From: Glenn Morton (glennmorton@entouch.net)
Date: Tue Jul 22 2003 - 22:40:29 EDT
I am a wee bit behind in my reading and just got to the July 7th Oil and Gas
Journal. One of the leading experts on Middle Eastern Oil has an article in
that issue entitled: "Middle East Oil Production to Peak within Next
Decade," pp 20-28
A. M. Samsam Bakhtiari works for the National Iranian Oil Co. in Tehran. I
have read many of his articles and he is very good and very careful in his
analyses. What he says is worth listening to.
He points out that Saudi Arabia has 260 billion barrels of proven reserves.
To the lay person that sounds like lots of oil. What is often not realised
in such discussions is that the Saudi's have already produced 100+ billion
barrels. Bakhtiari points out that if these reserve numbers are correct, the
midpoint of Saudi production will come within 10 years. Saudi Arabia
produces 3 billion bbl/year so to get to the place where half of Saudi's oil
has been produced will take only 10 years. It is at the mid-point at which
production begins to decline. Bakhtiari notes that the late 1980s reserves
increase from 170 billion bbl to 260 billion might well be a 'spurious
revision'. Thus Bakhtiari observes that the Saudi peak might come earlier.
Oman may be a case in point. During the 1980s Omani oil production went from
300,000 bbl/day to 700,000 bbl/day, They managed their fields very well.
During the 90s the production went up even further to 960,000 BBL/day in
2000. By then Oman had produced about half of their expected ultimate
recoverable reserves. They had produced about 7.5 billion barrels and
Bakhtiari believes that the ultimate recovery will be 14.6 billion barrels.
But in 2001, the bottom began dropping out. Omani production dropped to
840,000 in 2002 and Shell's target for 2003 is only 703,000 bbl/day.
This drop is in spite of Oman putting a huge effort into stopping the
decline.. They applied enhanced recovery projects by the bucket load. They
installed gas injection at two large fields and water injection at another..
They drilled horizontal wells which normally produce huge volumes, but
ultimately make the eventual decline even more rapid. But all this has yet
to stop the decline. Bakhtiari's comment:
"Put in a nutshell, the Oman oil story is a caveat for other Middle East
producers. Oman's track record had been excellent with no hint at the
dramatic reverses of the past 2 years. Moreover, with the highly experienced
Shell supermajor advising on the projects, inadequate tecnology or services
should not be a factor." p. 21
Bakhtiari's article says that the Middle east will peack out about 2010. His
figure 6 predicts that the world production will peak
out in only 2 years. Given the number of articles like this one over the
past 2 years, one thing is clear--the oil industry is very concerned about
where the oil will come from.
Some people, like my friend, economist Michael Lynch, believe that
technology and the inevitable price rise will bring forth new supplies. I
hope he is correct. I simply don't think so because each generation of
oilmen find about 1/8 of the oil the previous generation found. And that is
using vastly improved technology. A case in point is the North Sea where I
spent 3 wonderful years. In the 1970s, 19 billion barrels was found. In the
1980s, only 5.6 billion and in the 90's only 2.7 billion. What does this
mean for production? Grim things. In 1985 there were 200 fields producing
nearly 2.7 million a year. Just 20 years later there are 900 fields
producing only 2.4 million.
The future simply doesn't look bright--literally.
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