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Countdown to $100 oil (21A) - The 4 biggest oil fields in the world are in decline

by Jerome a Paris Thu Jan 26th, 2006 at 04:04:27 PM EST

Remember this from this week end?



Only around 50 super-giant oilfields have ever been found, and the most recent, in 2000, was the first in 25 years: the problematically acidic 9-12 billion barrel Kashagan field in Kazakhstan.

(...)

In 2000 there were 16 discoveries of 500 million barrels of oil equivalent or bigger. In 2001 there were nine. In 2002 there were just two. In 2003 there were none.

So we're stuck with the existing supergiant fields we already  know. But we're able to squeeze increasing proportions of their oil out, right? Well, up to a point.

The 4 biggest fields on the planet are now in decline, 3 officially.

From the diaries ~ w.


Let's start with Cantarell, the jewel of Mexico's Pemex, and the third largest field ever found.



from the Financial Times (15 March 2005, via the Energy Bulletin)

The Cantarell oil field, in the shallow waters of Campeche Bay, is regarded by Mexicans as their crown jewel. It is the second largest oil field in the world by production, behind Saudi Arabia's mammoth Ghawar oil field, pumping 2.2m barrels a day, the same amount as all the Kuwaiti fields together.

For that reason, Mexicans were recently dismayed when Petróleos Mexicanos, the state oil company, said that the field's production would decline this year, signalling a trend towards its depletion.

Pemex now expects production to reach 1.9mb/d in the coming years, and to decline to 1.4 mb/d by 2010. With Cantarell providing close to two thirds of Mexico's production, Pemex needs to replace this ultra cheap oil by much more expensive ultra-deep offshore reserves which it does not have the competences to exploit on its own - and it is forbidden by Mexico's Constitution to invite foreign partners (even 'innocuous' ones like Petrobras, the Brazilian company which has strong offshore experience) to help it. Expect political upheavals in Mexico over this in coming years; in the meantime, prodcution will go down.

Next, we can talk about Samotlor, the largest Russia oil field, and the second largest ever found. From a peak of close to 2mb/d, its production is now down to less than 0.5mb/d. BP has invested heavily in the field via its purchase of 50% of TNK, but as the table below (from an official BP presentation (pdf)) shows, more than two thirds of the oil to be recovered, in the most optimistic scenarios, already has.

In case you've never heard it, as most news in recent years talk about rapidly growing oil production in Russia, Russia's oil production peaked in the first half of the 1980s - what we witnessed in recent years was simply some catching up after the collapse of the early 90s which was not due to technical reasons but to the chaos in the early post-Sovier years. Russia is about to know a second, lower peak as its production is now stagnating again.

But let's move on to the Gulf, and to the third largest field by production levels today, Kuwait's Burgan, also in the top 5 on the planet by reserves. Well, guess what?



Kuwait's biggest field starts to run out of oil  (26 January 2006)  

KUWAIT: It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output.

Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al-Zanki told Bloomberg.

He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 million a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.

Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?

(Note that all these fields were n°2 at some point, whether in production or reserves. They are each super giant, no such large fields will ever be found again, and they are all in decline.

Which brings us, of course, to the uncontested largest field on the planet, Saudi Arabia's Ghawar. This is the only one (yet) for which there has been no official announcement of decline, but there are lots of people that are talking about it. Here are a few:



Bank says Saudi's top field in decline (Al Jazeera, 12 April 2005)

Speculation over the actual size of Saudi Arabia's oil reserves is reaching fever pitch as a major bank says the kingdom's - and the world's - biggest field, Gharwar, is in irreversible decline.

The Bank of Montreal's analyst Don Coxe, working from their Chicago office, is the first mainstream number-cruncher to say that Gharwar's days are fated.

(...)

"The combination of the news that there's no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert's Peak has arrived in Saudi Arabia," says Coxe, referring to data compiled by the International Energy Association's (IEA) August 2004 monthly report.

(...)

"The kingdom's decline rate will be among the world's fastest as this decade wanes," predicts Coxe. "Most importantly, Hubbert's Peak must have arrived for Gharwar, the world's biggest oilfield."

Coxe dismisses Saudi claims that the country can produce extra capacity to satisfy surging demand. He notes that Saudi promises to increase production last year failed to materialise. Aramco had pledged an extra 500,000 barrels of oil immediately and an extra 5 million bpd by 2012.

He says the markets had "assumed this first flow would be a half million barrels daily of the benchmark Saudi Light, the high-end product that any oil refinery can process. Instead ... the new oil was heavy, sulphurous oil that only a few refineries had the spare capacity to use".

(...)

