trysail
Catch Me Who Can
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Oil May Rise to $150 a Barrel, Ex-Shell Chairman Says (Update1)
By Eduard Gismatullin and Francine Lacqua
Sept. 18, 2007 (Bloomberg) -- Crude oil prices may rise to $150 a barrel in the next 20 years because demand is growing in China and some other developing nations and reserves are dwindling, said the former chairman of the U.K. branch of Royal Dutch Shell Plc.
The world is running out of ``cheap oil,'' Ronald Oxburgh, the former chairman at Shell Transport & Trading Plc, said in an interview late yesterday from Ireland. ``The world is never going to run out of oil. The price is likely to rise so high, that we simply cannot afford to use it as a cheap fuel.''
Global oil demand is expected to rise about 1.3 percentage points a year from 2004, reaching 5.6 billion tons of oil equivalent in 2030, according to an International Energy Agency forecast from last year.
Crude oil for October settlement traded at $81.38 a barrel on the New York Mercantile Exchange at 12:38 p.m. local time.
In 20 years ``we will have energy consumption patterns changed completely,'' Gundi Royle, a consultant at The National Investor, said in an interview in London. ``The supply constraint at the moment is oil. There is no such thing as supply constraint and reserve constraint for gas,'' which can partly substitute for crude oil along with other fuels.
__________________________________________________________________________
Twilight in the Desert
Twilight in the Desert by Matthew Simmons seriously questions the capability of Saudi Arabia to increase or even maintain production given the mature state of the 7 major fields that produce 95% of their oil. It is sobering. Some of these points will be familiar to those who have reviewed Simmons’ presentations on his company website.
http://www.simmonsco-intl.com/...
The focus of the book is a series of SPE (Society of Petroleum Engineers) papers that have been written by consultants, employees of service companies and ARAMCo employees. Points include -
90% of Saudi oil comes from six large fields that were discovered in the 1940s-1960s during the heyday of exploration in the Middle East (onshore carbonates Ghawar, Berri, Abqaiq; offshore clastics Zuluf, Marjan and Safaniya). Onshore carbonates have poor aquifer support; edge-water drive has been implemented for decades to maintain pressure. Offshore clastics have good aquifer support.
One field (Ghawar) produces ~50% of Saudi Arabia’s oil, and has produced ~60% of the oil that Saudi Arabia has ever produced. The field is divided into sectors – Ain Dar and Shedgum in the north, Uthmaniyah in the center and Haradh in the south. Some sectors have been in constant production since 1951. Generally reservoir properties deteriorate towards the south, consequently the southern portion of Ghawar is less developed. Ghawar produces from the Jurassic Arab-D Formation – superior reservoir qualities are attributed to thin super-K (very high permeability) layers believed to be locally dolomitized carbonate. While the super-K layers have enhanced production for decades, they have typically proved a hindrance when water breakthrough from Ghawar’s extensive edge-water drive occurs at producing wells.
Record Saudi production occurred in 1981 at 10.5 million bbl/d, in the immediate aftermath of the Iranian revolution when 4+ million bbl/d of Iranian crude were taken off the market. According to the most recent IEA oil market report, they produced 9.55 million bbl/d in May of this year. The source of this information after 1982? HARBOR SPIES reporting to a small Swiss-based agency called Petrologistics who watch tanker liftings at Jubayl and Ras Tanura on the Gulf and Yanbu on the Red Sea!
The newest producing field is Shaybah, in the Empty Quarter of Saudi Arabia south of the UAE. Shaybah was discovered in 1968 and has a large primary gas cap. It is produced by a number of exotic multilateral horizontal completions (each with a herringbone configuration) termed 'maximum reservoir contact' wells. Shaybah came onstream in 1998 and it produces from the same Cretaceous carbonate Shu’aiba Formation as Oman’s Yibal Field.
All major fields have been producing almost flat-out for decades, with the exception of the 1980s when Saudi ARAMCO pulled back on production. This respite in production likely extended ‘peak production’ of Saudi oil for a decade.
The fields that ARAMCO is relying on to increase production (at least publicly) - Khurais, Qatif, Abu Safah and Khursaniyah - have all produced in the past with very disappointing results believed related to poor reservoir properties. Qatif is very close to the major refining complex at Ras Tanurah and was once used as a naphtha storage reservoir - an odd use for a field with such high stated potential. Saudi Arabia is relying on these fields, which have never produced more than ~400,000 bbl/d combined, to add more than 1.5 million bbl/d of spare capacity. Currently, developed ‘spare capacity’ is limited to heavy sour production from the offshore Safaniya Field which currently produces less than half of what it did during its peak in the 1970s (at that time, 1.6 million bbl/d).
