Oil Problems comin' round the mountain

[Augustine2004]

Norway had long been an oil exporting nation. But today supposedly many of its fields are 'dead,' or in oil industry parlance, 'fully mature.'

Guess what? The biggest find in Norway's history was recently announced by Lundin Petroleum, thanks to a technological revolution--3D imaging of the netherworld. 'Today, . . . Halliburton claims it can hit a spot the size of a coffee can three miles away.'
So, we are not going to run out of oil.
(hat tip to Matt Badiali. I can't post a link. It's email and anyway Tweb prohibits anything that may be advertising.)

Good gracious, think of it, maybe we can get an image of Satan someday.

[Augustine2004]

WTI prices 30% discount to Brent! Seemingly suddenly US oil production is flooding the market. And Anadarko just announced an elephant find in Colorado, the biggest in the USA in > 40 years. Who knows whether even bigger elephants underground are waiting to be found?
Goldman Sachs says US production will eventually > Saudi Arabia's this decade and be the world's most.

[Augustine2004]

University of Exeter built a 3D printer that prints . . . chocolate treats. Enough fun already. Gasoline! Gasoline!

As shown before, the long-term US oil picture looks bright. However, something called the 'production deficit bubble' will hit soon (3-9 months), causing oil prices to soar. About three years ago, oil prices had fallen so low oil producers quit producing. Now we are about to catch price hell, because it's going to take months before production can respond fully to higher prices.

[Augustine2004]

Injecting hot CO2 into old oil fields = technique that has been tried for years. But now it's perfected to the point of making your jaw drop. Could reserves quadruple? Daily oil production up by 50% 25 years from now, just using that technique?

[KBertsche]

This Eric Peters article on the Aptera is dated September 18 http://epautos.com/2011/09/18/400-mp...piracy-theory/

How up-to-date is your news?

As of Dec 2, 2011, Aptera is out of business.

[Augustine2004]

How inaptera!

[Augustine2004]

China on Friday announced shale-gas resources that on the face are the world's largest

http://www.marketwatch.com/story/chi...kly-2012-03-16

Solar and wind projects would have to be mothballed. Nuclear energy would plateau out or even go down. It's that big, if the announcement is reliable. Washington so far have not challenged its trustworthiness; indeed Washington appears to be resigned to the situation.

[Augustine2004]

David Deming bashes the peak oil theory.

Facts:

M. King Hubbert predicted world oil production would peak at 12.5B barrels in 2000; in 2011 maximum possible US oil production = just 1B. 2010 U.S. gas production = 4TCF.

Actual production: in 2011 US production was two B barrels; world, 26.6 B. 2010 US gas production actually 26 TCF.

Hubbert didn't take into account the effects of high price and technology, both of which are difficult to predict.

Resources have been growing faster than production, and we have a world wide glut.


This of course does not mean the Middle East power keg--the Shia-Sunni war--could not explode oil prices sky high. $20 per gasoline gallon, anyone?

[grmorton]

David Deming bashes the peak oil theory.

Facts:

M. King Hubbert predicted world oil production would peak at 12.5B barrels in 2000; in 2011 maximum possible US oil production = just 1B. 2010 U.S. gas production = 4TCF.

Actual production: in 2011 US production was two B barrels; world, 26.6 B. 2010 US gas production actually 26 TCF.

Hubbert didn't take into account the effects of high price and technology, both of which are difficult to predict.

Resources have been growing faster than production, and we have a world wide glut.


This of course does not mean the Middle East power keg--the Shia-Sunni war--could not explode oil prices sky high. $20 per gasoline gallon, anyone?

Sigh, I have been gone mostly, for a couple of years, and Augustine, you still don't understand peak oil. I love Deming's statement,

David Deming

"Hubbert predicted that annual world oil production would peak in the year 2000 at 12.5 billion barrels. It didn't. World oil production in 2011 was 26.5 billion barrels and continues to increase."

http://www.oilandenergynews.com/2012...il-theory.html

© source where applicable

The emphasized statement by Deming, that oil production continues to increase is so utterly ignorant of the facts that it shows what one can accomplish in this world without any real knowledge of the topic being discussed.

