Saudi Arabian oil production - a very disturbing analysis

[GliderGuider]

An article over at The Oil Drum reveals that Saudi Arabia's oil production declined by 8% last year and concludes that it wasn't due to voluntary cuts. This may be a smoking gun analysis in support of a current peak in oil production. Add this to Cantarell's problems and the North Sea slide as well as the fact that 3/4 of all oil-producing countries in the world and 3 of the world's four biggest oil fields were already in decline, and the recent statements of T. Boone Pickens , Matt Simmons and Ken Deffeyes look like they are vindicated. The peak has happened.

From the author's conclusions:

Overall, I feel this data is clear enough that I'm willing to go out on a limb and conclude the following:

* Saudi Arabian oil production is now in decline.
* The decline rate during the first year is very high (8%), akin to decline rates in other places developed with modern horizontal drilling techniques such as the North Sea.
* Declines are rather unlikely to be arrested, and may well accelerate.
* Matt Simmons appears to be right in Twilight in the Desert, but the warning did not come until after declines had actually begun.

Please take the time to read the whole article and thread - the implications are overwhelming.

[phantom power]

1. What's the word for predicting 1st, 2nd, 3rd *and* 4th?

[Systematic Chaos]

11. It is a "superfecta"

And I'm proud to say that I've hit a couple. :)

[tsuki]

2. Last year, it was reported that they have not opened any new sites

in over 20 years.

[no_hypocrisy]

3. Assuming loss does not exceed 8 percent a year, conceivably

10+ years of oil reserves left. Obviously more years if rate is less than 8 percent.

[GliderGuider]

4. They have many more years than that

But at steadily decreasing production rates.

The issue is not how many years' worth of oil there are left - we will have some oil around for hundreds of years. The question is is what production rates will we be able to achieve globally, and will the decline in those rates outstrip our ability to fill the demand gap with renewables, efficiency and new technology.

[amandabeech]

17. Earlier discussion at The Oil Drum on the Saudi problem

has overall Saudi depletion running at 4%. There are a few small fields that may produce again or for the first time, and other fields that are not in as bad a shape as prime regions of Ghawar.

An additional consideration with the Saudis is the quality of the oil that they have on offer. There is a glut of heavy oil in the market, and much Saudi new production is of that type. As you probably know, refineries geared for light or medium crude can't do much with the molasses-like stuff without serious retooling.

You may not remember, but in the early days of Bush, the Saudis offered to build refineries here for their product with no charge for the equipment or labor. All we had to do was provide the land or at least the clearances. Georgie was going to offer them decommissioned military bases, but nothing came of it.

We're going to need all the oil we can get even if we are transitioning to a low-petroleum economy. Having a virtually guaranteed supply of Saudi heavy going to a Saudi refinery here sounded like a good idea to me. Instead, the Saudis are building their own refineries and will sell to whomever they please. The Saudis still have lots of oil compared to everybody else, especially the Mexicans. The Saudis also have the money to exploit what they have, which the Mexicans do not, at least at this time. I suspect that the North American Union is geared as much to getting a piece of Pemex as it is to cheap labor.

The Bushies figure that they have all your oil tied up. I suspect that you Canadians see it otherwise.

[profgoose]

5. Excuse me while preach to the choir...

I understand that the Saudis do not want us to develop alternatives because they don't want to leave any oil in the ground, and the royal family wants to stay in power...but erm, when are we supposed "advanced and intelligent people" going to start worrying about our own freaking interests and get off of this crack called OIL?

This all just makes me nauseous.

[GreenPartyVoter]

6. I saw an article about Kuwait going into solar power. What does that tell us?

[NNadir]

9. Really? How much solar power are they producing in Kuwait?

[Javaman]

7. I think you answered your own question: "crack called oil"

nobody gets off crack.

[4dsc]

18. We're not going to get off oil

until the last drop possible is used.. We are a nation that cannot and will not change because we have grown fat and wasteful!!

