation of tar sands projects. Biofuels are not economic and require massive subsidies that may not last long when the world is in a severe crisis.

"Why are people so shocked, so appalled about water being injected into Ghawar? This is standing operating procedure for oil production, has been for decades. Yes, as a field ages, water cuts rise; but Ghawar’s water cut, between 30-40%, is for the time perfectly acceptable. Texas oil production - which peaked at 3.4 mbpd in 1972, and now produces somewhere over 900,000 today - averages a water cut over 90%; Alaskan production, which peaked in 1988, is well over 80%. Ghawar has a ways to go."

You inject water into ageing fields when you want to keep production flat. The process traps oil behind as fractures take the water around and above certain oil-rich sectors and those sectors will not produce much useful oil unless companies go to the expense of drilling that specific area directly. Some areas are too small to make this likely so the oil will not migrate to the well.

The people that I talk to in the industry are certainly not accepting 40% water cuts as acceptable. They point out that once the water cut starts to rise to those type of levels you are looking at a major decline over the next few years. What they also point out is that the slow declines of large fields produced by using normal practices that did not use enhanced recovery techniques are are not seen when water drives and horizontal drilling has been used. Such fields tend to have major declines that happen much faster than the optimists expect. A perfect example is Cantarell, which used a nitrogen drive and is now seeing its production falling off a cliff.

""The Ghawar NGL “flick of the wrist…” First, its pretty difficult to pull off, especially if the field is dropping 8% annually as some claim have claim for years now, certainly if it “only has 821 days of oil left” as some stated in 2006 - and especially if gas production is dissipating as Mathew Simmons claims! I’ve never seen, heard nor read anything about this trick; I decided to take you up, take a little time, look around. Nothing."

Simmons is certainly right about the Saudis. Even with prices going above $100 they could not incrase production and it is still below their peak. For the record, that peak was reached at a time when the Saudis were not pumping in 8 mbpd of water to keep reservoir pressures high.

"Besides Ghawar, peakers declared for years that Saudi itself was in decline - until last year, because of Bush’s whining - it opened the spigot and blasted out an additional 500,000 barrels of crude per day - bumping production past its 1981 record! Some decline."

Actually, SA has not reached its 198s peak even though prices exploded. The fact is that SA has been playing a game with the numbers and has kept reporting reserve and production levels that are flat out lies. Even as it was producing around 8 mbpd it kept talking in the press about how it could go from its 11 mbpd of production to 22 mbpd. This was as the country had kept its reserve reporting static even though there was little new exploration work to justify the claim that it had found exactly enough oil to match its production every year for more than two decades. Then there is the big lie, which is the total reserve level. SA reported an increase from 169.6 billion barrels 1987 to 255 billion barrels of reserves in 1988. That went up to 260 billion barrels in 1989 and the number has stayed in a 5 billion range ever since. None of these numbers came from drill bit data. They were simply created by accountants who were more concerned with OPEC reserve based quota agreements rather than what was really in the fields.

In the 1980s the Saudis were nut pumping millions of barrels of water into their fields as they are today and if their reserves really are what was being claimed they wouldn't have to inject any water to keep production flat.

"In terms of Saudi’s bad management… if the Saudis did as the Americans pleased - that is, open the tap completely so we could fly in delight in our personal star destroyers - sure, Ghawar would have peaked years ago and would be in decline; but the Saudis, like many in OPEC who are dependant on a non-renewable resource for income, moderated production."

The opposite is true. Many Texans left their oil fields alone and tried to extract as much oil as possible by no using expensive recovery techniques that would trap oil behind early in the game. The Saudis wanted as much cash as possible and decided to get production to high levels and keep it there. Right now they are paying the price because they did not receive as much money for their oil as they could have and are now running down.

"OPEC’s conservative approach, along with other factors, are the reasons why “Hubbert’s Peak II” bombed - which predicted a production peak at 33 mbpd, btw."

This is a flat out untruth. It was OPEC's lack of discipline that caused the oil price collapse in the 1980s. It produced far more oil than was needed and prices collapsed for more than a decade.

"Saudi Arabia doesn’t assume oil will last forever, nor have they been hiding the fact. The kingdom has taken steps to diversify its economy, such as building steel mills and diversifying its energy sector, to prepare for a future when oil production will slide down the slippery slope, when they will need to depend on other sources for income. They’ve stated hints that their oil production will be sliding after 2020."

Well, I have news for them. They have yet to reach their old production levels for good reason; their most important fields are in decline.

"Brazil is experiencing economic problems, the Real is in the shitter. It’s global trade to the rescue. When there’s oil, when there’s hungry powers looking for it, deals can be brokered. “Good times are good and bad times are better,” says the wise investor. Petrobras can get aid from the government, it’s issuing 10-year bonds, and its willing to give multi-nationals stakes in its fields. Another example, Venezuela, has deplorable finances and a result, Hugo Chavez is hinting hey may welcome back the oil multi-nationals he kicked out. Russia, will likely need help, too. all oil is expensive to extract - whether the price it will fetch is expensive or not. You’d be amazed at how expensive the lowly West Texas drilling done by small independents can be."

Brazil is in much better shape than the US. And it makes no difference how much new investment flows into Russia, Venezuela or Mexico because all of those countries are past their peak and will never reach the old highs again. The bottom line is that global production is not going higher and we are at or past Hubbert's Peak. For every day that oil prices stay this low there will be more delays and more capital budget cuts in the energy sector. That will mean that the new production that was supposed to come on line just to keep production flat will not be there and that depletion will take total production lower.

"About Tupi being profitable at $40 a barrel? Here’s another bit. Want to know where I got the first story? It appeared on the Oil Drum’s Drumbeat - a cherished peak oil website=) Maybe I am full of it for “checking out all sides…”"

It won't be profitable at $40 because it is far too deep and requires massive infrastructure investments. You look at any industry data and you will see that deep water development will not be funded at less than $80 per barrel. The reason why a few companies are still investing is because they do not expect the current price levels to stay low.