Attached is a picture of global black crude oil production. If one takes out biofuels, coal-oil etc, and only looks at black crude oil, the global production rate has been basically flat for 7 years. I think that will be the second picture. Black crude production has stagnated around 74-76 million bbl/day for 7 years. It is not increasing as Deming proclaims. The data for this chart comes from the US Energy Information Agency and can be obtained at http://www.eia.gov/cfapps/ipdbprojec...eq=M&unit=TBPD
Make sure you select "Crude Oil with Lease Condensate" for that is the measure of what is traditionally known as crude oil.

Secondly, the first pic is of the growing gap between what oil we burn each year and what we in the oil business find. I don't care what Deming says. If we are finding much less oil each year than we burn, we are running out of oil just as assuredly as if you withdraw more money from your bank account each month than you put into it, and if you do that over a long period of time, you are going bankrupt.

002.JPG006.JPG

One guy on the Oil Drum was singularly unimpressed with Deming's claim.

The Oil Drum April 7, 2012

This commentary by David Deming (a professor of geology at the University of Oklahoma) shows quite a bit of confusion. He writes:

For at least 100 years, people have repeatedly warned that the world is running out of oil. In 1920, the U.S. Geological Survey estimated that the world contained only 60 billion barrels of recoverable oil. But to date we have produced more than 1,000 billion barrels and currently have more than 1,500 billion barrels in reserve.
...
Conventional oil resources are estimated to be in the neighborhood of 10 trillion barrels. The resource base is growing faster than production can deplete it!

Peak Oil is about the rate of production, not resources. His claim for massive reserves likely includes "oil shale", as in, the Green River Formation. That's not oil which can be pumped out of the formation, no matter how much it's "fracked". The professor is either a fracking idiot or is intentionally spreading disinformation to help set the stage for the November election...

E. Swanson

http://www.theoildrum.com/node/9104

© source where applicable

[Augustine2004]

Welcome back, Glenn! Where have you been!?

The bank account analogy is not applicable. If oil supply struggles to keep up with demand, prices rise. Hence, resources that were uneconomic before become economic. Also new technology will help. Look at how much it did for natural gas supply. Has Glenn not been keeping up with how low natural gas prices have fallen? Natural gas producers made the mistake of starting drilling just when the market collapsed. They have been struggling mightly to switch to oil production since then.

The Argentinia nationalization of an oil company is rather unfortunate. It's going to harm production for years.

[Augustine2004]

Are oil prices high because supply is struggling to keep up with demand? But what about Charles Goyette's estimate of the fear premium in his book The Dollar Meltdown? He says people fear war in the Middle East, especially with Iran, would interrupt supply there. He says the book estimated $20-$40 as the fear premium.

Obama is recently blaming oil speculators, but they did not do anything that even comes close to matching in magnitude what Obama's Administration has done to fan war fears (deliberately or unwittingly, take your choice).

[grmorton]

Welcome back, Glenn! Where have you been!?

I started a company 2 years ago--busy busy busy getting it off the ground. 2. I got very tired of endless meaningless debates and decided to spend a couple of years learning about my family history. I just finished printing 32 copies of a 750 page book on my ancestors. I will give it to my family after I get the hard covers on them.

The bank account analogy is not applicable. If oil supply struggles to keep up with demand, prices rise. Hence, resources that were uneconomic before become economic.

Once again, you are mixing reserves with PRODUCTION. Yes, as price goes up, reserves go up, but not necessarily daily PRODUCTION. I know of only one or two cases where when a region's peak oil has passed, production has again achieved or exceeded those peak levels again. When production is extremely low, then a rise in price can increase the production significantly from a low level, but the quantities are smaller than those produced during the peak.

