Showing posts with label ELM. Show all posts
Showing posts with label ELM. Show all posts
Sunday, July 13, 2014
Tech Talk - Here we go again, again
A couple of posts or so ago I mentioned that there are three major problems sitting relatively un-noticed as we head into the mess of Peak Oil. Of these, perhaps the one that gets the least attention is the steady decline in production from existing wells. We are just about at the point where the Alaskan Pipeline will tip over into feeding less than half-a-million barrels a day down from the North Slope. (It sent 501 kbd down the pipe in June with a 98.6% reliability factor). At the same time those in control of the oilfields in the Russia are reporting that Russian exports have fallen to the lowest level in 6 years. This brings back the relatively unrecognized reality of the Export Land Model which Jeffrey Brown first introduced on The Oil Drum back in 2007.
It is worth resurrecting that thinking (which time has proven to be only too true) as we look at the continued declines in production from the UK, as an example. It is not easily discernable from the official Department of Energy and Climate Change, which plots oil production on a monthly basis (with different months having a variety of days):
Figure 1. Monthly production of oil from the fields of the UK continental shelf (DECC ).
Euan Mearns has, however, done the necessary arithmetic and clearly shows the reality of the situation once one converts it back to barrels per day:
Figure 2. UK production of oil and natural gas over the past decade (Euan Mearns)
The steady decline has also been noted by the EIA who commented that UK production fell by 9% from 2012 to 2013. There was a time, back in the days of The Oil Drum, where we debated whether an estimate of 5% for field decline rates was or was not too high. Obviously those days are now behind us, and reality is starting to show numbers that far exceed the rates that, at the time, some thought rather pessimistic. To continue the UK numbers, as OPEC recently anticipated, the decline this year will take the total down to 800 kbd with an 8% decline expected for this year.
The Export Land Model, in its simplest form, can be illustrated with the following plot:
Figure 3. A simplified illustration of the changing production, internal use and exports for an oil producing country, once it reaches a peak in production (Sam Foucher )
The argument that produces the above plot goes along the lines that, as an oil producer (think for a moment of Russia for eg) produces larger volumes of oil, so the economy of that country starts to grow. As that growth continues it demands an increasing amount of energy to sustain the increased internal demand (the green line). However, once production stabilizes or starts to decline (the blue line above) so the amount available for export becomes reduced (the red line).
The three top producers of petroleum products in the world are the United States, Russia and the Kingdom of Saudi Arabia. The United States consumes far more than it produces, and thus is already a net importer of petroleum products, although in the short term, as I noted earlier production gains from the Bakken and Eagle Ford are hiding the problems of decline rate. It is increasingly unlikely that any significant volume of US oil will make it onto the world market.
Saudi Arabia has, for years, controlled the amount of oil that it puts on the market, based on the anticipated global demand, and the supply available from the rest of the world - so that the global price remains at a level to sustain OPEC economies. That has been illustrated over the past couple of years by the increase in production from the KSA to cover the decline from Libya as about a million barrels a day disappeared from the global market. The gains in production from the US helped in meeting global demand and the strain in supply was thus relatively easily hidden. But the KSA has an imminent problem that has largely disappeared from public view now that the eyes of The Oil Drum correspondents have lost that focus.
The major oilfields of the Kingdom are old, and to sustain production perimeter wells were located around the oilfields that injected millions of barrels of seawater a day, to drive the oil towards the center of the fields, where it could be relatively easily recovered from Maximum Reservoir Contact wells drilled along the very top of the reservoirs. But as folk such as JoulesBurn have noted, those wells slowly change in nature, over time, as the oil migration continues, and water injection must move inwards to ensure continued production.
Figure 4. Layout of initial wells at the Haradh III development in the Ghawar oilfield in Saudi Arabia (JoulesBurn at The Oil Drum)
He noted, in the original post, that Aramco had to drill some 52 wells, rather than the estimated 32, to get the production they needed, and that was back in 2010. Since then Ghawar has continued to produce for the Kingdom, but with daily levels of up around 10 mbd, the volumes in the crests of the anticlines along which the oil wells sit within the Ghawar field have been steadily contracting, and although they have carried out some of the most advanced oilwell engineering to sustain production from the attic oil in the older parts of the fields, there are only so many ways you can squeeze a rock before you get out all the oil that you will – and those days are approaching fast.
At the same time (relating back to the ELM) while Saudi production has remained at just under 10 mbd for the past few years, internal demand has been rising at a steadily more rapid rate.
Figure 5. Internal consumption of oil in Saudi Arabia (Index Mundi ).
Hoping to transition some of the current internal demands to natural gas, the KSA has been looking for internal resources to allow it to move away from oil. However the search has not been as successful as hoped, particularly with the search for natural gas, Shell having backed out of the program as a result of the poor results to date.
With internal consumption continuing to rise at more than twice the rate anticipated by the ELM shown in Figure 3, and, at best, stable production, global exports from the Kingdom are of increasing concern.
Which brings us back to Russia, where the new fields that must be exploited to sustain production are in remote parts of Eastern Siberia and the Yamal Peninsula – if not offshore in the Arctic.
Russian oil production has been peaking for some time (falling from 3.4% growth in 2012 to 1.3% in 2013) and is now reported to likely fall by 6.3% over the next two years. Since this implies that Russia is now at peak, the decline in overall production initially will fall below that of Figure 3, though likely only for a year or so, before the rate will be, at minimum, that shown. (The reason for this conclusion comes from the lack of enough investment in the fields where growth can be expected). At the same time internal demand is rising at around 100 kbd or 3% pa slightly above the value assumed for Figure 3.
If none of the three largest producers can even sustain exports, and the ELM explains why they can’t, and world demand continues to rise at the rates projected, then, in even the short-term, something is going to have to give. The logical weakest link is price, with the consequence, that invalidates a lot of the other arguments, of a significant impact on global economic health. As we have seen before, significant increases in price lowers the demand for oil, and thus demand from the various nations will become even more skewed.
The only problem, with this next iteration, is that there isn’t another Bakken or Eagle Ford conveniently sitting waiting to be tapped.