Implementation of oilfield technology - most notably multilaterals and ‘intelligent’ completions - have resulted in limited incremental gains but tend to accelerate production declines. Yibal in Oman (operated by Shell through its Petroleum Development Oman joint venture) is cited as a primary example of a redeveloped field that failed to meet expectations and shortly faced dramatic water production problems as a result of indiscriminate application of horizontal drilling. ARAMCo’s development drilling has exclusively been horizontal/multilateral for the last decade.
ARAMCo has a hard enough time history matching their dynamic reservoir simulations, let alone generating reliable forecasts.
Secondary and tertiary recovery techniques may extend the productive life of a field, but rarely (if ever) restore peak production achieved during the primary phase of production. Large fields elsewhere in the world are presented in case studies illustrating that all fields are subject to natural decline. Iran, just across the Persian/Arabian Gulf from Saudi Arabia, has never reattained peak 1970s production of ~6 million bbl/d. Iran currently produces ~3.9 million bbl/d, half of which comes from four aging carbonate fields – Gach Saran, Marun, Agha Jari and Ahvaz. Expertly managed fields like Prudhoe Bay (Alaska North Slope), Oseberg and Gullfaks (Norwegian North Sea), and Brent (UK North Sea) – all of which produced ~0.5 million bbl/d or more in the case of Prudhoe during their peak years – have also not avoided substantial decline. Overproduced fields, such as Samotlor in Siberia, decline even more rapidly. Samotlor produced 3 million bbl/d during its peak in the early 1980s, which declined to 300,000 bbl/d by 2000; BP is currently redeveloping it in partnership with TNK.
Saudi ARAMCo, despite substantial effort that includes a state-of-the-art seismic data processing center, has not located a new oil field in Saudi Arabia since 1968. The most significant new find, the Hawtah trend south of Riyadh, was brought onstream in 1990 but has not met expectations in terms of sustained production. Exploration for gas has also met with limited success. The Saudi Gas initiative, an ambitious scheme devised to lure foreign investors into the country to develop gas fields as well as build processing/distribution networks and energy-intensive desalination plants, fell apart. The stated reason was that the terms were insufficient to meet the companies’ (XOM, CVX, MRO, COP, RD) economic screening criteria. However, the potential reservoirs were also described as ‘crummy’ by one executive.
And the big point. Reserves. At the end of the 1970s, when control of ARAMCo was passed to the Saudis, partners Exxon (30%), Chevron (30%), Texaco (30%) and Mobil (10%) reported reserves of 110 billion barrels, this after a REDUCTION of reserves in the mid-1970s believed related to increasing watercut in portions of major fields. Immediately in 1979 reserves were boosted 50 billion bbl by the Saudis. Then in 1988, reserves were boosted an additional 100 billion bbl to 260 billion bbl. Stated reserves have remained static since then, while Saudi ARAMCo has produced a cumulative 45+ billion barrels!
Saudi ARAMCo officials have repeatedly assured the world that they are capable of producing 12, 15, even 20 million bbl/d from their inventory of producing and non-producing assets. Credulous analysts rarely question these projections, which often run decades into the future. ARAMCo steadfastly rejects third-party reserves audits, and dismisses SPE literature as focusing on a limited set ‘problematic’ issues to pursue ‘academic’ research. Saudi officials can also maintain that the decline curves are less steep because they are not motivated by a desire to maximize Net-Present-Value at the expense of Ultimate Recovery - as publicly-traded companies are. Yet ARAMCo has repeatedly stepped into the breach by steeply ramping up production dramatically during times of need – such as the two oil crises and the more recent Iraqi conflicts – likely at the expense of reservoir pressure and ultimate recovery.
I recommend the book, it provides an awful lot of information about a subject that is poorly understood. The book is a bit repetitive at times, I suspect it was rushed into print because oil is such a hot-button topic these days. It’s sobering and a real wakeup call. The book does not advocate a doomsday scenario, rather emphasizing the need for data transparency (ARAMCo, like many OPEC countries motivated by jockeying for production quota, has not released production data since 1982 on a field-by-field basis) and preparedness (through conservation and renewed investigation of alternative sources) for a world in which oil prices top $100/bbl.