"Yemen’s example doesn’t apply to all fields. Offshore sites, such as Cantarell, tend to die quicker - because, at least for now - it’s more difficult to maintain production once it enters depletion. Kuwait’s Burgan is in decline, but that’s not dropping like a rock. Horizontal drilling has been used in Alaska’s North Slope for eons, but its decline has never crashed."

Yemen's experience applies to fields that use secondary and tertiary recovery techniques in conjunction with horizontal wells. The beauty of horizontal wells is the ability to keep producing at high levels even as the water is drive is pushing oil towards the pipe. The horror with horizontal wells is that once the water reaches the well its productive life is over.

A perfect example is Oman's productive Yibil field. It peaked in 1997 at around 250 thousand barrels a day. Three years later production declined to 90 thousand barrels a day. The huge decline rate was caused to the use of horizontal wells and a water drive. Ghawar has exactly the same type of wells and is also using a water drive. So are many other fields, including Cantarell.

"No, it’s not the Jack Oil Field that possesses 3-15mb of oil, it’s the lower tertiary formation its located at. I admit that I mislabeled Jack’s quantity in the second post; I indicated the restatement in the first response to you. Is the lower tertiary a Cantrell? No, but potentially not shabby either. If reserves end up on the optimistic side, it’s a Prudhoe Bay, a field that peaked at 1.5 mbpd; Cantarell peaked at 2 mpbd. If you want Cantarells, consider Caricoa or Kashagan (when it picks up). Anyways, where’s your evidence that says Chevron’s discoveries are duds, and for that matter, Iraq? There seems to be a lack of contrary evidence. Why do you think America embarked on its Iraqi clusterfuck (Mathew Simmons advised under Cheney’s energy task force) ? Again, Noxal bombed, but risks and mistakes are apart of exploration. The oil industry is not for wussies. In the early 20th centuries, petroleum geologists were certain the land, of what now comprises Saudi Arabia, couldn’t produce dirt for oil, even though they found oceans of the stuff in Iran and Iraq prior. Texas oil potential was dismissed in the early ages of the oil industry."

This is a nice narrative but what matters is real actionable data that can tell us just how much oil can be developed economically from the deep water formations in the Gulf and how much can be extracted per day. From what I see, we lack much test data to make any call about both. But even if we assumed that the reserves were in place you still can't produce enough to offset the depletion.

"The North Sea is easy today; in the 1970s, it wasn’t. Cold, storm-tossed water made exploration and production very difficult, and costed hundreds of lives. In the early 20th century, oil exploration was dangerous work with blowouts, odorless poison gas (such as hydrogen sulfide) seeping out of the ground, equipment breakage and malfunctions, and other accidents. Later inventions, such as blowout preventers and gas monitors, aided oil work greatly and helped save lives. In the 19th century, British coal mining was an arduous engineering feat, with mines collapsing, explosions, carbon monoxide and of course, floods; so, necessity is the mother of invention."

Deep water is never going to be easy. The formations that you are talking about are in the path of hurricanes and will have many shut-downs due to storm activity. But that is nothing compared to the need to lift the oil several thousand meters higher than the oil any conventional or shallow water wells.

"Going on with coal, various incarnations of the steam engine had been around for centuries before (some historians believe the ancient Romans nearly invented it), but there wasn’t a use for it. Well, first came deforestation in Britain, next came coal, followed by that was the mines flooding, and the “ultimate” solution was the steam engine. You know the history. Anyways, getting back to the North Sea, today it looks easy compared to Tupi, but again, difficulty is relative to the time. In the future, mining the moon for resources will make drilling in Tupi look like a high school science project. (Sure, that sounds looney, but the idea of flying, nuclear energy, and Adobe Photoshop would sound looney in 1900. Not as looney as abiotic oil fans - lol=))."

You need to think about reality. We want the oil because it gives us energy that we can use. If the energy you use to get the oil out is greater than the energy from that oil the process is not economical. Walking on the moon is a piece of cake when compared to trying to develop these fields ECONOMICALLY.

"Shale gas exploration has been scaled back in the face of cheap gas… America is tootin’ dimethyl sulfide. Welcome to the “boom-bust cycle“. Last year, America was experiencing the biggest increase in production since the late 50s, so that says something about the potential. And guess what… America may slammed with a greater gas glut later this year (scroll down Matt Perry’s blog; I tipped him on that=)). Europe and Canada are looking to get into the shale game. What about the gas crisis that was suppose to occur this decade? When production fell off the cliff, it went the wrong way."

Shale gas makes sense at $12 but not at $5. And shale gas wells have a high depletion rate so they need to be reworked constantly. That limits how much gas you can produce from any given area in any given period.

"Algae needs $500 a barrel oil to be productive!? Even that lousy corn-based ethanol doesn’t need anywhere $500 a barrel to “work.” Algae is quick, cheap and easy to grow. Does the arduous work that goes into turning Alberta into “Mordor of the North” need $500 a barrel to work? It’s profitable at $33 a barrel. All of this sounds similar to naysayers saying hydrogen cars won’t work, because “We won’t have enough platinum to make the catalysts (the biggest obstacle will be infrastructure)” Recent research have produced catalysts made of alternative materials, minus the platinum, that are cheaper and will last longer. Sure, further advancements are needed, but they’re coming."

I have looked at the papers written on the subject. Algae is not very economical at this particular point in time. And while I am hopeful that we can produce strains that will help us get oil out of algae that still won't help you offset depletion. The number is 5 mbpd each and every year of new capacity. That will not come from algae.

