Saudi Production Profile
Guest post by David Archibald
World conventional oil production peaked in 2005 and has been on a plateau at about that level ever since. This graph suggests that the market changed from inherent over-supply to inherent tightness in June 2004:
Figure 1: World Oil Production and Oil Price 1994 – 2011
World conventional oil production will at some stage tip over into decline. That may be this year or it may be as late as 2015. The decline in US production began over four decades ago in 1970, as predicted by King Hubbert in 1956.
The next big one to tip over into decline will be Saudi Arabia. In determining what that will look like and its consequences, the first thing to do is a logistic decline plot of Saudi production history. Figure 2 shows the result:
Figure 2: Saudi Arabia Logistic Decline Plot
Figure 2 shows that the Saudis have produced about half of their ultimate recoverable reserves. When half of a nation’s oil has been depleted, production rate decline is inexorable. From this plot, total ultimate recoverable reserves for Saudi Arabia are estimated to be 275 billion barrels. From this plot, Saudi Arabia is on the cusp of decline. So what will that decline look like?
Figure 3: Saudi Arabia Conceptual Crude, Condensate and Natural Gas Liquids Forecast
This figure was produced by Euan Mearns in 2008. The red volume on the bottom right is the Ghawar Field and the green is the rest of the heritage super giants. The steep fall in projected Ghawar production from about 2012 would be due to an expectation that the field is watering out on its crest as shown in this figure:
Figure 4: Two cross sections of a reservoir simulation of the northern part of the ‘Ain Dar region of the Ghawar Field
Figure 4 shows the progressive displacement of oil by water over the sixty years from 1940 to 2004. SW is water saturation. The reds are high oil saturation and the green shows where oil saturation is now down to about 50%. To recover further oil from the green areas requires enhanced oil recovery (EOR) tehniques such as carbon dioxide injection.
Figure 5: Regional cross section through the Ghawar Field
This figure is from the American Association of Petroleum Geologists. The Ghawar Field is developed from a north-south trending horst block. It is 174 miles long by 16 miles wide. The producing horizon is the Arab D reservoir at about 7,000 feet.
Figure 6: Saudi Arabia Production Profile 1938 – 2040
From the foregoing, Figure 6 shows the production profile generated for Saudi Arabia. The production decline is 3% per annum which amounts to about 300,000 bopd per annum from the current level. The world can cope with that, but will the Saudis?
Figure 7: Saudi Arabia Population 1960 – 2040
Back in 1960, there were only about 4 million Saudis, now there are 27 million with population growth at 2.4% per annum compound. So, if the current trend continues, there will be 50 million of them by 2040. With population rising at 2.4% per annum and production falling at 3% per annum, we are starting with a net 5.4% per annum contraction in per capital oil production. The effect of that is captured by Figure 8 following.
Figure 8: Saudi Arabia cash available per capita
The forecast in Figure 8 is based on the oil price running up to $200 per barrel by 2018 and then plateauing at that level. The Saudi Govt increased social welfare payments in response to the Arab Spring. As a consequence, their budget is just about break even at the current oil price. If social outlays aren’t increased further, they pontentially have a lot of cash to play with for the next eight years or so, though they are also propping up Yemen with whom they share a land border. The crunch point is reached about 2026 when income falls below constant per capita outlays. As a society and as individuals, Saudis will then find their standard of living falling by 7% per annum compound. None shall weep for them.
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Fraccing technology has indeed been transferred to the rest of the world including Europe and India, where Oilex Ltd has, with US technological assistance, drilled and fracced a pioneering well in the Cambay Province. Pressures encountered were however so high that they struggled to control the well for six months and have still not been able to put it on test. They are nonetheless proceeding with a field development plan.
The Cambay basin covers a massive area and has stacked layers of gas producing tight sands.
It will not take long for this technology , now proven as effective in India, to spread to other basins across the sub continent.
The question is not, “What does the US do if Saudi Arabia doesn’t pump oil”, but, “What does the WORLD do if Saudi Arabia doesn’t pump oil”.
See, oil is traded on a world market basis, and, our OTHER sources of oil in the world would be affected as the other nations in the world seek out those other oil sources too … so not only would we _not_ have access to Saudi oil, but less _Venezuelan oil_ as well as others bid competitively for that crude oil …
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Hubbert was right about “peak oil” in the same way that the inevitable lottery winner is right about his numbers.
There certainly was a combination of govt action and cheap SA oil to account for the drop in the 70s.
Peak oil theories have been around for a long time and they present many interesting graphs and charts – many of which deliberately fail to provide the whole picture.
