The Anatomy of Oil Decline

I spend a lot of words talking about oil decline without explaining what it is or how it works… well. If you’re looking for a slightly more technical take… here’s one on Cantarell.(Gerson Lehrman Group)

An average well in 1981 would produce 29,000 bbl/day. Development continued with production coming from many of the fields including Ixtoc, but as flow rates fell, gas lift equipment was installed. By 1995, the average well would produce 7,000 bbl/day. The gas lift program was expanded and by 1999, total production from the complex was 1.4 million bbl/day.

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Had there been no pressure maintenance installation, by 2004, production per well would have been about 3,200 bbl/day.
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Pemex decided to inject nitrogen gas into the dome of Cantarell. That began in May of 2000 at an initial rate of 300 million cubic feet/day and was expanded through the year with a total of four stages to 1,200 million cubic feet/day.
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The original estimate of reserves was 17 billion barrels but this was raised to 19.3 after the nitrogen gas had pushed the original oil/water contact back to its original position. By 12/31/2006, cumulative production was 16.6 billion barrels. In 2004, the complex produced 2.136 million bbl/day which declined to 1.525 million by 2007. Production declines as the expanding gas cap intersects the well bores.
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Today the end is near with expectations that Cantarell will become uneconomic as early as 2014 and no later than 2019.

Newt Gingrich can’t Count (oil) he’s dangerous.

Today the House Energy Committee got a visit from Al Gore… and he ruffled some feathers… especially those of Mr. Gingrich.

Here’s his response

He says that Al Gore presented “misleading ascertions”.

Newt says…

[Al Gore] said for example, the rate of new discoveries, is falling for energy. That’s factually not true.

Actually, Newt, it is true. And it has been true for over 60 years… and here’s the proof Newt:

Discoveries

In 1965, 60 Billion barrels of conventional oil were discovered.

But Newt goes on:

In the last 3 years we have found (who is we?) have found 100 years of Natural Gas in the United States

That’s nice Newt. If I took only one sip out of a coke bottle every day then it might last 100 years as well. The question Newt, is not the amount, it is the rate. How much of the 20 million barrels of oil that the US consumes in a day can that “new natural gas” displace.

The answer, according to the US Energy Information Administration (PDF), is very little.

From 2004 – 2007, 46 Trillion Cubic Feet of “Proved Reserves” were added. Yet Estimated Production only grew by 0.2 Trillion cubic feet a year… the US consumed 23 Trillion Cubic Feet of Natural Gas in 2007

The picture for oil and oil substitutes like Natural Gas Liquids is even more grim:

From 2004 – 2007, 1.6 Billion Barrels of Crude Oil Equivalent were discovered of Natural Gas Liquids reserves. Yet estimated Production grew by 4 million barrels a year. That equates to 11,000 barrels of oil a day… roughly 0.06% of the daily 18 million barrel consumption in the US.

And finally, for crude oil…

From 2004 – 2007, -547 million barrels. Repeat. Negative 547 Million Barrels of crude oil were “discovered”….. in other words, we used it up faster than we discovered new stuff. Which brings us back to the graph above, the graph that matters.

Production of crude oil in the United States was 1.8 Billion barrels in 2004, and 1.7 in 2007. That’s a drop of 100 Million Barrels of oil a year or 0.5%.

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I hope that clarifies things for you Newt. The party is over. I know you’ll never accept it… probably not even when either your country collapses under its own debt to oil producing countries, or riots erupt from gas shortages and skyrocketing prices… but at least there are some who get it.

And by the way, from 1997 to 2007 total estimated production of Crude Oil plus Natural Gas Liquids went from 3 Billion Barrels of oil a year, to 2.5 Billion Barrels. A drop of 16%.

Brazil can’t save you Newt. Even without the current global recession, production from the new Brazilian finds wasn’t going to reach its full potential of 1.1 Million barrels a day (400 Million a year) until, wait for it, 2017.

Lets see.. in another 10 years we will likely drop another 16%… another 500 Million a year… much more than Brazil could provide, if even it all went to the US, which it won’t.

You’re dangerous Newt. You’re Dangerous!

Hey BC NDP’ers: Al Gore wants Cap and Trade…. plus Carbon Tax

This at least makes me feel a little better about Carole James cynical opportunism….

If you don’t feel like clicking (come on, it’s only 1 1/2 minutes long!)… at a Senate Hearing discussing what sort of Climate policy and bill the US Congress should pass, a Senator mentioned that a Carbon Tax is a Carbon Tax, but a Cap and Trade system is a “huge tax” as well.

