Wednesday, September 23, 2009

Quote of the Day: Betting on Progress, Technology

The “Peak Oil’ers” tell us that there are no new “whale” oil finds to be found; that the drilling to find crude oil is too expensive and that further exploration is a waste of time. The problem is that they are wrong. As we like to say, the world did not stop using Whale Oil to light its lamps in the late 19th century; the world stopped using Whale Oil because its cost had gotten too high creating the “technology” needed to find a new source of energy, fossil fuels. Now, the technology involving seismic geology, and the technologies involving multiple drilling points from one initial hole in the ground, et al has succeeded in finding new, massive oil pools… most of which is now offshore where the finding is good and getting better.

Twenty five years ago, oil was not drilled for in water deeper than 600 feet. The platforms were not stable; the pipe too weak; the technology simply not extant. Now, however, oil drilling firms are comfortable drilling in water 6000 feet deep, and the huge new oil finds reported two weeks ago by Anadarko Petroleum found off the western coast of the African nation of Sierra Leone was drilled for and found in water that deep. Two years ago, Anadarko found another huge pool of oil in deep water off of the Cote d’Ivoire and Ghana. BP recently found a “whale” in deep waters in the Gulf of Mexico, and Petrobras continues to drill for and find huge new pools of crude off shore from Brazil in ever deeper water.

We tell the “Peak Oil-ers” to sit down and shut up, for they are wrong. They are bettors in favor of antiprogress… in stasis… and we are far more willing to bet in favor of progress, and of technology and of the eventual replacement of fossil fuels with something else entirely. Betting on progress has been the better of the bets to be made through history; we’ll go with for a while longer anyway.

~Dennis Gartman in today's
The Gartman Letter (subscription required)

74 Comments:

At 9/23/2009 8:39 AM, Blogger jeppen said...

Large discoveries are nice, but extraction rates are also large. The peak-oilers claim that the yearly global extraction volume is around three times larger than the volume of discoveries. Is there any counter-evidence?

 
At 9/23/2009 9:18 AM, Anonymous Anonymous said...

The peak oilers miss a vital point there is a peak oil level at a given price, but not at any price. If the price gets high enough then new technology comes in and finds new reserves.
Only because we have gotten to 60 dollar oil is it justified to spend the billion or more dollars to set up to produce in the deep water.
So the comment about 600 feet is true but avoids the fact that that was in (1970) a 5 dollar oil price.
If oil had stayed at 140 you would have every rig in the world drilling, and would have the rig makers backed up for years on new rigs.

 
At 9/23/2009 9:24 AM, Blogger VangelV said...

The “Peak Oil’ers” tell us that there are no new “whale” oil finds to be found; that the drilling to find crude oil is too expensive and that further exploration is a waste of time. The problem is that they are wrong.

Actually, they are not wrong. Discoveries peaked many decades ago and most of the world’s produciton has come from large fields that are now past their peak.

As we like to say, the world did not stop using Whale Oil to light its lamps in the late 19th century; the world stopped using Whale Oil because its cost had gotten too high creating the “technology” needed to find a new source of energy, fossil fuels. Now, the technology involving seismic geology, and the technologies involving multiple drilling points from one initial hole in the ground, et al has succeeded in finding new, massive oil pools… most of which is now offshore where the finding is good and getting better.

The world stopped using whale oil because petroleum provided a better and cheaper alternative, not because technology allowed whalers to find more whales. For seismic to be a solution it would have to lead to the discovery of substantially more recoverable oil than is being produced every year. That is not happening.

Twenty five years ago, oil was not drilled for in water deeper than 600 feet. The platforms were not stable; the pipe too weak; the technology simply not extant. Now, however, oil drilling firms are comfortable drilling in water 6000 feet deep, and the huge new oil finds reported two weeks ago by Anadarko Petroleum found off the western coast of the African nation of Sierra Leone was drilled for and found in water that deep. Two years ago, Anadarko found another huge pool of oil in deep water off of the Cote d’Ivoire and Ghana. BP recently found a “whale” in deep waters in the Gulf of Mexico, and Petrobras continues to drill for and find huge new pools of crude off shore from Brazil in ever deeper water.

First, the discoveries are hardly ‘huge.’ They could be huge if we drill very expensive test wells that check the flow rates over a certain period of time and we were capable of building the infrastructure to lift and get the oil to shore. Keep in mind that lifting oil 6000 feet to the surface is no easy task and that we have to have massive reservior pressures to help out. But such pressures do not persist and depletion rates of deep-water wells are very large. Even under the most optimistic scenario production from new discoveries will not be sufficient to offset the depletion from existing wells.


...continued below...

 
At 9/23/2009 9:25 AM, Blogger VangelV said...

...continued from above...


We tell the “Peak Oil-ers” to sit down and shut up, for they are wrong. They are bettors in favor of antiprogress… in stasis… and we are far more willing to bet in favor of progress, and of technology and of the eventual replacement of fossil fuels with something else entirely. Betting on progress has been the better of the bets to be made through history; we’ll go with for a while longer anyway.

Not much of an argument, is it? Gartman does not say where we will get the equipment and people needed to develop these new discoveries. He does not look at the maximum production levles that are required to make the development of such fields economic. He does not point out that PEMEX wrote down 95% of the claimed discovery in the Gulf of Mexico or that not much work has been done to evaluate the deep-water discoveries made several years ago. He certainly does not mention that existing production is declining at 6.5% per year, which means that we need around 5 mbpd of new production every year just to stay in place. And he does not mention that the explosion in oil prices and the massive investment in the sector was not able to do much for production from 2003 to 2008. (http://www.theoildrum.com/files/ccst20090515.png)

A better argument from someone who actully knows something about oil production and oilfield technology can be found here: http://www.foreignpolicy.com/articles/2009/09/04/oil_spin

So if you want to look at short-term profits and wish to gamble on a new crisis or shoulder season weakness feel free to short oil. But if you want to understand what is going on I suggest looking at the credible sources who have science and data on their side.

 
At 9/23/2009 9:31 AM, Blogger VangelV said...

Only because we have gotten to 60 dollar oil is it justified to spend the billion or more dollars to set up to produce in the deep water.

Sorry but most deep water oil is not economic at $60 oil. At $60 companies that have strong cash positions are better off buying their competitors than wasting money drilling.

If oil had stayed at 140 you would have every rig in the world drilling, and would have the rig makers backed up for years on new rigs.

We did have every rig drilling and could not get production to increase very much. Hubbert's Peak is behind us and the only thing that saves us from major turmoil is something new that can be scaled up to offset the 6.5% depletion from existing fields. (Deep water production won't matter for several more years and by that time depletion takes us so low that no recovery to the previous peak is necessary.)

My bet is that someone figures out how to exploit methane hydrates or that Simmons' ammonia scheme manages to provide an alternative supply to offset some of the decline at a reasonable price.

http://www.theoildrum.com/files/ccst20090515.png

 
At 9/23/2009 1:08 PM, Anonymous Ian Random said...

Remember that the Mexicans are barred by their constitution from joint partnerships. And just like Venezuela they need outsiders to help with oil extraction and processing. Both have expropriated assets, so I don't think anyone will be lining-up. Also remember the infamous "NO" zone around the US. There is a lot of oil, but politics are preventing it from coming online.

Also look at promising technologies like algae which is viable at $22/gallon,fermented butanol at $1.20/gallon or octanol. Hell, even Vladimir Kutcherov is revisiting Thomas Gold's oil theory. Someone somewhere will figure out something if the price rises high enough.


http://www.sciencedaily.com/releases/2009/09/090910084259.htm

 
At 9/23/2009 1:51 PM, Blogger VangelV said...

Remember that the Mexicans are barred by their constitution from joint partnerships. And just like Venezuela they need outsiders to help with oil extraction and processing. Both have expropriated assets, so I don't think anyone will be lining-up. Also remember the infamous "NO" zone around the US. There is a lot of oil, but politics are preventing it from coming online.

There are clearly oil reserves that can be developed or have yet to be found. But you are still missing the important part; depletion from existing fields are running at 6.5% per year. That means we need around 5 mbpd of new production to stay at the same production levels that we have today. But at the current low prices of $60-$80 per barrel you can't get financing to develop the very risky ultra deep wells.

Also look at promising technologies like algae which is viable at $22/gallon,fermented butanol at $1.20/gallon or octanol.

I have. While there might be some potential the process is not very easy to scale and will require a great deal of investment and infrastructure.


Hell, even Vladimir Kutcherov is revisiting Thomas Gold's oil theory. Someone somewhere will figure out something if the price rises high enough.


http://www.sciencedaily.com/releases/2009/09/090910084259.htm


The fact that you can get hydrocarbons from abiotic sources is not all that important because what makes oil production possible is the concentration of petroleum in reservoirs that can be developed. Even if we have hydrocarbons seeping up through the mantle they will be dispersed because you need special geological structures to collect them and we have already looked at most of those structures.

I have been following the abiotic origin of oil thesis for years and have yet to see anything useful that can help us to produce oil economically.

The bottom line is that the Peak Oil thesis has not been refuted by the optimists and is strongly supported by the real world production data. That means that the prudent approach is to buy shares in good energy companies during severe pull-backs that are usually driven by technical reasons.

 
At 9/23/2009 1:53 PM, Anonymous Anonymous said...

Peak Oilers miss the point. We are already moving to better options.
PHEVs and CNG cars will become commonplace, unless OPEC figures out a way to keep oil cheap.
The Oil Era is ending, and with a whimper, not a bang.
Consider the rapid progress made in PHEVs, in just the brief, four-year window of higher oil prices (2004-2008).
Imagine if oil ever gets expensive, and stay there.
Good-bye oil. Actually, not sorry to see you go.

 
At 9/23/2009 2:34 PM, Anonymous Anonymous said...

The peak oil theory assumes the market does not react to price signals. As oil gets more scarce and thus higher priced, replacements will arise, as well as non commercial deposits becoming commercial. For example a stripper well may be uneconomic at 40 but wildly economic at 140. Higher prices bring out new technologies as well.
As an example the Baaken shale in North Dakota in theory has 600 billion barrels of oil in place with a 1% recovery factor using current technology, but get the price to 200 a barrel and lets see what comes out of the wordwork.

So as the price rises the demand falls, the peak oil theory assumes that demand is unchanging. Take Iron for another natural resource, when the magnetite in the Mesabi ran out it was thought that Iron would spike but then technology discovered how to work taconite.
Also note if the price for oil gets high enough its easy to make longer chains out of methane.

 
At 9/23/2009 3:11 PM, Blogger 1 said...

Hey VangeIV thanks for bringing us that New York Times editorial like comment...

Meanwhile back on earth we just awash in energy reserves here in the US: U.S. Solid and Liquid Fuels Resources
(Total endowment 9,033 billion bbls oil equivalent*)


And elsewhere apparently:Methane in deep earth: A possible new source of energy

Petroleum under pressure

 
At 9/23/2009 3:28 PM, Blogger VangelV said...

The peak oil theory assumes the market does not react to price signals.

That is not true. They only assume that the amount of economically recoverable oil is limited and know that money is not enough. Even if prices went to $200 the industry would have a hard time getting enough qualified people and equipment. What works in favour of the peak oil argument is the volatility that makes investors uncertain. As I wrote above, it is a lot cheaper to add to reserves by buying other companies during price weakness than to risk a great deal on the drill bit and on developing very risky known deposits.

As oil gets more scarce and thus higher priced, replacements will arise, as well as non commercial deposits becoming commercial. For example a stripper well may be uneconomic at 40 but wildly economic at 140. Higher prices bring out new technologies as well.

A stripper well cannot produce much oil and it will take hundreds of thousands of such wells to offset the natural depletion. And $140 is not high enough to allow for the development of the very deep water wells.

As an example the Baaken shale in North Dakota in theory has 600 billion barrels of oil in place with a 1% recovery factor using current technology, but get the price to 200 a barrel and lets see what comes out of the wordwork.

First, shale oil needs to be heated to temperatures of 400C to 500C to convert the sediments to kerogen oil and combustible hydrocarbon gases. To do that you will need to mine it and heat the shale at the surface or use some type of in-situ heating process that allows you to recover the kerogen effectively. While we can use frac technology to get natural gas out of oil at a price of around $6 we have no technology yet that will allow for economic recovery of oil.

So as the price rises the demand falls, the peak oil theory assumes that demand is unchanging.

No it does not. It only states that production will peak and that after the peak you will need other sources to make up for the decline in oil production.

Take Iron for another natural resource, when the magnetite in the Mesabi ran out it was thought that Iron would spike but then technology discovered how to work taconite.

You are talking about two different things. We don't have any oil that is readily recoverable at this time and the people who do most of the financing in the oil services sector see no technology in the pipeline that helps us meet the long term demand projections. That means that we will need to have other substitutes and that those who come up with the substitutes will be able to get very rich by satisfying our energy demand.

Also note if the price for oil gets high enough its easy to make longer chains out of methane.

That is true but you will need massive investment in facilities that will convert natural gas to oil. With depletion running at around 5mbpd annually it is difficult to see how demand is met quickly enough to prevent a crisis.

 
At 9/23/2009 3:54 PM, Blogger VangelV said...

Hey VangeIV thanks for bringing us that New York Times editorial like comment...

Meanwhile back on earth we just awash in energy reserves here in the US:

U.S. Solid and Liquid Fuels Resources
(Total endowment 9,033 billion bbls oil equivalent*)


Great, you are going to subsidize companies that want to convert natural gas and coal into petroleum.

