The chart using the BP world oil production data in the June 18 Peak Oil Review, effectively separates the peaked producers from those who are increasing, and those who may still increase or at least hold steady for awhile. To follow up, I’ll add a few thoughts on likely future production trends. This might stimulate discussion among the Peak Oil troops.
Saudi Arabia and OPEC: First off, many people look at the recent trend of Saudi Arabian production and have expressed suspicion that the decline may be geologically based, rather than Saudi Arabia maintaining a balance between supply and demand. The statements and actions of OPEC over the last several months have made it clear that they are taking oil off the market in order to defend $60 oil. (The recent price for “OPEC Basket” oil was around $67.) Saudi Arabia is still the premier swing producer, maybe the only OPEC member who can vary production rates at their discretion. My guess is that this is a market-related reduction and that they could return to their high point of late last year and sustain that rate for many years. They have numerous projects on the board to raise productive capacity, so I would not be surprised if they eventually reach and sustain 10 million b/d. How much higher can SA go? God only knows; not even the most analytical Saudi oilmen can say with certainty. The timing of Saudi’s return to producing at capacity, and their future development of capacity, depends on world demand, the ability of non-OPEC producers to increase capacity, and the price that OPEC chooses to defend.
Non-OPEC: In the meantime, we should watch the progress of non-OPEC producers. Non-OPEC production has stagnated since mid-2005, suggesting that this category of production may be nearing a peak. Peaking of non-OPEC would test the potential of OPEC resources. However, monthly data from the Oil and Gas Journal shows a recent break of non-OPEC production into record territory. [Please keep in mind that my accounting of non-OPEC production always includes Angola so that data remains consistent, even though Angola has joined OPEC.]
Non-OPEC production has flirted with 43 million b/d since mid-2005, briefly touching that level, but never sustaining it for more than two months. The high point was set in April 2006, 43.313 million b/d, but sagged over the next six months. In November 2006 non-OPEC moved past 43 mbd again, and progressively set new records for December, January, and February, to a new high point of 43.979 mbd. March 2007 was 43.830 mbd.
Record-high production from Brazil, Canada, and Angola, and near-record production from Azerbaijan, Kazakhstan, Russia, and China are the main contributors to increased non-OPEC output. Even though Mexico has slipped off its peak, production recovered from its infrastructure-related drop in December and has held steady through March 2007.
All this begs the question: how long and by how much can non-OPEC resources sustain increased production? The short answer is: not very long and not very much, followed by a gradual decline during 2010-2020. Future non-OPEC production can be more readily estimated than trying to guess when and at what level Saudi production will peak. Let’s look at the producers critical to the peaking of non-OPEC production.
Canada likely will be able to increase production marginally through 2010. Beyond that, Hibernia will slip into decline despite aggressive drilling and continued development. Terra Nova, also off Newfoundland, will follow a year or two later. These two biggies will add to the gradual decline of conventional oil in Alberta, thus neutralizing expected gains from oil sands. Expansion of oil sands production will be constrained by access to natural gas. Burning bitumen for fuel is a non-starter, based on the need for new burner technology and the resulting increase of CO2 emissions. Thus Canadian production will round a subtle peak about 2010, 2012 at the very latest.
Mexico is key because its resource base is small and highly concentrated, leading to the likelihood of a steep decline. But production has not yet really begun to decline. The International Energy Agency expects Cantarell to drop by 15% this year, which translates to a 9% national decline rate if everything else holds steady. Nitrogen injection at Ku-Maloob-Zaap will account for much of Mexico’s production gains, but this will be only for a couple of years. Mexico releases scant data on field production, so analysts will have to be content with passively watching monthly nationwide data for signs of Mexico’s imminent decline.
Brazil and Angola are similar in that future production will be governed by deepwater offshore. Brazil may be 5 years closer to peak than Angola. Brazil has the potential to increase production by roughly 10% and maintain its current level until, say, 2012. By then, the growing inventory of declining wells is bound to exceed production from new resources. Brazil will thus enter a lengthy but gradual decline. They have many resources to milk, and they have the financial and national commitment to do it.
Angola is a relative newcomer as a critical producer. Their resources are flush, with many more to develop. If they remain stable politically, the door will remain open for Western technology and investment for deepwater development. Angola’s production may peak around 2015, reaching 2.5 million b/d. They will effectively act as non-OPEC, producing at capacity, because they want to show the world what they can do. Angola is unlikely to develop new resources, and then sometime in the future, cut back per any OPEC requirement. This justifies keeping Angola as non-OPEC. Thus future non-OPEC data will remain consistent with the past. Angola’s decline, however, is apt to be steeper than Brazil’s. Angola’s resources seem to be well-defined, and will likely follow traditional decline curves, compared to the more sprawling resources in Brazil’s deep water. By 2020, Angola production may slip below that of Brazil.
Azerbaijani production is on the upswing, and if we take the upstream reports with a helping of salt, production is likely to continue modest growth for several years. Most assessments appear too bullish, stating that the ACG complex will top one million b/d. Producing formations are extensive, but not highly productive. Thus national production should grow until maybe 2012, reaching around one million b/d, but not much more. Production then tapers off slightly as new wells are drilled to replace the growing inventory of wells that become watered or gassed out. A gradual decline becomes evident after 2015.
