Peak Oil is You
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Page added on March 5, 2014
Can we depend on a “Call on OPEC”, or has OPEC peaked?
Steve Kopits, in his recent presentation at Columbia University, ridiculed the IEA’s often used term a “Call on OPEC“. That is, the IEA looks at the world oil supply and if they see a supply shortage looming on the horizon they then issue a “Call on OPEC” to supply x number of extra barrels and fill that gap. But the next time the IEA issues such a call can OPEC deliver? Or, is OPEC already producing every barrel they possibly can.
One thing for sure, there are eight OPEC countries that are definitely producing every barrel they possibly can, those countries are Algeria, Angola, Ecuador, Iran, Libya, Nigeria, Qatar and Venezuela. The chart below is the combined production of those 8 nations.
All charts in this post are “Crude Only” in kb/d with the last data point Jan. 2014.
There can be no doubt that all eight of these OPEC countries are producing every barrel they possibly can. While it is true that Iran and Libya have political problems that is holding their production back, but political problems in that part of the world are likely to get worse rather than better.
But what about the other four OPEC nations. The chart below shows the combined production of Iraq, Kuwait, Saudi Arabia and the UAE.
It is my contention that not only are these four OPEC nations producing every barrel they possibly can but that they have little prospect of producing much more. I will examine each country one by one.
Iraq has not been subject to OPEC quotas since the the beginning of Mr. Bush’s war and make no bones about producing every barrel they can and hope to produce more, a lot more.
But their production has been relatively flat for almost two years. They may be able to squeeze out a few more barrels in the future but any increase will be very slow in coming.
But what about the other three. First Kuwait.
Kuwait initiated Project Kuwait in 1997 in hopes of slowing the decline of Burgen and increasing production in their northern fields. The project was delayed by political bickering about bringing in outside contractors but finally got underway in early 2007 only to be delayed a year later by the crash. But the project, really a massive infill drilling program, got underway again in early 2011 and has managed to increase their production by some 200,000 bp/d over their 2008 peak. That simply means more infill drilling. But they are clearly at peak right now.
However their production has been flat for almost two years. Recently they announced an effort to increase their “Production Capacity” by another 150 kb/d. Like all other OPEC countries they claim to be able to produce a few more barrels than they are actually producing.
The United Arab Emirates?
The UAE has learned the same trick as every other nation with tired old fields. That is if you drill new horizontal wells that run along the length of the top of the reservoir, they can increase production slightly or at least slow the decline rate. They are looking toppy right now and can expect decline to set in soon.
That leaves Saudi Arabia.
Saudi Arabia was among the first nations in the world to initiate new infill drilling programs. Before they they did this their decline rate of their old fields was averaging 8% per year. They claimed, with that drilling program, they got that decline rate down to almost 2% per year. But that was over eight years ago. I suspect that the decline rate has increased considerably since then.
Saudi has however, been able to keep from declining in net production by bringing on new fields, or rather old mothballed fields back on line. The most recent being Khurais which was brought on line in 2009 and Manifa which came on line last year with 500,000 bp/d and is ramping up to its full capacity of 900,000 bp/d this year. The spike you see in 2013 is Manifa ramping up.
Saudi may be able to produce a few more barrels but not very many. But as, Sadad Al Husseini a former executive at Aramco, said in 2012 “Saudi is producing flat out”. If they did manage to squeeze out a few more barrels it would be only temporary. Saudi is about to go into decline, or at least that is my opinion.
Any “call on OPEC” by the IEA would likely produce about as much new oil as a call on their grandma.
11 Comments on "Can we depend on a “Call on OPEC”, or has OPEC peaked?"
Northwest Resident on Wed, 5th Mar 2014 9:18 pm
The only thing that keeps “Peak Oil” from being true today beyond any shadow of a doubt is the non-conventional oils that have been added to conventional oil for a total daily barrels of oil production. We are in a lull before the storm, a period where the rats are spinning those treadmills as fast as they can in OPEC countries to just barely maintain output levels, and where the oil workers here in the U.S.A. are drilling dozens of holes daily/weekly to squeeze out every last possible drop of that illusive oil hiding in the shales and tar sands. The frenzied activity across the oil producing board reeks of desperation and despair. It may be that oil workers and some investors are making a killing with high oil prices as they are today, but I hope those guys see this period of time for what it is, and I’m sure they do — and that is, the last stand of an oil-driven world.
rockman on Wed, 5th Mar 2014 9:42 pm
NR – I know you understand but I’ll still pretend to pick on you for the benefit of the unwashed amongst us.
“…a lull before the storm”. A LULL! LOL. US consumers were spending $210 billion/yr for oil 10 years ago and today, in spite of surging US production, are spending over $600 billion/yr. And if I recall correctly, the world is spending an additional $2 trillion/yr.