If your thesis is correct, I would expect to see production rises in areas that used to produce lots of oil and gas. Believe it or not, Ohio used to be the colossus of the oil industry. New York and Pennsylvania as well as West Virginia used to be quite formidable. Below is a picture of the production from these states. I have attached the price curve from 1861 to 2010 on the bottom. I have put the price in constant 2010 dollars, which is favorable to your thesis. As you can see, there is little correlation between price and production in these areas. Your misguided and muddled understanding of the oil industry says there should be a correlation.
NY PA OH WV oil production PRICE.jpg

Why is there no upward production when the price rises in PA and NY as in WV? There isn't any resource of significance left, that's why.

with Ohio the secondary peak of production accually occurred in a low priced environment. A new play was found and it was developed during low prices. But, this story tells why Ohio has never returned to the glory days of 23 million bbl/year of production:

John Kuehner, "Ohio was once oil King but production peaked in 1896

Between 1895 and 1903, Ohio was the leading producer of crude oil in the country.

But Ohio's reign as oil king was short-lived.

Production could not keep up with demand. Plus, major oil fields found in Texas and Oklahoma would quickly surpass Ohio's.

Ohio's petroleum industry did not know it at the time, but it's obvious now: Ohio's oil production peaked in 1896. That year Ohio's wells generated 23.9 million barrels of oil.

After that year, oil production gradually decreased.

"As you look at the numbers, you see occasional new discoveries or lots of activity that generated more production, but it's never come close to that 23 million in 1896," said Mike McCormac, a geologist with the Ohio Department of Natural Resources' division of mineral resources management.

Drillers treated Ohio's landscape like a pincushion. Over the years they have sunk more than 271,000 wells across the state. Only Texas, Oklahoma and Pennsylvania have more.

© source where applicable

The article points out that what Ohio produces today in one full year is about the quantity of oil the US uses in 6 hours. Let's hear it for prices saving our cookies.

Augustine, you need to pay attention because if a 100-fold increase in the nominal price of oil doesn't increase production in Ohio, West Virginia, PA and NY, why do you think it will work the world over? Seems to me that one must reverse the declines in individual areas before one can increase the world's production.

Also new technology will help. Look at how much it did for natural gas supply. Has Glenn not been keeping up with how low natural gas prices have fallen? Natural gas producers made the mistake of starting drilling just when the market collapsed. They have been struggling mightly to switch to oil production since then.

YAWN!!! belly scratching... Aug, this is about the 5th time in my career that there has been a major glut of natural gas.Natural gas was much much lower in the early 1990s, under a dollar per mcf. I was trying to sell an 18,000 ft gas well prospect at the time, unsuccessfully, I might add.

Shoot, in the Carter years, natural gas was 50 cents per mcf. And yes, at times of low gas prices the oil industry tries to find oil.

The difference between oil and gas is that no one has ever doubted that there is a huge quantity of natural gas in the world. The problem is, it is uneconomic most of the time. There are an estimated 6,300 Trillion cubic feet of gas. Most of it is so far from civilization that it costs more to build the pipeline than you would get out of it. But it isn't an energy salvation. As noted, if it costs more to get it, than one can sell it for, it won't come to market. Secondly As I pointed out to you before, to replace the US oil usage, we need 2.8x more natural gas than we are currently producing. There are a lot of technical reasons that is unlikely.

The Argentinia nationalization of an oil company is rather unfortunate. It's going to harm production for years.

Yes, and as peak oil occurs, this is my biggest fear. Angry citizens will tell their politicians to nationalize the oil companies, and then there will be little drilling because no one wants to invest millions on a 1/4 chance of a successful well only to have the government come in and steal all the good wells leaving you the dry holes. Nationalizations will drive the prices so high that economies will collapse.

A couple of other worries. The average age for an oil field worker is probably about 53 years. Average age of retirement is 55 in our business--I don't intend to retire and the scarcity of personnell allows me to continue working and earning a good wage. When we geezers finally throw in the towel, there will be fewer people to do that drilling you think is going to save our cookies. I won't work natural gas today. I would retire if someone tried to make me. It is a treadmill of sweat shop proportions. I don't need the money bad enough to go do that.