[Pooka Fey]

8. Meanwhile, in Phoenix - State plans to double US60 from 12 to 24 lanes

and the City of Scottsdale has decided AGAINST building any light rail routes to connect into the Tempe and Phoenix lines now under construction, citing reasons of costs. There won't be any visible skidmarks leading up to the edge of the cliff in this part of the country. Whooooshhh...........

[IDemo]

10. Don't the folks at the EIA have email?

Or at least chat at the watercooler? The EIA data points in the first graph indicate a reduction of 750,000 bpd over a one year period. There seems to be a disagreement with this trend in their publication "Annual Energy Outlook 2007 with Projections to 2030":

-- world liquids demand is projected to increase from about 84 million barrels per day in 2005 to 117 million barrels per day in 2030. OPEC liquids production is projected to total 48 million barrels per day in 2030, 40 percent higher than the 34 million barrels per day produced in 2005 and almost 2 million barrels per day above the AEO2006 reference case projection of 46 million barrels per day in 2030. The Middle East OPEC producers and Venezuela have the resources to boost their output substantially over the period. Non-OPEC liquids production is projected to increase from 50 million barrels per day in 2005 to 70 million in 2030, as compared with the AEO2006 reference case projection of 72 million barrels per day.

Not really suggesting a decline anywhere, are they? Another reason I call them the "EDA", (Energy Disinformation Agency).

[Jcrowley]

12. Necessary reading

comments section as well.

K&R

[formercia]

13. The Caspian Basin

It's the point of this illegal War. Besides the oil fields of Iran and Iraq, there lie great untapped reserves in the Caspian Basin that Big Oil wants to control and Halliburton wants to get at the oil field maintenance contracts and lock them in before the French, Russians and Chinese can under bid them.

[amandabeech]

16. There is less Caspian crude than originally thought. The deposits

are in reef-like formations; originally, more of a "sea" had been expected. The oil is also of relatively poor quality, being generally fairly heavy and loaded with sulfur. That is why most of the majors originally invested in the area have sold out. They're looking for something easier to get at and either lighter or with less sulfur. Also, the political climate in that part of the world looks less friendly than it did in the age of Yeltsin.

Still a lot of interest in natural gas, which won't be coming our way. The easy pipeline markets in Europe and Asia will burn all that up.

[whosinpower]

14. Funny you should mention that

I talked with a client just yesterday who came back from a trip to visit her sister. Her sister is a geologist who works for an oil company. It is her job to find oil. And if anyone would know if oil was getting harder to find--you would think it would be her.

That IS her job after all. She would tell you that it is a big lie. There is lots of oil. And it is no harder to find that it was ten years ago. She feels that the oil companies are deliberately slowing down production and releasing information on oil finds to keep prices high.

Just letting you know what tidbit of info comes my way as gas prices up here swell again.

[GliderGuider]

15. The world has been using more oil than it has been discovering since 1984.

World consumption is now out-pacing discovery by a factor of four, as shown on the following graph:



Think of the implications of that. I find it much easier to believe that this is a result of global geology rather than global conspiracy.

[Javaman]

24. Some how I have a hard time believing a geologist that works for

an oil company would say that there is plenty of oil around. It's in her own best interest to say that. If it got out that she was either saying something to the contrary or **cough** **cough** the truth, she would no longer be employed by said oil company.

With all the major oil producing nations fields in decline, I find it amusing that she said that there is plenty of oil to be had.

Considering that it would require 3 of Saudi Arabia's biggest oil field to full fill our needs in 10 short years.

So far, no discovery has come even close to that in the last 30.

Sure there is "plenty of oil", it's the other half of the peak. All the easy stuff is gone, it's the sludge on the bottom that no one wants to talk about. And that's the stuff that is really hard to pull to the surface, because, the level of saturated natural gas in that stuff is so low, that it requires lots of steam and water to get it to the surface.

[lumberjack_jeff]

19. A blast from the past

http://archives.cnn.com/2000/LOCAL/northeast/07/04/boh.gas.prices/index.html

July 4, 2000

BOSTON, Massachusetts (The Boston Herald) -- Gas prices, after hitting another all-time high in the Bay State, may finally begin cooling off with the promise yesterday that Saudi Arabia was set to boost oil production.