Coxe's figures may even be on the sympathetic side. According to Saudi Aramco's own statistics, existing Saudi fields deplete by 600,000 to 800,000bpd each year. If such levels are maintained until 2012, Saudi depletion will have reached  a minimum of 4.2mbpd.

(...)

One factor contributing to the scrutiny the Gharwar field faces is the huge amount of water injection used. Water is pumped into an ageing oilfield in order to maintain high pressure inside.

This allows the oil to be pumped out at the original constant rate. Eventually, however, the water reaches the well-head, and the field effectively dies.

Coxe goes on to ask why new Saudi fields, not just ageing ones, are also water injected.

"As if that weren't bad enough news, the Saudis claim they need at least $32 a barrel to justify new production, because ... new production ... requires water flooding. Water flooding on newborn Saudi wells? Isn't water flooding [the] Viagra of ageing wells?"

From the NYT (24 February 2004) (readable here by scrolling down):



"We don't see us as the ones making sure the oil is there for the rest of the world," one senior [Saudi] executive said in an interview. A Saudi Aramco official cautioned that even the attempt to get up to 12 million barrels a day would "wreak havoc within a decade," by causing damage to the oil fields.

In an unusual public statement, Sadad al-Husseini, Saudi Aramco's second-ranking executive and its leading geologist, warned at an oil conference in Jakarta in 2002 that global "natural declines in existing capacity are real and must be replaced."

Dr. al-Husseini, one Western oil expert said, has been "the brains of Saudi Aramco's exploration and production." But he has told associates that he plans to resign soon, and his departure, government oil experts in the United States and Saudi Arabia say, could hinder Saudi efforts to bolster production or entice foreign investment.

Saudi Arabia's reported proven reserves, more than 250 billion barrels, are one-fourth of the world's total. The most significant is Ghawar. Discovered in 1948, the 300-mile-long sliver near the Persian Gulf is the world's largest oil field and accounts for more than half of the kingdom's production.

(...)

The average decline rate in Saudi Aramco's mature fields - Ghawar and a few others - "is in the range of 8 percent per year," without additional remediation, according to the company's statement. This means several hundred thousand barrels of daily oil production would have to be added every year just to make up for the diminished output.

(...)

The company projects that Ghawar will continue to produce more than half its oil. One internal company estimate from 2002 puts Ghawar's production at 5.25 million barrels a day in 2011, more than half the total expected crude oil capacity of 10.15 million, according to United States government officials and oil executives.

"The big risk in Saudi Arabia is that Ghawar's rate of decline increases to an alarming point," said Ali Morteza Samsam Bakhtiari, a senior official with the National Iranian Oil Company. "That will set bells ringing all over the oil world because Ghawar underpins Saudi output and Saudi undergirds worldwide production."

The most skeptical of all is Houston banker Matt Simmons, who thinks, after painstaking examination of existing data (mostly from the 70s, before the Saudis clamped down) that Ghawar is in a really bad shape:



Saudi's "king" of oil fields, Ghawar, is the world's largest oil field. Wildcat discoveries there from 1948 to 1952 proved reserves estimated at 170 billion barrels of oil in place and 60 billion barrels recoverable. Those numbers remained unchanged in Aramco's 1975 reserve estimates. Ghawar has accounted for 55 percent to 60 percent of all Saudi oil produced. If these numbers are correct, Ghawar's oil is 90 percent gone.

ANWR would have perharps 10 billions of recoverable barrels - enough to replace Ghawar (5% of world production) for 5-7 years.

No super giant fields have been found in the past 25 years, and all the rock structures on the planet where such fields could be found are known.

We will not find more oil. We will squeeze more out of the existing fields, thus generating new "reserves" (in their economic definition), but we are already running out of the cheap and easy to produce stuff.

Peak oil is very real.

Display:
Jerome could you let us have your take on the recent Saudi-Chinese deal?

Curious in Chalabre :-)

by Lupin on Thu Jan 26th, 2006 at 09:49:07 AM EST
Everybody talks to everybody in that business. I don't see anything ominous there, but it's a useful reminder to everybody that China is now the second biggest importer of oil and that a clash between them and the USA sees its probability increase with each passing year of massive oil demand growth...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Jan 26th, 2006 at 09:57:37 AM EST
[ Parent ]
Why isn't this diary part of the $100 oil series?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 26th, 2006 at 09:52:13 AM EST
Choose:

  1. I forgot
  2. The title would have been too long.

Should I makes this diary an honorary memeber of the series?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Jan 26th, 2006 at 09:58:21 AM EST
[ Parent ]
Excellent diary, Jerome.

Thinking about this leads me to several questions, most of which are probably rhetorical.  Or maybe I know the answers but I'm too mad to admit it.