If you do the math, there is no way to offset natural depletion by relying on such processes. For one, you do not have enough drill rigs to keep finding natural gas that you can convert into oil. And if you could find the rigs you certainly do not have the people to use them. Most of the people in the industry are old and close to ending their careers. You are going to have a hard enough time replacing them as they retire so I do not see how you are going to triple the number of competent engineers, geologists and production personnel that the sector will need. And even if by some miracle you could get those problems solved I don't see how you can navigate through the legal and regulatory system which has already stopped drilling and the building of a number of projects that would supply us with new energy.

But suppose you could do all that. To build the facilities that will help offset some of the depletion will put direct pressure on current energy demand because the production of all of the infrastructure will require a huge amount of additional energy.

And elsewhere apparently:Methane in deep earth: A possible new source of energy

Petroleum under pressure


This is old news. The abiotic oil people have been talking about this for decades and have yet to manage to come up with anything useful.

You also missed methane hydrates, which are a much more promising alternative than abiotic hydrocarbons. I have been looking to invest into methane hydrates for more than a decade and have yet to find a company that has a clue how to make a buck from developing methane hydrate reserves.

 
At 9/23/2009 9:00 PM, Blogger mongander said...

Never try to argue with a "peaker". The only peak beyond their horizon is "PEAK GLOOM".

 
At 9/23/2009 11:16 PM, Blogger like such as said...

Hey VangeIV - have you ever heard of Julian Simon?

You may find the man interesting. He mostly dealt with "population" issues, but his wagers with Ehrlich seem to be on topic right now.

http://en.wikipedia.org/wiki/Julian_Lincoln_Simon

also, a youtube clip:

http://www.youtube.com/watch?v=uLQoa_FA_zo

 
At 9/24/2009 10:58 AM, Blogger misterjosh said...

How about a different flavor of doom & gloom. The best way to handle the immense transition from an oil dependent economy to reliance on other forms of energy is best handled how? That's right - with a free-market based economy. In what direction are we heading? (for at least the next 1.3 years, & possibly longer) Towards a centrally planned economy. The Democratic party's ascendancy couldn't have come at a worse time.

 
At 9/24/2009 12:52 PM, Blogger Bloggin' Brewskie said...

VangeIV,

Sir, I don't mean to be rude, but seriously, you need to get a life.

"That is true but you will need massive investment in facilities that will convert natural gas to oil. With depletion running at around 5mbpd annually it is difficult to see how demand is met quickly enough to prevent a crisis."

You're still running with this farce? I ran all over this one the last time we had a spat. Do you know how much non-OPEC crude has declined since peaking in '04 - with both the N Sea and Cantarell weighing things down? Check this out. The loss in non-OPEC daily crude production, over the stretch from 2005 to last year, is roughly 1 mbpd TOTAL.

This is hardly a worrisome decline in production, it's a far cry from the annual 5 mbpd of lost production you claim; and this fits much closer to "prophets of a slow decline" such as Yergin, Jean Laherrere, Kjell Aleklett and, believe it or not, is even postulated by the Hubbert theory.

 
At 9/24/2009 2:55 PM, Blogger VangelV said...

Never try to argue with a "peaker". The only peak beyond their horizon is "PEAK GLOOM".

That is not true. Most of the people who are talking about the peak are trying to find new sources to replace the oil that will be removed by depletion. They are risking their own capital to come up with solutions because they are optimistic that substitutes can be found.

 
At 9/24/2009 9:10 PM, Blogger VangelV said...

You're still running with this farce? I ran all over this one the last time we had a spat. Do you know how much non-OPEC crude has declined since peaking in '04 - with both the N Sea and Cantarell weighing things down? Check this out. The loss in non-OPEC daily crude production, over the stretch from 2005 to last year, is roughly 1 mbpd TOTAL.

You are missing the big picture and are still buying into the myth of plenty oil as far as the eye can see.

First, non-OPEC oil has already peaked and production rates will never reach previous levels. That puts non-OPEC production on the wrong side of Hubbert's Peak.

Second,the IEA has finally admitted that its previous figures were wrong and that depletion from existing fields is running at 6.7% per year. Perhaps you would not see that admission as a problem but most rational people who are not concerned about short term trading and are willing to look a few years into the future would be terrified.

Third, the IEA data also shows that crude oil production has declined from a peak of 74 mbpd to the current level of 71 mbpd.

While some heavy oil production, CTL, refinery gains and boiofuels can make up some of this decline for a short period, the natural depletion rate is indisputable and will demand massive investments of capital that will not come with oil under $100 a barrel.

Forth, we spent hundreds of billions on new projects aas prices exploded from $30 to over $140 but could not get the production rate to meaningfully go over the 2005 peak. It took demand destruction in the form of a massive economic contraction to get demand to fall below the supply capacity.



...continued below...

 
At 9/24/2009 9:12 PM, Blogger VangelV said...

This is hardly a worrisome decline in production, it's a far cry from the annual 5 mbpd of lost production you claim; and this fits much closer to "prophets of a slow decline" such as Yergin, Jean Laherrere, Kjell Aleklett and, believe it or not, is even postulated by the Hubbert theory.

Like I wrote, a natural DEPLETION rate of 6.7% is very worrisome and requires a huge amount of investment to try to keep level. (The depletion rate is not the same as the produciton decline rate.)
While massive investments were able to keep production levels steady even as demand was being rationed by higher prices, the new investment could not move the production levels higher.

If you pay attention to the conference calls you will have to conclude that not much new investment will appear as long as oil is below $100 a barrel and even if by some miracle that investment appeared, you will not see the 2005-2008 average production rate exceeded in any future three year period. That means that we will either need the current economic contraction to keep decreasing demand or that we will need a new source to replace the lost production.

Your reference to the Hubbert theory also has a major flaw. Hubbert's production declines were based on the methods used by the oil companies during his time. In the absence of horizontal wells, water sweeps and other recovery methods it is very likely that oil production would have peaked more than a decade ago and that we would see the expected decline predicted by Hubbert. But those methods did not just lead to a bit more oil being recovered from fields. They also allowed production levels to increase and for oil to be removed faster than would otherwise have been the case. That presents a problem for field operators because once the water sweep gets to the horizontal wells there won't be a gradual decline as in the past but an abrupt one as we saw for Yibil.

If you have done your research as you claim you would know that Oman's Yibil field peaked in 1997 at about 250,000 bpd. By 2000 its production had declined to 90,000 bpd. The rapid decline rate occured because of the use of horizontal wells and a water drive. The same type of wells are being used in Ghawar and Cantarell. Ghawar is using a water drive while the Mexican engineers have used nitrogen injections for Cantarell. Once declines for these fields begin, production falls off a cliff. Cantarell's production peaked in 2003/2004 at around 2.1 million barrels per day. By July 2009 the production rate had fallen to 588,210 barrels per day and the Mexican government was scrambling to find new deposits that it can bring on line (in a few years at best) to make up some of that decline.

I don't know about you but such massive decline rates seem scary, particularly when I see Chinese companies taking advantage of lower price levels to purchase large stakes in producing companies and to make deals with state owned producers to ensure an adequate supply in the future.

 
At 9/24/2009 9:20 PM, Blogger VangelV said...

How about a different flavor of doom & gloom. The best way to handle the immense transition from an oil dependent economy to reliance on other forms of energy is best handled how? That's right - with a free-market based economy.

I could not agree more. Sadly, most people disagree and want governments to help drive the transition even though they have never done so before.

In what direction are we heading? (for at least the next 1.3 years, & possibly longer) Towards a centrally planned economy. The Democratic party's ascendancy couldn't have come at a worse time.

You are right except that you do not mention that Bush was also in favour of big government and expanded the size of the bureaucracy and the number of regulations. As such the Republican Party has no credibility. After all, it was the Republican Party that marginalized Ron Paul, who was the only small government candidate it had running for president and went as far as to try to stop him from taking part in the debates.

The solution will come from someone looking to get rich by solving a looming problem that threatens the economy. While the solution will not prevent prices from exploding for a while it will come and will help us move to a new source of liquid fuels. I am still trying to get more details on Simmons' ammonia production scheme. If anyone has links to good sources of information I would appreciate it.

 
At 9/25/2009 10:34 AM, Blogger VangelV said...

Hey VangeIV - have you ever heard of Julian Simon?

You may find the man interesting. He mostly dealt with "population" issues, but his wagers with Ehrlich seem to be on topic right now.


I am a big fan of Julian Simon and have the same faith in human ingenuity that he did. (That is the reason why I invest my money looking for alternatives.)

But Julian Simon never claimed that we can't run out of something. He only claimed that when prices got high enough there would either be investment that found new supply, or if no new supply were available, there would be substitutes found. As I wrote above, we didn't find more whales to light our lamps. We got off whale oil and used something cheaper and better. That there was a peak in whale oil is not in dispute and that there is or will be a peak in crude production is also not in dispute.

All I point to is the ample evidence that I have referenced above. It is a fact that most conventional fields are well past their peak and that the only reason why we did not seen a sharp drop in production after 2005 was the massive investment that came into the sector. But that investment was unable to get production to grow and without it, it is extremely unlikely that the 75 mbpd production rate will be exceeded. That means that we better have alternatives step up and make up the oil that will be lost due to depletion. But I do not see that happening and the only reason why prices have collapsed and are weak has to do with a weak global economy, not a supply side response.

 
At 9/25/2009 2:18 PM, Blogger Bloggin' Brewskie said...

Hey guys,

Boy, VangeIV is reliable, as stubborn as ever! Before we run over this religious zealot, lets take a look the appalling track record of his heroes, including Matthew Simmons, Ken Deffeyes, James Kunstler and Mike Ruppert at my sub-blog, Peakers' Hall of Shame. It's got some great stuff, and mind you it's only the tip of the iceberg. Unfortunately, because of my recent enrollment into grad school and my current full-time employment, I do not have the time to update this or my flagship blog, Ghawar Guzzler.

VangeIV,

Stick to what you've been whining about: "With depletion running at around 5mbpd annually it is difficult to see how demand is met quickly enough to prevent a crisis." Your stubbornness is not going to get you out of this. Where is the annual decline of 5 mbpd, the 5.5% or 6.5% rates you've been crowing about?

"First, non-OPEC oil has already peaked and production rates will never reach previous levels. That puts non-OPEC production on the wrong side of Hubbert's Peak."

Thanks for not paying attention, VangeIV. I already said non-OPEC peaked; I've posted that numerous times on my blog. Now it's time for you to pay attention to the statistics: where's the hard crash?

"Third, the IEA data also shows that crude oil production has declined from a peak of 74 mbpd to the current level of 71 mbpd."

Very good, VangeIV, you're for once paying attention to the news=) I've had graphs on this stuff on Ghawar Guzzler for months. Now have you been paying attention to why this is? As I've said to you in the past, it's because of cutbacks in OPEC production in response to oil's price drop.

"Second, the IEA has finally admitted that its previous figures were wrong and that depletion from existing fields is running at 6.7% per year. Perhaps you would not see that admission as a problem but most rational people who are not concerned about short term trading and are willing to look a few years into the future would be terrified."

Do not confuse 6.7% annual depletion rates of some fields with the overall picture. I want to know - where is the annual 5 mbpd of loss production you've been preaching about? This would match the 5.5%, 6.7% you've screaming about. Tell us. Such a decline would be terrible, I agree with you, but so far you look like a raving lunatic.

"Like I wrote, a natural DEPLETION rate of 6.7% is very worrisome and requires a huge amount of investment to try to keep level. (The depletion rate is not the same as the production decline rate.)"

I agree with you, but where is it? The worse we've been getting from non-OPEC of roughly 300-400 bpd of loss production annually, a rough 1% annual depletion rate at worse. I, like many others, including Yergin, Jean Laherrere and Kjell Aleklett, have predicted post-peak oil would be a slow squeeze (at least for several decades), not a hard crash.

"Your reference to the Hubbert theory also has a major flaw."

Your persistent belief in high peak priests is flawed. You can comb through Peakers' Hall of Shame, Ghawar Guzzler or Peak Oil Debunked to see that. Did you hear what Simmons said a while back? "OPEC has no spare capacity." That's right! Anyone who has paid attention to the news is knows that's flatly incorrect; I debunked it here. Also, check out this fabulous bit on Mike Ruppert, star of the new film "Collapse."

 
At 9/25/2009 2:19 PM, Blogger Bloggin' Brewskie said...

Anyway, considering we're 3 1/2 years in the midst of non-OPEC declines, considering it's only cut off roughly 1 mbpd of daily production, and considering non-OPEC production comprises for over half of the world's crude production, the evidence supports my argument for a slow decline, not yours supporting a hard crash.

"Cantarell's production peaked..." (blah, blah, blah)

I've written about this before. Let Cantarell croak. Good riddance. Who needs it?

Sorry VangeIV, but you really need to get a life. Until you bring forward hard data proving that global oil production, or at the very least, non-OPEC, IS falling at 5.5%, 6.5% or whatever you claim, your argument is moot.

Believe me, the day I find out global crude has peaked and therefore is in decline, I will celebrate the matter: I'll give high-fives, give big group hugs, write about it and go out for dinner and drinks.

 
At 9/26/2009 3:23 AM, Blogger 1 said...

The New York Times editorialist says: "Great, you are going to subsidize companies that want to convert natural gas and coal into petroleum"...

You garnered all that from where?

I don't want ANYONE subsidized just as I don't want government interference stopping the production of crude, of coal, and nuclear...

"If you do the math, there is no way to offset natural depletion by relying on such processes"...

Hmmm, according to which credible source?

"This is old news. The abiotic oil people have been talking about this for decades and have yet to manage to come up with anything useful"...

Yes it is old news from the fifties if not earlier thanks to Russian geologists...

Again another broad brush statement with NOTHING credible behind it from you...

"You also missed methane hydrates, which are a much more promising alternative than abiotic hydrocarbons"...

No I didn't miss it, I just didn't want to bring up every well known alternative to your peak oil talk...

