Fedun: Medvedev’s the most liberal of the existing policymakers, and he has deep expertise in the oil and gas industry. The Russian oil industry has reached peak production and requires a lot of investment. That means support from the government is required.

So Yeltsin/Gorbi were apparatchiks of sorts, Putin was a KGB man with a university thesis on controlling the globe strategically using oil and gas, which he has pretty much accomplished as far as possible and now Medvedev is an oil man. This is a logical transition with Putin as chief advisor till Medvedev gets up to snuff.

http://www.kommersant.com/p836972/hydrocarbons/
Dec. 17, 2007
Bankers See Grim Outlook for Russian Oil

UBS investment bank has followed Alfa Bank's example and lowered its recommendation for the Russian oil industry. The bank says that oil production will become unprofitable for many companies because of high taxes, capital investments and exhausted deposits.

The pessimistic long-term prognosis was published on Friday. Recommendations for all Russian oil companies except Rosneft were lowered by at least one position. The bank notes that Rosneft had good indicators even without YUKOS assets. . . .

. . . Not all investment banks agree with the UBS assessment. JP Morgan published a rosy appraisal of industry health at the end of last month, and Troika Dialog recommends buying Gazprom Neft. Renaissance Capital predicts that LUKOIL will benefit from tax policy changes by the new government next year.

Fedun: Medvedev’s the most liberal of the existing policymakers, and he has deep expertise in the oil and gas industry. The Russian oil industry has reached peak production and requires a lot of investment. That means support from the government is required.

Gotta love a billionaire who's angling for more government support. If only we were all so needy.

Euan,

Re UAE shutting down production for maintenance. See:

UAE forced to slash oil output by a quarter (Arabian Business, Sun 23 Sep)

http://www.arabianbusiness.com/index.php?option=com_content&view=article...

Article: Scheduled maintenance at three of the UAE's largest oilfields will cut oil output by 600,000 barrels per day (bpd) in November, the Abu Dhabi National Oil Company (Adnoc) said in a statement on Sunday.

Adnoc's statement confirmed work widely expected by the industry and reported by Reuters in August. At its peak, the maintenance would cut 810,000 bpd of output from the world's sixth-largest oil exporter, oil traders said last month.

The output reduction as detailed by Adnoc was about a quarter of the UAE's output. The Opec member produced about 2.56 million bpd in August, according to a Reuters survey.

Adnoc will also do work at the 415,000 bpd Ruwais refinery from December 22 to February 25, cutting crude processing by a total of 5 million barrels during the maintenance period, Adnoc said.

... ADNOC gave no details on the length of the oilfield maintenance. Industry sources said last month the work would last for two to three weeks and start in late October.

The state oil firm also gave no details on the units to undergo work at Ruwais, the UAE's largest refinery. An industry source in August said Adnoc's refining arm Takreer would undertake work on a crude distillation unit and a diesel-making hydrocracking unit, shutting in around 150,000 bpd.

Rembrandt - this is truly amazing work. I'm glad your old second hand lap top is still struggling on and wonder what all these free loading multi-billion $ corporations will do when it eventually croaks?

I second this sentiment, and add: any hedge fund out there that has profited from analysis from this site, please send Rembrandt a new laptop. Email editors box for address. No other renumeration required...;)

Given that the Kuwaitis are supposed to be producing at a "sustainable" level these days -- i.e. that they have been apparently limiting their production voluntarily to conserve for the future -- the sudden up-tick in recent months is quite striking.

I suspect they got their arms twisted at OPEC, to produce a temporary surge.

I suspect that the OPEC "surge" strategy was calculated to prevent the world economy from stalling on high oil prices, given that they expect an increase in production from new projects in 2008. It looks to me that it was a smart move, in terms of their own medium-term interests.

What about the Mexican production? The graph that is displayed differs from the one shown in the pdf-file.