It is worth resurrecting that thinking (which time has proven to be only too true) as we look at the continued declines in production from the UK, as an example. It is not easily discernable from the official Department of Energy and Climate Change, which plots oil production on a monthly basis (with different months having a variety of days):
Figure 1. Monthly production of oil from the fields of the UK continental shelf (DECC ).
Euan Mearns has, however, done the necessary arithmetic and clearly shows the reality of the situation once one converts it back to barrels per day:
Figure 2. UK production of oil and natural gas over the past decade (Euan Mearns)
The steady decline has also been noted by the EIA who commented that UK production fell by 9% from 2012 to 2013. There was a time, back in the days of The Oil Drum, where we debated whether an estimate of 5% for field decline rates was or was not too high. Obviously those days are now behind us, and reality is starting to show numbers that far exceed the rates that, at the time, some thought rather pessimistic. To continue the UK numbers, as OPEC recently anticipated, the decline this year will take the total down to 800 kbd with an 8% decline expected for this year.
The Export Land Model, in its simplest form, can be illustrated with the following plot:
Figure 3. A simplified illustration of the changing production, internal use and exports for an oil producing country, once it reaches a peak in production (Sam Foucher )
The argument that produces the above plot goes along the lines that, as an oil producer (think for a moment of Russia for eg) produces larger volumes of oil, so the economy of that country starts to grow. As that growth continues it demands an increasing amount of energy to sustain the increased internal demand (the green line). However, once production stabilizes or starts to decline (the blue line above) so the amount available for export becomes reduced (the red line).
The three top producers of petroleum products in the world are the United States, Russia and the Kingdom of Saudi Arabia. The United States consumes far more than it produces, and thus is already a net importer of petroleum products, although in the short term, as I noted earlier production gains from the Bakken and Eagle Ford are hiding the problems of decline rate. It is increasingly unlikely that any significant volume of US oil will make it onto the world market.
Saudi Arabia has, for years, controlled the amount of oil that it puts on the market, based on the anticipated global demand, and the supply available from the rest of the world - so that the global price remains at a level to sustain OPEC economies. That has been illustrated over the past couple of years by the increase in production from the KSA to cover the decline from Libya as about a million barrels a day disappeared from the global market. The gains in production from the US helped in meeting global demand and the strain in supply was thus relatively easily hidden. But the KSA has an imminent problem that has largely disappeared from public view now that the eyes of The Oil Drum correspondents have lost that focus.
The major oilfields of the Kingdom are old, and to sustain production perimeter wells were located around the oilfields that injected millions of barrels of seawater a day, to drive the oil towards the center of the fields, where it could be relatively easily recovered from Maximum Reservoir Contact wells drilled along the very top of the reservoirs. But as folk such as JoulesBurn have noted, those wells slowly change in nature, over time, as the oil migration continues, and water injection must move inwards to ensure continued production.
Figure 4. Layout of initial wells at the Haradh III development in the Ghawar oilfield in Saudi Arabia (JoulesBurn at The Oil Drum)
He noted, in the original post, that Aramco had to drill some 52 wells, rather than the estimated 32, to get the production they needed, and that was back in 2010. Since then Ghawar has continued to produce for the Kingdom, but with daily levels of up around 10 mbd, the volumes in the crests of the anticlines along which the oil wells sit within the Ghawar field have been steadily contracting, and although they have carried out some of the most advanced oilwell engineering to sustain production from the attic oil in the older parts of the fields, there are only so many ways you can squeeze a rock before you get out all the oil that you will – and those days are approaching fast.
At the same time (relating back to the ELM) while Saudi production has remained at just under 10 mbd for the past few years, internal demand has been rising at a steadily more rapid rate.
Figure 5. Internal consumption of oil in Saudi Arabia (Index Mundi ).
Hoping to transition some of the current internal demands to natural gas, the KSA has been looking for internal resources to allow it to move away from oil. However the search has not been as successful as hoped, particularly with the search for natural gas, Shell having backed out of the program as a result of the poor results to date.
With internal consumption continuing to rise at more than twice the rate anticipated by the ELM shown in Figure 3, and, at best, stable production, global exports from the Kingdom are of increasing concern.
Which brings us back to Russia, where the new fields that must be exploited to sustain production are in remote parts of Eastern Siberia and the Yamal Peninsula – if not offshore in the Arctic.
Russian oil production has been peaking for some time (falling from 3.4% growth in 2012 to 1.3% in 2013) and is now reported to likely fall by 6.3% over the next two years. Since this implies that Russia is now at peak, the decline in overall production initially will fall below that of Figure 3, though likely only for a year or so, before the rate will be, at minimum, that shown. (The reason for this conclusion comes from the lack of enough investment in the fields where growth can be expected). At the same time internal demand is rising at around 100 kbd or 3% pa slightly above the value assumed for Figure 3.
If none of the three largest producers can even sustain exports, and the ELM explains why they can’t, and world demand continues to rise at the rates projected, then, in even the short-term, something is going to have to give. The logical weakest link is price, with the consequence, that invalidates a lot of the other arguments, of a significant impact on global economic health. As we have seen before, significant increases in price lowers the demand for oil, and thus demand from the various nations will become even more skewed.
The only problem, with this next iteration, is that there isn’t another Bakken or Eagle Ford conveniently sitting waiting to be tapped.
Read more!
Thursday, October 7, 2010
The ASPO Conference - first afternoon
One of the speakers commented, just at the beginning of the ASPO 2010 Peak Oil Conference, that we would be subject to enough information that it would seem that we were standing under a fire hose. Well the Conference has had its first day, or at least afternoon, our first fire alarm (we got to the top of the stairs before being told it had been dealt with) and our first reception is over, as is the evening keynote session. He was right.
I occasionally think that attending Conferences should be a biennial practice, since change in the papers is so slow – but so far that hasn’t been the case this year where the new information available is already evident, though some of the old lions are still roaring on the same topics. There were three concurrent sessions this afternoon, and so I can only report on one set – starting with the session on the Export Land Model (which just gets more worrisome); then the Oil Drum session (where I was a speaker) and then the session on Energy Alternatives (which mainly talked about EROI). This report is being written incrementally, and has been updated once, but I will add the evenings two sessions in a second post, given the length that this one has already.