Second worry. I heard Jim Rogers today say that the average age of a farmer is 58 in the US and 66 in Japan. I can tell you that everyone who can get out of farming in China is doing so--it is an awful way to live a life. Who is going to produce our food when their bodies break down?

[Augustine2004]

Once again, you are mixing reserves with PRODUCTION. Yes, as price goes up, reserves go up, but not necessarily daily PRODUCTION. I know of only one or two cases where when a region's peak oil has passed, production has again achieved or exceeded those peak levels again. When production is extremely low, then a rise in price can increase the production significantly from a low level, but the quantities are smaller than those produced during the peak.

Only an idiot or fool would attempt to produce from an uneconomic resource. What would you do with resources that appear likely to remain economic for years? MAYBE you will say, PRODUCE, you IDIOTS!!

If your thesis is correct, I would expect to see production rises in areas that used to produce lots of oil and gas.

Hmmm, what does Glenn think my thesis is? High prices banishes our problems? No, the free market or any other economy will not banish all our problems. Glenn however seems to have not thought out the probable consequences of high prices. Not only do they spur more production than otherwise, they cool down demand. We may make do with less oil and find substitutes like natural gas replacing diesel in heavy-haul trucks (here I must mention the unfortunate Washington change of regulations that made the $2000 cost of converting a truck from using diesel to natural gas jump to $10,000). The US economy is able to produce much more per unit of oil today than many years ago.

Believe it or not, Ohio used to be the colossus of the oil industry. New York and Pennsylvania as well as West Virginia used to be quite formidable. Below is a picture of the production from these states. I have attached the price curve from 1861 to 2010 on the bottom. I have put the price in constant 2010 dollars, which is favorable to your thesis. As you can see, there is little correlation between price and production in these areas. Your misguided and muddled understanding of the oil industry says there should be a correlation.

Glenn needs to review economics, not I.

Laboratory productions of oil, such as with specially bred algae, may not be commercial yet, but if prices rise higher . . .

The difference between oil and gas is that no one has ever doubted that there is a huge quantity of natural gas in the world. The problem is, it is uneconomic most of the time. There are an estimated 6,300 Trillion cubic feet of gas. Most of it is so far from civilization that it costs more to build the pipeline than you would get out of it. But it isn't an energy salvation. As noted, if it costs more to get it, than one can sell it for, it won't come to market. Secondly As I pointed out to you before, to replace the US oil usage, we need 2.8x more natural gas than we are currently producing. There are a lot of technical reasons that is unlikely.

Glenn appears to have not gotten the news that power plants are switching to natural gas from coal. Not just trucks. And a substantial fraction of the world fleet of cars run on natural gas.

To be sure natural gas cannot substitute for crude oil any time soon. But the thread's title is not "peak production is past" or "how to replace all our oil with something else." Also, the world must adjust to the increasing scarcity of our finite oil resources, within or without the free market. But we can't predict what technology can do in the future. Five years ago, who would have believed that most of the world people are able to communicate on hand-held devices?

[grmorton]

One reason I don't debate much any more is because of what you failed to do. I posted the black crude production 2 posts ago showing that it has been flat for 10 years. You didn't have the decency to acknowledge that Deming has it wrong. I see little reason to waste time in such Sissyphusean endeavours as this.

Only an idiot or fool would attempt to produce from an uneconomic resource. What would you do with resources that appear likely to remain economic for years? MAYBE you will say, PRODUCE, you IDIOTS!!

I have no idea what you are talking about here. Please make yourself clear.