Fact – we don’t know when peak oil will hit but any prediction of it hitting in most of our lifetimes are developed by narrow thinkers. Sometimes with less than altruistic motivations, though I don’t believe that to be the poster’s position in this case. I have spoken with peak oil advocates in the financial industry mostly, which is where many of them seem to reside. They all seem to fail to remember Mr. Simon, to their own financial detriment.
Technology in oil exploration always improves three things – access, cost, and energy required to obtain. Since none of the charts in this post reference any of these well documented truths – this is a nice article on a specific episoidal issue of supply demand mismatch – which is driven by multiple things, including US monetary policy.
When peak oil really shows up and prices move accordingly – we will find something else to power our mobile transport. I’m not worried and neither should you be – just play oil long against the peak oil fanatics and you will profit handsomely.
@lazyteenager: “I bet the Romans figured those pesky barbarians could not possibly affect Rome. But they did. The biggest enemy is complacency.”
Where is this “complacency” you speak of? Why are so many countries and companies continuing to seek and find new sources of oil and natural gas, expending billions in the process? In the face of dire predictions about “peak oil”, why haven’t they all just given up?
Please don’t tell us it’s “society” that is complacent. The demand for ending government restrictions on searching for, drilling and distributing petroleum and natural gas remains front-page news in America. It’s our government that is “complacent”, in that they believe “alternative energy” sources such as wind and solar can replace oil and natural gas. Experience has shown this belief to be chimerical.
As the relative price of oil rises, more oil is available, and alternate energies become more economically attractive. Peak oil will be a very gradual turn, lasting perhaps numerous decades, with plenty of time to adapt to alternate energies.
While there won’t be a peak oil before we are well ready for it, some of the traditional petrostates are in for some nasty days ahead. They need to keep present infrastructure up to snuff (something many have been lax in doing) while investing in newer forms at a time when the price is down and not soon to rise (due to others competitors). They have also, as mentioned, had high spending on their elites, terrorists, preparing for war with each other and propping up weak allies. As chemistry advances, biomass will start to eat into the market for non-fuel petrochemicals and power from nuclear, hydro and other energy sources can be used to drive chemical reactions in directions which would not be possible otherwise; further displacing oil and transforming it into just another commodity.
rockdoc says:
May 31, 2012 at 7:21 am
“First off the very idea of abiotic oil is so far flung and completely without either experimental, empirical or theoretical sense that to even spout such nonsense on what is supposed to be a science blog is contemptible.”
Careful, this sounds like a “man-will-never-fly” statement – which was also made by experts of the day. I don’t have a position on abiotic oil one way or the other, but I caution you, “solid” experts are prisoners of their education and yours was 30yrs ago.
Snake Oil Baron says:
May 31, 2012 at 8:40 am
I think you are right. Especially because the carbonate needed for the reaction with water and reductive metal catalysis is mainly of organic origin, probably. As the seashells accumulate on the sea bottom, kilometers deep, ocean floor spreading brings it to subduction zones, where friction provides the heat and pressure needed.
Even Vietnam, doing deep well drilling using the Russian yardstick for fault zone hydrocarbon sourcing, has uncovered all the hydrocarbons needed for their development. In N America, we have just scratched the surface, literally.
Peak oil, not for a while yet. New technology means old fields can now be re-visited. Fields once impossible are now coming on stream. As for US production falling. Environmental issues prevent the drilling for oil in many locations.
The US will start drilling soon,
LazyTeenager says:
May 31, 2012 at 4:52 am
The British Empire evolved into the Commonwealth in a gentlemanly manner over time,and as far as I can tell the countries that make up the commonwealth took with them the UK building blocks of civilisation and remain a part of the civilized world that exists today.
Many citizens of Commonwealth countries are regular contributors to this blog and seem quite civilised to me, but I could be convinced about the demise of neanderthals were it not for the AGW supporters…………
Wow, this place is full of “supply siders” this morning. As one who has been in the oil fields since I was born, I have no difficulty in believing that crude oil is getting harder and harder to find. The potential reserves are in deeper and deeper water and in more remote, difficult, locations such as the Chukchi Sea.
Growth in technology, such as horizontal drilling and vertical fracturing, has opened up new, almost impermeable zones, such as shales. However, drilling 10,000 feet vertically, then 10,000 feet horizontally, then isolating 35 zones for sequential fracturing is costly. The breakeven price is about $7 per mmbtu in these wells. Cessation of drilling the shales is already started. Prices will have to rise from near $3 per mmbtu to above the $7 per mmbtu breakeven to keep drilling ongoing, except for those wells that must be drilled to hold the leases.
