Saudi Arabian Oil Declines 8% in 2006

[Jcrowley]

Saudi Arabian oil declines 8% in 2006
Posted by Stuart Staniford on March 2, 2007 - 10:10am

<snip>

The first possibility is that the Saudis could still pump 10 mbd or more today if they wanted to, but they are cutting back production and exploring like mad because they put an extremely high value on having 2-3 mbd of excess capacity. If so, the recent price behavior suggests that the reason they would seek such capacity is not because they want to stabilize the price, but because it puts them in an incredibly powerful negotiating position. For example, the ability at any time to flood the market could be used at an opportune moment to undercut expensive alternatives such as oil sands that require an oil price over $50.
The second and more natural interpretation is even more disturbing: the mighty Ghawar oil field is already in decline, and the Saudis don't want anyone to know.

What I did in this post was to look in more detail at what happened from the beginning of 2006 on, which is when the apparent decline begins. I added data from a fourth source (the OPEC Monthly Oil Market Review), and for each of the four sources of data, I fit a linear trend:



Saudi Arabian oil production, Jan 2006-Jan 2007, from four different sources. Linear trends fitted to each series. Graph is not zero-scaled to better show changes. Click to enlarge. Source: US EIA International Petroleum Monthly Table 1.1, IEA Oil Market Report Table 3, Joint Oil Data Initiative, OPEC Monthly Oil Market Report, Table 17 (or similar) on OPEC Supply.
The resulting graph is extremely striking, I think. The four different sources all estimate Saudi production slightly differently - they fluctuate in different ways month to month, and disagree over the absolute level (that last may be differences in exactly what is defined as oil). However, the regressions make clear that all four sources are in strong agreement about the nature of the decline. The slopes of the lines are very similar.

The implied decline rate through the year is 8% ± 0.1%. (Note that the year on year decline from 2005 to 2006 will only be about half that, as the decline only began at the beginning of 2006). As far as I know, there are no known accidents or problems that would explain any restrictions on oil supply, and the Saudis themselves have maintained publicly that their production is unproblematic and they intend to increase it.

http://www.theoildrum.com/node/2325

This matters.

[lovuian]

1. The Truth comes out finally the Saudis are running out of oil

and what this is all about is so they keep up the income they have
they must get TOP dollar for their oil

100 dollars a barrel

Karma is an amazing thing

[lakeguy]

4. 100?

try as much as a country will pay for it. more demand than supply means any price they want, basically. and, guess who'll have to pay...

[JCMach1]

24. I don't think so...

this is about price maintenance...

[rman]

27. if this is price maintenance,

why did they not think of this before?

Declining production capacity doesn't provide future financial security - people don't generally want to invest in an industry that's on the decline. During the 1980's they claimed increased reserves and production capacity.

[Marie26]

34. No they're not

They're driving down prices to pressure Iran.

[yourout]

2. They have to delay development of alternatives for as long as....

possible to maximism profits. If the world developed renewable alternative energy sources the middle east would once again be a forgotten strip of desert.

[Gman]

3. Didn't Saudi Arabia threaten Cheney with flooding the market with oil

among other things (including sending Saudi troops) if the US pulls out of Iraq and leaves the Sunni's there unprotected?

[Jcrowley]

5. I highly recommend

that you take the time to read through the entire comments section of that link in the OP. What you touch upon is discussed and a few other matters that are also relevant.

Ghawar is fading:

What is the future of Ghawar and Saudi production? It is not good.

"All production comes from 'very old fields', with no major exploration success since the 1960s, and almost every field has high and rising water cut.

"Saudi Aramco is injecting a staggering 7 million barrels of sea water per day back into Ghawar, the world's largest oilfield, in order to prop up pressure. It accounts for 30% of Saudi oil reserves and up to 70% of daily output." "Doubts grow about Saudi As Global Swing Producer," Aberdeen Press & Journal Energy, April 5, 2004, p. 15

and

"The Wocap simulations for Saudi oil are presented in Fig. 5. They clearly show a long plateau at 8-10 million b/d. Here the main question is: How long can Saudi Arabia plateau at that level? Or in other words: Will it age gracefully? Much will depend on Ghawar. “

“With 100 billion bbl of crude oil produced so far, Saudi Arabia should not be far from the midway point of its proved reserves of 260 billion bbl—that means just 10 years at the going rate of roughly 3 billion bbl/year. Bearing in mind the "spurious revision" of 1990 that boosted proved Saudi reserves to 257. billion bbl from 170 billion bbl, the midway point could happen even sooner than that. “

http://solutions.synearth.net/2004/08/23

[IDemo]

16. They are being taken at their word about the 260 billion bbl "proven" reserves

SA took a magical leap upwards in their stated reserves figures several years ago, along with most other OPEC nations. The Energy Information Agency and virtually every other governmental agency or mainstream media accepted the figures without question, and continue to quote 258-262 billion barrels to this day.