"Second,the IEA has finally admitted that its previous figures were wrong and that depletion from existing fields is running at 6.7% per year"...

Now the New York Times editorialist is quotion a UK socialist rag...

What's next? Words of wisdom from Feinstein and Boxer?

 
At 9/26/2009 9:35 AM, Blogger Bloggin' Brewskie said...

Hey 1,

Check out this video of VangeIV's hero, Matthew Simmons, "the King of Peak." This was shot last year on July 11 - right at oil's price peak of $147. Matthew goes on a schpeel on why oil's price is not going to collapse. Truly priceless, it still brings laughter to me this day

 
At 9/26/2009 2:31 PM, Blogger Bloggin' Brewskie said...

Hey VangeIV,

Your comment on Simmons's big push for ammonia reminded me of a piece written by Oil Drum writer Robert Rapier last year. Lol! Yeah, your faith in this is pretty amusing, especially since you’re so vigilant at trying to shoot down other readers' technical thoughts. Anyway, in the post Rapier questions something I've long been a vocal skeptic on: Simmons's technical expertise. For example, Rapier says:

"For instance, in Twilight, I can recall him becoming alarmed by the term 'fuzzy logic.' I had been around control systems based on fuzzy logic, so I was familiar with the term. But Simmons said he had never heard it before, and interpreted the phrase as one might interpret 'hunch'... I would say that most technical people are familiar with fuzzy logic, so I figured that Simmons was just not a technical guy."

Rapier goes on about Simmons's assertion of "Sour, heavy oil not being worth very much" by saying:

"That's preposterous. Refiners with crackers and hydrotreaters love heavy, sour oil, because they can make a lot of money with it. I explained this in detail in The Assay Essay. Furthermore, refiners can get almost as much liquid product out as they can from light sweet oils."

And on to ammonia, he says:

"Here's another example. While I agree with Simmons that corn ethanol is 'a terrible, tragic mistake', I can't agree with his assertion 'It [ammonia] has 111 octane, whereas corn-based ethanol has a very low octane.' For all its faults, ethanol has a very high octane, and is used to boost the octane of gasoline.

So, the point is that I am learning to take Simmons with a grain of salt when he is discussing technical subjects. He may be an ace investment banker - and he has certainly made a lot of money - but he has given me no reason to put stock in predictions like this from him"

I couldn't agree more with the last paragraph more. As for someone who has tracked Simmons's numerous follies very well, and has documented some of them, I will say that while Matthew is very good at the money making game, he's to be viewed skeptically in the technical world.

 
At 9/27/2009 11:29 AM, Blogger Bloggin' Brewskie said...

Everyone,

Here's one of Matthew Simmons's best moments - it's pure classic. He, with like-minded (and ever more incompetent) peak prophet Mike Ruppert, predicted in a 2003 conversation that the US would experience a natural gas crisis within two years, with "production destined to fall of a cliff." Get a load of this:

Simmons: "As you know, I have been talking for some time about the natural gas cliff we are experiencing.

[...]

Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It's a sharper issue with gas, which doesn't follow a bell curve but tends to fall off a cliff.

[...]

Someone's going to be left holding the bag big time. If natural gas consumption surges in ten days of excessive heat then it would require almost a complete shutdown of industrial consumption to compensate and protect the grid. As I have been reporting for years now, there isn't going to be enough gas to run those plants, let alone new ones.

[...]

Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty."

Lol! Yup, this came from the sage himself; a self-made man who founded Simmons & Company International, a highly successful investment banker, the author of Twilight in the Desert, and a highly herald energy-insider and peak oil prophet.

Mind you, these aren't the only two blunders he's got to his name - he's got a whole stable full of them.

 
At 9/27/2009 7:18 PM, Blogger VangelV said...

Boy, VangeIV is reliable, as stubborn as ever! Before we run over this religious zealot, lets take a look the appalling track record of his heroes, including Matthew Simmons, Ken Deffeyes, James Kunstler and Mike Ruppert at my sub-blog, Peakers' Hall of Shame. It's got some great stuff, and mind you it's only the tip of the iceberg. Unfortunately, because of my recent enrollment into grad school and my current full-time employment, I do not have the time to update this or my flagship blog, Ghawar Guzzler.

You are looking at short term moves in the markets but that is not what the debate is about. The debate is about the supply picture and on that the 'peakers' have been proven to be right.

In case you forgot, it was the 'peakers' who argued that that the depletion rates used by the IEA were way off while the analysts you cite as being credible disagreed. But after the IEA performed a field-by-field analysis of the largest producing fields it determied that the official depletion estimates were too low, and that Simmons and the rest were right.

And keep in mind that many of the 'peakers' argued that the price of oil would remain between $80 and $100 for several years even though we were near a peak. The spike only came when the idiots at the IEA and the ‘credible analysts’ overestimated non-OPEC production growth and OPEC nations responded by reducing their production. The 1.8 mbpd cut caused an unnecessary $60 price spike and made consumers a lot poorer.

Stick to what you've been whining about: "With depletion running at around 5mbpd annually it is difficult to see how demand is met quickly enough to prevent a crisis." Your stubbornness is not going to get you out of this. Where is the annual decline of 5 mbpd, the 5.5% or 6.5% rates you've been crowing about?


For a guy who has such a strong opinion you seem to be ignorant of the meaning of the term depletion.

On page 243 of its 2008 World Energy Outlook report the IEA states, "we estimate that the average observed decline rate worldwide is 6.7%. Were that rate applied to 2007 crude oil production the annual loss of output would be 4.7mmbpd." The fact that you are unaware of the data is not my problem; it is yours. Of course, if you are trying to make money from short term swings in price as many of the degenerate gamblers do then you don't really have to know much about the long term because such knowledge only gets in the way of trading activity.

To make up for this natural depletion and to make certain that it does not show up in the production numbers the energy producers have had to invest extraordinary amounts but the best they could do is to keep production flat from 2005 to 2008. Even though massive investments were made there was no supply response and demand in excess of production capacity had to be rationed by sharply rising prices. It took a sharp correction to get demand to fall below supply capacity.

 
At 9/27/2009 7:32 PM, Blogger VangelV said...

"Like I wrote, a natural DEPLETION rate of 6.7% is very worrisome and requires a huge amount of investment to try to keep level. (The depletion rate is not the same as the production decline rate.)"

I agree with you, but where is it? The worse we've been getting from non-OPEC of roughly 300-400 bpd of loss production annually, a rough 1% annual depletion rate at worse. I, like many others, including Yergin, Jean Laherrere and Kjell Aleklett, have predicted post-peak oil would be a slow squeeze (at least for several decades), not a hard crash.


The depletion rate comes right out of the IEA report. You are trying to equate it to a production decline rate but that is not the same thing.

Because you seem to have a big problem let me illustrate this with a simplified example. (We can add complexity later.)

Think of a field as a one-liter milkshake from which you are drinking a fixed amount of 20 ml every minute. That is the production level, which you can keep constant if you wish. This means that you can keep drinking for 50 minutes and get as much of the milkshake in the last minute as you did the first. (There is no peak in this example.)

But look at the depletion rate. In the first minute you depleted 2% of the milk shake. In the second minute you depleted 2.04%, not significantly different from the first minute. By the tenth minute the depletion rate is 2.44% and the twentieth minute gives us 3.23%. After 25 minutes half the field (milk shake) is gone and the depletion rate is still around 4%. After 40 minutes you are still drinking away at the same rate but the depletion rate is now 10% over the next minute increment. After 45 minutes it is at 17% and after 48 minutes it is 50% over the next interval. In the 50th minute you drink the last 20 ml and your field is empty.

Here are the numbers. Column one is the amount of liquid that is available. Column two is the production rate. Colum three is the depletion rate.

1000 20 2.00%
980 20 2.04%
960 20 2.08%
940 20 2.13%
920 20 2.17%
900 20 2.22%
880 20 2.27%
860 20 2.33%
840 20 2.38%
820 20 2.44%
800 20 2.50%
780 20 2.56%
760 20 2.63%
740 20 2.70%
720 20 2.78%
700 20 2.86%
680 20 2.94%
660 20 3.03%
640 20 3.13%
620 20 3.23%
600 20 3.33%
580 20 3.45%
560 20 3.57%
540 20 3.70%
520 20 3.85%
500 20 4.00%
480 20 4.17%
460 20 4.35%
440 20 4.55%
420 20 4.76%
400 20 5.00%
380 20 5.26%
360 20 5.56%
340 20 5.88%
320 20 6.25%
300 20 6.67%
280 20 7.14%
260 20 7.69%
240 20 8.33%
220 20 9.09%
200 20 10.00%
180 20 11.11%
160 20 12.50%
140 20 14.29%
120 20 16.67%
100 20 20.00%
80 20 25.00%
60 20 33.33%
40 20 50.00%
20 20 100.00%

The example shows that you can have a rising depletion rate that is rapidly draining a field even if it does not show up in the production numbers. In the real world case we don’t start off at the peak rate, which will last us from beginning to end. We begin with a single well that begins to lose pressure and production falls off right from the start. To increase the field production we need to drill more wells, which are also losing production with time. At some point we reach maximum production even if we add more wells because the loss of pressure from existing wells is reducing production faster than the addition of new wells. (While this does not have to be the case accounting and prudent investment management make it inevitable because nobody wants to pay the cash for new wells that cannot be justified to the accountants.)

 
At 9/27/2009 7:34 PM, Blogger VangelV said...

Thanks for not paying attention, VangeIV. I already said non-OPEC peaked; I've posted that numerous times on my blog. Now it's time for you to pay attention to the statistics: where's the hard crash?

You give a chart that shows a decline even after hundreds of billions of dollars were spent to get oil production to go up as prices exploded. The fact that such a massive investment could not reverse the production decline is bad news and evidence against your thesis.

And once again, what part of 6.5% depletion don’t you understand? Let me state it over again because you missed it the first 20 times. To prevent a collapse in production you need discoveries that can be developed quickly enough to offset that decline. While we have seen hundreds of billions of dollars in new investment keep the declines from getting out of hand you will not see such investment at the $90 a barrel price that we expect to see next year. To reduce the risks, most producers will want to see a price get above $125 and stay there.

"Third, the IEA data also shows that crude oil production has declined from a peak of 74 mbpd to the current level of 71 mbpd."

Very good, VangeIV, you're for once paying attention to the news=) I've had graphs on this stuff on Ghawar Guzzler for months. Now have you been paying attention to why this is? As I've said to you in the past, it's because of cutbacks in OPEC production in response to oil's price drop.


OPEC was not trying to cut production in 2005, 2006 or but production could not rise. Prices moved from $30 to more than $100 and attracted hundreds of billions in new investment but production could not rise. That is supportive of my position and argues against yours.

"Second, the IEA has finally admitted that its previous figures were wrong and that depletion from existing fields is running at 6.7% per year. Perhaps you would not see that admission as a problem but most rational people who are not concerned about short term trading and are willing to look a few years into the future would be terrified."

Do not confuse 6.7% annual depletion rates of some fields with the overall picture. I want to know - where is the annual 5 mbpd of loss production you've been preaching about? This would match the 5.5%, 6.7% you've screaming about. Tell us. Such a decline would be terrible, I agree with you, but so far you look like a raving lunatic.


The 6.7% annual depletion rate is the big picture. It is that depletion that is causing the production for some older fields to fall at much higher rates. (See North Sea, US Gulf of Mexico, or Cantarell.) This is why the IEA is in a panic; it understands that unless there are enough discoveries that can be brought on line quickly enough world oil produciton will fall much more sharply than it has claimed for years. It only figured out what was going on when it did a field-by-field assessment in 2008, after years of urging by Mat Simmons and others in the peak oil camp. That assessment led the IEA to conclude that its depletion number was wrong and that the peak oil proponents were right.

 
At 9/27/2009 7:43 PM, Blogger VangelV said...

"Your reference to the Hubbert theory also has a major flaw."

Your persistent belief in high peak priests is flawed. You can comb through Peakers' Hall of Shame, Ghawar Guzzler or Peak Oil Debunked to see that. Did you hear what Simmons said a while back? "OPEC has no spare capacity." That's right! Anyone who has paid attention to the news is knows that's flatly incorrect; I debunked it here. Also, check out this fabulous bit on Mike Ruppert, star of the new film "Collapse."


Simmons was right. OPEC had no spare capacity and could not increase production to meet growing demand. Prices did not fall because more oil was produced but because we ran into a black swan that destroyed demand. The chart that I have cited is still showing the problem; massive amounts of new investments were not sufficient to get production to rise from 2005 to 2008.

As I said, do not confuse your attempt to make money by playing the volatility with the bigger picture. For now all we need to know is that the IEA has finally admitted that the ‘peakers’ were right all along and that depletion rates were much higher than the official numbers indicated. Next on the list will be the validity of the reserves claimed by most of the OPEC nations. Given the fact that their production quotas are tied to reserves and that most OPEC nations doubled their reported reserves in the 1980s even though no new drilling was being done most prudent analysts do not trust the data that the IEA was willing, until recently, to take at face value. If you have paid attention that trust in the data is now gone. And so is the trust in the credibility of those analysts you keep quoting.

 
At 9/28/2009 12:28 PM, Blogger Bloggin' Brewskie said...

VangeIV! You're back. I'd knew you'd return with your religious zealotry but I was starting to miss you. Let's pop your ignorance, your religious zeal, your stubbornness...

First, I thought it was very interesting you stated several times I was somehow making money on this. Nice foresight. No, I'm not making money on this nor do I have any money invested in this. That's a sharp contrast to others who do benefit from this: Simmons, T. Boone Pickens, Savinar and writers who've made a buck off of peak oil books (there's a sucker born every minute), or you through your previously admitted investments.

