Last week, the Oil and Gas Journal had a very interesting article entitled,
"Future of deepwater, Middle East hydrocarbon supplies", by Ivan Sandrea and
Osama Al Buraiki. The article was discussing one of the optimistic forecasts
of oil supply (I would say it is a happy hopalong forecast), made by the
Energy Information Agency (EIA). This report suggests that oil production
will increase from 76 million barrels per day(b/d) today to 115 million b/d
in 2020.
Let me start with the conclusion of these authors first, to get your
attention. They write:
ìIf consumption were to stay relatively flat due to a sharp rise in oil
prices, or if alternative energy sources were introduced, resource depletion
could be delayed by several decades. However, under current and projected
trends, world crude oil production will begin to fall within years, not
decades. " Ivan Sandrea and Osama Al Buraiki, "Future of deepwater, Middle
East hydrocarbon supplies," Oil and Gas Journal, June 17, 2002, p. 32
The article notes that there are several major assumptions in the EIA
report. First, it is assumed that we will be able to recover much more oil
from producing oil fields than we currently think. Secondly, it is assumed
that Russia, West Africa and Latin America will provide most of the non-OPEC
supply increases. Third, deepwater Brazilian fields, the West African
fields parts of the former Soviet Union and the Gulf of Mexico deepwater
will produce 7-9% of world oil (5-7 million b/d). Finally, it is assumed
that the producers in the Middle East will double their production over the
next 17 years.
The first assumption, that technology will double our recovery factors is
doubtful as huge investments in waterflood equipment and energy investments
in pumping water through the field are required and often such systems don't
make sense economically. This is something I consider doubtful. We will
improve recovery some but not that much.
The second assumption is not examined by the article. They go on to examine
the third assumption, that the Deepwater will become a major oil supplier
for the world. Here are the plain numbers today. Over the past 13 years,
130 fields have been found in what are defined as deepwater and they contain
20 billion barrels of oil. Only 46 of the fields have been developed and are
producing. The rest are either uneconomic or marginally so at current
prices. The producing represent 12 billion barrels and only 2% of the worlds
global oil and gas production. Many analysists see the deepwater producing
7-9% of world production for only a couple of years after which the decline
in production due to field depletion will be quick. And that then will do in
the second assumption fairly quickly. Many of the undeveloped fields have
been left alone for many years because no one can make money out of them.
Indeed, if you put all those discoveries online at once, you would only get
1 million b/d which is only a little more than 1% of world production.
The authors then look at 3 deepwater areas of the world, Nigeria, Egypt and
the Gulf of Mexico. In Nigeria deepwater exploration began in 1993 and since
then 38 exploratory wells have been sunk. They have found only 4 deepwater
fields, Bonga being the largest of them. Nine years after Bonga was
discovered, and after a $2.7 billion dollar investment, it will begin
producing 220,000 b/d. To achieve the production assumed by the Nigerian
government and by the EIA, one must assume that by 2010 Nigeria's deep water
will be producing 2 million b/d, equivalent to 10 Bonga's. Given that it is
now 2002 and 2010 is only 8 years away, it is unlikely that this production
target will be reached.
Egypt was examined and it has geological problems in being able to increase
its deepwater production by much. The Nile sediments thin to the north and
that means that there is a limited distance beyond which the oil can be
found. They have almost drilled out that far.
The Gulf of Mexico has this said about it:
"Despite the GOM having the largest number of discovered fields of all known
deepwater basins, it also has the highest number of undeveloped fields,
largely because the majority of the fields are not economic under most
scenarios (Table 3). This is partly because the size of many of these fields
is difficult to predict. " Ivan Sandrea and Osama Al Buraiki, "Future of
deepwater, Middle East hydrocarbon supplies," Oil and Gas Journal, June 17,
2002, p. 26
The authors then turn to the inflated reserves which have been claimed by
the Middle Eastern countries. This was done because in the late 1980s and
early 1990s OPEC quotas were assigned based on reserves. REserves
mysteriously grew even though no wells were drilled. Here is what the
authors say:
"Although world proved reserves are reported to be about 1 trillion bbl-of
which two thirds are in the Middle East- this estimate may be artificially
high. ì
ìBeginning in 1985, OPEC members, driven by the desire to increase their
production quotas, which are related to the size of proven reserves, started
reporting huge increases in their reserves. For example, in 1985, Kuwait
reported an increase of 41%; in 1986, Venezuela doubled its reserves; in
1988, UAE reported a tripling of its reserves; and, in 1990, Iran and Iraq
each doubled their proven reserves, while Saudi Arabia reported a 50%
increase, by about 85 billion boe. " Ivan Sandrea and Osama Al Buraiki,
"Future of deepwater, Middle East hydrocarbon supplies," Oil and Gas
Journal, June 17, 2002, p. 28
**
"There have been creditable reports that, in the 1990s, the Saudi government
mandated that the oil reserves would not decline. Thus, in spite of the
production of some 16 billion bbl of oil, Saudi reserves are 3.6 billion bbl
higher now than in 1989.î
ìUnder the generally accepted definition, the current proved reserves of
Saudi Arabia probably would be about 160 billion bbl, leaving some 100
billion bbl as inferred reserves that, at very considerable expense, could
be converted to proved reserves. Similarly, Kuwait currently has about 86
billion bbl of proved reserves, with field growth potential of perhaps 10
billion bbl produced at significant additional expense. ì
ìIn the UAE, 61 billion bbl of oil may be proved, leaving 37 billion bbl of
inferred reserves potentially available at substantially higher cost. In
Iran, perhaps 69 billion bbl of the 99 billion bbl reported as oil reserves
qualify as proved reserves, while in Iraq it is possible that as much as 91
billion bbl of the reported 112 billion bbl of oil reserves may qualify.î
ìIraq hiked its proven oil reserves by 12% in 1996 even though no
significant exploration work was going on at the time. In general, the
Middle East region has reported nearly a doubling of proven oil reserves
since 1980, to 695 billion bbl from 363 billion bbl, largely from inferred
reserve additions. " Ivan Sandrea and Osama Al Buraiki, "Future of
deepwater, Middle East hydrocarbon supplies," Oil and Gas Journal, June 17,
2002, p. 28
Kuwait, they say, has the same reserves today that they had before the oil
well fires burned up about 3% of their reserves in 1990. And inspite of
producing 700 million barrels per year over the past 10 years, no reduction
in their reported reserves has occurred. This means, that they aren't
telling the truth about something.
The Saudi's, they point out, have no money to invest in increasing oil
production, so the EIA, who believes that the Middle East will be the swing
producer, must count on Saudi Arabia for that increase. They are broke ,
their living standard is falling, they have record unemployment, and as I
note on a web page, they are ripe to fall soon.
So, as the authors conclude, world oil production will probably begin to
fall within a few years. All scenarios I have seen for this mythical
increase in future production depend upon unrealistic scenarios.
glenn
see http://www.glenn.morton.btinternet.co.uk/dmd.htm
for lots of creation/evolution information
anthropology/geology/paleontology/theology\
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