As an OPEC delegate reported that the Middle Eastern kingdom was set to hike production by 500,000 barrels a day, the American Automobile Association's weekly gas price report showed regular unleaded gasoline averaging a record $1.67 per gallon in Massachusetts.

``That again is the highest ever,'' said AAA spokesman Art Kinsman. ``But the good news is it only went up a penny. In the past seven weeks we've seen a two- to five-cent increase a week.''

The increased production by Saudi Arabia could finally stabilize pump prices, analysts predicted.

Who are these "experts" of which you speak, CNN?

Reading news from 7 or 8 years ago is really depressing.

[GliderGuider]

20. The author of the original article has published an expanded analysis

http://www.theoildrum.com/node/2331

It's even more persuasive than the earlier one linked in the OP. IMO none of the attempts in the ensuing thread to challenge his interpretation of the data are convincing because they lack the internal consistency and parsimony of Staniford's analysis. Given the lack of data transparency we have to suffer from places like KSA, the fact that such a convincing case can be made based on what is already historical data has frightening implications.

I think this is the best keypost I have ever read on The Oil Drum. Congratulations to The Oil Drum for attracting and publishing some of the very best thinkers and analysts in the Peak Oil field (well, the best of those who don't already have their own book contracts, anyway :-) )

[phantom power]

21. A couple comments interested me near the end

Exactly:

Well, that hypothesis has some problems, I think. One is, why don't they cut even further, and make even more money? Knock another few mbpd off, and oil will be $150, which is even better for the treasury. Ok, they can't do that all at once, or they'd throw the world into recession. But after prices peaked at almost $80 last summer, why did the newly greedy Saudis let them come down again. Why not have managed them slowly higher to find the point of maximum profitability, which is almost certainly higher than $60? Or if they aren't that greedy, and $60ish is the new price band, the new balance between the interests of producers and consumers, why'd they let the price go almost to $80 over the summer? Why not ramp up to 10.5mbpd for a few months and scare the markets back down to $65?

In short, if the Saudis had spare capacity, we'd expect the production profile to show some intentionality around managing the price in some way that they perceive to benefit them. But that's not what we've got.

I have a quibble about this statement:

Which reminds me. For those of you doomers keen to see this as the end of civilization as we know it, it's going to take more than this for me to join you. While it's certainly worrying, we need to keep some perspective: 8% of Saudi production is 1% of global production, and as long as global declines are less than a few percent a year they are well within society's proven capacity to adapt. Probably the biggest potential issue is the political stability of the Kingdom of Saudi Arabia once this news becomes clear to everyone.

And my quibble is that there are three other supergiant fields that are experiencing annual declines of similar magnitude. So, if this doesn't exactly spell the imminent end of civilization, I think it's also wrong to say "hey, this is just 1% of world production" because that is ignoring some precipitous declines in other parts of the globe.

[GliderGuider]

22. If it will "take more than this", all he has has to do is wait.

I think where Stuart is coming from is a response to people who have said "When Ghawar starts to slide, it's over". I agree with the broad sense of that - that Ghawar is the final canary in the coal mine - but Stuart may be taking a more literal interpretation.

Personally, I think we're going to see a 0.5% to 1% decline in global Crude & Condensate & NGPL this year, and that will be the harbinger of increasing declines starting in 2008. Stuart's analysis has convinced me that the peak has happened (actually that it happened around when Deffeyes said it did, at the end of 2005). From here on we will see an almost imperceptible initial decline, followed by a gradually increasing slope. I was of the opinion that we would stay on the plateau for another three years, I now think we'll be off it fairly convincingly by the end of this year.

[phantom power]

23. There are three trends (at least)...

which most people are still either unaware of or are in a state of denial about.

1) Our current passage thru Peak Oil
2) Climate change
3) The fact that America's economy is massively overvalued

I'm waiting with interest (and some amount of dread) to see what happens when the majority of people begin to internalize that these things are really happening. That "100th monkey" point where John Q Public, businessmen, stock traders, our intrepid leaders, etc, all see it. Feel it in their gut, and start acting on those feelings.