"Network-based news might be crap (thanks for the hard-hitting journalism before the invasion of Iraq, “liberal” media), but even they could see the speculative rocket fuel that sent oil prices up. Remember late last summer, when Congress started getting ornery, started declaring they were going to clamp down on speculators? Yup, that’s precisely the moment when the rats jumped the ship, and that’s the moment when oil entered its “Wiley E. Coyote free fall.” Demand was falling last year, even when prices continued to go up - that’s not supply and demand fundamentals. OPEC, Russia and Canada have been scaling back productions as of late, but prices remain low, and demand continues to decline. You’ve heard about the oil glut “sitting out at sea?” Cushings, OK, is a ready to burst. Network news is crap, but its evidently better than peak oil news. Did the peakers see the collapse of oil coming? When oil started its descent, everyone insisted it would never drop below $100 a barrel, that it was taking a breather, and would soon continue its death march to $250 a barrel. Oil insiders, like T. Boone Pickens and Mathew Simmons, made the same claim. Network news failed us with the prelude to the Iraqi invasion, but at least they’re not reporting that we’re in the midst of peak oil."

The report was crap. The rise of oil was steady over many years because spare capacity was gone and the system was vulnerable to disruptions. In addition to the increase in demand there was also the collapse of the dollar, which 60 minutes ignored. And if the networks were on the ball they would ask us where the 5 mbpd of new production that we need to keep production flat will come from this year, next year or the one after that. I note that while you post nice narratives you have yet to answer the basic questions that have to do with depletion.

"Any field in depletion is considered to be aging; and again, Russia peaked in the late 80s at 12.5 mbpd and produced around 9.7 mbpd last year. Even though its past peak, its still producing handsomely, and it only uses around 3 mbpd for domestic consumption (America was importing 30% of its oil during peak production of 9.5 mbpd). Again, East Siberia has been mostly ignored, and its claim to the artic circle lies is 2/3rds (yes, difficult to reach oil)."

Russia, the US, Saudi Arabia, Iran, Venezuela, Mexico, Kuwait, Yemen, Oman, UAE, Indonesia, etc., are all producing less oil than they did at their peaks. The massive oil fields that had the favourable geology have been found. For the last decade we found four times less oil than we produced. In fact, since the 1980s we have been producing more oil than we have been finding. That is bad news for your case yet you still refuse to deal with it.

Where will the new production that is necessary to offset the 6.5% annual depletion come from?

"The usage of petroleum as a fuel is entering its twighlight chapters. With the growth of the world economy, sure demand for energy sources will grow. There are many other things we can use to generate energy: nuclear (which are sprouting up all over; hit the snooze button on the uranium peak), solar (which is iffy for now but is experiencing technological advances; its expected to be cost-completive with natural gas by the middle of next decade), geothermal, natural gas, wind (so-so, but every bit helps), and others. Once again, necessity is the mother of invention. Besides conventiontional sources of oil we can use unconventional like tar sands. Though its nasty, difficult and comes with unpardonable environmental costs, are abundant (and I know about the EROEI ratio of its production. Like I said, I doubt there’s anything you can tell me that I don’t know already). Offshore drilling technology is continuing to improve; currently, developments underwater robots to find offshore oil are under way."

While some countries are relying on nuclear facilities that is not happening in the US and many European countries. Solar is a net energy loser. Geothermal, in which I have invested, is a good idea in some locations but limited in most places. Biofuels are not going anywhere in most countries because they do far more harm than good. Tar sands, in which I have also invested, are not a solution because they cannot produce enough to offset depletion rates. The same is true of deep water drilling. While it will make a few people rich the production is small and will remain small. When you add up all of the contributions you will find that they will not be sufficient to offset depletion and all require very high oil prices.

"Anyways, why exactly are you still into peak oil? Peak oil is dead!"

It isn't dead. We have yet to produce more conventional oil than we did in 2005 and the only reason why the total has not yet been reported as having peaked has to do with the inclusion of biofuels, CGLs, NGLs, refinery gains, etc.

"Over the past few months, many of the groupies either splintered off, becoming more rationale human beings, or got into the latest “collapse-craze” of the blogosphere - the finance doomers. Since being washed out, the “king of peak himself,” Mathew Simmons, has been acting like a drug addled Britney Spears, making proclamations that we need to “mow the oceans for seaweed by using ‘under water lawn mowers,’” and still sticking to his bet that oil will average $300 for the next year. James Kunstler has been having a meltdown. Back in September, when oil was into its maddening descent, he insisted the decline was a “total fake out, the result paper market’s disintegration,” and that we “will be experiencing oil shortages within a mater of months where, literally, supplies won’t be available.” And one the early decade’s hot acts, Matt Savinar, long ago gave up on posting peak oil news, and switched to financial collapse (I’ve heard his website is for sale). Those poor, once mighty peak oil websites, sites like Energy Bulletin and the Oil Drum. It breaks one’s heart to see them slowly turn into listless acts, posting such hopeful, yet banally-themed articles like “A World Without Money.”"

I think that you need to think. Nothing that Simmons has written about depletion is wrong. In fact, the IEA just increased its reported depletion rate because of the work that Mat did. None of the countries that have been reported as post-peak have managed to show that they can sustain production at the previous rates and the real world is still the same as it was before.

I think that you mistake is made by confusing the financial movement in commodity prices as the real world. It is true that speculation in paper markets can cause extreme volatility but the volatility is not reflective of real world fundamentals. In the real world the case for energy rests on answering the simple question that you refuse to deal with; where will the oil that we need to offset the 6.5% annual depletion come from? When you think about an answer try to deal with the reality as it is today, not claims about nanotechnology in thirty years or ultra deep water fields will only start to produce a little bit of oil a decade from now.