[Jcrowley]

17. That's right

What year was that when OPEC defined certain percentage limits to production and POOF! all of a sudden everyone had way more oil (in well-rounded figures and some of them the SAME figures!) than they had previously declared while the records showed no new discoveries!?

Crazy huh?

[GreenTea]

6. Keeping oil production low...less gas - higher profits! Controlling & stealing Iraq's flow

to a minimum is what they are after...larger profits for less product...first rule in business, it preserves the product as well, so as to charge more later...record oil companies profits prove this....as they will continue to gouge us at the pumps..."less gas" is costing us $3.09 at the pump up here in Humboldt County, how about you? Controlling the flow with the usual oil company lies & excuses will only increase these fuckers profits...they have us over the barrel if you will.

Saudi Arabia, BushCo & the Carlyle Group all business partners making a "killing"!

Now they want Iran's huge oil fields, got to control that flow...Imperialism, war for profit...Poor Hugo will be all alone until they get him too.

And what are they forcing us to live with...pollution, pollution and more pollution as well as more gouging at the pumps, with no end in sight.

Controlling the flow, the killing & dying, stealing our tax dollars is what it's ALL about...The fucks are multi-nations, they don't care about us...They only pretend to care and offer their phony patriotism. It increases their profits!

[pscot]

7. We'll know for sure

by the end of summer. If this is true we are going to be paying a lot more for gas a lot sooner than anyone expects. This was posted over at the Peak Oil group earlier today, but it deserves a wider audience. Recommended. The full article over at The Oil Drum is also worth reading. The comments are quite good. Posters over there often speak with the authority of insiders.

[Nikki Stone1]

8. kick and recommend

K & R

[sakabatou]

9. And so starts the end of Big Oil

Hopefully

[toddaa]

11. You root for this at your peril

The end of Big Oil also means the end of agriculture as we know it. Cheap energy is what allows 7.5 billion people to live on this planet. Wars and famines are going to increase considerably in the next decade. If we manage to get through the end of oil, it will be with a lot fewer people on this planet and they won't die a pleasant death. Civilization, as we know it, is coming to an end. What replaces it is a mystery, but the transition is going to be horrible.

[sakabatou]

12. That's... ach, forget it

I gotta stop digging my own grave.

[sendero]

31. I agree with you...

.... but unfortunately there is little the average person can do about it.

[roamer65]

10. Good. I hope the decline is faster than predictions.

[IDemo]

13. related thread in E/E

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x85695

[nam78_two]

14. K&R.nt

[LaPera]

15. If Saudi Arabia has the largest oil fields, Iran # 2, Iraq # 3 Venezuela # 5 who is

# 4? American & Britain's puppet Kuwait?

Russia also has huge reserves but they don't export correct?

Who is # 6?

Where does the US domestic reserves stand in the world market?

[rman]

25. Mexico, Cantarell, declining

WSJ:
Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.

The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.

[Junkdrawer]

18. If true, it means that a war with Iran is nearer than I feared....

When Saudi Arabia hits decline, Iraq has to come online.

Iraq doesn't come online until the "Shiite Problem" is resolved.

[profgoose]

19. if the SA depletion rate is this bad...

...the world is in for a course of Machiavellian "rational" action heretofore unseen...how long can oil remain fungible, especially with all of the nationalization going on in other oil-rich countries (Ven, etc.)

We all understand that the Saudis do not want us to develop alternatives because they don't want to leave any oil in the ground, and the royal family wants to stay in power...that's why they threaten...

but erm, as I said over in E/E, when are we supposed "advanced and intelligent people" going to start worrying about our own freaking interests and get off of this crack called OIL?

The answer: probably as soon as we realize that it's crack...and once your on crack, you're always on crack, because you don't realize you're on crack.

Going backwards is too much of a bitch.