By Eduard Gismatullin and Francine Lacqua
Sept. 18, 2007 (Bloomberg) -- Crude oil prices may rise to $150 a barrel in the next 20 years because demand is growing in China and some other developing nations and reserves are dwindling, said the former chairman of the U.K. branch of Royal Dutch Shell Plc.
The world is running out of ``cheap oil,'' Ronald Oxburgh, the former chairman at Shell Transport & Trading Plc, said in an interview late yesterday from Ireland. ``The world is never going to run out of oil. The price is likely to rise so high, that we simply cannot afford to use it as a cheap fuel.''
Global oil demand is expected to rise about 1.3 percentage points a year from 2004, reaching 5.6 billion tons of oil equivalent in 2030, according to an International Energy Agency forecast from last year.
Crude oil for October settlement traded at $81.38 a barrel on the New York Mercantile Exchange at 12:38 p.m. local time.
In 20 years ``we will have energy consumption patterns changed completely,'' Gundi Royle, a consultant at The National Investor, said in an interview in London. ``The supply constraint at the moment is oil. There is no such thing as supply constraint and reserve constraint for gas,'' which can partly substitute for crude oil along with other fuels.
__________________________________________________________________________
Twilight in the Desert
Twilight in the Desert by Matthew Simmons seriously questions the capability of Saudi Arabia to increase or even maintain production given the mature state of the 7 major fields that produce 95% of their oil. It is sobering. Some of these points will be familiar to those who have reviewed Simmons’ presentations on his company website.
http://www.simmonsco-intl.com/...
The focus of the book is a series of SPE (Society of Petroleum Engineers) papers that have been written by consultants, employees of service companies and ARAMCo employees. Points include -
90% of Saudi oil comes from six large fields that were discovered in the 1940s-1960s during the heyday of exploration in the Middle East (onshore carbonates Ghawar, Berri, Abqaiq; offshore clastics Zuluf, Marjan and Safaniya). Onshore carbonates have poor aquifer support; edge-water drive has been implemented for decades to maintain pressure. Offshore clastics have good aquifer support.
One field (Ghawar) produces ~50% of Saudi Arabia’s oil, and has produced ~60% of the oil that Saudi Arabia has ever produced. The field is divided into sectors – Ain Dar and Shedgum in the north, Uthmaniyah in the center and Haradh in the south. Some sectors have been in constant production since 1951. Generally reservoir properties deteriorate towards the south, consequently the southern portion of Ghawar is less developed. Ghawar produces from the Jurassic Arab-D Formation – superior reservoir qualities are attributed to thin super-K (very high permeability) layers believed to be locally dolomitized carbonate. While the super-K layers have enhanced production for decades, they have typically proved a hindrance when water breakthrough from Ghawar’s extensive edge-water drive occurs at producing wells.
Record Saudi production occurred in 1981 at 10.5 million bbl/d, in the immediate aftermath of the Iranian revolution when 4+ million bbl/d of Iranian crude were taken off the market. According to the most recent IEA oil market report, they produced 9.55 million bbl/d in May of this year. The source of this information after 1982? HARBOR SPIES reporting to a small Swiss-based agency called Petrologistics who watch tanker liftings at Jubayl and Ras Tanura on the Gulf and Yanbu on the Red Sea!
The newest producing field is Shaybah, in the Empty Quarter of Saudi Arabia south of the UAE. Shaybah was discovered in 1968 and has a large primary gas cap. It is produced by a number of exotic multilateral horizontal completions (each with a herringbone configuration) termed 'maximum reservoir contact' wells. Shaybah came onstream in 1998 and it produces from the same Cretaceous carbonate Shu’aiba Formation as Oman’s Yibal Field.
All major fields have been producing almost flat-out for decades, with the exception of the 1980s when Saudi ARAMCO pulled back on production. This respite in production likely extended ‘peak production’ of Saudi oil for a decade.
The fields that ARAMCO is relying on to increase production (at least publicly) - Khurais, Qatif, Abu Safah and Khursaniyah - have all produced in the past with very disappointing results believed related to poor reservoir properties. Qatif is very close to the major refining complex at Ras Tanurah and was once used as a naphtha storage reservoir - an odd use for a field with such high stated potential. Saudi Arabia is relying on these fields, which have never produced more than ~400,000 bbl/d combined, to add more than 1.5 million bbl/d of spare capacity. Currently, developed ‘spare capacity’ is limited to heavy sour production from the offshore Safaniya Field which currently produces less than half of what it did during its peak in the 1970s (at that time, 1.6 million bbl/d).