Why is there not more alarm about this?  Why is there not a concerted effort to wean our societies off of our petroleum dependency and develop/establish practical alternatives?  Do we actually have to run out of oil before anyone takes this seriously?

None of this is a secret, and it is also not terribly new.  I remember reading a story in a children's magazine 25+ years ago about how petroelum was a finite resource that we were going to run out of pretty soon, and we would need to find alternative sources of energy.  I was a kid then, and I assumed that all the adults running the world realized this and would do something about it.  Now, a quarter of a century later... they have not, and I'm royally pissed off about it.

by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Jan 26th, 2006 at 10:14:09 AM EST
Do we actually have to run out of oil before anyone takes this seriously?

I mean, of course, anyone besides us... :0

by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Jan 26th, 2006 at 10:24:35 AM EST
[ Parent ]

Do we actually have to run out of oil before anyone takes this seriously?

Well, it seems we are having a grand scale demonstration that the answer to your question is yes.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jan 26th, 2006 at 10:39:23 AM EST
[ Parent ]
People in the energy industry certainly take it seriously. That's why they're investing in alternative sources. The political sphere is, as usual, follwing rather than leading...
by asdf on Thu Jan 26th, 2006 at 05:29:52 PM EST
[ Parent ]
I think that, at the moment, political decisions with respect to oil are mainly based on economical implications. A sudden shift from oil to some other energy source (how about hydrogen, for instance?) would lead to some serious adverse economic shocks in a number of oil-exporting countries which will further affect negatively economies in the rest of the world.

Nevertheless, even if we set the economic aspect of the matter aside a shift to another energy source would put a serious strain on international relations between exporters and importers of oil. Even at the present moment relations between the US and OPEC countries aren't too rosy, imagine what would happen if the vital oil relationship ceased to exist...

Funny thing is that sooner or later we'll have to go ahead and abandon oil just because we won't have any more of it left. Then it will present a much harder blow to both economic and political life than if the new source was introduced gradually. However, currently, no one is willing to even consider the gradual implementation of a new fuel as viable. Car producers have their long-term contracts with engine producers, politicians have their trade arrangements with oil-exporting countries, and people aren't too unhappy with €1.5 per liter of unleaded so I guess we're stuck with the current situation... at least for a while.

by Navaros (pshipkov@@gmail.com) on Thu Jan 26th, 2006 at 06:56:19 PM EST
[ Parent ]
The bigger question is, if you're a politician, how do you broach the issue without sparking a panic? Remember that the media (and the public) operate on soundbites: you don't get to write a lengthy, nuanced diary.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 26th, 2006 at 05:38:11 PM EST
[ Parent ]
Well, here's a recent attempt. First, the wrong-headed editorial in the red-state newspaper:


Renewables revisited

Report offers alternative energy reality check

Alternative energy advocates are masters of painting pretty mental pictures, of an America liberated from its dependence on "dirty" fossil-fuels and powered by "clean" alternatives: wind turbines, solar panels, hamster wheels or whatever the panacea of the moment is. And those pretty pictures obviously have curb appeal. Colorado voters in 2004 imposed statewide renewable energy production quotas on most utilities, based on promises (already proven false) that such mandates would be virtually cost- and consequence-free. A number of other states have joined the fad.

California's Public Utilities Commission last week approved $3 billion in subsidies for the California Solar Initiative. And many members of Congress -- including Colorado Sen. Ken Salazar -- have been completely swept away by the craze for so-called "renewables," and want to pour even more of the taxpayers' money into increasing their miniscule contribution to the nation's energy portfolio.

But a new report to the California Energy Commission may provide a sobering reality check for these folks. The study, conducted in part by the Lawrence Berkeley National Laboratory, found that "between 20 and 30 percent of renewable energy projects that sign contracts with electric utilities are likely to never reach operation or otherwise fail to meet expected performance metrics," according to a report posted on Greenwire, an environmental news site. And reliance on certain solar power projects could result in a "50 percent or higher failure rate," according to researchers.

This news isn't likely to be received well in states that are sipping the renewable-energy-Kool-Aid -- or gulping it, in California's case. "As California considers adopting the nation's strongest mandates for renewable portfolio standards (RPS), the likelihood of substantial project failures poses a threat to reaching those goals, the report says. California law requires utilities and other load serving entities to meet a 20 percent RPS goal by 2010, but Gov. Arnold Schwarzenegger (R) and the California Public Utilities Commission want to accelerate the RPS to 33 percent by 2020," reports Greenwire.