There is talk of exporting natural gas as LNG but this is just talk at this point. The theory of oil being generated by heat in the calcareous subduction zones, especially in the Middle East near Saudi Arabia has been around for a quite a while but has not been proven as yet. Figure 2 of David’s study belies this theory.
We do need to feel good about shale gas but we would do ourselves a disservice to think that oil will not become more costly and will not go into decline in the next decade — provided the world continues to develop, especially China and India.
JFD
Austin is right.
Hubbert had no way of knowing what technological advances would be 50 years in the future.
Also, the oil prices are based in dollars (that will be changing), and as the value of the dollar falls, the price of oil rises.
Gary Pearse says:
May 31, 2012 at 9:00 am
I am a scientist in life sciences, and have come to realize that abiogenic oil has the science on its side. It is a misstatement, to the extreme, that there is no science behind Abiogenic oil. The Ukrainians actually made oil in high yield (3-4%) in a very short time from carbonate, water, and iron/cobalt catalysis. Not only that, but they clearly explained that “dinosaurs” could not be buried as deeply as oil is found, and proved that the thermodynamics for reduction of organic detritus was totally wrong. Organic matter has a high oxygen content, and all of these compounds must be completely reduced, going energetically uphill!
Ask the genius “Rockdoc” where the seas of ethane, methane and higher hydrocarbons on Titan come from? Prehistoric dinosaur aliens? Must have been a whole slew of them…
jim says: @ur momisugly May 31, 2012 at 3:35 am
…. Of course USA oil production has been increasing lately due to new technologies. We have cut our imports dramatically, with some predicting USA being energy independent in a decade or so.
The Malthusians have been wrong time after time, usually because of their ignoring man’s ability to solve problems….
BTW: increasing world population provides more Eiensteins to solve problems.
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Spot on _jim
Whenever I hear this I think of the The Great Horse-Manure Crisis of 1894
Peak oil is another ” Great Horse-Manure Crisis” Mankind is very capable of thinking his way out of problems if he is given the freedom to do so.
John H. –
When supply cannot keep up with demand, prices increase, thereby rationing available supply. Those who can’t afford oil, don’t buyt it. (And many people buy a little bit less.) But in a market economy there is no shortage unless the government creates one (through price caps, for example). Of course, you will have noticed that you are paying a lot more for gasoline than you did in 2004. This price means that the US is now consuming 16% less oil per capita than it did in 2005 (the first year the oil supply failed to grow at trend). Statistically, it means that 1 vehicle in every 7 is missing from the roads compared to trend; and 1 commercial airline departure is missing in every 3. I think that’s pretty close to a social and economic disaster.
As for WUWT, I am a big fan. This site tends to handle nuances on climate issues better than most non-specialist sites, and non-specialists tend to have incomplete or off-target assessments of climate trends.
The same is true for oil, in reverse. I could spend a couple of hours writing rebuttals to many of the comments I read here on oil because this is a non-expert community wrt oil. (It is a quite expert community with respect to climate issues.) Most the people on this stie have not read three or four articles on Saudi Arabian oil; they don’t know the relationship of Saudi to other countries; they don’t have a feel for demand and pricing trends in oil. If I write here that UAH is a superior source for temperature data than GISS, a lot of readers will know what I mean, and why. If I say that the EIA forecasts the the oil supply will be 350 kbpd higher next April than today, most WUWT readers will not know what that means, or whether it is good or bad, and why. (It is bad.) They don’t know who the EIA is, and whether their bias is low or high. (Low, in this case, I think.) Most people here don’t have a deeper and contextual sense of what’s going on in the oil business. Readers at the Oil Drum do. That’s the point I was trying to make about being “off the reservation”.
No LazyTeenAger, the biggest threat is corruption and moral decay. Just look at DC and the US media!
Bill
LazyTeenager says: @ur momisugly May 31, 2012 at 4:52 am
I could go on forever about people who thought things would never end. But they did.
I bet the Romans figured those pesky barbarians could not possibly affect Rome. But they did. The biggest enemy is complacency.
_________________________
Actually if you dig a little the biggest enemy is cold weather and overburdening with increasing parasitic bureaucracy and red tape.
I am stealing this from CHIEFIO
I suggest you read his whole post about cold cycles (Bond events and 1/2 bond events) and the collapse of empires.
Richard Lewis says:
May 31, 2012 at 6:00 am
WUWThis space and time-wasting drivel on this excellent climate change blog?