"I’ve dealt with many in the “peak army” over the years. Their some of their arguments were just like yours - verbatim talking points from the peak preachers themselves - shooting down the prospect that oil would be cheap again, that speculation was behind the drive in price, new developments in technology won’t save us, that we’ll have to plan for a post-oil society and scale back from our modern way of living (actually, to be fair, not all peakers shot down technology on the spot, and some had faith that improvements could pull us out of oil’s gravity). I made a hard attempt trying to be the uncommon voice - particularly last year, when this collapse-craze was assimilating everyone, including grandmas! I attempted facts and rationality with the peak oil crowd, trying to convince them everything would be okay. I endured much ridicule and many insults; but it was taken as a badge of honor, because in the end, I knew I would have the last laugh. Although the peak crowd has thinned, it’s good to know some still keep the fire, still keep it real."

From what I see, you have yet to answer the simple question of how we find the oil that we need to keep production flat or rising. Where do those 5 mbpd come from? Which new technology or new field provide the energy that we need to replace the 5 mbpd.

It seems to me that you 'deal' with Peak Oil by empty narratives full of hot air and by trying to come up with reasons to explain temporary market moves that fit your theories. In the real world what is needed is data and logic.

 
At 2/08/2009 6:19 PM, Blogger Bloggin' Brewskie said...

Spoken like a true peaker=) Anyway, why keep getting the panties tied up in a bunch on the “light sweet crude” bit. Because it’s cheaper to extract, to refine into numerous types of fuel? Tell me something I don’t know ALREADY. There’s the alternatives have been kicking in - NGL, unconventionals sources, etc. And no, tar sands does not need $100 a barrel to justify production, though some production has been scaled back because of the decline in oil, and because of the GLUT. (What are those oil tankers sitting on the ocean looking autistic for? OMG, Cushings is about ready to burst.) It‘s profitable at $33 a barrel; when oil first climbed above $30 a barrel a few years back (OMG, it was a travesty!), the Canucks licked their chops and started tearing hell in Alberta; but as demand for labor (huge shortages) and commodities soared, so did productions costs. How many times do I have to mention soaring production costs? Anyway, global production increased 2008 from 85 mbpd to 87 mbpd, so it has not declined from 2005. OPEC pumped record levels last summer, even with Iraq in a hell hole, and even with Hugo Chavez manhandling his oil industry, even with Indonesia out of the game. A site like the Oil Drum hasn’t officiated non-OPEC peak yet. If production has been dropping 5 mbpd since its peak in 2005, then why was production at 87 mbpd; why are we in a glut, with cheap oil like many analysts predicted last year; why is oil expected to be cheap for the rest of the year? You might be using math a 5th grader can do off the back of an envelope, but even a 1st grader can see it’s the wrong math.

Water injections is an enhanced recovery method!? LOL. You know nothing about the oil industry!! That’s a secondary recovery method, like steam and gas injection - all old hat techniques. One cannot simply jab pipe into the ground and continually expect oil to gush up the ground like gas - this plays out fairly quickly. Secondary recovery methods are used when the oil field is still in its prime, and are perfectly normal, and can go for years or decades. When production declines during the secondary recovery stage, that’s when enhanced recovery methods are kicked in - and they do little to enhance things. And about the “oceans” of water being injected into Ghawar… that’s because it’s a big ass oil field, that produces enough oil to nearly meet Japan’s oil needs; you need to inject enough water that could bathe God himself to keep it running. Are people shocked and appalled when they learn over 200,000,000 gallons of black crude come out of that beast everyday? Current Texas oil production of some 900,000 barrels a day, has over 90% water cut. Do the math and find out how much water that is.

OPEC did provide some mismanagement that contributed to oil’s crash in the 1980s, but there were other factors, too: Soviet Russia pumped like mad; the North Slope, the North Sea and Cantarell contributed nicely; other factors, such as more fuel-efficient vehicles, a switch-over to natural gas for electrification purposes, and Europe and Japan’s step-up of mass transit all helped. Notice the last part of the sentence? Taking constructive approaches to dealing with high gas prices. Yes, it can be done. Anyways, after Saudi’s previous all time best set in 1981 (a record that would stay in the books until last year, when it was broken=)), production nose-dived down to under 5 mbpd in 1985, and wouldn’t see numbers above 8 mbpd until the early 1990s, when - you guessed it - Iraq I kicked in.

Why do people keep assuming horizontal drilling is a new technology, one that eats our oil future like a guzzling’ start destroyer? Neither is true. Horizontal drilling got its teeth cut in Alaska’s North Slope in the 1980s, and the decline that’s been occurring since 1988 hasn’t be a free fall. Greater difficulty with production is experienced when offshore fields decline. Maybe in the future, this can be somewhat remedied; but for now, it’s the reality that occurs.

As for the Texas boys conserving oil production, nope you’re pulling that information out of assapedia. Texas, like the rest of the U.S. kept pumping and pumping - giving more and more oil to keep America’s thirst for battle cruisers alive, year after year - ignoring King Hubbert when he was smart, and peaking in 1972. As for Saudi’s production, I look at a graph and see since the 1970s: up, down, up, down, up… but no consistent increase in production. Not like what we’ve witnessed with the U.S., Russia (up to the late 1980s) or the North Sea.

The stuff you’re reading about algae being uneconomical is stuff that was written about the first-generation biofuels. Ethanol needs to die. Algae is not a hard thing to grow; the trick for now is figuring out how to process into “liquids.” The energy yield will be great; this is sharp contrast to corn-based ethanol which - requires vast amounts of fields to grow, needs tractors and such, a slew of petroleum-based fertilizers and pesticides - than has to be transported for processing. It barely offers a net energy return - in some cases its break-even or a loser - and requires vast amounts of corn better left to feed people. Algae, in contrast, does not require a Master’s in bioengineering to grow, doesn’t require a slew of petroleum-based fertilizers and pesticides to grow, is easier to transport - it can be piped to the processing facility - and promises better energy yields. But growing that stuff in water tanks will compete with our food supply, right?