Implementation of oilfield technology - most notably multilaterals and ‘intelligent’ completions - have resulted in limited incremental gains but tend to accelerate production declines. Yibal in Oman (operated by Shell through its Petroleum Development Oman joint venture) is cited as a primary example of a redeveloped field that failed to meet expectations and shortly faced dramatic water production problems as a result of indiscriminate application of horizontal drilling. ARAMCo’s development drilling has exclusively been horizontal/multilateral for the last decade.
ARAMCo has a hard enough time history matching their dynamic reservoir simulations, let alone generating reliable forecasts.
Secondary and tertiary recovery techniques may extend the productive life of a field, but rarely (if ever) restore peak production achieved during the primary phase of production. Large fields elsewhere in the world are presented in case studies illustrating that all fields are subject to natural decline. Iran, just across the Persian/Arabian Gulf from Saudi Arabia, has never reattained peak 1970s production of ~6 million bbl/d. Iran currently produces ~3.9 million bbl/d, half of which comes from four aging carbonate fields – Gach Saran, Marun, Agha Jari and Ahvaz. Expertly managed fields like Prudhoe Bay (Alaska North Slope), Oseberg and Gullfaks (Norwegian North Sea), and Brent (UK North Sea) – all of which produced ~0.5 million bbl/d or more in the case of Prudhoe during their peak years – have also not avoided substantial decline. Overproduced fields, such as Samotlor in Siberia, decline even more rapidly. Samotlor produced 3 million bbl/d during its peak in the early 1980s, which declined to 300,000 bbl/d by 2000; BP is currently redeveloping it in partnership with TNK.
Saudi ARAMCo, despite substantial effort that includes a state-of-the-art seismic data processing center, has not located a new oil field in Saudi Arabia since 1968. The most significant new find, the Hawtah trend south of Riyadh, was brought onstream in 1990 but has not met expectations in terms of sustained production. Exploration for gas has also met with limited success. The Saudi Gas initiative, an ambitious scheme devised to lure foreign investors into the country to develop gas fields as well as build processing/distribution networks and energy-intensive desalination plants, fell apart. The stated reason was that the terms were insufficient to meet the companies’ (XOM, CVX, MRO, COP, RD) economic screening criteria. However, the potential reservoirs were also described as ‘crummy’ by one executive.
And the big point. Reserves. At the end of the 1970s, when control of ARAMCo was passed to the Saudis, partners Exxon (30%), Chevron (30%), Texaco (30%) and Mobil (10%) reported reserves of 110 billion barrels, this after a REDUCTION of reserves in the mid-1970s believed related to increasing watercut in portions of major fields. Immediately in 1979 reserves were boosted 50 billion bbl by the Saudis. Then in 1988, reserves were boosted an additional 100 billion bbl to 260 billion bbl. Stated reserves have remained static since then, while Saudi ARAMCo has produced a cumulative 45+ billion barrels!
Saudi ARAMCo officials have repeatedly assured the world that they are capable of producing 12, 15, even 20 million bbl/d from their inventory of producing and non-producing assets. Credulous analysts rarely question these projections, which often run decades into the future. ARAMCo steadfastly rejects third-party reserves audits, and dismisses SPE literature as focusing on a limited set ‘problematic’ issues to pursue ‘academic’ research. Saudi officials can also maintain that the decline curves are less steep because they are not motivated by a desire to maximize Net-Present-Value at the expense of Ultimate Recovery - as publicly-traded companies are. Yet ARAMCo has repeatedly stepped into the breach by steeply ramping up production dramatically during times of need – such as the two oil crises and the more recent Iraqi conflicts – likely at the expense of reservoir pressure and ultimate recovery.
I recommend the book, it provides an awful lot of information about a subject that is poorly understood. The book is a bit repetitive at times, I suspect it was rushed into print because oil is such a hot-button topic these days. It’s sobering and a real wakeup call. The book does not advocate a doomsday scenario, rather emphasizing the need for data transparency (ARAMCo, like many OPEC countries motivated by jockeying for production quota, has not released production data since 1982 on a field-by-field basis) and preparedness (through conservation and renewed investigation of alternative sources) for a world in which oil prices top $100/bbl.
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