Kazakhstani production appears to be greatly hyped and will likely see minimal growth for many years. On the other hand, its peak may not come until 2020 and its decline rate will be hardly visible. Whereas most analyses show Kazkh production exceeding 2.5 million b/d by 2020, a cold, hard look at the sulfur conditions points to production remaining below 2 million b/d. The reason for limited growth is the huge sulfur concentrations in associated gas at Tengiz and Kashagan. Suffice it to say for now that there is no quick escape from that box. Jamming all the produced gas back down into the reservoir or any other formation will not enable operators to raise production significantly. At Kashagan, sulfur removal and injection has to be accomplished from structures offshore, which I think is whistlin’ Dixie. Bottom line: Kazakhstan production will ramp up almost imperceptibly as the operators come to grips with handling the sulfur. Even Karachaganak is a sour oil resource, with restricted growth potential because of the need to construct hydrodesulfurization units for every added increment of production. Thus Kazakhstan will supply a steady non-OPEC increment through 2030.
Russian production is a major unknown. John D. Grace’s 2005 treatise, “Russian Oil Production,” a history and prospects for the future, sheds light on this critical component of future oil production. In brief summary, resurgent Russian production after the Soviet collapse did not result from returning idle wells from the great oil fields to service. Rather, the Russians had to develop numerous 3rd and 4th generation fields that are orders of magnitude smaller than the supergiants. The great fields have barely maintained rates that they fell to when Soviet funding collapsed, and at a small fraction of peak production. This means that future growth depends on continued development of many new small fields, most of which were discovered during the Soviet period. The big resources at Sakhalin will not add enough to modify this fundamental trend.
This trend is likely to send Russian production toward a subtle peak by 2008. But because of Russia’s vast resource base, their decline will be hardly noticeable for many years. They are obsessed about oil production, and will fund any promising project, in the name of maintaining production rates, especially for exports.
Chinese production is similar in principle to that of Russia, but at about one-third the rate. They are as obsessed as the Russians are about hiking production rates, but for their own domestic supplies. Reports of major new discoveries are probably exaggerated, but their extensive formations of low productivity will provide a buffered supply near present rates for many years, say beyond 2020.
Assembling these components gives us a picture of non-OPEC production into the 2020s. During the next few years, Mexican production goes into serious decline, Russian and Canadian production flattens. Modest gains in Brazil, Angola, Azerbaijan, and Kazakhstan will offset the Mexican decline for a while, but eventually declines will outweigh the gains. Thus non-OPEC production will probably show an undulating plateau during 2009-2012. The decline phase will be evident by 2015, although tempered by minimal decline rates in the US, Russia, and China. Beyond 2020, Angola, Brazil, Azerbaijan, will increase the non-OPEC decline, while flat production in Kazakhstan will keep the decline from steepening further.
Flat production from non-OPEC will turn the spotlight onto OPEC by 2010, with increasing intensity thereafter. That is when Saudi Arabian oil resources and the credibility of Ali al-Naimi will be tested. Much of the growth of global oil demand after 2012 will have to be absorbed by increasing production from Saudi Arabia. Very few other OPEC members will be capable of expanding productive capacity to a significant degree. The timing and magnitude of global Peak Oil will thus largely depend on the rate of growth of global oil demand, and the rate at which Saudi Arabia is capable of expanding productive capacity.
During 2015 – 2020, as more non-OPEC resources fall into decline, the pressure on Saudi Arabia, the supplier of last resort, will mount. My head spins at the possible ramifications. The drive toward alternative fuels–ethanol, biodiesel, etc.–will fill a small part of the growth in demand of liquid fuels, but I think that production of “green” fuels will fall far short of present expectations.
Increasing biofuels by a factor of 3 by 2015 is unrealistic. Cellulosic ethanol is a non-starter within this time frame because an enzyme capable of isomerizing cellulose to starch has yet to be invented. Claims that the energy balance for producing ethanol from cellulose is more positive than using corn as feedstock, is premature since processes have yet to advance beyond the laboratory.
Finally, consider a related concern from the paper by Paul Chefurka, “Peak Oil, Carrying Capacity and Overshoot: Population, the Elephant in the Room.” His major conclusion is that global population will return to the population of the late 19th century, by the end of the 21st century. He bases this on the decline of oil consumption that will be forced upon the world’s population.
While Chefurka’s linkage of oil to population can be criticized on many fronts, I take issue with the decline curve of world oil production that he says is his “…best estimate of a reasonable shape for the decline curve.” I hope that no one in the peak oil movement gives credence to such a steep decline curve, because this only invites criticism from the likes of CERA. Chefurka shows a gradual peak during 2009-2012, which is reasonable. But then his logic falls apart. Global production then plunges by 50% by 2026 (only 14 years), it halves again by 2036 (10 years), and then halves again by 2048 (12 years). His decline is even steeper than the decline of the Texas 21 fields, which is a closed system, i.e., no new resources to temper the decline. A better comparison is the entire state of Texas, where production dropped by half from its 1972 peak, by 1992 (20 years). From 1992 to present (15 years) production has fallen another 25%. But Texas is not the whole world. Thus, once global production slips into terminal decline, its decline rate will be considerably less than that experienced by Texas since 1992.
Tom Standing began his career as a chemical engineer in petroleum refinery operations. He later shifted careers as a civil engineer for the San Francisco water system. He is self-taught in the sciences of petroleum production, geology, and geochemistry and has studied the production histories of hundreds of oil fields