Brazil is in better economic shape than the U.S.? This is getting better yet!! I wouldn’t know from the double-digit inflation they’re experiencing (check out a prior Mark Perry’s post), the high unemployment. They’re dependant on commodities for export - where are they at today? Is Venezuela in better shape? What about Russia? Sure, the U.S. is in the crapper, but compared to other parts of the world, the U.S. is actually doing somewhat well in the contest of the uglies - that is, it’s one of the least ugly contestants. Yes, the economy is bad, but if you want to experience a real recession, go back to the early 1980s - with double-digit inflation and unemployment, plus high gas prices. Take the peak oil gospel to that era.

Did I offend you on Mathew Simmons? All passionate peakers abide by his word, just like hypnotized, zealous Christians (or Jews, Muslims, or anybody who takes religion TOO seriously) who listen to their cherished pastor, damning those homosexuals because they’re causing our high gas prices! Is Mathew Simmons going to win that bet next year? Is oil going to average $300 in 2010, like he insists it will. Did he take that consultation to the IEA, too? What about last September, when oil was dropping, and he insisted “it could only go up at this point,” that “there was no roof?” Again, Mathew Simmons is an investment banker with a good business education. Nobody will argue his monetary success, but he’s not a petroleum engineer or geologist - both of which you need a hard science background in to succeed (peakers like Savinar and Kunstler also do not possess science backgrounds; like math, the science fundamentals need to be learned early, or one can only become an amateur later, at best). Predicting the North Sea’s decline a whole two years in advance - especially when many in the industry were predicting its decline - shows you that, at best, he’s an armchair analyst. Oh well… least he didn’t jump into the Y2K bandwagon like Kunstler did. (If Kunstler wants the world to end, he should start making optimistic forecasts instead, such as oil dropping to 10 cents a barrel, or the DOW skyrocketing to 40,000 this year. Every time he makes a prediction… the opposite happens!)

I’ve provided a valuable service to the peak oil community since 2006. My record speaks for itself. I and others have trashed many myths: America will experience a dooming gas crisis (nope), worldwide gas production will soon peak (has anybody checked how much gas is in the world, how much there is to be discovered?), that uranium will soon peak (hit the snooze button; never heard of recycling spent fuel rods?), shale gas production won’t work (this keeps getting rammed into the ground, but it’s unbelievable how obstinate people were to it), we don’t have enough platinum for hydrogen cars (whose going to need platinum?), solar is a dud (solar technology is improving vastly, it’s expected to be cost-competitive with natural gas next decade, its ability to sap sunlight is improving), Ghawar and Saudi Arabia are declining (twighlight in the desert, my ass), large deposits of oil are not being discovered (get off the bong, dude, and pay attention to the news), oil won’t be cheap again (ha-ha!), technology won’t help us and we won’t be able to move beyond oil (similar to “we can’t feed growing populations” claims of decade and centuries past).

Honestly, I’m starting to have too much fun with this, and I think I’ll be the gracious one, and say “It’s time to let the sun set on this one.” Go ahead… have the last word, insult me or whatever, I’ve taken plenty of it from persistent peakers. I’m just going to leave you with three of things.

First, there’s been plenty of doomsayers throughout the age of humankind who’ve predicted our apocalypse; from the belief of Christen Armageddon striking in 1,000 A.D., which caused much starvation as a result of many farmers who ceased growing crops, because they believed God’s judgment was coming; to the intellectuals who forecasted mass-starvation as a result of the world’s population reaching 1 billion people; to kids hiding under desks in the 1950s, the peak oil hysteria of the 1970s and 1980s, and the Y2K of yesteryear; to peak oil, financial collapse, and Al Qaeda of today, the idea that humans are on the brink of an apocalypse is nothing new. A new fear that’s emerging: a few paranoid “schizophrenics” who believe the world is going to end in 2012, because of the Mayan calendar. The idea that humans will die under an apocalypse of some sort - whether its God’s fury, computers failing us, nuclear missiles firing, Al Qaeda bombing us, economic collapse - has been with us for considerable time, and will likely stay with us further more. (As a confession, I do buy into the danger of global warming)

Secondly, the very idea that we’re going to have to scale back our away of living, and make drastic changes - reintegrate to 19th century towns and farming - is itself an idea doomed to fail itself. We’ve come too far forward, we can’t go back. That would be like going back to simpler Bronze Age metallurgy, because of declining iron ore reserves; that would be like the Brits going back to firewood, because their coal production peaked in the early 20th century. We’ve come too far forward and only have forward to proceed, or else.

Finally, gardening as a hobby is rewarding, relaxing and gets one good exercise; but relying on it for substance is not. It’s tedious, backbreaking work and met with periodic failure - even in good growing regions. Anyone who considers otherwise, thinks of it nostalgically, should seriously buy a lot of land in some poor Asian country, and give it whirl. Blogger JD once posted this funny, but truthful bit on how the “EROEI of Gardening Sucks.”

(This is not directed at you, but to the “king of peak” himself) “Data always beats theory. Compare data to theory three times and come to a conclusion.” Yes, Mr. Simmons. Twighlight in the desert, my ass.

P.S. - It’s hard to say if it can be found, but for some classic Kunstler writings, do a search on his Y2K material. The devastating forecasts he predicted are strangely similar to today’s, including : “the need to scale down our living arrangements and face devastating consequences,” to “the need to reintegrate small town living and farming,” to “the end of our happy motoring society,” and “that there’s no way we’ll run our Disney World and K-marts.” His most Jo Montana like moment occurred back in 2007, over Thanksgiving week, when he predicted a drop of 1,000 points in the DOW in one week. It melted up 1,000. The man is gifted.