"The debate is about the supply picture and on that the 'peakers' have been proven to be right."

Oooohhh, you're special. Well, I hate to burst your bubble, but virtually everybody, expect the mentally retarded, understands oil is a finite substance; I've understood oil will eventually deplete since 3rd grade.

"On page 243 of its 2008 World Energy Outlook report the IEA states, 'we estimate that the average observed decline rate worldwide is 6.7%. Were that rate applied to 2007 crude oil production the annual loss of output would be 4.7mmbpd.'"

You're spinning your wheels here. What are you throwing a conniption about? Do not confuse the loss experienced at some fields with the overall picture. Are your lights starting to flicker out? Are you witnessing your arm disintegrate into individual particles?

"The spike only came when the idiots at the IEA and the ‘credible analysts’ overestimated non-OPEC production growth and OPEC nations responded by reducing their production."

I agree the IEA can be stodgy, but the term "idiot" seem better applied to Simmons and the peak oil cohorts. Brush on over to Peakers' Hall of Shame for some good data. I've got plenty more; stick around and we'll get you brushed up, Mr. Faithful.

"Think of a field as a one-liter milkshake from which you are drinking a fixed amount of 20 ml every minute." (blah, blah, blah)

Hmmm... Thanks for the simplistic math demonstration. I didn't have anything like that when I took the GRE. However, you appear to confused about my argument. You don't seem to understand how I can accept the fate of peak oil, and yet be so caviler about it.

"You give a chart that shows a decline..."

No shit!

 
At 9/28/2009 12:50 PM, Blogger Bloggin' Brewskie said...

"The fact that such a massive investment could not reverse the production decline is bad news and evidence against your thesis."

VangeIV, if you really feel a cumulative annual loss of roughly 1mbpd since '05 is bad news, with an average annual loss of 300,000-400,000 (Guess what? If it wasn't for Cantarell, non-Opec production would have roughly broken even last year) than by all means continue work on your doom bunker. Meanwhile, for those of us who have more rationale minds, we'll hit the snooze button on peak oil.

"Simmons was right. OPEC had no spare capacity and could not increase production to meet growing demand."

Hey idiot, the article is from this year. Since I assume you didn't read it or my post that debunked it, here, let me show you OPEC' drop in production in response to high oil prices; and also, how many times do I have to tell you that Saudi Arabia is adding production, (with more to come)? Here's another a bit on OPEC's plan to add 2mbpd of natural gas condensate production by the end of next year - and I still have other articles of on oil discoveries/developments in OPEC. Anyway, you haven't even touched on ther other stuff I posted about Simmons, particurly Rapier's assesment of the man. Trust me, I have plenty more dirt on the man.

Anyway VangeIV, the reason why I have done the work I have done (now mostly ceased because of grad school) has nothing to do with with financial gain (I haven't made a dime), but rather, to help people see through the hype, the half-truths, the misinformation and outright lies the high peak priest doomers throw out with great endowment. My argument has never been about denying peak oil; rather, it's helping people see the doomers in the peak oil crowd are the LAST people you want information pertaining to peak oil, technology development, and the future beyond peak oil. Their forewarning about shale gas is exemplary proof of this: two years ago, Americas was suppose to fall off a natural gas cliff, and now, we have more of the stuff than we know what to do with.

As evidenced by peak and decades-long production plateau in areas of large blocks (i.e., continents),I like the others I have posted, have long felt post-peak oil will be a slow, manageable decline, not a hard crash. Non-OPEC's glacial descent backs up my claim.

I had an exchange with a former peaker on the net a while back. He said his turning point occurred thanks to the emergence of shale gas; he said this totally took the wind out of the peakers' call of a "natural gas cliff," and since none of them saw it coming - and even denounced it when it started making rumbles - he realized then and there that the doomers in the peak oil crowd really do not have a good grasp on technology. I couldn’t agree more; as for someone with plenty of experience following the peak oil crowd, that says it in a nutshell.

 
At 9/28/2009 1:03 PM, Blogger Bloggin' Brewskie said...

VangeIV,

Hey, do you read James Kunstler? I have some interesting pearls from the man, read:

"Some people may lose their lives - but more likely at the hands of a disabled medical establishment than because of civil disorder, loss of power, starvation, bad water, or other projected horrors (though these, too, are possible). Some will suffer the loss of fortunes, some of any income whatsoever, and many of something in between. Quite a few will find themselves suddenly without an occupation, and few ideas about how to make themselves useful to other people (without occupations themselves). Many will suffer a loss of comfort and modern convenience, and if that goes on any longer than a week, it may escalate into serious problems of public sanitation and infectious disease."

Certainly vintage Kunstler, familiar material on the effects of peak oil, except...

It has nothing to do with peak oil but rather, his predictions for Y2K written TEN YEARS AGO!!

Read below. It's interesting to see how similar his predictions were then for Y2K as they are now to peak oil...

"I doubt that the WalMarts and K-Marts of the land will survive Y2K. Their fabulous success the past 20 years had been due to the combination of continually falling gas prices, relative world political stability (and long distance outsourcing of cheap labor), and computerization. They operate at extremely narrow profit margins."

"The aftermath of Y2K will require us to do things differently. We are going to have to live more locally, and more self-dependently. All our activities will have to be conducted on a finer scale. The "move to quality" that is sometimes invoked in discussions of financial investments will apply across the cultural and economic board. There will be less room in our lives for junk of all kinds: junk food, junk merchandise, junk entertainment, junk relationships. We are going to have to re-invent smaller-scaled farms (with value-adding activities), and we’re going to have to localize, or at least regionalize, commerce. We may have to start making some things again ourselves, or do without them for a while."

 
At 9/28/2009 2:17 PM, Anonymous westWright said...

Wow I looked at this Peak Oil post just to see the flamers argue...I have to say VangeIV just takes the cake for BloviTard of the day. This is the mentality that got all those Jim Jones converts drinking the Koolaid in the jungle.

 
At 9/28/2009 4:01 PM, Blogger VangelV said...

Here's one of Matthew Simmons's best moments - it's pure classic. He, with like-minded (and ever more incompetent) peak prophet Mike Ruppert, predicted in a 2003 conversation that the US would experience a natural gas crisis within two years, with "production destined to fall of a cliff." Get a load of this:...

Let us look at the big picture again. Simmons argued that the IEA was using a depletion rate that was way too low at 3.5%. Yergin and the other 'experts' you cite supported the same 3.5% rate on the based on OPEC reserve claims that they assumed were accurate. Your experts never questioned how Iran and Iraq can drill enough to double their reserves as they were fighting a war or how OPEC members were able to find just enough oil to replace annual production perfectly. The sceptics were not as naive and saw through the data issues.

After the IEA did a field-by-field analysis, as Simmons had done to come up with his own conclusions, it figured out that the thousands of analysts, including your 'experts' that it relied on were wrong and that Simmons was right.

But somehow we are supposed to think that Simmons is not credible and that your 'experts,' who were off by around 100%, were right?
I also think that Simmons’ argument about natural gas was valid. American conventional production has already peaked and we are now dependent on more expensive shale gas. But that is not enough to meet demand at less than $8 gas if the economy were robust; particularly if there is the more typical temperature profiles that come with a negative PDO phase.

If economic activity was normal and there are warm periods during the summer and cold periods in the winter there isn’t enough production and storage capacity to keep the gas price level relatively stable. Prices would explode when extra demand was created by extreme weather positions. Obviously if we have a very weak economy and a mild summer/winter, as we have had in 2008/2009, the excess capacity will cause spot prices to collapse, particularly during the shoulder season when there is no more storage.

At this time we are seeing the effects of last year’s investment conditions, when companies locked in high gas prices in the futures market and spent money on drilling to meet their obligations. (While the spot market price is low many of the companies are still selling their gas based on the forward price locked in last year or in 2007.) But the low spot prices have had a very negative effect on drilling, which means that we will be vulnerable to price spikes again if the economy picks up or the weather creates strong demand for heating in north-eastern North America. There is no such thing as a free lunch and if spot prices remain lower today it only sets up the market for a price spike later.

That said, the big picture is still not what you think it is. To allow for shale gas to become a reliable source we will have to switch to more long term supply contracts that will allow the companies to guarantee a decent return and to eliminate some of the environmental and legal issues that are threatening the industry. If the environmental problems can’t be corrected shale will produce significantly less gas even if prices spike again.

 
At 9/28/2009 4:04 PM, Blogger VangelV said...

westWright said...

Wow I looked at this Peak Oil post just to see the flamers argue...I have to say VangeIV just takes the cake for BloviTard of the day. This is the mentality that got all those Jim Jones converts drinking the Koolaid in the jungle.


Like I said, the IEA finally saw the light after it did a field-by-field analysis and had to conclude that the peak oil people were right about the depletion rate. Ignore reality at your own peril and do not ignore the demand destruction with a supply response.

 
At 9/28/2009 4:15 PM, Blogger VangelV said...

Hey, do you read James Kunstler?......

I don't like his alarmism. While he has some very valid points he tends to mix up many factors and makes assumptions that lead him in the wrong direction.

He has clearly drank the Kool Aid on global warming and assumes that our near future includes warmer temperatures when the opposite is likely to be true. He also does not tend to understand that in the agricultural sector we can use GM seeds to protect production even as oil production declines. He certainly does not seem to understand that many of the food problems go away in the short term if the idiotic waste in food to fuel programs is ended. He also does not seem to see that one way to postpone the problem is to ensure that American consumption collapses as it would if the USD is devalued by a significant amount. With fuel prices double the current rate you can bet that Americans will use a lot less gasoline and heating oil than they do now and that they will not be opposing coal and nuclear plants.

 
At 9/28/2009 8:39 PM, Blogger VangelV said...

First, I thought it was very interesting you stated several times I was somehow making money on this. Nice foresight. No, I'm not making money on this nor do I have any money invested in this. That's a sharp contrast to others who do benefit from this: Simmons, T. Boone Pickens, Savinar and writers who've made a buck off of peak oil books (there's a sucker born every minute), or you through your previously admitted investments.

You misunderstand my point. I have no trouble with Yergin making money by pushing the optimism scenario or Pickens trying to make money by arguing for wind power. What matters to me is the soundness of the argument.

I merely point out that you seem to be focused on short term issues and are ignoring the big picture, which is very obvious to anyone with an open mind.

This argument is about the supply side, which is where the peak will become evident and show itself, not about having spare capacity when demand is destroyed by economic contractions or high prices.

Oooohhh, you're special. Well, I hate to burst your bubble, but virtually everybody, expect the mentally retarded, understands oil is a finite substance; I've understood oil will eventually deplete since 3rd grade.

You say one thing but keep arguing against peak oil even though the data has shown that most of the large producing nations have already seen their production peak and that most of the large fields that have produced the bulk of the world's oil are either past their peak or near it.

You're spinning your wheels here. What are you throwing a conniption about? Do not confuse the loss experienced at some fields with the overall picture. Are your lights starting to flicker out? Are you witnessing your arm disintegrate into individual particles?

The large producing fields are the overall picture. Small discoveries that will not come on line until 2015 and will require hundreds of billions in investment and $200 oil to be economic will not offset the declines. And neither will recovery techniques that leave oil behind the sweep and ensure that the decline rates at the tail end of the curve are very large.

I agree the IEA can be stodgy, but the term "idiot" seem better applied to Simmons and the peak oil cohorts. Brush on over to Peakers' Hall of Shame for some good data. I've got plenty more; stick around and we'll get you brushed up, Mr. Faithful.

Wrong. Yergin and the IEA were wrong about depletion while Simmons was right. The optimists based their conclusions on assumptions; Simmons came to his conclusions by looking at the data that was available. And as Simmons says, all one needs is 30 days and all of the production data to nail the peak within a year. It is not a difficult exercise and any new data should be able to produce an improved prediction within a few hours.

Hmmm... Thanks for the simplistic math demonstration. I didn't have anything like that when I took the GRE. However, you appear to confused about my argument. You don't seem to understand how I can accept the fate of peak oil, and yet be so caviler about it.

You do not seem to be accepting the peak oil argument. After all, you side with the people who have gotten the depletion and reserve story very wrong and consider those that actually did the math idiots. That was the view of Hubbert, when he made his prediction about the American oil production peak. He was vindicated while the optimists were proven wrong.

 
At 9/29/2009 10:58 AM, Blogger Bloggin' Brewskie said...

westWright,

Thanks for the wise words, sir, best thing I've read all day! Yesiree, VangeIV is a bonafide, stubborn angus sow: he may not be Westtexas himself, the Oil Drum's biggest fan, but he appears to be the next rung down.

 
At 9/29/2009 11:22 AM, Blogger Bloggin' Brewskie said...

"Let us look at the big picture again. Simmons argued that the IEA was using a depletion rate that was way too low at 3.5%. Yergin and the other 'experts' you cite supported the same 3.5% rate on the based on OPEC reserve claims that they assumed were accurate."

Wow. I merely point out Simmons's technological incompetence on natural gas and you fly into oil. Stick to the subject.

"I also think that Simmons’ argument about natural gas was valid."

Are we freezing in our homes? Has our power gone off? Last I checked US gas production for the year was nearing its early '70s peak; there's even discussion about America becoming a net gas exporter.

"But that is not enough to meet demand at less than $8 gas if the economy were robust."

Wrong again. Technological improvements are making shale gas fore cost feasible. Here's some wise words from Robert Auilra, one of the leading experts on natural gas:

"ET: Speaking of prices, what is a sustainable price for natural gas? I ask because I’ve heard some producers insist that shale gas wouldn’t be profitable when prices are under $8. Now, I’m hearing $5. What’s your take on the relationship between the relatively high cost of drilling for tight gas and the market price which has been so volatile lately?