Jeff Brown began the session on the outlook for exports. His Export Land Model is now well recognized within the community, and after paying a short tribute to the late Matt Simmons, always a friendly and helpful face at these meetings, he brought us more up to date on where the model predictions were being validated, and what they were showing. With lots of papers to cover I can only hit the very high points of the presentation, so this is a very short summary. After commenting on how production declines in major fields, he tied this in to the rising standards of the producing country, and showed that, in a base case a 5% decline post-peak production for a country’s oil, when matched with a 2.5% growth in that country’s consumption, driven by the oil, but continuing after it starts into decline, rapidly lowers exports. Simplistically within 3 years after peak the country will have exported half the oil it will export post-peak. He then compared this theoretical situation with the realities of Indonesia and the UK, where within 9 years for Indonesia, and 6 years for the UK, the countries stopped exports and became importers. Export declines in the final years were over 25% per year.
He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia) will stop exporting before 2030. Looking a the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.
While unconventional oil is supposed to be a positive contributor in the future, he noted that when Canada and Venezuela are combined, production is actually falling. The worrying factor is the combination of China and India, who have increased imports from 11.3% of the total in 2005, to 17.1% in 2009. If this continues they will consume 25% of global oil exports by 2015, which will significantly reduce the amount available to the rest of us.
With the first speaker having raised the problem of oil, it was Jonathan Callaghan who shifted the topic over to Natural Gas. Jonathan runs the websites on energy that I use as a reference on occasion, where there are very useful plots of the energy consumption, production and import/export balances for the nations around the world. These provide patterns for the various fossil fuels, by nation, and Jonathan used representative plots from the series for his talk, beginning with the UK.

Noting that the UK used town gas (made from coal) until 1959, when the first LNG was imported from LA, gas in the UK was privatized in 1986 and reached peak production in 2000, becoming a net importer of natural gas in 2004. This last winter it was necessary, on three occasions for the National Grid to issue “Gas Balancing Alerts”, where industrial consumers should reduce use to protect domestic consumers. The situation is anticipated to get worse.
He contrasted this way of managing a resource with that of the Dutch, who have the large Groningen Gas field but which they have managed in a much more conservative way. With their different management philosophy they have retained a considerable margin for the future, over the same time interval.

Presentation of the data in this way also allows judgments that are not otherwise immediately obvious. For example consider the data for Argentina:

Without looking at the export/import data it might be hard to decide whether it had peaked in production, but when that data is examined the conclusion is relatively obvious.
And thus he went through different countries showing how the analysis of the plots, with a little local knowledge, gives a global picture of what is going on. As South America moves to becoming an overall importer and China is adding compressors to the pipeline from Turkmenistan to increase the flow rates, the time before world production peaks may be considerably sooner than people realize, since most of the fields are being run on the British, rather than the Dutch model.
He then turned to coal, in what was really a second talk, looking at the amounts that are available (pressing the coal button on the website) allowed him to note how dominant China is becoming in coal consumption.

The problem, however, is while the condition of the industry is known in general, the behavior of China and India will likely govern overall future coal use in ways that we have yet to understand.
There was then a very short break, and the team from The Oil Drum took to the podium. Gail Tverberg began with introductory remarks explaining some of the factors, such as Geology, Technology, Economics and Timing that influence production and its impact on demand, and ability to respond to it. She noted the difficulty in justifying large investment for increasingly expensive reserves, and the problem in justifying the expense years in advance of production. Further when there are new crises, which could be created by one of several scenarios (including higher industry taxes) drops in production which can be relatively immediate cannot always be made up in that short a time interval. And sometimes those with the capacity might not be so inclined – particularly if the shortage drives up prices.
I spoke second and took as my theme that Technology, while it can come to the rescue on some occasions if needed (the horizontal well, slick fracture development of gas shales for example) requires considerable lead time and the solving of several technical problems if it is to succeed. Those solutions as has been stated in the Hirsch Report, can take 20-years to become a significant player. Thus while, for example, the “Green Hornet” flew with biofuel power this April, it used oil from camelina, which is not a popular agricultural product in the US. I then pointed out ( and I will expand this thought into a technical post, perhaps this Sunday) that those who anticipate Peak Coal in the next few years are likely going to be mistaken. The reason there has been no innovation in mining has not been because no one has thought of answers, rather that what is used today is too cheap to need replacing.
Dave Murphy then gave a discussion on the changes needed to move away from the classical economics theories toward recognition of other factors in societal health. He noted that national economies are tied to the consumption of oil (which is then tied to price) rather than to oil price itself. The variation between expansion (up 2%) and recession (down 2%) is not great. Though it is the provision of cheap fuel that has funded international growth. Every recession since 1970 has been preceded by an oil price spike.
We are now in an era where small fluctuations in flow (on the order of 1 – 2 mbd) can have a significant impact on price and economic stability. We are entering a period where the cost of production of oil begins to reach the point at which a recession is started, but the drop in demand in a recession would not justify the oil supply. And so this conundrum illustrates the world into which we are rapidly entering.
As the production of energy requires complex drilling platforms that rent for $450,000 a day (of the Deepwater Horizon ilk) rather than the wooden platforms used to drill Spindletop, those costs will only continue to rise.
With so much uncertainty it is, perhaps time to change economic models, from the neoclassical to bio-environmental. He noted that studies have shown that emotional happiness increases only until a person earns $75,000 a year. Above that there is no increase, and so perhaps we should be content when we reach this level, and stop the perpetual growth cycle.
The session closed with a talk by Jeff Vail, who talked of the “Rescuing of Suburbia.” Much has been written about the trouble that those communities are in, but does it really need rescue? Of the 150 million Americans living in the 40 million homes in Suburbia, how many would have the money to relocate and where? There are 5 million homes at risk of, or in foreclosure with that big a problem already how could one afford to abandon Suburbia.