 
At 2/08/2009 11:03 PM, Blogger VangelV said...

Blogger Bloggin' wrote...

"Spoken like a true peaker=) Anyway, why keep getting the panties tied up in a bunch on the “light sweet crude” bit."

Because the modern economy was founded on refining light sweet crude. It is the best and most accessible oil; the low hanging fruit that is easiest to pick. When that fruit is gone things become much harder. And no, that does not mean that things get better and cheaper right way.

"Because it’s cheaper to extract, to refine into numerous types of fuel?"

It isn't cheaper to extract shale oil or tar sands.

"Tell me something I don’t know ALREADY."

It seems that you don't know what you don't know. And that is leading you to rely on hot air and narrative instead of looking at the actual data. For one, you might start at looking at the economics of producing the light sweet crude that we were relying on and compare it to the economics of tar sands, heavy crudes, biofuels, CTL, shale oil, etc. You might learn something.

"There’s the alternatives have been kicking in - NGL, unconventionals sources, etc. And no, tar sands does not need $100 a barrel to justify production, though some production has been scaled back because of the decline in oil, and because of the GLUT."

Actually, if you have already built your tar sands facilities you can stay profitable at a fairly low oil price. But we are talking about incremental additions to offset natural declines. Those need $100 oil or higher, which is the reason why the new players are scaling back or cancelling projects.

"(What are those oil tankers sitting on the ocean looking autistic for? OMG, Cushings is about ready to burst.)"

It is called free money. I rent a tanker and fill it at $35. I wait a few months and sell it at the $63 price I sold the futures contract for. I clean up with no risk.

"It‘s profitable at $33 a barrel; when oil first climbed above $30 a barrel a few years back (OMG, it was a travesty!), the Canucks licked their chops and started tearing hell in Alberta; but as demand for labor (huge shortages) and commodities soared, so did productions costs. How many times do I have to mention soaring production costs? Anyway, global production increased 2008 from 85 mbpd to 87 mbpd, so it has not declined from 2005. OPEC pumped record levels last summer, even with Iraq in a hell hole, and even with Hugo Chavez manhandling his oil industry, even with Indonesia out of the game. A site like the Oil Drum hasn’t officiated non-OPEC peak yet. If production has been dropping 5 mbpd since its peak in 2005, then why was production at 87 mbpd; why are we in a glut, with cheap oil like many analysts predicted last year; why is oil expected to be cheap for the rest of the year? You might be using math a 5th grader can do off the back of an envelope, but even a 1st grader can see it’s the wrong math."

Please cite your sources. I certainly did not see production at 87 mbpd. In fact, when I look at the IEA monthly energy report I see that the 2008 ten month average that is reported was only 500,000 barrels higher than 2006 although the prices were significantly higher. That should be setting off alarm bells among the optimists because if you couldn't produce very much more at a price of more than $100 how are you going to manage to stay flat at $45 oil?

"Water injections is an enhanced recovery method!? LOL. You know nothing about the oil industry!! That’s a secondary recovery method, like steam and gas injection - all old hat techniques."

http://www.springerlink.com/content/pw241225p2061724/

I guess that you did not know that when people talk about enhanced recovery they can mean water drives.

"One cannot simply jab pipe into the ground and continually expect oil to gush up the ground like gas - this plays out fairly quickly. Secondary recovery methods are used when the oil field is still in its prime, and are perfectly normal, and can go for years or decades. When production declines during the secondary recovery stage, that’s when enhanced recovery methods are kicked in - and they do little to enhance things."

You need to read some more because when you start to rely on enhanced recovery techniques it means that your field is getting long in the tooth and needs some help. That means that a great deal of the easiest oil is gone and that you will have to spend a lot more money than you did before per barrel of oil that you are producing.

"And about the “oceans” of water being injected into Ghawar… that’s because it’s a big ass oil field, that produces enough oil to nearly meet Japan’s oil needs; you need to inject enough water that could bathe God himself to keep it running. Are people shocked and appalled when they learn over 200,000,000 gallons of black crude come out of that beast everyday? Current Texas oil production of some 900,000 barrels a day, has over 90% water cut. Do the math and find out how much water that is."

Again, you need to read up. Oil people would consider a 90% water cut a disaster because that would mean that the field has had seen its best days and that further production increases are not possible. In the case of Ghawar, the water cut has been reported between 28% and 35%. While that seems great compared to old California or Texas fields that are decades past their peaks it is terrible news for the Saudis, who had hoped to increase their production to 12 mbpd, a number that they cannot reach no matter how hard they try.

"OPEC did provide some mismanagement that contributed to oil’s crash in the 1980s, but there were other factors, too: Soviet Russia pumped like mad; the North Slope, the North Sea and Cantarell contributed nicely; other factors, such as more fuel-efficient vehicles, a switch-over to natural gas for electrification purposes, and Europe and Japan’s step-up of mass transit all helped. Notice the last part of the sentence? Taking constructive approaches to dealing with high gas prices. Yes, it can be done. Anyways, after Saudi’s previous all time best set in 1981 (a record that would stay in the books until last year, when it was broken=)), production nose-dived down to under 5 mbpd in 1985, and wouldn’t see numbers above 8 mbpd until the early 1990s, when - you guessed it - Iraq I kicked in."


The Saudis averaged 9.4 mbpd production last year for the ten month reporting period that I have seen. That is still blow the 9.8 mbpd peak in the 1980s even though the Saudi inflation adjusted spending is sharply higher now than it was then. Spending a lot more to get less does not seem to be good news for anyone who understood the sector.

"Why do people keep assuming horizontal drilling is a new technology, one that eats our oil future like a guzzling’ start destroyer? Neither is true. Horizontal drilling got its teeth cut in Alaska’s North Slope in the 1980s, and the decline that’s been occurring since 1988 hasn’t be a free fall. Greater difficulty with production is experienced when offshore fields decline. Maybe in the future, this can be somewhat remedied; but for now, it’s the reality that occurs."