RA: My take is that $5 to $6 will work in most cases and will make most shale plays competitive."


Or this from George P. Mitchell, founder of Mitchell Energy Development (now part of Devon), one of the leading compananies that founded modern "fraccing" techniques:

"Any advice?

You've got to get your costs down. The drilling costs got out of sight. Fracturing costs got out of sight; you've got to have $4 gas to go 8,000 feet [in the Barnett]; Haynesville is more than that. ... We think we can get down from $4 to $2.50.

How long is that going to take?

I would say within eight months. I know that Devon right now is working very hard to get their costs down from $4 because a lot of their wells have to be horizontal."

 
At 9/29/2009 11:53 AM, Blogger Bloggin' Brewskie said...

"I don't like his alarmism. While he has some very valid points he tends to mix up many factors and makes assumptions that lead him in the wrong direction."

You see Kunstler's foolishness, too? Well this seems to be the first thing we see somewhat eye-to-eye on; but Kunstler isn't the only fool whose a technological nincompoop in the PO community.

"I merely point out that you seem to be focused on short term issues and are ignoring the big picture, which is very obvious to anyone with an open mind."

And you seem to be ignoring the peakers' colossal failure of a track record that runs for over a century. The slow decline argument, something postulated by the Hubbert Theory, Jean Laherrere, Kjell Aleklett and Yergin is backed up by non-OPEC's peak oil prelude. Colin Cambell - a peak priest - predicted in a 2008 ASPO newsletter that total liquids production would decline from of a peak of 87mbpd in 2010, to 60 mbpd in 2030 - a decline rate of 1.8%.

But seriously, VangeIV... if you really think any of this is alarming, than by all means continue work on your doom bunker. Nobody's going to stop you.

"You say one thing but keep arguing against peak oil even though the data has shown that most of the large producing nations have already seen their production peak and that most of the large fields that have produced the bulk of the world's oil are either past their peak or near it."

Do you keep forgetting it was I who first indicated non-OPEC's crude peak, that it was I who showed you the graph? I'll say it again: non-OPEC crude production has peaked, it IS in decline!! If the tepid decline rate causes you to soak your pants, than please, by all means, continue work on your peak oil preparations. I don't need you to distract me from my grad studies.

 
At 9/29/2009 12:21 PM, Blogger Bloggin' Brewskie said...

"Wrong. Yergin and the IEA were wrong about depletion while Simmons was right. The optimists based their conclusions on assumptions; Simmons came to his conclusions by looking at the data that was available."

Hmmm... it was Simmons who was wrong about the natural gas cliff, who was wrong about the '05 peak, wrong about oil jumping to $120-$195 per barrel in 2005; it is Simmons who was wrong when he said "oil prices have no roof at this point"; it's Simmons whose a nutcase for having an affiliation with Mike Ruppert, whose Sept. 2009 prediction of gold hitting $2,000 in six months is a drop in Mike's crazy bucket head; it's Matt who got burned by Robert Rapier, a writer for the Oil Drum, for his technical ineptness; it's Matt who believes crude will at 60mbpd by 2015, who still believes we're heading for a natural gas cliff, who still dismisses natural gas production figures as "crackpot." It's Matt whose pushing to rebuild the entire GLOBAL oil industry for what he estimates will cost $50-$100 TRILLION - yes, "T!" And Simmons has been dead wrong about a large number of other things(BTW - I wrote a post on the last one a while back burning Simmons's idiocy on this. I'll have to dig some stuff up and show you, it's too funny).

Anyway, VangeIV, I've never said the IEA is a brilliant organization, but what we seem to have is a colossal battle between the nitwits - and right now, Simmons is winning the battle of the biggest nitwit hands down.

What does Matt like to say?

“Data always beats theories. 'Look at data three times and then come to a conclusion,' versus 'coming to a conclusion and searching for some data.' The former will win every time.”

Indeed. Twilight in the desert, my ass.

 
At 9/29/2009 12:37 PM, Blogger Bloggin' Brewskie said...

Anyway, VangeIV, I really don't care what your opinion is, how it affects your life, nor do I really care if I've changed you or if you discuss your thoughts with other people. What is bothersome is your strong-willed doomer mentality and your stubborn persistence of vigilantly shooting down other readers' arguments in their entirety. I've seen you debate other readers, VangeIV, and not just peak oil. I don't know if you're aware of it, but everything has to go your way, you go into very long tangents (something I confess I'm now doing with you) to tear up others’ arguments, and this is a very big turnoff for a lot of readers.

I ultimately think if you took a more conciliatory approach to debating, if you conceded more points and weren’t so vigilant about defending your viewpoint, if you discarded the notions of "fire and brimstone," I think you would have a more receptive audience with other readers and wouldn't be shunned by others who view you in the light of a borderline cultist.

You don't have to change your opinions or your way of life; you will simply find it helpful if you change your overly aggressive attitude in debates.

 
At 9/30/2009 4:55 AM, Anonymous rapa said...

It is true that the drilling of (crude) oil has definitely passed its peak and the output of even new oil fields would only be a declining output. Perhaps we should think carefully that after may be another decades away, we would be out of crude and the use of fossil fuel would have to be less and less and new sources of energy must be sourced, be it biofuels, nuclear power, or windpower must be explored. Ever since oil was first found in Iran in the beginning of the 20th century, humans may or would have exhausted all of the fossil fuel in , perhaps, one and half of a century and have we ever thought that Earth may have used more than 4.8 billion years to form the fossil fuel and humans have used perhaps, less than 2 centuries to fire all of them. Are humans too greedy for growth or have capitalism been destroying our only earth in the name of economic development ?

rapa

 
At 9/30/2009 5:58 PM, Blogger VangelV said...

It is true that the drilling of (crude) oil has definitely passed its peak and the output of even new oil fields would only be a declining output. Perhaps we should think carefully that after may be another decades away, we would be out of crude and the use of fossil fuel would have to be less and less and new sources of energy must be sourced, be it biofuels, nuclear power, or windpower must be explored.

We will never run out of oil because price will ration demand. that means that we will have to pay more and more until substitutes are found.

Ever since oil was first found in Iran in the beginning of the 20th century, humans may or would have exhausted all of the fossil fuel in , perhaps, one and half of a century and have we ever thought that Earth may have used more than 4.8 billion years to form the fossil fuel and humans have used perhaps, less than 2 centuries to fire all of them.

First, we have known about oil for millennia. Second, modern production first became viable in the US, not Iran about 150 years ago. Drake drilled his well at Titusville in 1958, well before the Shah of Iran gave William Knox D'Arcy an exploratory oil concession in 1901.

Since Drake drilled that first well we have used up around 50% of the globe's economically recoverable reserves of conventional crude. That means that we will have to find suitable substitutes.

Are humans too greedy for growth or have capitalism been destroying our only earth in the name of economic development ?

Capitalism has improved our standard of living substantially and humans live better than every before. By pursuing their economic goals entrepreneurs have allowed us to live much better than our ancestors could have dreamed of. Today we have ordinary workers being able to live in air conditioned residences, dress in affordable warm clothing, eat food from around the globe, travel the world, and have access to knowledge and entertainment that was unavailable to kings and queens just a hundred years ago. Of course, the good brought about by the productive classes has attracted rent seekers in the form of a political class, a business class that seeks protection from competition and special favours for itself, and special interest groups looking to transfer wealth to their own members and clients.

 
At 10/02/2009 8:42 PM, Blogger VangelV said...

VangeIV, if you really feel a cumulative annual loss of roughly 1mbpd since '05 is bad news, with an average annual loss of 300,000-400,000 (Guess what? If it wasn't for Cantarell, non-Opec production would have roughly broken even last year) than by all means continue work on your doom bunker. Meanwhile, for those of us who have more rationale minds, we'll hit the snooze button on peak oil.

It is time for a reality check. It wasn't just Cantarell that declined. Russia peaked in 1987 and cannot get back to the previous level of production. China has peaked and its newer fields can only offset some of the loss from Daqing, which is losing production by around 7% per year. The UK and Norway peaked around ten years ago. Venezuela peaked in 1970; Iran in 1974, Nigeria in 1979, Trinidad in 1981, Indonesia in 1991. The world’s greatest producer nation, the US, peaked in 1970 North Sea.

And keep in mind that some new production has came from the tar sands in Canada. While the existing facilities can make a profit at $50 oil, additional investment will need at least double that. But even if we were to get such investments, they would only be sufficient to offset declining production from conventional Canadian sources and production would still be limited to around 5 mbpd maximum. That is just enough to offset a single year of depletion.

Hey idiot, the article is from this year. Since I assume you didn't read it or my post that debunked it, here, let me show you OPEC' drop in production in response to high oil prices

My response was to the chart that you linked and the general statement that you made. Your charts have shown non-OPEC production coming down even though prices were exploding and there was a massive investment in new oil projects. That makes Simmons correct and your position unsupportable. The simple fact is that the UK and Mexico will soon be net importers of oil while not too long ago they were important exporters. China, which has been reducing output from Daqing to optimize its total production, stopped exporting quite some time ago and is now becoming a major importer. The same is true of Indonesia, which is now a net exporter as production from its oil fields has declined signifcantly.

Your OPEC chart also argues against your position. Although it was promising to increase production by several million barrels per day from 2004 onwards, OPEC could not add more than 1 mbpd of capacity. The hundreds of billions in new investments only helped to ensure that production did not decline.

It is clear that the increased production from 2003 to 2008 came from dipping into the spare capacity, which which was substantial early on but was gone by the time 2008 rolled around. I will say more on this when we look at your Saudi example next.

 
At 10/02/2009 9:01 PM, Blogger VangelV said...

; and also, how many times do I have to tell you that Saudi Arabia is adding production

First, the Saudis have made this claim a number of times in the past few years. In 2007 ARAMCO claimed that it would increase the total production capacity to 12 million b/d by 2009. It couldn’t do it even as the price of crude was exploding and it was spending billions.

Second, the article claims that Saudi Arabia, “will more than double its spare capacity by the middle of the year to 4.5 million barrels a day.” That tells us that they only have 2.25 mbpd of spare capacity now. Add that capacity to their actual production and you 10.25 mbpd of capacity, not much more than the actual production in 1975 when the kingdom was not spending hundreds of billions and less than in 2005, when capacity was 11 mbpd. If the Saudis could not increase their capacity when oil went from $60 to $145, what makes you so sure that they will be able to do so now?

The new capacity will come from an old field, Khurais, which has never been a good producer. The aquifer below the field is of very low pressure so ARAMCO has used gas reinjection to maintain pressures. The big problem comes from the fact that there are fractures between the trhee reservoiors that make up the field. Those fractures allow injected water or gas to move from one reservoir to another. That means that the fields can never be managed effectively enough to produce consistent volumes of oil.

Khurais was discovered in the late 1950s and has been a problem for Saudi engineers from day one. The field produced some oil in the early 1960s but production ceased as pressures declined and flow rates became too low. In the early 1970s, new investments were able to get the production rate up to 40K bpd, where it stayed for most of the decade. At its 1980s peak, after a program to drill a large number of gas reinjection wells was implemented, the field was able to produce an all time high of 150K bpd. Unfortunately, the engineers found that a lack of consistently and uniformity of the rock limited their abilities to manage production and production was cut in the 1990s. Although millions were spent on many studies, by 2002 the plans to revive Khurais faded and the engineers moved to other candidates. But as prices kept going up ARAMCO found it useful to go back to the drawing board and by 2004 management was touting Khurais as a promising new project. But that is all there was, one promise after another but no technical capability to make the field work as would be expected in order to meet the production numbers being promised. Those numbers are fantasy and the mere fact that the Saudis moved back to Khurais means that the promise of Abu Safah and Qatif as viable producing fields that will make up for the loss of Ghawar production have also faded.

If you knew the history, the ARAMCO engineering and production issues, and the geology of the region you would see your linked story as an argument that Saudi production is past its peak, not that one can be optimistic about greater future production.

 
At 10/02/2009 9:03 PM, Blogger VangelV said...

, (with more to come )?.

Let us look at the projects mentioned one by one.

First, how can you accept Khursaniyah as a great new project? Don’t you know that the field was discovered more than half a century ago and peaked at 210 K bpd in 1979? The rock has too many issues with permiability and porosity to ever produce much oil for very long, regardless of what technology is used to try to improve production.

Second, Abu Hadriya and Fadhili, also more that half a century old but smaller, peaked in 1977 at around 130 K bpd and 60K bpd respectively. Like Khursaniyah, you are looking at very old and underperforming fields that have serious geological issues that engineers cannot overcome

And why do you keep looking to company press releases to support your positive argument when the history of the field clearly shows that any help from Khursaniyah is going to be very limited?

Here's another a bit on OPEC's plan to add 2mbpd of natural gas condensate production by the end of next year - and I still have other articles of on oil discoveries/developments in OPEC.

Wow. You need to familiarize yourself with the failiure of the Saudi natural gas initiative. For one Saudi Arabia, and most OPEC nations are looking to use natural gas for domestic purposes because the gas is to be used to generate electricity, run desalination plants, provide feed to chemical producers, etc. If any of these projects succeed in producing economically, most of their output will go to feed internal OPEC demands.

And while you are probably not aware of this because you do not seem to do much in the way of reserch that goes beyond editorial comments, the Hawiyah plant has been a huge loser. Its $2 billion cost was much higher than was expected by the Saudis and the operations are not economic for the Western producers, who were getting $0.75 per thousand cubic feet for the gas coming out of the deep wells, which required a much greater price to be economic. The natural gas experiment that began in the late 1990s ended badly in the early 2000s. As much as the Iranian newpapers may wish to claim a great success in the future, it won’t come from places like Saudi Arabia.