Commuting costs are a real problem, but this is a low hanging fruit. But to save energy and cost, one must accept inconvenience. (The Admiral later in the evening talked of going to a child’s game and seeing all the neighbors there in there SUVs , all having driven separately an hour and forty-five minutes to get to the game, and the same back.) He talked of making other decisions, citing Brad Lancaster in Tucson who harvested rainwater to grow good to feed 50% of the needs for a family of four on what started as a barren lot. The open spaces also allow more effective installations of solar power.
The transition however must go beyond that, if we are to re-invent suburbia – and there are tools in development. Rapid prototyping equipment and early machines that can make 3-D objects from computer programs. This will allow small-scale manufacturing and construction, and distributed manufacturing decentralizing the process and empowering suburbia. Suburbia, it must be remembered, has need the greatest egalitarian land ownership movement in history. Unfortunately the transition, without significant help, will not happen fast enough.
We then took the break in which I started this post. I'll write on what came next in a second post.
I occasionally think that attending Conferences should be a biennial practice, since change in the papers is so slow – but so far that hasn’t been the case this year where the new information available is already evident, though some of the old lions are still roaring on the same topics. There were three concurrent sessions this afternoon, and so I can only report on one set – starting with the session on the Export Land Model (which just gets more worrisome); then the Oil Drum session (where I was a speaker) and then the session on Energy Alternatives (which mainly talked about EROI). This report is being written incrementally, and has been updated once, but I will add the evenings two sessions in a second post, given the length that this one has already.
Jeff Brown began the session on the outlook for exports. His Export Land Model is now well recognized within the community, and after paying a short tribute to the late Matt Simmons, always a friendly and helpful face at these meetings, he brought us more up to date on where the model predictions were being validated, and what they were showing. With lots of papers to cover I can only hit the very high points of the presentation, so this is a very short summary. After commenting on how production declines in major fields, he tied this in to the rising standards of the producing country, and showed that, in a base case a 5% decline post-peak production for a country’s oil, when matched with a 2.5% growth in that country’s consumption, driven by the oil, but continuing after it starts into decline, rapidly lowers exports. Simplistically within 3 years after peak the country will have exported half the oil it will export post-peak. He then compared this theoretical situation with the realities of Indonesia and the UK, where within 9 years for Indonesia, and 6 years for the UK, the countries stopped exports and became importers. Export declines in the final years were over 25% per year.
He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia) will stop exporting before 2030. Looking a the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.
While unconventional oil is supposed to be a positive contributor in the future, he noted that when Canada and Venezuela are combined, production is actually falling. The worrying factor is the combination of China and India, who have increased imports from 11.3% of the total in 2005, to 17.1% in 2009. If this continues they will consume 25% of global oil exports by 2015, which will significantly reduce the amount available to the rest of us.
With the first speaker having raised the problem of oil, it was Jonathan Callaghan who shifted the topic over to Natural Gas. Jonathan runs the websites on energy that I use as a reference on occasion, where there are very useful plots of the energy consumption, production and import/export balances for the nations around the world. These provide patterns for the various fossil fuels, by nation, and Jonathan used representative plots from the series for his talk, beginning with the UK.

Noting that the UK used town gas (made from coal) until 1959, when the first LNG was imported from LA, gas in the UK was privatized in 1986 and reached peak production in 2000, becoming a net importer of natural gas in 2004. This last winter it was necessary, on three occasions for the National Grid to issue “Gas Balancing Alerts”, where industrial consumers should reduce use to protect domestic consumers. The situation is anticipated to get worse.
He contrasted this way of managing a resource with that of the Dutch, who have the large Groningen Gas field but which they have managed in a much more conservative way. With their different management philosophy they have retained a considerable margin for the future, over the same time interval.

Presentation of the data in this way also allows judgments that are not otherwise immediately obvious. For example consider the data for Argentina:

Without looking at the export/import data it might be hard to decide whether it had peaked in production, but when that data is examined the conclusion is relatively obvious.
And thus he went through different countries showing how the analysis of the plots, with a little local knowledge, gives a global picture of what is going on. As South America moves to becoming an overall importer and China is adding compressors to the pipeline from Turkmenistan to increase the flow rates, the time before world production peaks may be considerably sooner than people realize, since most of the fields are being run on the British, rather than the Dutch model.
He then turned to coal, in what was really a second talk, looking at the amounts that are available (pressing the coal button on the website) allowed him to note how dominant China is becoming in coal consumption.

The problem, however, is while the condition of the industry is known in general, the behavior of China and India will likely govern overall future coal use in ways that we have yet to understand.
There was then a very short break, and the team from The Oil Drum took to the podium. Gail Tverberg began with introductory remarks explaining some of the factors, such as Geology, Technology, Economics and Timing that influence production and its impact on demand, and ability to respond to it. She noted the difficulty in justifying large investment for increasingly expensive reserves, and the problem in justifying the expense years in advance of production. Further when there are new crises, which could be created by one of several scenarios (including higher industry taxes) drops in production which can be relatively immediate cannot always be made up in that short a time interval. And sometimes those with the capacity might not be so inclined – particularly if the shortage drives up prices.
I spoke second and took as my theme that Technology, while it can come to the rescue on some occasions if needed (the horizontal well, slick fracture development of gas shales for example) requires considerable lead time and the solving of several technical problems if it is to succeed. Those solutions as has been stated in the Hirsch Report, can take 20-years to become a significant player. Thus while, for example, the “Green Hornet” flew with biofuel power this April, it used oil from camelina, which is not a popular agricultural product in the US. I then pointed out ( and I will expand this thought into a technical post, perhaps this Sunday) that those who anticipate Peak Coal in the next few years are likely going to be mistaken. The reason there has been no innovation in mining has not been because no one has thought of answers, rather that what is used today is too cheap to need replacing.
Dave Murphy then gave a discussion on the changes needed to move away from the classical economics theories toward recognition of other factors in societal health. He noted that national economies are tied to the consumption of oil (which is then tied to price) rather than to oil price itself. The variation between expansion (up 2%) and recession (down 2%) is not great. Though it is the provision of cheap fuel that has funded international growth. Every recession since 1970 has been preceded by an oil price spike.