_______________________________________
It is all part of the same Malthusians “We are all going to DIE if you do not hand over complete control to us” horse manure that goes along with CAGW and therefore needs debunking as well.
The first thing I do when reading an alarmist anything is to cross-check their figures and assumptions, as it is amazing how often not trusting utterly pays off. Sure enough, actually global oil production was 91.0 mbd last month, a figure above and off the chart in this article, when properly counting production from unconventional sources and oil equivalents. That supply figure is mentioned in a more reliable source, the International Energy Agency:
http://omrpublic.iea.org/currentissues/full.pdf
The following is the real picture, what articles like this neglect:
http://www.crudeoilpeak.com/wp-content/gallery/iea_weo_2010/iea_weo_2010_crude_oil_plateau.jpg
Look at the dark blue part alone, and you are an alarmist.
Look at more, and you understand how much the alarmists leave out.
The shale gas boom in natural gas allows more production of NGLs. Estimates of U.S. natural gas reserves doubled in the past several years due to changes in drilling technology. (Also, although relatively uncommon in first world countries so far, there has been exponential expansion of vehicles running on natural gas directly in some countries, millions of them).
Be careful of “reserve” estimates used for peak doomsaying on anything by the way. Oil is a different situation from elements, but, still, for a few quick examples:
Tin, copper, iron, lead, and zinc all had both production from 1950 to 2000 and reserves in 2000 much exceed world reserves in 1950, which would be impossible except for how “proved reserves are like an inventory of cars to an auto dealer” at a time, having little relationship to the actual total affordable to extract in the future.
http://books.google.com/books?id=yIbH4R77OtMC&pg=PA730%7COnline
If anyone feels they know the future of oil prices much better than the average market expert (where oil futures prices for future years sell for not much higher than now), they can become rich by outbetting the experts. Be careful, though, as matters are far more complicated than alarmists depict.
“The decline in US production began over four decades ago in 1970, as predicted by King Hubbert in 1956.”
Red flag right there. The US Congress banned oil production within the continental states since 1970s. This has been the main reason for “decline,” which otherwise wouldn’t happen.
The rest of the article is dubious at best. I’ve seen similar “doom graphs” all my life, and they always found enough of new oil to satisfy demand.
Oil is ubiquitous, it is the liquid hydrocarbon phase of planetary formation; the question is only of convenience of drilling deep enough. Natural gas is even more ubiquitous, and we didn’t even start to produce it in quantities comparable to “reserves.”
Oil and gas companies are interested in keeping prices as high as possible; they are not eager, therefore, to publish accurate information about available reserves. They even finance the green hysteria to some extent, to cover their behinds and to keep market prices up.
Global oil demand is probably peaking or may have already peaked. There was this notions the BRICs would cause demand to continue rising but with the Great Recession, so much for that. Now, with the Great Recession, population decline in the places that actually matter and technology / conservation, that’s all she wrote. I would not want to me in the oil business now or for the foreseeable future. One price crash … coming up!
Kaboom says: @ur momisugly May 31, 2012 at 7:05 am
….. Being just at the cusp of not being able to meet oil demand is the sweet spot for crude pricing after all.
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And that is the reason oil companies are not about to let the cat out of the bag about abiotic oil, nor are they going to clue in their geologists. If they are funding CAGW for financial purposes why in the world would anyone think they would not lie about Abiogenic Petroeum?
An interesting paper BIOGENIC AND ABIOGENIC PETROLEUM
Every cloud has it’s silver lining. Saudi Arabia becoming irrelevant might a boon to worlds peace.
MarkW says: “Malthus was wrong for two reasons, resources are never limited, and demand is never geometric.
Both may appear that way over short periods of time, but over longer periods of times, other things always intervene.
For resources, as supplies run lower, prices go up, this causes people to be more carefull in their use of that resource, which lowers demand, it also cause producers to produce more, and to search for alternatives.
On the demand side, changing prices always reduces use”
Malthus looked at nature. He was just observing and formulating a law. That we humans are able to control birth rate or switch to another resource doesn’t make the law faulty. Going to another resource still keeps the other limited. Not growing exponentially means the law doesn’t apply.
And btw humankind is not very good at the moment at switching to other energy sources or be more careful in the use of oil. The search for alternatives isn’t going to good either. As Ferd Berple above shows. Humankind has made quite good progress with all kinds of inventions and theories. But usually we don’t know beforehand were it is good for. So now we are in need of some new source of energy and economists are not going to help us with that (were are they good for actually) and physicists can’t be pushed. So all reasons to be careful.