And to turn to the very unfunny side of the lull: the $trillions of our taxes and tens of thousands of lives expended in our various military adventures in foreign oil producing regions.
So a lull like when a 260 mph tornado is blowing up you butt? LOL.
ghung on Wed, 5th Mar 2014 9:45 pm
While we don’t have good figures on how much the Saudis or other NOCs are putting into upstream investments, I expect their predicament is similar to the public companies that Kopits mentioned in his presentation; a case of diminishing returns from significantly more investment. KSA doesn’t need to worry about keeping investors happy as much as Shell, et al, but certainly needs to keep the subsidies flowing to its citizens. At least BPs investors aren’t going to riot if production falls.
Perhaps the old saying will need to be amended to include “… his son will eat his camel.” At that point, the rest of us will likely be well down the back slope of oil production, but KSA and other gulf producers can only ride their one trick pony (camel?) for so long. Oil-induced overshoot is not an equal opportunity employer. Some producers are looking at a very hard landing when the big sucking sound starts.
Oil production isn’t a dead horse, but we’re beating that beast pretty hard these days. The global financial system crashing sooner than later may do us all a big favour; throttle consumption way back.
Northwest Resident on Wed, 5th Mar 2014 9:59 pm
“So a lull like when a 260 mph tornado is blowing up you butt?”
That’s right, rockman. When you have a hurricane of destruction bearing down on you with winds so fast that “cat 5” doesn’t even begin to describe the capacity for the horror and damage that will be done, then you can claim that a mere 260 mph tornado is a “lull before the storm”. It’s all relative!
But excellent point. And thanks for the laugh too. 260 mph blowing up somebody’s butt — what a mental image that conjures up!
noobtube on Wed, 5th Mar 2014 10:11 pm
Why isn’t Europe producing any oil?
Oh, that’s right. They don’t have any.
Yet, these scumbags are always running their mouths about how civilized, advanced, and developed they are.
Well, if you are all that, why are you leeching off of Africa and Africans?
Europe has always been a leech and a burden on the rest of the world (especially Africa).
Nony on Wed, 5th Mar 2014 10:24 pm
Rock is right. There was a very recent time when oil was 60/bbl and we were unhappy about it. Now it is 100/bbl.
Tight oil (shale oil, unconventional oil, whatever you want to call it) has been estimated to have kept the oil price from going to 120/bbl. It has been a rear guard action on price.
Now natural gas? That’s been kick ass.
Dave Thompson on Thu, 6th Mar 2014 12:39 am
Great stats and charts. World conventional crude has been at 73-75 million bbls per day now close to ten years. We have arrived.
Davy, Hermann, MO on Thu, 6th Mar 2014 1:00 am
@Ghung said – Oil production isn’t a dead horse, but we’re beating that beast pretty hard these days. The global financial system crashing sooner than later may do us all a big favour; throttle consumption way back.
G, a part of me finds the idea of a correction or contraction what the doctor would order. If we are lucky enough to go through a financial correction that significantly reduces our standard of living but leaving our support structures in tact we can probably buy a few more years of relative prosperity. This relative prosperity would be plus or minus a great depression standard of living. It is a big if at this point. The current financial system is so far away from a stable state that I fear a correction will be severe and could be a collapse. The sooner we begin the decline and the gentler the decline the more time to adjust. Witness Greece and the changes that society is going through. We will need trial and error and time to land at a new level. I still believe at a point in the not too distant future the systematic risk to a complex global interconnected economic system will cause a significant contraction and or collapse leaving much infrastructure ruined. In a matter of a generation the education level needed for a complex society could also be greatly diminished. We are on the ride down there is no doubt in my mind.
Keith on Thu, 6th Mar 2014 3:17 am
All the unconventional in the world doesn’t help Climate change. We are not in a good place. Something will give.
GregT on Thu, 6th Mar 2014 6:19 am
All of the unconventional oil in the world is only propping up BAU for a brief while longer, while causing further irreparable damage to our life support systems.
The world is starting to wake up to the reality of the damage that we are causing, and climate change will continue to increase in intensity for another 40 years.
It is no longer about luck, it all boils down to ignorance, greed, and sheer stupidity. We are not going to learn the easy way this time. We had our chance and we blew it.
rollin on Thu, 6th Mar 2014 12:32 pm
rockman said
“So a lull like when a 260 mph tornado is blowing up you butt? LOL.”
Good one rock, I need a good laugh. Points out the spinning wheels in the oil system, it’s losing traction. Producing very little more for several times money input.
All those graphs mean very little, without considering the wars and other problems in the region. They do not show the EOR and other advanced techniques needed to nudge production upward (driven by huge monies). They also do not show the falling ability to export.
Ability to draw a little more oil from the ground at huge expense is just delaying the inevitable. The slow descent away from oil.