We are now in an era where small fluctuations in flow (on the order of 1 – 2 mbd) can have a significant impact on price and economic stability. We are entering a period where the cost of production of oil begins to reach the point at which a recession is started, but the drop in demand in a recession would not justify the oil supply. And so this conundrum illustrates the world into which we are rapidly entering.
As the production of energy requires complex drilling platforms that rent for $450,000 a day (of the Deepwater Horizon ilk) rather than the wooden platforms used to drill Spindletop, those costs will only continue to rise.
With so much uncertainty it is, perhaps time to change economic models, from the neoclassical to bio-environmental. He noted that studies have shown that emotional happiness increases only until a person earns $75,000 a year. Above that there is no increase, and so perhaps we should be content when we reach this level, and stop the perpetual growth cycle.
The session closed with a talk by Jeff Vail, who talked of the “Rescuing of Suburbia.” Much has been written about the trouble that those communities are in, but does it really need rescue? Of the 150 million Americans living in the 40 million homes in Suburbia, how many would have the money to relocate and where? There are 5 million homes at risk of, or in foreclosure with that big a problem already how could one afford to abandon Suburbia.
Commuting costs are a real problem, but this is a low hanging fruit. But to save energy and cost, one must accept inconvenience. (The Admiral later in the evening talked of going to a child’s game and seeing all the neighbors there in there SUVs , all having driven separately an hour and forty-five minutes to get to the game, and the same back.) He talked of making other decisions, citing Brad Lancaster in Tucson who harvested rainwater to grow good to feed 50% of the needs for a family of four on what started as a barren lot. The open spaces also allow more effective installations of solar power.
The transition however must go beyond that, if we are to re-invent suburbia – and there are tools in development. Rapid prototyping equipment and early machines that can make 3-D objects from computer programs. This will allow small-scale manufacturing and construction, and distributed manufacturing decentralizing the process and empowering suburbia. Suburbia, it must be remembered, has need the greatest egalitarian land ownership movement in history. Unfortunately the transition, without significant help, will not happen fast enough.
We then took the break in which I started this post. I'll write on what came next in a second post.
Read more!
Labels:
ASPO Conference,
ELM,
peak coal,
peak natural gas,
peak oil
Thursday, September 24, 2009
The Future of Oil - or a gentle Cough at the NYT
The Mining Community is not a really large one, and in our meeting tonight I met folk that have worked on projects that were, for their time, world shattering. But we began the day by remembering, with a moment of silence, the miners that died this past week in Lower Silesia. In a small enough community there were those not present today because of that incident, and we paused to remember that supplying the world with the energy that it needs comes at a certain cost.
And then, after a day of presentations that ranged from presented material that will be in my lectures next week, to promotions that were little more than reading the Web adverts for company products, tonight we had, again, a miners picnic – only this time there was the European tradition of induction for us foreigners into the Brotherhood (except in that – as a ninth generation miner – I think I’m already there, and have done this before) – yet we were led into the assembly in green hoods, leapt the apron and were suitably entered into the community (each country has a slightly different tradition).
A coleague ready to "leap the apron"
I gave a keynote address before lunch today on the problems that the world will face as the economies of the nations resurrect. In a way the talk was “set up” by the CEO of the Polish company KGHM who are running this first Copper Congress here in Lubin. He pointed out that in running a company that uses some 3% of the energy demand for Poland, they have, as a company, to become energy independent since without that security they will become increasingly vulnerable to outside influence.
In the talk that I gave (which was written more for the local audience than as a global message) I tried to walk though the evolving energy changes, and what they would lead into.
Having tied my talk to some 23 slides, obviously I am not going to try and post the entire talk, but perhaps if I go through the theme, you might get the gist of what I was trying to say.
I began with a slide that shows the current top crude oil producers in the world (based in EIA May figures) and noted that, at the moment Russia is at the top. (Note please that since it is late and I still have my “answer” presentation to prepare for the morning, I am not going to give my references tonight). (And if you want to consider that this is a rebuttal to today’s optimistic report in the New York Times feel free to do so).
Then I showed a slide of a well in Samotlor and noted that the Russian historic large fields are running out. Samotlor has declined from 3.2 mbd to 750,000 bd and is pumping, in some wells, 90% water. The Russian strategy has been to find and produce a region until exhausted, and then move East to find the next major depost. That has worked fine as a strategy until now when they have reached Sakhalin Island – on the far East of the country – the next logical place to look is . . . . .
Alaska, and sorry folks, that is already in play, and in fact rather played out.
Which is a good point to introduce the Export Land Model and so I talked just a little about the fact that as a country’s oil peaks and starts to fall, domestic consumption becomes more important and exports suffer a much greater decline than the actual fall in production. Then I showed how this was already happening to Russia, and the impact that this would have on Poland.
To make life even more complicated in terms of those in Eastern Europe with a reliance on Russian oil, I put up a slide showing that the United States is now importing some 840,000 bd of Russian oil, in order to meet its needs, and thus Europe is now competing in the global market for that oil.
Why must America compete in that market – I used a graph showing the collapse of Cantarell (not to mention the other fields in Mexico) and the 100,000 bd fall every three months to show that America has to go to the world market to find the oil that it now needs.
Non-OPEC crude oil production has peaked and is in decline (I used a TOD graph showing the fall since 2004) and so when one looks at countries that have a surplus of production over current supply (comparing IEA and EIA data) the stand-out is Saudi Arabia at either 3.3 or 2.5 mbd (depending on who you believe) with the next largest being the UAE at somewhere between 0.3 and 0.6 mbd.
(And here let me briefly digress to point out that those who wave the NYT story have little clue of the time that it takes between discovery and full field production – nor do they understand oil field depletion, or that just because we have passed peak production does not mean that there is not a whole lot of oil out there that is still waiting to be discovered – only that it is going to be less than the huge volumes that we have already found and exploited).
