Sharon Astyk: We are becoming the Saudi Arabia of dumb.

A few readers have asked me to comment on Goldman Sachs’ prediction that the US will be the world’s largest Oil producer in 2017. I am delighted to do so. Several possible comments come to mind.

1. Apparently Crystal Meth has become the trendy drug at Goldman.

2. How did the Yes Men get this published under Goldman’s Name?

3. Goldman is apparently even less optimistic about Saudi oil production than I am. They think the depletion curve is going to be a straight line downwards.

4. Oh, wait, they are talking about “oil” not oil! That “oil” stuff is almost infinite – you can magically turn anything into “oil” without any infrastructure or energy costs at all – rocks, corn, algae, tar sands, hyperbole… We is gonna be the Saudi Arabia of “oil!”

(And may I just ask yet again why it is that politicians speak of being the Saudi Arabia of anything as a good thing?)

Art Berman has an analysis at the The Oil Drum that is a perhaps a little less snide than mine, while amounting to much the same thing:

NGL and LRG are not crude oil. These result from processing impurities and various non-methane hydrocarbons and fluids to produce what is known as ‘pipeline quality’ dry natural gas. These liquids and liquefied gases include ethane, propane, butane, pentane, and certain condensates that do not naturally separate from crude oil. They contain approximately 60-70% of the heating content of oil so a barrel of NGL/LRG is not comparable to a barrel of oil. In fact, ethane, the largest component of NGL, is not even a fuel and is used primarily to make plastic.

U.S. crude oil production growth will come principally from the Bakken Shale in North Dakota and Montana, and from the resource plays of the Permian basin in West Texas and New Mexico. Bakken-Three Forks production has reached about 400,000 bopd and some believe it could eventually exceed 1 Mbopd. Most of the renewed activity in the Permian basin is from shale and low permeability limestone reservoirs. Permian production has increased from a low of 841,000 bopd in 2004 by 100,000 bopd in 2010.

Early Eagle Ford production estimates in South Texas are as high as 750,000 bopd of liquids that include both condensate and NGL (Bernstein Research, August 24, 2011). Condensate, like NGL, is not crude oil although it can be used as a fuel. While there is great enthusiasm and hope for the Eagle Ford Shale, it is a very new play and there is insufficient production history in the liquid portion of the play to confidently estimate reserves. It seems highly speculative to extrapolate from current rates of about 14,000 to 750,000 bopd by 2015.

In the Comments thread to the same post, Jeffrey Brown makes the observation that all this optimism comes without a real comprehension of demand side issues:

On the natural gas side, a good deal of the blogosphere is talking about the US becoming a natural gas exporter. The most recent annual EIA data show that the US consumed 9% more natural gas than we produced in 2009, while we consumed 12% more than we produced in 2010. While we had a small increase in production, consumption rebounded, causing net natural gas imports to increase year over year.

Global annual C+C production has been between 73 and 74 mbpd since 2005, except for 2009. Global annual total petroleum liquids production has been between 81 and 82 mbpd since 2005, except for 2009. In both cases, this is in marked contrast to the rapid increases in production that we saw from 2002 to 2005.

We have seen a measurable decline in Global Net Exports (GNE), with 21 of the top 33 net oil exporters showing lower net exports in 2010, versus 2005. Furthermore, a simple model, and numerous case histories, show that net export decline rates tend to accelerate with time.

The data show that the developing countries, especially China & India, are generally outbidding the developed countries for access to GNE. Our work suggests that the US is well on it way to “freedom” from our reliance on foreign sources of oil, just not in the way that most people hoped.

All of our problems are over, man! Let’s just get out and party!

Sharon

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