 
At 10/02/2009 9:05 PM, Blogger VangelV said...

Anyway, you haven't even touched on ther other stuff I posted about Simmons, particurly Rapier's assesment of the man. Trust me, I have plenty more dirt on the man.

I don’t care much about editorials and emotional assessments because the facts are all that we need to deal in.

The bottom line is that Simmons stood alone on the Saudi issue when the CIA analysts, IEA, AIE, CERA and everyone else bought the official story. When he did his field-by-field assessment and his literature summary he found that ARAMCO was in big trouble and that global depletion rates were around double what CERA, IEA, AIE and the industry were assuming. In the end, after the IEA replicated his efforts it was forced to agree with him and all the critics have to defend their own competence are personal attacks.

 
At 10/02/2009 9:07 PM, Blogger VangelV said...

Anyway VangeIV, the reason why I have done the work I have done (now mostly ceased because of grad school) has nothing to do with with financial gain (I haven't made a dime), but rather, to help people see through the hype, the half-truths, the misinformation and outright lies the high peak priest doomers throw out with great endowment. My argument has never been about denying peak oil; rather, it's helping people see the doomers in the peak oil crowd are the LAST people you want information pertaining to peak oil, technology development, and the future beyond peak oil. Their forewarning about shale gas is exemplary proof of this: two years ago, Americas was suppose to fall off a natural gas cliff, and now, we have more of the stuff than we know what to do with.

As I said, I have no trouble with people trying to make a buck. My problem is with your supreficial analysis that seems not to include looking at the actual data and doing the math. What you call research seems to be limited to looking at editorials and superficial personal attacks directed towards individuals rather than attacking their views on the basis of hard facts. Rather that helping people you may be painting the wrong big picture and setting them up to fail.

I also cannot see how you can argue that we should pay attention to those that got the depletion and reserve stories wrong, (IEA, EIA, CERA) but ignore the people who got it right.

Let us begin with reserves. Simmons pointed out the reserve increases that came from the pen rather than drill bit and stated that it was impossible for individual OPEC country production to match discovery year after year. For some reason CERA and the agencies never questioned it until the IEA smartened up last year. The last CERA report that I saw still seemed clueless, perhaps because OPEC is a Yergin client.

Simmons was also right about depletion while the optimists were wrong. Given the discovery data and the lag between discovery and production there is no way to argue that the peak will not be here withing a few years if it isn’t already behind us. Given the depletion rates and the reduction of investment in new production the old 2005 to 2008 production levles will not be reached and manintained in any future three-year period.

And while Simmons has pointed out that if the Saudi’s spend hundreds of millions they could get production up to perhaps 11 to 12 mbpd, he is also right when he says that they they couldn’t manage to stay such production levles for long and the days when the kingdom had plenty of spare capacity to meet incremental demand are long gone. But without Saudi Arabia growing, you can’t get global production to keep going up. His message has been verified by Dr. Sadad Al-Husseini and Fatih Brio, both of whom should know the story because they played such a big part in it.

I believe that the next big story in the sector will be a positive spin on the production decrease in Ghawar for ‘improvement’ and ‘maintenance’ purposes. When you read that story, probably early next year, I suggest that you try to make a buck or two over the long term by loading up on companies with reserves in safe areas of the globe.

 
At 10/02/2009 9:12 PM, Blogger VangelV said...

As evidenced by peak and decades-long production plateau in areas of large blocks (i.e., continents),I like the others I have posted, have long felt post-peak oil will be a slow, manageable decline, not a hard crash. Non-OPEC's glacial descent backs up my claim.

There is no evidence to suggest that you will be right. As I said, the only way to get a plateau is to ignore economic returns and push fields recklessly by extracting more oil than is prudent and risk leaving some trapped behind the sweeps. From what I can tell, there is no economic incentive to take such an approach, which is why Sadad Al-Husseini has argued that the Saudis should not risk their reserves by increasing their production above 12 mbpd. Given the fact that in order to meet such a rate the Saudis will need hundreds of billions of investment and for everything to work out perfectly in new fields (which is not where the investment is going) I don’t see how the math will work to make the optimists right.

Your only hope for declining prices is a global collapse of economic activity that does not negatively affect the purchasing power of the USD. While I can accept the first part, it is hard to buy into a long-term increase in the purchasing power of the USD. And even if by some miracle both were to happen, I can’t see how development activity would continue to offset depletion. That makes the future a bleak one for the oil optimists and a very bad one for all of us unless we can come up with alternatives quickly.

 
At 10/02/2009 9:23 PM, Blogger VangelV said...

Anyway, VangeIV, I really don't care what your opinion is, how it affects your life, nor do I really care if I've changed you or if you discuss your thoughts with other people. What is bothersome is your strong-willed doomer mentality and your stubborn persistence of vigilantly shooting down other readers' arguments in their entirety. I've seen you debate other readers, VangeIV, and not just peak oil. I don't know if you're aware of it, but everything has to go your way, you go into very long tangents (something I confess I'm now doing with you) to tear up others’ arguments, and this is a very big turnoff for a lot of readers.

I ultimately think if you took a more conciliatory approach to debating, if you conceded more points and weren’t so vigilant about defending your viewpoint, if you discarded the notions of "fire and brimstone," I think you would have a more receptive audience with other readers and wouldn't be shunned by others who view you in the light of a borderline cultist.

You don't have to change your opinions or your way of life; you will simply find it helpful if you change your overly aggressive attitude in debates.


Rational discussions should be about facts, not opinions. On that front there is plenty of data to make a valid call yet you refuse to look at it and prefer to use press releases and editorials instead.

The bottom line is simple. Reserves have been overestimated and the production of light sweet crude is already behind us. The world's biggest fields are past their production peaks and the smaller new fields cannot make up for that decline. Annual depletion rates are running at 6.7%, which is very troubling to anyone who understands a bit of math and can figure out the implications.

 
At 10/04/2009 3:59 PM, Blogger Bloggin' Brewskie said...

VangeIV - I knew you'd be back! You just have to fight for that very last word, don't you? Of course... no stubbornly-fueled ego would be complete without it. Anyway, I'm pretty busy today and don't have the time to yack, but I am going to touch on a few things...

It is time for a reality check"...

Yes, most of these we've already discussed; UK, Russia, N Sea and Indonesia are all countries I've told you in the past peaked. What part of my acceptance of peak oil do you not accept?

And keep in mind that some new production has came from the tar sands in Canada."

Tar sands is nonconventional oil; it's considered apart of "total liquids," not conventionalcrude as we've been discussing.

First, the Saudis have made this claim a number of times in the past few years. In 2007 ARAMCO claimed that it would increase the total production capacity to 12 million b/d by 2009."

I pointed this out to you before. By the END of 2009.

My response was to the chart that you linked and the general statement that you made. Your charts have shown non-OPEC production coming down even though prices were exploding and there was a massive investment in new oil projects. That makes Simmons correct and your position unsupportable."

You were trying to counter my argument for a slow decline by showing crude had dropped to 71mbpd; I showed you it was because of OPEC's cutbacks in response to high oil prices.

Khurais was discovered in the late 1950s and has been a problem for Saudi engineers from day one.

The problem with your argument is that you're pointing to engineering attempts made decades ago. Remember, drilling the N Sea in the 1970s was a serious technological undertaking.

Wow. You need to familiarize yourself with the failiure of the Saudi natural gas initiative."

Wow. You need to famierlize yourself with how much natural gas OPEC has.

That's all the time for now. I got some good stuff on the Oil Drum and Simmons's moronic "Plan B"...

 
At 10/05/2009 12:41 PM, Blogger Bloggin' Brewskie said...

Going back to "Your OPEC chart also argues against your position."

Again, OPEC cut production in response to oil's price drop, thus leaving wiggle room as demand returns.

"Let us look at the projects mentioned one by one."

I've read stuff like this on the Oil Drum before. How dependable is the Oil Drum - or the peak oil community for that matter - on matters pertaining to technology? Well, here's a little recap on the Oil Drum's natural gas purgatory from 2006:

"Simply put, by 2010 Conventional Gas production can be half of what is today in worth America, falling from 20 Tcf/a to 10 Tcf/a. Jean doesn't hesitate to say that shortages will soon occur in this part of the world. Production already peaked in 2001, declining 5% up to 2005, so a downward trend is already there, but will that cliff unfold? Unconventional Gas production has been rising too slowly to avoid the peak, can it avoid the cliff?"

And when shale gas started making noise last year, they had this to say:

"But until some solid, repeatable well data emerges, the Haynesville will remain more diamond in the rough than diamond ring... So there you have a brief explanation of how the new technology is slowing, though it won’t stop, the declining gas reserve in the United States."

That was written in April, right as America was experiencing the biggest boost in nat. gas production since the late '50s. A few months later, the goons realized they goofed:

"My analysis indicates that NCI is correct in some respects. There is indeed a great deal of unconventional natural gas resources in the United States, and recent improvements in technology point to the possibility of significantly greater production... EIA has recently reported a big increase in US natural gas production (8.8%, comparing the first five months of 2008 with the first five months of 2007). Some have suggested that the EIA numbers must be wrong. It seems to me that what we may be seeing is the effect of a recent technological breakthrough."

LOl! Of course they were in full denial only a month before they conceded

The lesson here? Despite the Drum's appearance of intellectual discourse, any site whose authors censor or delete posts that offers contrarian evidence, with regular vigilance, should be viewed skeptically.

 
At 10/05/2009 1:27 PM, Blogger Bloggin' Brewskie said...

"I don’t care much about editorials and emotional assessments because the facts are all that we need to deal in."

Your stubbornness and denial only means your trying to avoid the subject. Robert Rapier is a chemical engineer and a damn good one to boot. The fact he points out Simmons's technical shortcomings - for example, his great underestimation of corn-based ethanol’s (which I admit is a terrible mistake) octane content, or his ignorance on "fuzzy logic" - along with the stuff I've brought up proves Simmons is not technologically competent as he professes. So who is more technologically competent: Matthew Simmons or Robert Rapier?

"The bottom line is that Simmons stood alone on the Saudi issue when the CIA analysts, IEA, AIE, CERA and everyone else bought the official story."

I've always said the only thing peakers get correct is that oil will someday peak; a trump over a stodgy organization, like the IEA, in my opinion, doesn't warrant a cookie. Anyway, I'd say the unfortunate setback to Iraq's oil production, thanks to the disastrous invasion, made Simmons look better than he really is.

"Let us begin with reserves. Simmons pointed out the reserve increases that came from the pen rather than drill bit"

I couldn't open the link for some reason. I will say two things:

1) Continuous reserve increases among operational oil fields are not uncommon. As in case of the US (which in 1982 had 27bb of reserves) managed to produce 57bb to 2006, yet only drew down official reserves by 6bb.

2) Simmoons's is not proficient on technical matters. Have you not learned this? How do you answer for Simmons's ignorance on "fuzzy logic?"

"As I said, I have no trouble with people trying to make a buck."

What part of "I haven't made a dime" on the subject of peak oil don't you understand - or don't recall? You, in contrast, sound as if you are financially invested in this: you sound like you're ready to make a buck off of "Peak Oil Armageddon." You don’t think Simmons doesn’t make a buck off of high oil prices?

"As I said, the only way to get a plateau is to ignore economic returns and push fields recklessly by extracting more oil than is prudent and risk leaving some trapped behind the sweeps."

That's preposterous. N America has been on a production plateau of 13-15mbpd for the past THIRY YEARS, Asia-Pacific has been on a 6-7mbpd plateau for twenty years.

 
At 10/05/2009 2:20 PM, Blogger Bloggin' Brewskie said...

"Your only hope for declining prices..."

I'm not that concerned about oil prices - even last year's $147 oil hardly touched me. I will say the current price climate, which I hardly consider expensive, is due more to rigging rather than supply and demand fundementals, particularly in light of the glut. A while back, Philip K. Verleger Jr. said the oil glut "is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices."

"Annual depletion rates are running at 6.7%, which is very troubling to anyone who understands a bit of math and can figure out the implications."

Since you yourself seem to having trouble with math, lets look into non-OPEC's decline. If it was following the 6.7% decline you've been postulating, it would look like this:

2004: 42mbpd (peak)
2005: 39,816,000
2006: 37,190,558
2007: 34,698,792
2008: 32,045,053

A 6.7% decline rate would prove indeed to be terrible. Now VangeIV, again, I want you to look at the non-OPEC crude graph and I want you to point out to me, to everyone, where exactly is the terrible decline in produciton. In fact, all you have to do is point out ONE year on the graph of such a steep drop and I'll agree with you - seriously. Such a drop would be horrific, I agree with you. Nobody would be arguing with you if such statistics were produced, but VangeIV, you NEED to produce the proof.

I know you're very stubborn. I had to pull teeth with you the last time over your insistance that oil peaked in '05 - EVEN WHEN I PRODUCED THE GRAPH!! - and you contiuned your obstiance until I pulled the Robert Rapier card (and even then you still didn't admit it).

Needless to say, the graph backs up my argument for a slow global decline, not yours of fire and brimestone. It backs up me, Yergin, Jean Laherrere, JD (of Peak Oil Debunked), Kjell Aleklett, the Hubbert theory - and come to find out, Colin Cambebell, a peak priest.

Again, the proof is in front of you.

 
At 10/05/2009 2:38 PM, Blogger Bloggin' Brewskie said...

"Rational discussions should be about facts, not opinions."

Speak for yourself. You're the one who insisted oil peaked in '05 even when offered graphs to the contrary; you're the one who dismissed a post by Robert Rapier, plus other articles that contained Simmons's own words, that shed light on the man's lack of technical expertise and his blown predictions as "editorials and emotional assessment; you've insisted shale gas is a fool's hope despite evidence to the contrary. you're the who is obdurate to the slow decline argument. And of course, you still persists with Simmons despite his many blown calls. Who is letting their stubborn persistence get in the way of better judgment?