The problem, as I pointed out, is that the Saudi number includes, among other fields, Manifa, and Yes! we know it is there; Yes! we know that it can produce 1 million bd; but we also have to recognize that until a refinery is built to process that oil (which will not now come on line until after 2013) the use of that production number is a fiction. And thus there is less than 4 mbd available as a current world reserve.
So what else do we need to worry about? Well it was time to introduce oilfield depletion and so I put up the two contrasting graphs that I use from TOD that show decline in current fields when you use 4.5% depletion and then 5.25% (the significant point I indicated was the transition of peak oil from 2011 to 2008).
I then showed a slide with the FT quote that the oilfields in the North Sea were depleting at 9%, and followed it with Dr Fatih Birol’s comment that the depletion rate is 6.7%.
I tied the whole issue together by showing the need that the Western world will have as their economies rebound (about 3 mbd) with the increases in demand from China and India (already 1 mbd and rising) to show that by 2011 we will need some 5 mbd of additional oil over today, but at best have only enough on line to get 4 mbd. (The first Oops Moment).
So now I turned to the second fuel – natural gas – (time was now running a bit tight so this got a little less intense treatment, but also focused on the Polish need).
I began with a slide showing that, over time, natural gas fields were lasting a shorter period of time before they ran out, but then followed this with a slide of Turkmenistan, who has been supplying some 40 bcm to Russia (or thereabouts) for transfer (at a profit) to Ukraine, Poland and Western Europe. To ensure that supply last year (and there were posts on this at the time) Gazprom signed an agreement to pay the prevailing Western price for natural gas to Turkmenistan. Since when there was a collapse in the world price of natural gas and an “accident” to the pipeline between Turkmenistan and Russia means that Russia has not had to accept expensive NG that it has to sell at a loss, since then.
However, just as Russia pressures Turkmenistan to accept a new agreement to sell the gas at a cheaper price, the new pipeline from Turkmenistan to China will open in a couple of months (and I showed the map) meaning that, as China has been willing to pay the higher price (about $8 per kcf as I posted earlier in the week) they have underwritten a cost increase for NG to Western Europe and beyond that is unlikely to go away.
I then quickly put up a map showing the gas shale deposits in the United States and commented that this might at first appear to indicate that we are entering the “Age of Natural gas”, but then I followed this with Swindell’s graph showing that the new wells suffer 60% decline in the first year, and commented that with the high cost of wells, and the current low cost of NG in America (I tried converting prices to zloty per thousand cu m., but may have got a number wrong – we passed a gas station that was selling NG at 2 zloty per liter) the new wells that we need for next year are not being built. Thus we may be competing with Poland for LNG from Qatar.
What is left? I turned to coal (Poland currently gets around 85% of its electrical energy from this source) and I put up my final slide, showing 5 micron coal – which when mixed with 50% water will run a diesel locomotive (and I added a picture of one) as GE have demonstrated.
Which barely gave me time to note that for many countries in the world coal is the only available, viable and economically practical fuel (vide Vietnam and Botswana) at a time when (with a map from “energy shortages”) - which I contrasted with comments from the G-20 Summit - the world is already having serious problems and it was time for me to conclude.
There were no questions (but I was later told that this was due to the format of the session) but I did field comments during the rest of the day.
And so, tomorrow, I have to explain one of the ways they should change to cope with this situation. Excuse me! But I need to put those slides together.
And then, after a day of presentations that ranged from presented material that will be in my lectures next week, to promotions that were little more than reading the Web adverts for company products, tonight we had, again, a miners picnic – only this time there was the European tradition of induction for us foreigners into the Brotherhood (except in that – as a ninth generation miner – I think I’m already there, and have done this before) – yet we were led into the assembly in green hoods, leapt the apron and were suitably entered into the community (each country has a slightly different tradition).
I gave a keynote address before lunch today on the problems that the world will face as the economies of the nations resurrect. In a way the talk was “set up” by the CEO of the Polish company KGHM who are running this first Copper Congress here in Lubin. He pointed out that in running a company that uses some 3% of the energy demand for Poland, they have, as a company, to become energy independent since without that security they will become increasingly vulnerable to outside influence.
In the talk that I gave (which was written more for the local audience than as a global message) I tried to walk though the evolving energy changes, and what they would lead into.
Having tied my talk to some 23 slides, obviously I am not going to try and post the entire talk, but perhaps if I go through the theme, you might get the gist of what I was trying to say.
I began with a slide that shows the current top crude oil producers in the world (based in EIA May figures) and noted that, at the moment Russia is at the top. (Note please that since it is late and I still have my “answer” presentation to prepare for the morning, I am not going to give my references tonight). (And if you want to consider that this is a rebuttal to today’s optimistic report in the New York Times feel free to do so).
Then I showed a slide of a well in Samotlor and noted that the Russian historic large fields are running out. Samotlor has declined from 3.2 mbd to 750,000 bd and is pumping, in some wells, 90% water. The Russian strategy has been to find and produce a region until exhausted, and then move East to find the next major depost. That has worked fine as a strategy until now when they have reached Sakhalin Island – on the far East of the country – the next logical place to look is . . . . .
Alaska, and sorry folks, that is already in play, and in fact rather played out.
Which is a good point to introduce the Export Land Model and so I talked just a little about the fact that as a country’s oil peaks and starts to fall, domestic consumption becomes more important and exports suffer a much greater decline than the actual fall in production. Then I showed how this was already happening to Russia, and the impact that this would have on Poland.
To make life even more complicated in terms of those in Eastern Europe with a reliance on Russian oil, I put up a slide showing that the United States is now importing some 840,000 bd of Russian oil, in order to meet its needs, and thus Europe is now competing in the global market for that oil.
Why must America compete in that market – I used a graph showing the collapse of Cantarell (not to mention the other fields in Mexico) and the 100,000 bd fall every three months to show that America has to go to the world market to find the oil that it now needs.
Non-OPEC crude oil production has peaked and is in decline (I used a TOD graph showing the fall since 2004) and so when one looks at countries that have a surplus of production over current supply (comparing IEA and EIA data) the stand-out is Saudi Arabia at either 3.3 or 2.5 mbd (depending on who you believe) with the next largest being the UAE at somewhere between 0.3 and 0.6 mbd.