Additionally I wonder: total liquids and crude oil are equal or at least almost 100% correlated. Just one drop in total liquids is not mirrored in the crude oil production. Can anyone explain this to me?

My feeling is that we are still on an undulating slowly rising plateau.

EIA crude oil production still shows a slightly declining trend. Around 500 kb/d of the September increase came from the North Sea and Mexico, both areas we know are in terminal decline. This will not last long.

I'd tend to see this as multiple cycles in different parts of the industry that have just come into phase to produce this spikelet.

Yes, we'll have to work out what the statistical definition is of a spike compared to a peak.

Yes but does it not really come down to what the real base depletion rate/production decline rate is without new production and in field drilling ?

As you mention we really have thrown a lot of resources at oil production over the last few years and the net result is we have at best managed to stand still.

With simple calculations its reasonable to guess that depletion rates of 10-20% and base production decline rates of 8-10% are not unreasonable.

This means about 8-9 mbpd of new/infield drilling each year is needed to stand still on production and say 10 or more mpbd of new production to make up for the high depletion rates. We seem to be depleting faster than production rate is declining. So if this is even reasonable we may be getting to the point that we need close to 20mbpd of new production from all sources each year just to stay close to where we are now.

The point is production rate can stay fairly constant from the time a field is brought up to max production until the field is close to about 80%+ depleted.

It stands to reason that we should be able to keep production rates high and even increasing well past 50% URR with enough investment given our current technology. This is a variant of your 2-3.

So your 2 and 3 are pretty much the current consensus but its not clear yet to me at least that they are the most probable.

Throughout 2007, from spring to summer to fall, the same mantra has been repeated here - "the next 3 months will be telling". The idea that the next 3 or 6 months will finally reveal The Truth about peak oil has been ongoing, and yet, the months go by, and the situation has not gotten clearer. This latest uptick in production is again clouding the issue, and the arrival of a few megaprojects in 2008 seem likely to continue to cloud the issue.

I'm guessing 2008 will be a lot like 2007 - volatile prices, continuing uncertainty as to the real production capacity of OPEC and Saudi Arabia in particular, economies living on the knife edge of every pipeline explosion, every menacing word from D.C./Iran/Israel/Turkey, every hurricane and ice storm, every fed rate cut. It stinks, but it seems like all we can do is sit back and wait.

The only data that can be believed from the EIA is the IPM (table 1.4), the data from the Short-Term Energy outlook tends to be overly optimistic. I would not believe the EIA numbers from September, October, and November that Rembrant quotes because they are esentially forecasts, the total liquids EIA number for September should be 84.93 mbpd as Pollux notes above.

Rounding off to 0.1 mbpd, China's year to date C+C production is the same as 2006, about 3.7 mbpd.

As we discussed before, and as Matt Simmons pointed out, a fair amount of surging NGL production is probably the result of a surge of gas production from oil field gas caps (as Euan pointed out, the Brent Field for example) being blown down in the final stages of depletion of the field.

Given the increasing volumetric importance of condensates, NGLs, biofuels, etc in the total liquids numbers, it would be meaningful to include a chart that showed the output in energy equivalent terms exressed as barrels of oil.

IE if NGLs have only 70% of the btu's of a barrel of oil, 100 kbpd of NGL production should show only as 70 kbpd of oil equivalent production.

Just to ensure we are comparing apples with apples......

@Gail the Actuary

From a 2007 perspective your comments are correct that we need to be watching for what happens to conventional crude. But given the amount of capacity expected for 2008/2009 I think we could see some venturing off the plateau. Depending on how one defines the plateau that is.

The Graph for Iraq's production is in the PDF, on page 13 or 14 I think.

I think that PG, Heading Out, Gail, Euan and I all thought that Henry Groppe's presentation at ASPO-USA was a little odd. If memory serves, he thought that we were basically at peak crude oil production, with some potential for future NGL growth, but he did say that he thought that Saudi Arabia could produce at its current level for several years.

