Global Oil Production Peaking: What Happens Now?

One needs to note that the energy issues at hand are not purely economic. While the market will indeed force supply and demand into sink, the issue of petroleum reserves and exploration is not an economic issue but is rather an issue of geology.

While it is true that non-conventional sources, such as the synthetic oil from the tar sands, will provide additional reserves and production capacity, one needs to be cognizant of the decline rates of the super giant and giant fields. There are in excess of 40,000 oil producing fields in the world, but 94% of all known recoverable oil is concentrated in 1,500 giant and super giant fields. Of this 94% the majority can be found in the Middle East, and particularly in the

This triangle accounts for basically all the oil coming from the region. Saudi Arabia produces as astonishing 95% of its oil from only six fields! These fields are extremely old in comparison to other fields and their best know and largest field Ghawar, which has accounted for 60-65% of total oil production, is more than 50 years old. Ghawar has been resilient to less than stellar reserve management and massive water injection which has resulted in bacterial contamination of the field.

Peaking of Ghawar will occur sooner rather than later. Recent horizontal multi-lateral wells indicate the coming of a peak. Unlike vertical wells, which are able to capture the oil from its natural geologic pressure, horizontal wells are used to extract oil between the injected water and the gas cap which has formed above the oil column. This is an indicator of peaking. However, no field as large as Ghawar has been found so it is difficult to speculate the decline rates or how long a plateau can be maintained.

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