(And here let me briefly digress to point out that those who wave the NYT story have little clue of the time that it takes between discovery and full field production – nor do they understand oil field depletion, or that just because we have passed peak production does not mean that there is not a whole lot of oil out there that is still waiting to be discovered – only that it is going to be less than the huge volumes that we have already found and exploited).
The problem, as I pointed out, is that the Saudi number includes, among other fields, Manifa, and Yes! we know it is there; Yes! we know that it can produce 1 million bd; but we also have to recognize that until a refinery is built to process that oil (which will not now come on line until after 2013) the use of that production number is a fiction. And thus there is less than 4 mbd available as a current world reserve.
So what else do we need to worry about? Well it was time to introduce oilfield depletion and so I put up the two contrasting graphs that I use from TOD that show decline in current fields when you use 4.5% depletion and then 5.25% (the significant point I indicated was the transition of peak oil from 2011 to 2008).
I then showed a slide with the FT quote that the oilfields in the North Sea were depleting at 9%, and followed it with Dr Fatih Birol’s comment that the depletion rate is 6.7%.
I tied the whole issue together by showing the need that the Western world will have as their economies rebound (about 3 mbd) with the increases in demand from China and India (already 1 mbd and rising) to show that by 2011 we will need some 5 mbd of additional oil over today, but at best have only enough on line to get 4 mbd. (The first Oops Moment).
So now I turned to the second fuel – natural gas – (time was now running a bit tight so this got a little less intense treatment, but also focused on the Polish need).
I began with a slide showing that, over time, natural gas fields were lasting a shorter period of time before they ran out, but then followed this with a slide of Turkmenistan, who has been supplying some 40 bcm to Russia (or thereabouts) for transfer (at a profit) to Ukraine, Poland and Western Europe. To ensure that supply last year (and there were posts on this at the time) Gazprom signed an agreement to pay the prevailing Western price for natural gas to Turkmenistan. Since when there was a collapse in the world price of natural gas and an “accident” to the pipeline between Turkmenistan and Russia means that Russia has not had to accept expensive NG that it has to sell at a loss, since then.
However, just as Russia pressures Turkmenistan to accept a new agreement to sell the gas at a cheaper price, the new pipeline from Turkmenistan to China will open in a couple of months (and I showed the map) meaning that, as China has been willing to pay the higher price (about $8 per kcf as I posted earlier in the week) they have underwritten a cost increase for NG to Western Europe and beyond that is unlikely to go away.
I then quickly put up a map showing the gas shale deposits in the United States and commented that this might at first appear to indicate that we are entering the “Age of Natural gas”, but then I followed this with Swindell’s graph showing that the new wells suffer 60% decline in the first year, and commented that with the high cost of wells, and the current low cost of NG in America (I tried converting prices to zloty per thousand cu m., but may have got a number wrong – we passed a gas station that was selling NG at 2 zloty per liter) the new wells that we need for next year are not being built. Thus we may be competing with Poland for LNG from Qatar.
What is left? I turned to coal (Poland currently gets around 85% of its electrical energy from this source) and I put up my final slide, showing 5 micron coal – which when mixed with 50% water will run a diesel locomotive (and I added a picture of one) as GE have demonstrated.
Which barely gave me time to note that for many countries in the world coal is the only available, viable and economically practical fuel (vide Vietnam and Botswana) at a time when (with a map from “energy shortages”) - which I contrasted with comments from the G-20 Summit - the world is already having serious problems and it was time for me to conclude.
There were no questions (but I was later told that this was due to the format of the session) but I did field comments during the rest of the day.
And so, tomorrow, I have to explain one of the ways they should change to cope with this situation. Excuse me! But I need to put those slides together.
Read more!
Labels:
Copper Congress,
ELM,
Lubin,
Manifa,
peak oil,
Russian production,
Saotlor,
Saudi Arabia
Monday, August 24, 2009
The Changing oil supply perspective - opening lecture class note changes
It’s the start of a new Semester, and at the beginning of my Power class I spend the first lecture reviewing where I think we stand on the Energy supply to the United States. This has changed a bit since last year and so I thought I would run through some of the changes that I made to my lecture this year, in the same way as I did on TOD last September. Since the greatest impact is likely to come from the changing sources of supply that the US has had to go to, with the change in levels of production, I began with this slide:
Sources of Oil imported to the US in May 2009 (EIA)
It is interesting to see the relative amounts from Mexico, Saudi Arabia and Russia and the first thing to note is the decline in Mexican supply, brought about by the dramatic drop in production from Cantarell. (H/t Nate Hagens).
The peak and decline of Cantarell – where Mexico got most of its oil.
That drop has already shown up as a decline in Mexican exports to the US of over 800,000 bd. At this point I introduce them to the Export Land Model (ELM) of Jeffrey Brown, which basically points out that after a nation’s economy has grown (and oil consumption with it) during the high production years, then as oil production declines (as above) it is the export market which suffers more, as the country retains more of its product for its own use.
Export Land Model (ELM) of Jeffrey Brown, showing the more rapid decline of exports, as production falls in a country, yet internal demand continues to rise.
While Mexico is the most dramatic example of this at the moment, it is important to consider Russia next. We used not to get much oil from Russia, but as the table above shows, that situation is changing. (Russia to the Rescue was the theme of a made for TV movie Oil Storm back in June of 2005, where they sent us a couple of oil tankers which “saved the day”. At the time $75 a barrel for crude and $4 per gallon for gas was considered to only happen if the US was damaged by a hurricane and the Saudi terminal at Ras Tanura was attacked.) Well now they are sending more and regularly, but the question relative to the ELM is how long can they keep this up.
Exports from Russia dropped 5.2% in 2008, but have crept up some 0.2% since January, with Russia exporting about half its production. The big question about that, however, is that a pipeline is going in at the moment that will start shipping 300,000 bd of oil from Russia to China and to Japan. Given that overall Russian production is expected to decline (one of their major fields at Samotlor is now producing at 750,000 bd, when at peak it produced 3.2 mbd, and now that it is 80% depleted the water cut is 90%.)