I suppose, though, for somebody who not only has invested as much intellectual energy into peak oil but financial resources, too, it is very hard to convince somebody to the contrary.

Anyway VangeIV, I've come to the conclusion that, really, I don't have to prove anything to you. It's you who needs to prove to me. You need to show me that peak oil will be a hard crash, not a soft landing that will give people time to adjust. You need to point out to me where in the non-OPEC graph - which does show a peak, which does show a decline - where is death drop we should be scared of. If this exists, I can tell you nobody, including me, would be arguing with you. But as the statistics stand, the drainage is occurring so slowing that (probably) 98% of people don't even realize non-OPEC has peaked.

Until you offer proof of the contrary, you have no argument. The burden of proof lies with you.

 
At 10/08/2009 10:02 AM, Blogger VangelV said...

Yes, most of these we've already discussed; UK, Russia, N Sea and Indonesia are all countries I've told you in the past peaked. What part of my acceptance of peak oil do you not accept?


But you are not arguing for peak oil but against it. You keep claiming that technology will bail us out by letting us bring more oil from old fields and find new fields to offset depletion.

While I have no trouble accepting that old heavy oil fields can be rehabilitated by using steam injection and various other means or that you can drill wells in ultra deep water I maintain that such minor actions cannot offset the 6.7% depletion for very long.

Yes, most of these we've already discussed; UK, Russia, N Sea and Indonesia are all countries I've told you in the past peaked. What part of my acceptance of peak oil do you not accept?

Correct. The total production grew slightly due to heavy oil production increases plus biofuel and refinery gains. Conventional oil production reached its peak in 2005 and stayed there until 2008 even though hundreds of billions in new investment brought new production on line. The new production was just able to offset the production declines from older fields.

""First, the Saudis have made this claim a number of times in the past few years. In 2007 ARAMCO claimed that it would increase the total production capacity to 12 million b/d by 2009."

I pointed this out to you before. By the END of 2009."

In the past they have claimed that the new production capacity would come on line in 2007 and 2008. And let me note that claims are worthless unless proven by real production. So far all you have are press releases and empty claims.

"You were trying to counter my argument for a slow decline by showing crude had dropped to 71mbpd; I showed you it was because of OPEC's cutbacks in response to high oil prices."

This is meaningless because you have no idea what OPEC is capable of producing. The cutbacks due to a fall in demand does not mean that OPEC can go back to its previous production levels because production from the older fields is in decline.

"The problem with your argument is that you're pointing to engineering attempts made decades ago. Remember, drilling the N Sea in the 1970s was a serious technological undertaking."

No. I am arguing that the engineering in 2001 was insufficient to get Khurais to be a viable field. Let me note that I have no problem with an argument that you can get more oil out of it. I just point out that such a move only makes sense after Ghawar starts to decline faster because Economics matter.

Wow. You need to famierlize yourself with how much natural gas OPEC has.

Do I? Like I said, the Saudi initiative failed. And even if OPEC nations can develop more gas fields they will need it to operate chemical, desalination, and power generation plants.

 
At 10/08/2009 9:50 PM, Blogger VangelV said...

Speak for yourself. You're the one who insisted oil peaked in '05 even when offered graphs to the contrary; you're the one who dismissed a post by Robert Rapier, plus other articles that contained Simmons's own words, that shed light on the man's lack of technical expertise and his blown predictions as "editorials and emotional assessment; you've insisted shale gas is a fool's hope despite evidence to the contrary. you're the who is obdurate to the slow decline argument. And of course, you still persists with Simmons despite his many blown calls. Who is letting their stubborn persistence get in the way of better judgment?

Actually, here, is the chart showing that we have reached a peak. Hundreds of billions of investment were unable to get global production to exceed the 2005 level. All that investment managed was to keep production flat. With the recent volatility, companies have decided to decrease capital spending so there won't be enough new investment to keep production from declining.

I suppose, though, for somebody who not only has invested as much intellectual energy into peak oil but financial resources, too, it is very hard to convince somebody to the contrary.

I have been following the energy sector for thirty years and have a better grasp of what is going on than you do. It is easy to convince me if you have facts that are material to the argument at hand. So far you have produced little in the way of facts but a lot of opinions and press releases.

Anyway VangeIV, I've come to the conclusion that, really, I don't have to prove anything to you. It's you who needs to prove to me.

I provided the facts and cited the evidence. Yet you seem to have trouble figuring out simple things like the difference between depletion and production.

 
At 10/08/2009 9:52 PM, Blogger VangelV said...

You need to show me that peak oil will be a hard crash, not a soft landing that will give people time to adjust.

As I said, if there is a crash in demand caused by a depression we will have time to adjust. Of course, there won't be any capital to adjust but that is another story that we need not go into here.

The key point is the 6.5% depletion and investment in new production to offset that depletion. The hundreds of billions spent between 2002 and 2009 have gone a long way to ensure that we will not fall off a cliff in the next few years but those that wait to see the edge will have their heads handed to them as prices explode and they are unable to hedge their energy usage in the future without paying a very high price. I have no such problem because I have a great deal in the way of exposure via energy shares. Given the fact that those shares have cost me nothing, thanks to several years of distributions paying 25% or more of my initial investment I do not care much about the volatility.

You need to point out to me where in the non-OPEC graph - which does show a peak, which does show a decline - where is death drop we should be scared of.

You need to look at the infrastructure. We have pipes that were designed to last 20 years in the 30th year of their life. We have old drill rigs that are unable to meet the needs of the industry if production is to be maintained at a consistent level. We have supply chain issues and massive cost overruns in various projects because the specialized people, material and equipment inputs and skill sets are in short supply. We have refineries that have cores that are 80 years old and cannot be replaced/rebuilt due to idiotic laws passed by an anti-energy Congress. We have a shortage of deep water drills, divers, rig workers, etc., and horrible demographics for the industry. Unlike you, I actually go to industry conferences and see the age of the engineers, managers and geologists that are necessary to make things work. You see a lot of very old people and very few young ones. That is because a two decade long triple waterfall destroyed an entire generation of industry jobs.

 
At 10/08/2009 9:54 PM, Blogger VangelV said...

If this exists, I can tell you nobody, including me, would be arguing with you. But as the statistics stand, the drainage is occurring so slowing that (probably) 98% of people don't even realize non-OPEC has peaked.

As I wrote, the important issue is the 6.7% depletion rate and the discovery rate. For more than twenty years we have pulled more oil out of the ground than we discovered. (And no, the restated reserves due to the outdated SEC accounting rules are not replacement discoveries.) As long as that is not reversed, we are heading towards a cliff.

Until you offer proof of the contrary, you have no argument. The burden of proof lies with you.

I gave you the proof. The EIA, which has been far too eager to buy into the OPEC claims, finally smartened up and did its own field-by-field assessment. It yielded a 6.7% depletion rate. At the same time we see the North Sea, Burgan, Daqing and Cantarell in rapid decline.

Look at some of the specific numbers:

1. Cantarell peaked during the 2003 to 2005 period at over 2 mbpd. It is now down to less than 600,000 bpd and falling.

2. Prudhoe Bay peaked in 1989 at 1.5 mmbpd. It is now down to around 300,000 bpd.

3. North Sea peaked in 1999 at around 6 mmbpd. It is now down to around 2.5 mmpd.

Add to that the producer country peaks, most of which occurred decades ago, and there is a clear problem to all those that are willing to pay attention. What has saved us so far is the spare capacity that OPEC used to have but was eroded from 2002 to 2008. Now that some projects are coming on line OPEC should be able to maintain its capacity but not for very long because the depletion is relentless and the stated reserves and discoveries that were reported are a fraud.

Keep an eye on Kuwait because its story has gotten muddled a number of times in the past few years, including the latest contradictory statements by Ahmad al-Abdullah al-Sabah just a few days ago, when he stated that it was delaying an increase in capacity by a decade because of a lack of technical knowledge. By the time the government comes clean he is likely to be living in Switzerland and that may be far sooner than you imagine.

 
At 10/10/2009 12:32 PM, Blogger Bloggin' Brewskie said...

"I gave you the proof. The EIA, which has been far too eager to buy into the OPEC claims, finally smartened up and did its own field-by-field assessment. It yielded a 6.7% depletion rate."

How thoroughly did you read the articles you linked that pertain to this? The first one has:

"In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated."

Do not confuse the 6.7% annual depletion rate with the overall picture.

"Do I? Like I said, the Saudi initiative failed. And even if OPEC nations can develop more gas fields they will need it to operate chemical, desalination, and power generation plants."

Evidently. Iran and Qatar respectively have the 2nd and 3rd largest gas reserves. There's enough natural gas around to fill their energy needs, and use for export. What do you think Qatar has been building those LNG export terminals for?

 
At 10/10/2009 12:40 PM, Blogger Bloggin' Brewskie said...

"Actually, here, is the chart showing that we have reached a peak."

I was pointing out your recalcitrance to the concept that oil did not peak in '05 during our second discussion. What does Ace's graph prove? Again, the reason crude production is down is because of OPEC’s choice to gear back.

Speaking of Ace, I'm glad you brought him up again. The Oil Drum's leading doom forecaster has gotten things wrong in the past, and I've burned him on this. For instance, he got a number of production statistics wrong as evidenced by this graph: he goofed by stating total liquids '08 peak was 81.73mbpd (it stayed above 84mbpd all year). I pointed this out to him but he deleted my comment (it wasn't the first time). Also, he's also gotten Saudi production statistics wrong:

Ace: 9.02 (2006), 8.73 (2007), 8.44 (2008), 8.16 (2009), 6.86 (2012), 5.96 (2015).

EIA: 9.15 (2006), 8.72 (2007), 9.33 (2008), NA for beyond.

IEA: 9.23 (2006), 9.34 (2007), 9.44 (2008), 9.55 (2009), 10.26 (2010), 11.30 (2012).

Notice any bias?

Finally, I'd like to touch on the graph. This one I somehow missed; however, it's similar to a previous one Ace had in 2007.

Tony, “Ace,” predicted in '07 that a 1% decline rate would hit world oil production to the summer of '09, of which a 4% decline rate would take off afterwards. His 1% decline forecast over the course turned out wrong: oil production went up in '08 (even if OPEC hadn't turned the taps but left things the way they were, Tony would have been wrong), and the only reason why production is at or near his forecast now is because OPEC cut production due to falling prices.

The funny part is we're suppose to be in the beginning portion of his 4% decline forecast. 4% would result in 2010 crude production dropping to 69mbpd from its current 72mbpd. For this to materialize, of course, Tony would need a big favor from non-OPEC production as OPEC's hasn't peaked yet - we're talking the combined efforts of Cantarell and the N Sea's '08 decline efforts multiplied by roughly 2.5. That's huge. Do you see where that is coming from?

Of course Tony's '07 oil collapse prophecies aren't materializing, so it's nice to see Tony has waffled. Brace yourself in '10 for Tony's forecast: one of two things is going to start swirling down the toilet, world crude production or Ace’s reputation; and judging from his past record, I'm betting the latter.

The lesson? Don't rely on an MBA investor, someone who is not an engineer, for forecasts on oil production - particularly if he relies on Wikipedia for statistics.

 
At 10/10/2009 1:25 PM, Blogger Bloggin' Brewskie said...

"You need to look at the infrastructure..."

Simmons has been mongering about this and I've burned him on it in the past about it. Nevertheless, there are some valid points in this paragraph and I'll touch on them first.

The nation's oil infrastructure is aging and will require significant investment, particularly oil refining; some of our pipelines are 80 years old. Like the rest of America's engineering and scientific workforce, the oil industry's own engineers and petroleum geologists are showing grey hairs, and we've been laxed about churning out properly trained candidates for many years to replace them. America will experience a large problem replacing engineers and scientific personnel in the years ahead as these people retire, and this will spell consequence for all pertaining industries. Like caring for the retiring baby boomers, nobody seems to have an answer for this. This will be a large reason (among others) why America will not be the preeminent power for much longer in the 21st century.

Moving on…

While Simmons is somewhat correct about the need to invest in our oil industry’s infrastructure, he seems to show his trademark knee-jerk overreaction by pushing to rebuild the entire global oil industry for an estimated cost of $50-100 trillion - yeah, “t.” This is funny because such an urgent move would not only consume massive capital and government energy, but also engineers, construction equipment, resources. It would ultimately place priority over other needed infrastructure projects in America - roads, bridges, water pipes, etc.

Such a Herculean task would take decades to complete; and that is the crux of my argument against his crusade. Matthew Simmons is a man who believes oil peaked in ‘05 and is heading to 60mbpd by 2015 - a drastic decline rater in other words. Even if the globe started this task next year, and, by some miracle we complete it in 20 years (Who knows? Maybe Simmons is a real Roosevelt), world liquids production would be resting under 30mbpd (based on ‘08 numbers; this is minus increases from other sources, but even a 5mbpd increase from tar sands and other sources would prove tepid); crude would be under 20mbpd (based on last year’s numbers). I’m basing this on a 5% annual depletion rate; it gets worse under a 6.7% rate.

So in other words, in the event of such a catastrophic oil drop, does it honestly make sense to devote this much money, this much manpower, a colossal amount of recourses to rebuild the global oil industry when in 20 years, such a collapse scenario would suggest folly? Wouldn’t there be better things to devote these resources to? America’s current oil refining capacity is roughly 17mbpd; would it make sense to rebuild even a third of that?

Again, I don’t doubt Simmons knows how to make buck, but I don't place a great deal of faith on his opinions of technological matters. He's an investment banker, not an engineer.