Hmmm, what does Glenn think my thesis is? High prices banishes our problems? No, the free market or any other economy will not banish all our problems. Glenn however seems to have not thought out the probable consequences of high prices. Not only do they spur more production than otherwise, they cool down demand. We may make do with less oil and find substitutes like natural gas replacing diesel in heavy-haul trucks (here I must mention the unfortunate Washington change of regulations that made the $2000 cost of converting a truck from using diesel to natural gas jump to $10,000). The US economy is able to produce much more per unit of oil today than many years ago.Glenn needs to review economics, not I.

Oh I know what high prices do. They stop the poor people from going to work in their own car. They cause people to chose between having electricity for their home or money to buy gas to go to work. And when enough disposable income is squeezed out of the average family budget, the economy tanks like it did 1 year after the $150/bbl of 2008, and the tanking of the economy depresses the price of oil.

Laboratory productions of oil, such as with specially bred algae, may not be commercial yet, but if prices rise higher . . .

Pure and utter Hopium.

Glenn appears to have not gotten the news that power plants are switching to natural gas from coal. Not just trucks. And a substantial fraction of the world fleet of cars run on natural gas.

To be sure natural gas cannot substitute for crude oil any time soon. But the thread's title is not "peak production is past" or "how to replace all our oil with something else." Also, the world must adjust to the increasing scarcity of our finite oil resources, within or without the free market. But we can't predict what technology can do in the future. Five years ago, who would have believed that most of the world people are able to communicate on hand-held devices?

I see that instead of explaining why high prices didn't bring more production to the states I pictured, you chose to go off on tangents and talk about anything other than what I posted. High prices have not caused the North Sea to produce more oil. Today at $120/bbl for Brent crude,, the North Sea is producing about half of what it was back in 2000 when the price of oil was $20/bbl. High prices have not brought Texas and Oklahoma's production back to peak values. Have you no answer for this? or are you going to produce more mythical Hopium and imaginary solutions?

[Augustine2004]

I am going to show the ratio of the cost of a barrel of oil to that of an energy-equivalent amount of natural gas. Please at least glance at this Wikipedia article on "barrel of oil equivalent" (boe).


The point that appears to have escaped Glenn's attention is that today's ratio is not just unprecedented, but is way out there, skyhigh. Bloomberg http://www.bloomberg.com/energy/ says a barrel of oil now goes for around $105; natural gas is going for around $2 per mmcf. Well, anyway, have a look at these charts http://lakshmi-capital.com/2011/02/c...xtreme-levels/

Energy equivalence is 5.8, oil to natural gas, but it is now around 26. Oil prices may moderate or even go down, but natural gas will stay depressed for months.

One reason I don't debate much any more is because of what you failed to do. I posted the black crude production 2 posts ago showing that it has been flat for 10 years. You didn't have the decency to acknowledge that Deming has it wrong. I see little reason to waste time in such Sissyphusean endeavours as this.

You got what I was trying to say wrong.

I have no idea what you are talking about here. Please make yourself clear.

That was a response to what you posted. Let us agree to stop debating; you clearly don't have the time and patience to work out what I am trying to say.

Oh I know what high prices do. They stop the poor people from going to work in their own car. They cause people to chose between having electricity for their home or money to buy gas to go to work. And when enough disposable income is squeezed out of the average family budget, the economy tanks like it did 1 year after the $150/bbl of 2008, and the tanking of the economy depresses the price of oil.

That doesn't show you do fully understand.

Pure and utter Hopium.

?? They ARE producing oil. It's just not commercial yet. But if prices were to go much higher, then commercial.

I see that instead of explaining why high prices didn't bring more production to the states I pictured, you chose to go off on tangents and talk about anything other than what I posted. High prices have not caused the North Sea to produce more oil. Today at $120/bbl for Brent crude,, the North Sea is producing about half of what it was back in 2000 when the price of oil was $20/bbl. High prices have not brought Texas and Oklahoma's production back to peak values. Have you no answer for this? or are you going to produce more mythical Hopium and imaginary solutions?

That was not the point. I did not say high prices can get worthwhile quantities out of nearly empty fields. Again, let's agree to stop debating.