A well at Samotlor (TNK-BP )
So with increased amounts of internal consumption (it is using about 2.8 mbd internally it is becoming another example of the ELM.
Russian production, consumption and exports (note that according to Rosstat Russia is now exporting around 5 mbd) (from the EIA)
With both these countries exports declining, the question is becoming who will be the next to step in and provide additional oil for us. Saudi Arabia has dropped production to 8 mbd to keep the price up, and there are some questions about the future production – and I refer to the pictures from Satellite over the Desert that I have used before to question Saudi long term production ability. I also note that Saudi Arabia is now consuming 2.2 mbd of oil and demand is rising. There is, for example, this
And thus one comes to Canada, and so there is the quote from the Wicks Report that the Alberta oil sands will provide half of North America’s imports. The level of those imports is shown in the first table, and the oil sands are not now predicted to get to 2.7 mbd until somewhere around 2018, up from the current 1.3 mbd. So with the oil sands being the increasingly major supplier of oil to Canada as the conventional reservoirs deplete, it does not look as though Mr Wicks Report will prove realistic, and we will need to look elsewhere to make up supply shortages for ourselves.
At which point it is timely to point out that the UK will be competing with us for the remaining world supplies of oil, and that China and India, with their burgeoning car sales, will also be adding an mbd or so to their demands for oil next year.
The one bright hope that I end the oil section of the lecture with is that, with ethanol production at around 750,000 bd there is a new candidate supplier of jet fuel. The Japanese airliner that tested fuel this past winter used Camelina as the source for the jet fuel. It seems to have more going for it than corn or cellulosic based ethanol, at this point in the evaluation.
It is nice to end the section on an optimistic note, and the message from the above is that there are going to be jobs for the students when they graduate, and it will likely remain so for the length of their careers.
Sources of Oil imported to the US in May 2009 (EIA) It is interesting to see the relative amounts from Mexico, Saudi Arabia and Russia and the first thing to note is the decline in Mexican supply, brought about by the dramatic drop in production from Cantarell. (H/t Nate Hagens).
The peak and decline of Cantarell – where Mexico got most of its oil.That drop has already shown up as a decline in Mexican exports to the US of over 800,000 bd. At this point I introduce them to the Export Land Model (ELM) of Jeffrey Brown, which basically points out that after a nation’s economy has grown (and oil consumption with it) during the high production years, then as oil production declines (as above) it is the export market which suffers more, as the country retains more of its product for its own use.
Export Land Model (ELM) of Jeffrey Brown, showing the more rapid decline of exports, as production falls in a country, yet internal demand continues to rise.While Mexico is the most dramatic example of this at the moment, it is important to consider Russia next. We used not to get much oil from Russia, but as the table above shows, that situation is changing. (Russia to the Rescue was the theme of a made for TV movie Oil Storm back in June of 2005, where they sent us a couple of oil tankers which “saved the day”. At the time $75 a barrel for crude and $4 per gallon for gas was considered to only happen if the US was damaged by a hurricane and the Saudi terminal at Ras Tanura was attacked.) Well now they are sending more and regularly, but the question relative to the ELM is how long can they keep this up.
Exports from Russia dropped 5.2% in 2008, but have crept up some 0.2% since January, with Russia exporting about half its production. The big question about that, however, is that a pipeline is going in at the moment that will start shipping 300,000 bd of oil from Russia to China and to Japan. Given that overall Russian production is expected to decline (one of their major fields at Samotlor is now producing at 750,000 bd, when at peak it produced 3.2 mbd, and now that it is 80% depleted the water cut is 90%.)
A well at Samotlor (TNK-BP )So with increased amounts of internal consumption (it is using about 2.8 mbd internally it is becoming another example of the ELM.
Russian production, consumption and exports (note that according to Rosstat Russia is now exporting around 5 mbd) (from the EIA) With both these countries exports declining, the question is becoming who will be the next to step in and provide additional oil for us. Saudi Arabia has dropped production to 8 mbd to keep the price up, and there are some questions about the future production – and I refer to the pictures from Satellite over the Desert that I have used before to question Saudi long term production ability. I also note that Saudi Arabia is now consuming 2.2 mbd of oil and demand is rising. There is, for example, this
Estimates on how much crude it is burning differ, but the kingdom's own data show it has risen in recent years, and it could be as high as 470,000 bpd of crude this year, up 62 percent from 2008, consultancy FACTS Global Energy says.Aramco claim to have the capability of producing 12 mbd of oil, but again I remind the class that this includes the oil from Manifa, which cannot be produced until it can be refined and that won’t be until 2013 at the earliest.
A Saudi source familiar with the kingdom's energy sector said the maximum it could burn at power stations would be 300,000 bpd, although another 120,000 bpd could be burned to power refineries and other facilities related to upstream production.
And thus one comes to Canada, and so there is the quote from the Wicks Report that the Alberta oil sands will provide half of North America’s imports. The level of those imports is shown in the first table, and the oil sands are not now predicted to get to 2.7 mbd until somewhere around 2018, up from the current 1.3 mbd. So with the oil sands being the increasingly major supplier of oil to Canada as the conventional reservoirs deplete, it does not look as though Mr Wicks Report will prove realistic, and we will need to look elsewhere to make up supply shortages for ourselves.
At which point it is timely to point out that the UK will be competing with us for the remaining world supplies of oil, and that China and India, with their burgeoning car sales, will also be adding an mbd or so to their demands for oil next year.
The one bright hope that I end the oil section of the lecture with is that, with ethanol production at around 750,000 bd there is a new candidate supplier of jet fuel. The Japanese airliner that tested fuel this past winter used Camelina as the source for the jet fuel. It seems to have more going for it than corn or cellulosic based ethanol, at this point in the evaluation.
It is nice to end the section on an optimistic note, and the message from the above is that there are going to be jobs for the students when they graduate, and it will likely remain so for the length of their careers.
Read more!
Labels:
camelina oil,
Canada,
ELM,
Mexico,
oil exports,
Russia,
Samotlor,
Saudi Arabia
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