Given the fact that much of the techniques used were developed a hundred years ago, horizontal technology is new. What it does is such out oil a lot faster because it permits much more reservoir contact with the pipe. Of course, once the water gets to the pipe the well is shot and prices explode. The Saudis know all about this.

"As for the Texas boys conserving oil production, nope you’re pulling that information out of assapedia. Texas, like the rest of the U.S. kept pumping and pumping - giving more and more oil to keep America’s thirst for battle cruisers alive, year after year - ignoring King Hubbert when he was smart, and peaking in 1972. As for Saudi’s production, I look at a graph and see since the 1970s: up, down, up, down, up… but no consistent increase in production. Not like what we’ve witnessed with the U.S., Russia (up to the late 1980s) or the North Sea."

The oil people that I have talked to are telling me that some families never allowed the use of enhanced recovery techniques to be used until very late in the game because they wanted to get as much oil as possible. Kenneth Deffeyes and Mat Simmons have said the same thing so I believe them.

As for the Saudis, billions in extra investment and $140 oil could not get them to surpass their old high. That is not very good news.

"The stuff you’re reading about algae being uneconomical is stuff that was written about the first-generation biofuels."

No. It was an assessment on recent claims that I found very convincing. The fact that the algae claims are not being supported with actual production suggests that the assessment is correct. While I would not discount algae it has a long time to go.

"Ethanol needs to die. Algae is not a hard thing to grow; the trick for now is figuring out how to process into “liquids.” The energy yield will be great; this is sharp contrast to corn-based ethanol which - requires vast amounts of fields to grow, needs tractors and such, a slew of petroleum-based fertilizers and pesticides - than has to be transported for processing. It barely offers a net energy return - in some cases its break-even or a loser - and requires vast amounts of corn better left to feed people. Algae, in contrast, does not require a Master’s in bioengineering to grow, doesn’t require a slew of petroleum-based fertilizers and pesticides to grow, is easier to transport - it can be piped to the processing facility - and promises better energy yields. But growing that stuff in water tanks will compete with our food supply, right?"

Like I said, the math did not add up for algae. It needs sunshine to make the energy and the amount of sunshine that you can get in any particular area is limited. That means that you will need huge amounts of area devoted to algae farming and that the process will be a lot messier and complicated than the hype suggests. I'll see if I can find the paper. If I do, I'll pass on the link.

"Brazil is in better economic shape than the U.S.? This is getting better yet!! I wouldn’t know from the double-digit inflation they’re experiencing (check out a prior Mark Perry’s post), the high unemployment. They’re dependant on commodities for export - where are they at today?"

Brazil is self sufficient in energy and food. It has a big customer in China for many of the things that it produces. At the same time its people and government do not carry the same debt burden as the US. Your unfunded liabilities for SS stand at around $13 trillion. The Mdeicare liabilities stand at more than $80 trillion. Add federal, state and local debt, consumer and business debt and you are looking at more than $100 trillion in liabilities.

"Is Venezuela in better shape?"

No.

"What about Russia?"

Too early to tell about Russia. It certainly has natural resources and a lot of smart people. The trouble there is the uncertainty about government action.

"Sure, the U.S. is in the crapper, but compared to other parts of the world, the U.S. is actually doing somewhat well in the contest of the uglies - that is, it’s one of the least ugly contestants."

You depend on the Chinese to fund your deficits. That is not being one of the least uglies. As I said, Brazil is in better shape because it is self sufficient, exports products that the world wants and needs and because it has little debt compared to the US.

"Yes, the economy is bad, but if you want to experience a real recession, go back to the early 1980s - with double-digit inflation and unemployment, plus high gas prices. Take the peak oil gospel to that era."

If your creditors get worried your rates will go up sharply. That will kill the economy for good and you will not be in a position to compete for the limited amount of oil.

"Did I offend you on Mathew Simmons?"

No. You just got it wrong. From what I saw the IEA has reversed its position and has admitted that Simmons was correct. It increased its reported depletion rate by 50% and is actually doing exactly what Simmons suggested; a field by field assessment.

"All passionate peakers abide by his word, just like hypnotized, zealous Christians (or Jews, Muslims, or anybody who takes religion TOO seriously) who listen to their cherished pastor, damning those homosexuals because they’re causing our high gas prices! Is Mathew Simmons going to win that bet next year?"

This is just hot air. I note that you have yet to answer the simple question that you need to answer if you want to make your case effectively. Where will the new oil that is needed to offset the 6.5% depletion rate going to come from? Unless you can answer this your claims are meaningless.

"Is oil going to average $300 in 2010, like he insists it will."

It is possible if there is a recovery in demand. After all, we know that supply can't get much higher than the current rates even if oil goes up sharply higher. Of course, it could simply go up to those levels if the USD is devalued as it should be.

"Did he take that consultation to the IEA, too?"

Like I wrote, the IEA admitted that his approach and his depletion estimates were correct.

"What about last September, when oil was dropping, and he insisted “it could only go up at this point,” that “there was no roof?” Again, Mathew Simmons is an investment banker with a good business education. Nobody will argue his monetary success, but he’s not a petroleum engineer or geologist - both of which you need a hard science background in to succeed (peakers like Savinar and Kunstler also do not possess science backgrounds; like math, the science fundamentals need to be learned early, or one can only become an amateur later, at best). Predicting the North Sea’s decline a whole two years in advance - especially when many in the industry were predicting its decline - shows you that, at best, he’s an armchair analyst. Oh well… least he didn’t jump into the Y2K bandwagon like Kunstler did. (If Kunstler wants the world to end, he should start making optimistic forecasts instead, such as oil dropping to 10 cents a barrel, or the DOW skyrocketing to 40,000 this year. Every time he makes a prediction… the opposite happens!)"

