Wednesday, April 8, 2009

2009 Energy Conference - Meeting the growing demand for liquids

The third session of the conference dealt with either electrical power generation or transportation fluids. In reality that meant, for the second topic, that the topic was crude oil. Moderated by Glen Sweetnam the panel included Eduardo Gonzalez-Pier of PEMEX, DavidKnapp of the Energy Intelligence Group and Fareed Mohamedi of PFC Energy.

The panel moved around the world looking at the prospects for increasing production from the major producers of oil, dividing them into those whose production can be anticipated to increase, and those who are known to be declining in production. The list of those increasing included the USA, Saudi Arabia, Brazil, Canada, Algeria, Nigeria Iraq and Kuwait. For those who are wondering if time has moved backwards, or question whether the world has changed enough that this site is no longer dealing with a real concern – the anticipated increase in production in the United States is relatively small and transient. It is coming from the increase in production that is being achieved by the rigs in the deep water of the Gulf, and is sadly not going to take us back to the days when the country produced more than anyone else. The panel also looked at the change in the nature of production since IOCs were replaced in the scale of greatest production by NOCs. The panel did not seem to feel that this would, in itself, make much difference since, in the end, as oil fields decline the NOCs would have to engage with the IOCs in order to acquire the technology (see closing story at the end of the post) that would allow them to enhance recovery from their remaining reserve.

I started out in the other panel (which was talking about transmission lines) and did not come into the room until they were talking about Mexican production. I did not initially know the background of the speaker, (it was Eduardo) who, shortly after I arrived, commented that Pemex expected to stabilize production at existing levels for the next several years. He and the other two speakers talked about the increase in production from KMZ that would offset the Cantarell decline, and that there would be the longer term production from Chicontepec that would continue this stable production for the next few years. Somehow my concentration wandered after this, and so my reporting on this session (that occurred just after a brisk walk and lunch) may be a little less that all that was said.

The panel opinion on Venezuela was not promising (pessimistic was the word used) with significant questions on sustainability, although there is the hope that the majors would be reinvited back with renegotiations to bring production back to a more reasonable level. (Taken with the discussion on Mexico this also encouraged me to enter a dream-like state).
They generally viewed Brazil, and Petrobras, as a success. Nigeria was described as a failed state, though there were some attempts to distinguish the success of some of the production from the troubles that were occurring because of the insurrection in the country. Looking at Algeria the debate focused on the natural gas business and there was some debate on the hydrocarbon law in that country.

Libya is a different case. Having grown accustomed to a lack of external funds and lower levels of income, the country is quite able to weather the current cut back in oil prices and the Government has enough revenue at the moment and thus is not under pressure to export more. Because of a lack of investment over the past decades, the opportunities to increase production, particularly through secondary and tertiary recovery is considered gigantic, and thus the overall view of Libyan production has to be optimistic. (It is interesting to note that China is reported to be going after the Canadian interests in Libya).

Looking at the countries of the Middle East, Iraq and Kuwait can be expected to remain relatively stable in production, though with some potential for increase. However, as with a countries in the region, the questionability of the reserve values quoted keeps coming up. (In a later question the panel felt no compunction in accepting Saudi figures for their reserves and had no concern that the values had not changed over the years. They did recognize, however, that in contrast to other countries in the Middle East they counted proved and probable in reserves, not just proved). Kuwait is “muddling through.” The damage done to the Burgan field by the Iraqi army in their retreat after the first Gulf War did more damage to the field than was at first realized. Instead of this being a field that produced under its own pressure, pressure now has to be supplied to the field to get the production out, and this has opened a need for new technology that has not yet been realized. Kuwait can, however, live on $20 oil prices.

But once one has gone through these producers, with their limited capacities to increase production, then all the other countries that were considered are in decline. They were, for example, somewhat more pessimistic than I expected about future Russian production. They felt that the inability to develop in a timely fashion some of their Eastern fields was now hurting, though their recent willingness to work again with the majors (for example Shell in their recent production) may denote a change in attitude. There is just not much happening in Central Eastern Siberia, and while they just shipped (April 1) the first LNG cargo from Sakhalin Island, it is a bit of a stretch to see overall production increasing given the declines in some of the mature fields. Although they were reassured that Statoil is going to be working with Shtokman overall they felt that the atmosphere over there was still somewhat poor for investment. Financial pressures may also act as a lever to induce change, but with the example of Gazprom held up before us, there was not a lot of optimism.

China was considered to be an interesting case, since all the news of developments from the west has gone silent, and the thought is that perhaps there are some problems with the geology in those fields, and the group would be surprised if grown was reprised in that area of the country. There was some optimism expressed, however for the chance of improving the natural gas position, particularly perhaps with coal bed methane (CBM).

Looking at Kazakhstan, this may be a country with some potential for the future, but with pipelines taking that future to China and Russia and the country having borrowed a great deal when oil prices were higher, that promise is likely to end up in one of those two countries. There is apparently some problem between the Kazakhs and the Russians.

The volumes of additional gas that have become available through the technologies that are being applied in the Barnett Haynesville and the other US gas shale deposits may also change the reserves in other countries. The panel felt that there should be some production become available in China and in Europe as a result of such fields, but the size of that gain is not yet evident, since no-one has probably yet gone and looked.

The longer term outlook for Saudi Arabia is difficult to tell, since it all depends on the succession to the king, and that is a bit of a worry, but there is so much geopolitical froth in the air, that it is hard to see the actual current situation.

In developments since the paper, and relative to the need to find new technology, I notice that PEMEX is talking of a new technology to get some additional production from Cantarell. In this idea a foam will be injected into the formation and will displace any remaining oil, with the hope of recovering an additional 3 billion barrels from the reservoir. It is a technology being developed at CSM, Stanford, the U of Texas and the University of Houston. While injecting carbon dioxide reduces viscocity and adhesion of the oil, it does not work well in providing a mechanism to move the released to to the well, and the original mechanisms have been weakened due to the water flood. In this technique the foam acts to provide that sweep mechanism.


  1. Hi HO ;) isn't that what the Seven Dwarfs sang?

    Broke down and bought Oil 101 on the strength of your review. Great book, and was struck by how rightfully dismissive he is of the whole notion of exploiting kerogen. As has been said you might as well plan on how to extract H3 from the moon or methane from Titan. Of course people have serious proposals on how to do those as well...

    Thanks for the cub reporting. I'm at a loss how any foam would be a more effective method of EOR than gases. And if it'll only be in use at Cantarell in 3 years that's likely too late for Mexico's status as an exporter.

  2. Glad you liked the book, I had dinner with Morgan in DC and he talked about how long it took, both to write the book,and then to edit it into the shape it ended up. (A total of 5 years).

    I haven't read the foam report that I referenced in enough detail to explain why it is better than gas, though I can remember some years ago the talk was all about using micellar fluids as a tertiary sweep, and it may be along the same lines. The problem in the end is that none of this is cheap and you have to be really sure of the economics and the viability before you press the GO button, and I don't know that this is there yet, especially given the size of Cantarell.