To this, Al Gore said… a Carbon Tax is a tax, and Cap and Trade is expensive, but he actually supports HAVING BOTH… first the Cap and Trade, to encourage a global market and get more countries into the system… and then a revenue neutral Carbon Tax to further encourage reductions.

I’ll just close my eyes and believe that Carole James is really just in Al Gores head… it’s all good. Right?

On another note… Al Gore also directly mentioned Peak Oil in his comments to Senate leaders today… unfortunately it’s not in the video linked above, but the other rumour going around is that there some sort of “An Inconvenient Truth 2” focused on Peak Oil is in the works.

Hey Al? Can you hurry it up please? Thanks.

Here’s another opinion on the NDPs plan.

The NDP should Axe the Tobacco Tax.

Carole James

Yes, they should. It adds $37 to a carton of cigarettes. Canadians have pumped $138 Billion into government coffers since Louis St. Laurent levied the first tobacco tax in 1950.

And where has that gotten us? Censorship. Certain companies can’t advertise in certain places… or at all? Discrimination. Folks, stuck outside, 5 metres from everything, trying to lite up in the cold Canadian wind.

Is this the Canada we want to live in? Where habit is treated like a threat rather than a comfort? Where businesses are sued instead of embraced? Where hospitals are filled with the sick and needy… rather than the terminally happy?

In 1965, 60% of Canadians were loving life in Marlboro country, now only 25% enjoy that priviledge.

Carole James, thousands of British Columbians are counting on you to keep fighting against these repressive regimes. Not since “Colonel” Drew stood in the House against another giant taxgrab in 1950 has there been someone to fight against these grave injustices. Good Luck.

George Alexander Drew

***THE PRECEDING POST WAS EXTREMELY SARCASTIC —- I DON”T EVEN SMOKE —- THE CARBON TAX IS THE FIRST STEP TO ENDING OUR ADDICTION TO OIL —- OPPOSING IT TO SCORE POLITICAL POINTS ONLY ENDANGERS MORE LIVES DUE TO CLIMATE CHANGE AND RELIANCE ON INCREASINGLY PRECIOUS CRUDE OIL AND NATURAL GAS***

Peak Oil and Gas biting hard in Alberta – Have-Not soon.

While both the Liberals and Conservatives in Parliament talk up the potential of the Tar Sands to keep votes in Alberta… the reality on the ground is starting to really hurt the revenues of Canadas’ richest province.

As far back as August last year, at the apex of the oil price shock, there have been major warning signs that peak oil and gas production was starting to hurt Albertas revenue/royalty stream.

From the article last year:

Natural gas provides about $6 billion of the province’s $10 billion oil and gas resource revenue and accounts for most of the roughly $27 billion spent each year to explore for conventional hydrocarbons – which, incidentally, dwarfs high-profile oilsands spending.

In 2008, Canada’s natural gas output and drilling have both been in decline, while south of the border the natural gas drilling business is going flat out and gas output is up. Provincially, gas production is up markedly in British Columbia – but given Alberta’s 90 per cent weight in Canadian production, Wild Rose Country’s performance is pulling Canada’s national figures sharply lower.

This is the definition of Peak Oil my friends… pouring more and more money into exploration/wells just to offset the production lost due to a peaked resource… and because Natural Gas tends to decline much more sharply than Oil, the reliance on Gas royalties puts Alberta in an even worse position.

And now that oil prices are “low” at $50, oil companies don’t want to invest in a futile effort… here is yesterdays article:

Natural gas makes up two-thirds of all activity in the oilpatch and production has fallen almost 15 per cent over the past two years, taking the biggest contributor to the government’s revenue stream down with it. From a peak of about 14 billion cubic feet a day in 2001, Alberta’s gas production has steadily slid to a little more than 12 billion cubic feet at present.

So what? you might say… we have the Tar Sands. Well, without Natural Gas, you have no tar sands as it is required to melt or steam the oil out of the sand.

The implications of Peak Oil and Gas in Alberta?

  • Alberta will likely be a “have-not” province within 5 years, and stay that way indefinitely, much like the maritime provinces
  • Natural Gas prices in North America will rise sharply over the next few years as US production starts to fall and increased demand from a recovering economy and rejection of foreign oil takes hold.
  • A nuclear energy plant will be built somewhere near Fort Mac in order to replace the energy lost to declining Natural Gas.
  • LNG imports into North America will increase putting more upward momentum on Natural Gas prices.
  • NAFTA will be center stage once more, as the clause requiring Canada to export its fossil fuels to the US starts to worry citizens and politicians alike.