View Full Version : An Enerty Tsunami Ahead?

04-27-2005, 11:40 AM
An Energy Tsunami Ahead (http://www.simmonsco-intl.com/files/PESA%20Annual%20Meeting-B&W.pdf)

Admittedly this guy has a vested interest in increased oil production but he gives some statistics that are worth considering whether or not they have merit. A synopsys of the statistics in the presentation.

Statistics below are from Simmons' speeches.

50% of the world's oil production comes from only 120 fields that were discovered 40+ yrs ago. Half are more than 40 yrs old, 95% are more than 25 yrs old.

Saudi Arabia has 5 key fields producing 90% of their output, and have so for 40 yrs.

Pressurized oil fields all have a "rate sensitivity" to how they are drained, so that the higher the production, the faster high reservoir pressures end. Once pressures fall to a "bubble point", gas rises to the surface of the pool and pressures begin to drop much faster. Thus, many experts believe that if the Saudi's pump faster by adding a lot more holes in these few high producing fields, the peak production point will be reached faster and the degradation rate after peak production will become faster.

A geologist I read said the world has been entirely "mapped" seismically, and the liklihood of any significant numbers of "elephant" finds is highly unlikely: thus these types of finds may soon be called dinasaurs rather than elephants.

The date of peak discovery in the world was 1965. The typical time from date of peak discovery of a single field to peak production is tyically 40 yrs.

The Saudi's have some severe challenges to maintain production, let alone increase production: the age of their fields, the rising "water cuts" [The ratio of water produced compared to the volume of total liquids produced], and the tight and complex geologic formations. The north Ghawar water cuts have risen from 0.1% to ~3.0% over the life of the reservoir, so far, and the slope is increasing.

Technology was supposed to make oil easy to find and cheap to produce: instead, technology exaggerated proven reserves and used up most of the high quality light crude oil. The track record of technology being able to bail us out from the present course towards peak oil production is not good.

There are significant "choke points" of capacity to produce oil: Well head, Processing, Pipeline, Tanker, Refining, Drill rig capacities as well as finding new projects to boost the supply inventory of viable large drilling opporunities, and also the people to execute those projects. Spare high quality offshore and deep depth (high horsepower) land rigs can be counted on 5-7 hands. The global drilling fleet is old, the capacity to add drilling components is sparse, and the capacity to build offshore platforms is spare with the cost to build an offshore rig being twice that of the 1996-2001 period. The rig shortage squeeze in the near future will be acute. Also, the oil and gas industry has a graying work force with a "lost generation" gap of new hires since the late 70's, and pre-1982 hires will be retiring in the next 10 yrs.

There are frontiers out there (Russia, Artic, Antartic, offshore US/Canada and Mexico, and Alaska North Slope), but they all take time and will merely offset post Peak-production declines.

"Once Saudi oil productino passes peak, so has the world."

We are not running out of oil but we are running out of *cheap* oil just as oil demand appears to be surmounting supply in the 4th quarter of this yr as we will produce 83-84 M bpd and are likely to need 86-87 M bpd. We will not run short of oil then, but prices will cause the elasticity of demand to meet supply.

05-02-2005, 03:08 PM
Yeah, people don't seem to be paying attention to this.

Demand is ever increasing as China and India increasingly industrialize. There isn't a whole lot of new technology that will replace oil as an evergy source, because oil is so relatively cheap.

I read a report recently that production at each of the majors will peak sometime in the 2008-2014 timeframe. Sure, they are still investing in exploration, but the new fields are small, low-quality, or expensive to extract. Overall, there isn't a whole lot of excess capacity worldwide. Several OPEC members (Venezuela) are already well past their peak production.

In summary -
Demand side: I can't see anything that is going to slow the growth in demand, except rising oil prices
Supply side: worldwide production is going to peak in the next 5-10 years (best case)
Result: $100 oil sooner than you think.

05-03-2005, 12:51 AM
Result: $100 oil sooner than you think.

[/ QUOTE ]

Next result: 150mpg sooner than you think. Hey! It's available now! http://www.evworld.com/view.cfm?section=article&storyid=818

There will be enormous fortunes made in the next couple decades from entrepreneurs who are able to maximize energy efficiency.

Check this one out:

the post talks about two companies that sell products which help utilities to get more energy from their generators.


05-03-2005, 12:24 PM
Next result: 150mpg sooner than you think. Hey! It's available now! http://www.evworld.com/view.cfm?section=article&storyid=818

[/ QUOTE ]

Ha, it took me a couple of minutes to figure out what "mpg" meant.

For the love of god, will y'all going the metric system already.

05-03-2005, 01:28 PM
"The Sky is Falling" talk about oil supply...
Has been going on for 30 years.

The only reason alternate energy sources...
Such as hydrogen powered cars...
Are not in wide use...
Is that oil has been super cheap for the last 20 years.

Expensive oil...
Will dramatically accelerate...
Development and conversion to alt-fuels...
And most of us will live to see the day...
When oil is obsolete.

Then the Arabs will all go back to milking camels.

So we will never "run out" of oil.

There will still be lots of oil left...
When it becomes obsolete.

As for China...
It's a society where alt/mixed fuel cars will predominate from the start...
And gas guzzlers will something they see in Americans movies.


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05-03-2005, 03:56 PM
Of course we won't run out, because fields can only be pumped up to a finite rate. And yes, rising prices will curb the demand for oil. This does not change the fact that prices need to rise well above $50/bbl to spur serious innovation/adoption of new technologies.

On the hydrogen car front, any thoughts on where to get the hydrogen? I'm sure you're aware that hydrogen generation requires serious energy input. Most likely this energy has to come from the grid. This means that we need more power plants. Forget the puny contribution from windfarms, tidal, solar (unless there is a tech breakthrough there). It's either going to be environment-ripping coal/oil, or PR-unfriendly nuclear.

Getting a bit off topic, but as I look around my office, I marvel at the quantity of stuff that started out as fossil fuel - the case of my laptop, the wall of CD's (and CD cases), the fabric of the carpet, my white board, upholsery...practically everything that isn't metal or wood. Point being that getting off the ff wagon isn't as easy as hydrogen cars...

05-07-2005, 03:40 PM
There is no crisis or shortage, it just a simple supply and demand problem. More demand, from Americans, SUV's etc., and China/Asia creates higher prices. Add the weak American dollar into the equation and you have rapid price increases. But I haven't seen any shortages have you? No long lines at the fuel pumps like the 70's. World known oil reserves are higher than ever.

05-08-2005, 05:57 PM
Interestingly enough Carl Icahn is trying to get Kerr Mcgee to stop looking for oil, and sell it's next ten years of production now through forward contracts. Basically he's betting that prices have peaked.

I'm not sure he's right since the U.S dollar is likely to continue to decline. Oil prices in Euros have been actually pretty flat the last five years, most of the increases we have seen are due directly to the sinking dollar.