The study didn't look at project failures just in California, however, but in other states and in foreign countries, suggesting across-the-board problems delivering on the pretty picture's promises. We know, we know: solar and wind power are still "emerging" technologies. But solar has been an "emerging technology" for three decades at least and still can't stand on its own without a government crutch. And the only reason wind power has become cost competitive with coal or natural gas is because it is subsidized and the cost of fossil fuels has gone through the roof.

"Causes of contract failure outlined in the report include: failure to site or obtain permitting for the project; interconnection problems; financial failure by the developer; lack-of-creditworthiness by the utility buyer; increased development costs; project delay because of unstable political environment, with regard to federal production tax credit subsidies; and technology issues," according to Greenwire. "Wind power projects, for instance, face delays from a growing domestic shortage of turbines, while biomass plants often have difficulty securing costeffective fuel supplies."

A wind power project in the Midwest lost one nervous financial backer, for instance, when controversy arose because bats were being killed by turbine blades.

Say what one will about old-fashioned coal-fired power plants, or their gas-fired counterparts, but they are 100 percent proven technologies that deliver electricity not just when the wind blows, or when the sun shines, but on demand -- which is what Americans expect when they flick on the light switch. And the same can't be said for many pie-in-the-sky alternatives.


http://www.gazette.com/display.php?id=1313939&secid=13

Then, the well-stated counter-position, one which perhaps even a politician can understand:


Complex energy issues require informed solutions

"In trying to address the critical issue of U.S. energy supply, The Gazette surprisingly misses the big picture ("Renewables revisited," Our View, Jan. 21). Meeting U.S. energy needs via natural gas would require large volumes of liquefied natural gas imports. The countries with the required natural gas resources include Iran, Russia, Iraq, Saudi Arabia, Venezuela, Qatar and the United Arab Emirates. Relying on these countries for our energy needs has predictable outcomes: war, terrorism and price unpredictability.

Gazette readers should be heartened that Sen. Ken Salazar is showing the political will to implement policies designed to prevent deployment of our local military families to Iran (or Saudi Arabia, or Russia, or Venezuela) for another five to 10 years of "democracy building" and natural gas supply security. It is incomprehensible to many people why the U.S. should continue to pay hundreds of billions of dollars to bloodthirsty rogue regimes, which then use our money to establish religious schools of hate, build nuclear and biological weapons of mass destruction and attack our country.

As for wind power costs, while prices vary by geographic location, a general rule of thumb is that wind power with no government subsidies is less expensive than natural gas generation at natural gas prices exceeding $6/Mcf (1,000 cubic feet). Henry Hub natural gas prices throughout 2005 have ranged from $6/Mcf to $15.41/Mcf, and are now at $8.90/Mcf. The best thing that could happen to energy policy in the U.S. is an equalization or elimination of government subsidies, because coal and natural gas based electricity remain more heavily subsidized than wind power. Preferential fossil-fuel subsidies include depletion allowances, expensing of exploration costs, foreign tax credits, the Strategic Petroleum Reserve, and the Big Daddy of them all, our decades of Middle Eastern military support. A recent example of the "subsidy" disparity is the Energy Policy Act of 2005 in which coal, oil, gas and nuclear received $8.7 billion, and all renewable sources combined received $2.7 billion (the full extent of the subsidy).

Using so-called proven technologies to generate electricity is a fundamental position in the risk-averse utility industry. Denmark uses modern wind turbines to generate 20 percent of its electricity load. Utilities across the U.S. have recognized the financial benefits of today's "proven" wind turbines and are rapidly installing them, which is what has led to the current domestic shortage of these machines!

Energy is a required foundation for prosperity in all countries worldwide, and is a more complex issue than drill vs. don't drill. Proposals that deepen the reliance of the United States on unfriendly and enemy regimes shortchange our armed forces and weaken our country. The relative costs and risks of different energy sources are changing rapidly. Accurate comparative information will make a complex picture clearer and be more useful for public policy decision-making.

Thomas Conroy
Vice president
Wind Tower Composites
Monument


http://www.gazette.com/display.php?id=1314090&secid=13

Perhaps the most important point is that in this very reactionary newspaper, they allocated space on the editorial page to print this entire response. People are awakening to the issue; the problem now is how to get the politicians out of the way.

by asdf on Thu Jan 26th, 2006 at 08:06:55 PM EST
[ Parent ]
Better yet, send it to magazines, play it on radio. It's time the public starts worrying. Since the big oil companies don't just yet, as they have enough tricks upon their sleeves yet to survive the downfall of oil.

But then again, you just summed up yet another reason why I'm not eager to move into the oil industry.

by Nomad on Thu Jan 26th, 2006 at 03:40:22 PM EST


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