Heading Out

Seeking the winds that help to sail on Shakespeare's tide.

Friday, November 19, 2004


Today we found that Petroleum World gave the figures for oil production last month:

OPEC crude production rose 110,000 b/d to 30.3-mil b/d in October from 30.19-mil b/d in September, a Platts survey of OPEC and oil industry officials showed Tuesday.

Iraq, whose output rose to 2.2-mil b/d in October from 2.1-mil b/d in September, accounted for almost all of the increase. Excluding Iraq, the 10 members nominally bound by OPEC's formal quotas pumped an average 28.1-mil b/d in October, just 10,000 b/d higher than September's 28.09-mil b/d.

Algeria, Kuwait and Nigeria boosted output by 10,000 b/d, 40,000 b/d and 20,000 b/d, respectively, while Iranian and Saudi production fell by 30,000 b/d each.

This is interesting since it suggests that there is a problem is Saudi, which as indicated elsewhere by Bill Powers in likely to be due to a decline in production from the Ghawar field, which would translate into around 360,000 b/d decline over a year and which could be tied to their method of extraction which is very similar to that of the Yibal field in Oman
Yibal’s life cycle is important because many of the same EOR techniques used on the field have also been employed on the world’s largest oil field, Saudi Arabia’s Ghawar. In a February 2004 symposium at the Center for Strategic and International Studies in Washington, DC, energy investment banker Matt Simmons confronted two Saudi Aramco officials with the suggestion that the advanced recovery techniques used at Ghawar, which produces approximately 4.5 million bbl/d, have created an illusionary “fountain of youth” for the field. Simmons’ theory, which is based on the review of over 200 technical papers, suggests that the combination of horizontal drilling and water flooding has allowed Aramco to keep Ghawar production flat at the expense of future production. More importantly, Simmons believes that Ghawar’s rising water cuts indicate that the field is about to head into terminal and irreversible decline. Should Ghawar’s water cuts keep rising similar to Yibal’s; the world will soon experience triple digit oil prices.

The Yibal field was doing quite well with steady production until they tried the new methods and as Shell has found the end result has been close to catastrophic:
"The declines in the Yibal field are spelled out by officials of the joint venture in two papers that were published last year by the Society of Petroleum Engineers. The papers have different numbers: both say production peaked in 1997, but one said it declined to its current rate of 88,057 barrels a day by 2000 from a peak of 251,592, while the other said it fell to 95,000 barrels from 225,000. A spokeswoman for the society said she could not explain the difference.

Both papers say that about 90 percent of the liquid coming out of the ground is water and 10 percent is oil. The high volume of water, one paper said, comes in part from the water that Shell injects into the ground as part of its horizontal drilling technique, which it introduced to Oman in the early 1990's. The relatively high volume of water being pumped up adds considerably to the costs of extracting the oil."

Current production from that field is quoted elsewhere as having fallen beteen 2001 and now to less than 50,000 mbd from the peak of around 250,000 b/d. What makes this more worrisome is that the same techniques were applied in Saudi in the Ghawar field which currently produces between 4.5 and 5 mbd (6% of the world supply) and some of those wells are already flowing 50% water. This could mean an imminent collapse of production from that field, which would not be pleasant. For while the Saudi Oil Ministry has talked about increasing production it is only by on the order of 1 million b/d which must be set against these losses and the fact that the Saudi reserves are currently considered to be the only source for matching the increase in demand for oil world-wide next year, which is postulated to be at around 2 million b/d.

By the way while all these facts were pulled from the various sites today, and while all of this, and a lot more, is true, I am actually posting this as a practice on how to import text from other sites. Following this I have to learn to import graphs so that you can see how production from non-OPEC countries is now in decline, and that life could soon become a whole lot more interesting. For while Europe could cope with $7 a gallon for gas quite easily, paying $100 for a fill-up might be quite an eye opener over here.


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