More hot air. As I wrote, Simmons was right while CERA and the IEA were wrong about depletion rates and reserve estimates. And Simmons seems to understand the technical issues because he figured out the Saudi Arabian problem by reading the papers their engineers were submitting to the journals. That said, Simmons has plenty of support in the sector because respected geologists like Kenneth Deffeyes and Colin Campbel make the same arguments.

"I’ve provided a valuable service to the peak oil community since 2006. My record speaks for itself. I and others have trashed many myths: America will experience a dooming gas crisis (nope), worldwide gas production will soon peak (has anybody checked how much gas is in the world, how much there is to be discovered?), that uranium will soon peak (hit the snooze button; never heard of recycling spent fuel rods?), shale gas production won’t work (this keeps getting rammed into the ground, but it’s unbelievable how obstinate people were to it), we don’t have enough platinum for hydrogen cars (whose going to need platinum?), solar is a dud (solar technology is improving vastly, it’s expected to be cost-competitive with natural gas next decade, its ability to sap sunlight is improving), Ghawar and Saudi Arabia are declining (twighlight in the desert, my ass), large deposits of oil are not being discovered (get off the bong, dude, and pay attention to the news), oil won’t be cheap again (ha-ha!), technology won’t help us and we won’t be able to move beyond oil (similar to “we can’t feed growing populations” claims of decade and centuries past)."

This seems to be an overinflated sense of self importance. As I said, you seem to think that you know more than you do and refuse to answer a simple question about the new source of oil that you need to offset depletion. If you can't answer that question you expose yourself as so someone who does not deal in facts and prefers to write narratives instead.

"Honestly, I’m starting to have too much fun with this, and I think I’ll be the gracious one, and say “It’s time to let the sun set on this one.” Go ahead… have the last word, insult me or whatever, I’ve taken plenty of it from persistent peakers. I’m just going to leave you with three of things."

Why not answer the simple question first. Where will the oil that you need to offset depletion come from? I have written this question a number of times but all I get are long narratives in which you claim to have knowledge while you make basic factual errors and refuse to come up with a simple answer.

"First, there’s been plenty of doomsayers throughout the age of humankind who’ve predicted our apocalypse; from the belief of Christen Armageddon striking in 1,000 A.D., which caused much starvation as a result of many farmers who ceased growing crops, because they believed God’s judgment was coming; to the intellectuals who forecasted mass-starvation as a result of the world’s population reaching 1 billion people; to kids hiding under desks in the 1950s, the peak oil hysteria of the 1970s and 1980s, and the Y2K of yesteryear; to peak oil, financial collapse, and Al Qaeda of today, the idea that humans are on the brink of an apocalypse is nothing new. A new fear that’s emerging: a few paranoid “schizophrenics” who believe the world is going to end in 2012, because of the Mayan calendar. The idea that humans will die under an apocalypse of some sort - whether its God’s fury, computers failing us, nuclear missiles firing, Al Qaeda bombing us, economic collapse - has been with us for considerable time, and will likely stay with us further more. (As a confession, I do buy into the danger of global warming)"

Peak Oil is not a prediction of an apocalypse. It simply states that production will start to go down and that we will have to make a transition to other energy sources if we wish to maintain our standard of living. You are being far too emotional about the issue and keep ignoring what is material, which are the facts. For us to avoid a peak we have to discover more new oil than we are producing and have to bring on line more oil than the depletion that we are experiencing. If you can point to the discoveries and the new fields that will provide us with around 5 mbpd then you win the argument. If not you are just blowing hot air.

"Secondly, the very idea that we’re going to have to scale back our away of living, and make drastic changes - reintegrate to 19th century towns and farming - is itself an idea doomed to fail itself. We’ve come too far forward, we can’t go back. That would be like going back to simpler Bronze Age metallurgy, because of declining iron ore reserves; that would be like the Brits going back to firewood, because their coal production peaked in the early 20th century. We’ve come too far forward and only have forward to proceed, or else."

If you can't find new oil production to replace depletion you can't consume as much oil as you used to. That is simple logic that cannot be overcome by emotional arguments and wishful thinking. Once again, where will the oil come from? Which fields will give us 5 mbpd this year? How about next year? And the one after that? And so on, and so on....

"Finally, gardening as a hobby is rewarding, relaxing and gets one good exercise; but relying on it for substance is not. It’s tedious, backbreaking work and met with periodic failure - even in good growing regions. Anyone who considers otherwise, thinks of it nostalgically, should seriously buy a lot of land in some poor Asian country, and give it whirl. Blogger JD once posted this funny, but truthful bit on how the “EROEI of Gardening Sucks.”

(This is not directed at you, but to the “king of peak” himself) “Data always beats theory. Compare data to theory three times and come to a conclusion.” Yes, Mr. Simmons. Twighlight in the desert, my ass.

P.S. - It’s hard to say if it can be found, but for some classic Kunstler writings, do a search on his Y2K material. The devastating forecasts he predicted are strangely similar to today’s, including : “the need to scale down our living arrangements and face devastating consequences,” to “the need to reintegrate small town living and farming,” to “the end of our happy motoring society,” and “that there’s no way we’ll run our Disney World and K-marts.” His most Jo Montana like moment occurred back in 2007, over Thanksgiving week, when he predicted a drop of 1,000 points in the DOW in one week. It melted up 1,000. The man is gifted."

It seems to me that you are avoiding the issues again and just writing emotional narratives. Once again, where is the oil going to come from? Which fields will give us an extra 5 mbpd this year? The question is simple. If you don't answer it we know that all of your lengthy postings are just a cover for an unsupportable position.

 

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