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Uninvited observations

I understand that the Association for the Study of Peak Oil & Gas (ASPO) will not always be invited to speak at CERA Week (Cambridge Energy Research Associates annual conference in Houston), but if I had been invited I could have discussed the CERA 2006 forecast of future oil production (Journal of Petroleum Technology, February 2007).

CERA’s prediction is divided into conventional and unconventional oil, and if we sum the CERA-predicted crude oil consumption to 2070 we get a number in the region of 2,000 billion bbl, twice as much as has been consumed to date. Production of 70 million b/d in 2070 requires reserves of the order of 500 billion bbl, and current crude oil reserves are 800 billion bbl. Adding the numbers, 500 billion bbl plus 2,000 billion bbl, less 800 billion bbl, we arrive at a figure of 1,700 billion bbl. This is the amount of oil that must be found and developed during the next 62 years, or 27 billion bbl/year.

For these figures to work the oil industry needs to get out and start looking for oil like crazy.

If we just look 3 years ahead to the end of 2010, CERA perceives that crude oil production is set to be 80.8 million b/d. This is an increase of 8 million b/d when compared with today’s production. In 2002 ExxonMobil presented a fantastic graph in their magazine The Lamp. They showed that the decline in existing oil and gas fields was expected to be 4-6%/year for the next 20 years.

Last year CERA presented a detailed study of the decline in existing oil fields based on a study of 811 fields, and that gave an average decline rate 4.5%/year. We at Uppsala Hydrocarbon Depletion Study Group have made a study of decline in giant oil fields using data from 333 fields, representing 60% of global oil production, and CERA’s stated decline for large fields is of the same order as our figure for decline. For argument’s sake, let us use the CERA number for the rest of our discussion.

CERA’s decline rate for 2008, 2009, and 2010 means that the industry needs to fill a gap of 10 million b/d by the end of 2010. If we then add the increase in production of 8 million b/d that CERA predicts, we find that the world requires new production in the order of 18 million b/d in just 3 years. Is this really possible?

First we have to turn to Saudi Arabia and Saudi Aramco as they have the largest reserves. According to a seminar given in Washington in 2004, they have 700 billion bbl in place, and the cumulative production for Saudi Arabia to date is 119 billion bbl. Out of the reported 260 billion bbl of reserves they reported in 2004, they labeled 131 billion bbl as developed, and the depletion rate of developed production was 2.7%/year. A realistic assumption is that the depletion rate should be no higher the 3% in 2010. The fact that Aramco claims to have 700 billion bbl in ground, have produced 119 billion bbl, and have 260 billion bbl in reserves gives a recovery factor of 54%.

Saudi Aramco Chief Executive Officer Abdallah Jum’ah was invited to CERA 2008 and said that new investment is expected to boost the company’s oil production capacity to 12 million b/d by the end of 2009. With a depletion factor of 3%, this means that Aramco must increase their developed reserves from 131 billion bbl in 2004 to 146 billion bbl in 2010. In 1998 Aramco added the Shaybah field and 500,000 b/d. Aramco’s promises amount to new production equal to four Shaybahs and still require compensation for the decline of other fields.

Adding the new Saudi oil to the expected increase of production in new deepwater projects of around 4 million b/d plus other new projects providing an additional 2 million b/d, we end up with a figure of 8 million b/d of the 18 million b/d needed. We still have to find 10 million b/d to fill the gap in the CERA forecast.

If invited I would have covered many other interesting aspects of future oil production, but now I would just like to agree with the invited speaker John B. Hess, chairman and chief executive of Hess Corp.:

“Given the long lead times of at least 5-10 years from discovery to production, an oil crisis is coming and sooner than most people think. Unfortunately, we are behaving in ways that suggest we do not know there is a serious problem (OGJ Online, Feb. 15, 2008).”

Kjell Aleklett
President, ASPO
Professor, Uppsala University
Uppsala Hydrocarbon Depletion Study Group
Uppsala, Sweden

Volume 106 Issue 9 Mar 03, 2008

Editorial Notes: Contributor Kjell Aleklett writes: The article will also be posted on www.tsl.uu.se/uhdsg. You need a password to reed it on O&GJ

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