This all just makes me seriously nauseous.

[amandabeech]

35. There is no good substitute for oil out there right now.

EROEI is a bitch.

[robinlynne]

20. guys. when they produce less they earn more. It is really that simple.

[rman]

26. then why is it only now that they say capacity is declining?

It's not very long ago when they claimed additional reserves were found and capacity was increasing.

[Egalitarian]

29. Did you read the article and comments?

I'm not knowledgeable enough to provide a counter argument, but I'm confident that anyone who objectively looks into our present situation will come to similar conclusions about peak oil that most DUers have come to with regards to the rest of our governments policies. (Sorry terrible sentence)

[sendero]

32. Yes..

.... but that ONLY works in the context of a dwindling world supply. Basic supply/demand theory you know.

[ryanmuegge]

21. This is going to be my last post here for a while.

I know reality sucks and things are bleak, but the news on this board depresses me too much. I mean, I read stuff like this and I have a hard time going on in my own life. I guess I let things get to me too much or something.

We have to solve the transportation problem NOW. This would solve 3/4 of our problem and greatly assist us in conservation.

Can't coal be turned into gasoline?

[Jcrowley]

22. Solutions

The solutions are the same. Get the heck out debt - cut everything you can out of your budget - new clothes, meat, vacations, all extraneous driving, etc... and put it towards your debt, or, if you don't have any, your mortgage. Have a solid economic reserve not entirely dependent on the stock market. Store food - when you go shopping, buy a few extra bags of beans, rice, cooking oil, honey, spices, peanut butter, canned veggies. Or better yet, go to the bulk store, or a local farmer and buy potatoes, wheat, dried beans. Don't just store it - learn to eat it and enjoy it, and get your family used to it. Start a garden. Landscape with fruit and veggies - get rid of your lawn, and replace your shrubs with berry bushes. Use less, need less, get used to fixing things and making do. Find a way to get water, heat and light without power, just in case.

Because maybe it will never happen - but in most lives a little rain does fall. Get an umbrella.

Do it now. And remember, we can stop the rain from turning into a flood if we're just willing to do things differently.

[profgoose]

23. with current technologies, CTL would be B. A. D.

CTL (coal-to-liquids) would be unmitigated environmental disaster.

http://www.theoildrum.com/tag/ctl

[Egalitarian]

30. Yes, Coal to liquids (CTL), Fischer-Tropsch process/ synthetic fuel

http://en.wikipedia.org/wiki/Fischer-Tropsch_process

Here's the main rub:
"Recent work by the National Renewable Energy Laboratory indicates that full fuel cycle greenhouse gas emissions for coal-based synfuels are nearly twice as high as their petroleum-based equivalent."

We can also do gas to liquids (GTL), but natural gas is expected to peak 5-15 years after oil does according to wiki. We'll end up with a mixture of many things in the next two decades.

I here you on the struggle to go on and it's a perfectly normal response IMO. DU can be great fun and educational, but make sure to take care of yourself first. I've left and come back many times myself over the last four years. It's a balancing act for me.

[amandabeech]

36. Coal can be turned into gasoline, but the amount of CO2 released

into the atmosphere is absolutely incredible. You have to like global warming.

Coal provides 50% of our electricity here in the U.S., and most of it goes to reliable base loads. If you add more coal for gasoline onto the coal for electricity, you will have trouble extracting that much coal at one time, not to mention transporting it.

Of course, then our 200 year supply of coal will diminish quickly.

I had a hard time going on too with a combo of energy problems and GW. Check out the Yahoo group Runningonempty3. There used to be some people there going through the same thing that you are.

[Egalitarian]

28. KnR. Comments are insightful too

Gosh, I find it darn hard not to drift into depressive scenarios when I think through the ramifications of this. I need to buy a little timer that'll go off like every minute of so. then I can think for a minute, then recenter myself/meditate for a minute. The times they are a changin'.

I hate to say it, but as this plays out over the near future(2-10 years), many of us here at DU just might find ourselves living with the disgusting realization that Iraqi oil helps buy us time to transition away from oil.

edit to add:
If we do end up attacking Iran, look for us to try to occupy (I forget the name of the region) their reserves which are located along the Iraq/gulf region. Connect the dots.

[Jcrowley]

33. This is very important

Let us all prepare for the years ahead. These could be good times. But only if we face the reality square on.