 
At 10/10/2009 2:17 PM, Blogger Bloggin' Brewskie said...

(Going back)

"But you are not arguing for peak oil but against it. You keep claiming that technology will bail us out by letting us bring more oil from old fields and find new fields to offset depletion."

I've been arguing against your idea of peak oil, or the idea embraced by the peak oil doomer element of the community. I do believe global crude is close to peaking, I think future growth in production will be difficult, and I think it's very likely there is a 90% chance we will see a peak (and a proceeding decline) in global crude by 2015 at the latest.

I do think oil prices will go up. I do believe that, with emerging powers such as China and India, there will be supply constraints. We are going to have to adjust, it will be important to reduce oil consumption; but unlike you, with the evidence thus produced, I see post-peak oil has a slow squeeze, one that will allow humans to adjust, not a catastrophic crash. I see peak oil as a future headache, not an apocalypse; and so far non-OPEC backs my argument.

"I have been following the energy sector for thirty years..."

Can't claim this mantle but try this: did you grow up on peak oil? I did. My dad was deeply effected by the oil crises of the '70s, and thus turned his panic to peak oil books, pamphlets, meetings. He instilled this fear into his two sons; I've had a lot time to wrap my head around peak oil... I started noticing in the 8th grade that peak oil literature is not a reliable source on matters of technology, or facts in general.

Anyway, following the energy sector for thirty years hasn't helped you see that oil didn't peak in '05 (though you seem to concede that now), evaporate your doubts on shale gas, or detract from the fact that money, not technology, is Simmons's strong suit, nor has it displaced your faith in the Oil Drum's errant ways.

"(And no, the restated reserves due to the outdated SEC accounting rules are not replacement discoveries.)"

I never said they were. Updating reserves due better technology and geological understanding is a commonality in the industry, and a frequent thorn to peakers' efforts, forecasts.

"and the stated reserves and discoveries that were reported are a fraud."

You really think so? Have you seen what Saudi has for offshore fields?

While I too have some skepticism towards Saudi's 267bb claim, I think it's a lot higher than Jeffrey Brown's gueestimate of 70bb... (Say, this didn't turn out so good: "As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis." Oppps.)

 
At 10/10/2009 2:28 PM, Blogger Bloggin' Brewskie said...

"Look at some of the specific numbers:"

Amazing, isn't it? All of these are in the possession of non-OPEC producers, and yet, non-OPEC production is croaking at such a glacial pace that hardly anyone has noticed. And we're in our fifth year since its peak!

Finally, I wanted to touch on this:

"I have no such problem because I have a great deal in the way of exposure via energy shares. Given the fact that those shares have cost me nothing, thanks to several years of distributions paying 25% or more of my initial investment I do not care much about the volatility."

I rest my case. I thought you had some money lined up for an apocalypse. No wonder I had to pull teeth over the '05 peak argument: when money is in the equation, it's very difficult to convince someone otherwise - even when a graph is in front of their face.

I clearly see my efforts have been for naught, and I'll never convince you otherwise...

 
At 10/10/2009 9:26 PM, Blogger Bloggin' Brewskie said...

VangeIV,

I got to thinking about this graph from Tony ("Ace") that I critizied, and realized I crossed my wires with another example from the past. Disregard the error.

 
At 11/27/2009 10:33 PM, Blogger VangelV said...

BB wrote:

I've been arguing against your idea of peak oil, or the idea embraced by the peak oil doomer element of the community.


Doomer community? All I have said is that production will peak. Actually, I pointed out that by many measures oil production did peak and that massive price increases were not enough to get rates above those in 2005.

I do believe global crude is close to peaking, I think future growth in production will be difficult, and I think it's very likely there is a 90% chance we will see a peak (and a proceeding decline) in global crude by 2015 at the latest.

It seems to me that you have done some reading and have noticed the facts being pointed out to you. When you were arguing for an increase due to technology, new sources, etc., some of us were pointing out that none of the factors that you were bringing up could bring enough production to get rid of the 6.7% depletion rates from existing sources. I guess that the latest news has made you see the error of your ways and that your naive optimism was misplaced.

Can't claim this mantle but try this: did you grow up on peak oil? I did. My dad was deeply effected by the oil crises of the '70s, and thus turned his panic to peak oil books, pamphlets, meetings.

I think that I see your confusion. The 1970s had nothing to do with peak oil because the production people knew that there was still plenty of capacity left to meet demand. The problems of the 1970s were caused by politics and very bad economics but once those factors were removed the spare capacity prevailed as it should have. The problem that we have now is that the spare capacity is insufficient to handle possible disruptions as it did before.

He instilled this fear into his two sons; I've had a lot time to wrap my head around peak oil... I started noticing in the 8th grade that peak oil literature is not a reliable source on matters of technology, or facts in general.

As I said, above, you seem to have been barking up the wrong tree. That explains your inability to understand the argument properly and why you still have trouble with the implication of the depletion rate even though the math is very simple.

Anyway, following the energy sector for thirty years hasn't helped you see that oil didn't peak in '05 (though you seem to concede that now), evaporate your doubts on shale gas, or detract from the fact that money, not technology, is Simmons's strong suit, nor has it displaced your faith in the Oil Drum's errant ways.

But the production of conventional crude, which is what I am writing about did peak in 2005. The sharp increase in price was unable to bring enough production to get the levels above 2005. I already gave you a link to the IEA data and do not understand why you have trouble understanding it. While you can game the total numbers by adding NGLs or biofuels, which were being ignored in previous production report, but that can't change the picture for long. The point is that the data shows a peak in 2005 and a plateau from which we have seen a decline starting in 2008.

It is also very clear that Simmons was right because the IEA is now following his lead and has moved away from the optimist position of CERA. I found the Guardian story very interesting. A whistle-blower is claiming that the position taken by Simmons was correct and the story being told by the IEA was flat out wrong. I suspect that you know that you backed the wrong horse and are looking for a way to change your position without having to admit to being wrong.

http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

 
At 11/27/2009 10:35 PM, Blogger VangelV said...

"and the stated reserves and discoveries that were reported are a fraud."

You really think so? Have you seen what Saudi has for offshore fields


I am well aware of the Saudi activities because I have been following this debate for decades. Your citation actually proves my point. If the Saudis really could produce as much as they were claiming and still had so much easy oil to bring to the surface they would not be so desperate to rehabilitate old fields that have their best days behind them.

Let's go over where their hopes lie (according to your citation).

Berri is one of the last of the giant oil fields discovered in SA. The problems came early as pressures declined rapidly after production. The rapid decline rates had ARAMCO engineers writing papers suggesting that bubble-point pressures would be reached about five years after initial production started. To keep that from happening, ARAMCO began water injections, which increased production rates from 150,000 barrels per day to 800,000 barrels per day. But two years after the water injections the managers found water breaking through at wells near the injection sites. Thirteen years later, a quarter of the wells had been totally watered out and five years after that Berri's production was down by 65%. From what I have been reading it is most likely that the field's pressures will be allowed to decline to a point where the field passes the bubble-point and become s priary gas field, a product that SA desperately needs for desalination, electricity generation, chemical production, etc.

Zuluf is a lesser field than Berri. It was the last of the large Saudi fields to reach 500,000 barrels per day in production. Its problems are well documented in the paper Interpretational Complexities and Operational Complications Affecting Pressure Transient Analysis in Zuluf Field, Saudi Arabia. The paper outlines such factors as shale layers acting as vertical plugs, sudden pressure drops, the presence of gas caps, the inability to come up with the proper porosity and permeability values. The solutions advanced by the paper was a DECREASE IN PRODUCTION in some wells and the drilling of more test wells, which is where your citation is leading. The Saudis are also doing very targeted drilling in very thin areas but these activities will mean less rather than more daily production.

Given the 1,096 character limit I will stop this here and continue on the next posting.

 
At 11/27/2009 10:36 PM, Blogger VangelV said...

BB

You really think so? Have you seen what Saudi has for offshore fields?


Your article also mentions Safaniyah, which is the world's largest offshore field and Saudi Arabia's second most productive field. The problem is that the field has already peaked and will be unable to get to previous production levels. Water infiltration first began to appear in the late 1980s and Safaniyah has had severe sand production issues, which is not unexpected given the geology.

Some of the problems are documented here. They include a 50% water cut in some wells, and gas to oil ratios that ranged from 150 to 350 cubic feet per barrel of oil produced. Of course, as Safaniyah becomes relatively more important its heavy crude will mean less and less light sweet, which is far more useful, far better and in more demand by the market. At best, spare capacity in this old field is 600,000 barrels per day but that production will come at a cost and will be unable to offset declines elsewhere.

Manifa was shut down because of the poor quality of its crude so I see no way to spin the Saudi development as positive. It simply means that they are left to scraping the bottom of the barrel.

I also note that the article you cites show that a fourfold increase in rig activity from 2005 to 2008 was unable to produce a substantial increase in crude production. Now that the rig count has dropped why am I supposed to believe that an increase is in the works? And even if new production comes why am I supposed to believe that it can offset the 6.7% depletion from global fields producing conventional oil.

I am sorry but the type of optimism you are trying to push rings hollow. What we need is a great deal more and to see a solution we have to see governments get out of the way and let markets work. That will not happen any time soon and even if it did we will still have to overcome huge hurtles before we can transition from the current system.

 
At 11/27/2009 10:41 PM, Blogger VangelV said...

BB

Simmons has been mongering about this and I've burned him on it in the past about it. Nevertheless, there are some valid points in this paragraph and I'll touch on them first.

The nation's oil infrastructure is aging and will require significant investment, particularly oil refining; some of our pipelines are 80 years old. Like the rest of America's engineering and scientific workforce, the oil industry's own engineers and petroleum geologists are showing grey hairs, and we've been laxed about churning out properly trained candidates for many years to replace them. America will experience a large problem replacing engineers and scientific personnel in the years ahead as these people retire, and this will spell consequence for all pertaining industries. Like caring for the retiring baby boomers, nobody seems to have an answer for this. This will be a large reason (among others) why America will not be the preeminent power for much longer in the 21st century.


Just how exactly is agreeing with everything the man said about infrastructure justify your statement, "I've burned him on it in the past about it."

BB

While Simmons is somewhat correct about the need to invest in our oil industry’s infrastructure, he seems to show his trademark knee-jerk overreaction by pushing to rebuild the entire global oil industry for an estimated cost of $50-100 trillion - yeah, “t.” This is funny because such an urgent move would not only consume massive capital and government energy, but also engineers, construction equipment, resources. It would ultimately place priority over other needed infrastructure projects in America - roads, bridges, water pipes, etc.


If you have the system at the end of its life cycle you have to start replacing infrastructure or do without. Either way your costs have just exploded and you will need to consume massive amounts of new energy in addition to the energy used for regular daily operations.

 
At 11/27/2009 10:49 PM, Blogger VangelV said...

BB

Such a Herculean task would take decades to complete; and that is the crux of my argument against his crusade. Matthew Simmons is a man who believes oil peaked in ‘05 and is heading to 60mbpd by 2015 - a drastic decline rater in other words. Even if the globe started this task next year, and, by some miracle we complete it in 20 years (Who knows? Maybe Simmons is a real Roosevelt), world liquids production would be resting under 30mbpd (based on ‘08 numbers; this is minus increases from other sources, but even a 5mbpd increase from tar sands and other sources would prove tepid); crude would be under 20mbpd (based on last year’s numbers). I’m basing this on a 5% annual depletion rate; it gets worse under a 6.7% rate.


But if you have your pipeline network at 30 years of age but it was designed for 25 years you don't have decades. That is the problem with you; you read but do not understand the issue. Simmons does not say that the infrastructure can be replaced in an orderly manner or rebuilt quickly; he says that we are past the point when we could have planned and implemented an orderly transition.

Your understanding is very poor and you have yet to deal with the implications of the 6.7% depletion rate. If you can't offset it than you are looking at a steep decline and a problem that is bigger than you imagine. If you can offset it then you will need infrastructure to move it, which means a massive strain on capital and resources and much higher prices in the future than now. Either way, your naive optimism gives way to reality.

You remind me of those naive people who bought into the numbers being pushed by the AGW movement. Now that reality has hit and the numbers turned out to be not so unimpeachable they are scrambling to blame the people who committed the fraud or are hiding from the reality by focusing on their faith based position. Well, as the man said, truth is the daughter of time and there is no way that you get to escape it.

If I were you, I would worry less about my ego and start to look around at the real world as it is rather than as you imagined it.

 
At 11/27/2009 11:07 PM, Blogger VangelV said...

BB

So in other words, in the event of such a catastrophic oil drop, does it honestly make sense to devote this much money, this much manpower, a colossal amount of recourses to rebuild the global oil industry when in 20 years, such a collapse scenario would suggest folly? Wouldn’t there be better things to devote these resources to? America’s current oil refining capacity is roughly 17mbpd; would it make sense to rebuild even a third of that?

Again, I don’t doubt Simmons knows how to make buck, but I don't place a great deal of faith on his opinions of technological matters. He's an investment banker, not an engineer.


You take a position that leads to defeat. If oil production collapses then the peak is very real and not as you imagined it. Simmons would be right. If oil production can stay level or decline slowly than the infrastructure has to be replaced and Simmons is right again.

The only way for Simmons to be wrong is for alternatives to replace the energy lost from oil but that can't happen. According to some, the most promising approach actually involves using wind power to create liquid ammonia that can be used for transportation purposes as oil is being used now. I do not have all the facts so I will refrain from commenting on that now. But if that is true then we would have to get a pipeline infrastructure to distribute the ammonia. The chemistry means that the same pipelines, tank cars, trucks, storage tanks, and other infrastructure being used to handle petroleum products will be able to handle the ammonia.

 

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