Following are some 2005 comments:

http://www.ecocitycleveland.org/transportation/pd_peak_oil.htm
Has oil production peaked?

This is part of a year-long special series in the Cleveland Plain Dealer on when the world's oil supply runs out. It appeared in the Sunday, June 19, 2005 edition and was reported by John C. Kuehner.

Henry Groppe agrees. "We've concluded that we're roughly at peak and the turning point," said Groppe, founding partner of Groppe, Long & Littell in Houston, an independent firm that analyzes the oil and gas business and forecasts prices.

Groppe, 79, an oil analyst for 50 years, has been right before and other analysts have been wrong. In 1980, for example, his firm predicted a barrel of oil would drop to $15, while the U.S. Department of Energy and major oil companies said it would soar as high as $100.

"There's a lot of history that indicates how erroneous their long-term forecasts are, all of which makes us more and more relaxed about our work," Groppe said.

Worldwide discovery of oil peaked in the 1960s, he said. For the last 15 years, the world has consumed two to three times as much oil as it has found.

Last year, the four largest nongovernment oil companies - Chevron, Exxon-Mobil, Shell and BP - reported that their new oil discoveries were not enough to make up for what they had pumped that year.

"Against that background, how can you be optimistic about raising oil production 50 percent in the future?" Groppe asked.

Groppe's only real difference of opinion is about KSA production. He's already on record saying we are on peak plateau right now and that he expects 2008 to be it then downhill. I also do not read him as indicating that KSA can grow production by any significant amount over the next few decades - just hold current levels.

So here we have Groppe saying 86 mbpd is roughly peak, that KSA is able to sustain 8.6 mbpd for the foreseeable future, and that after 2008 we're headed downhill.

TOD analysts are saying that 86 mbpd is close to peak (Stuart, Ace, and others say this is it while Robert, Euan and others argue for a slightly higher number by 2010). TOD analysts are saying they think KSA is facing terminal decline beginning anywhere from now to about 2012 down to roughly 5-6 mbpd. And TOD analysts are calling peak either now or by 2010-2012.

Now put those two sets of predictions side by side and remember that the oil era on planet earth is going to run from Drake's discovery of oil 150 years ago and out forward probably another 100-150 years in ever decreasing amounts of oil. The difference is a few years, a few mbpd of oil for a few years, and how the king of all oil fields might behave. In other words, there's not that much disagreement between them other than KSA's status and KSA's status, while very important, is still less than 10% of global production. In other words, the difference of opinion is not much more than statistical noise in the larger picture.

ChrisN,

I would not pretend to be in the same league as the TOD analysts, but I follow both TOD and Henry Groppe closely and the conclusions I come to from reading both are as follows:

1. In agreement with the expert comments on this so far, H.G.'s view on peak oil falls well within the range expressed by TOD analysts, even though on a matter of significant detail H.G.’s judgement on KSA is one of greater stability of gross output.

2. H. G. has a major additional perspective not often expressed on TOD, which is that prices at the levels already seen will likely depress demand over the next few years, to the point that very broadly speaking, supply and demand will be in balance, but that there will be a fair amount of noise in this balance, and therefore also a fair amount of noise in the oil price, in both directions.

Thus the real difference between TOD and H.G. is H.G.’s views on the (delayed) impact of prices demand, both over the last few years and then into the future.

There is not much discussion on TOD about demand, and I find H.G.'s views on this convincing. After all, is there anyone out there with a better track record of predicting future oil supply/demand balance than H.G.? H.G. seems to me to be as close to being the Warren Buffet of the oil market as one can find. Please someone correct me on this if I am wrong.!

Which is why I keep on boring TOD readers with a repetition of the point that what we have seen is a dramatic modification of demand since 2004/2005, producing a near plateau (of demand), and that it does not make any sense to me to ignore the questions this raises about future demand., or to ignore the problems this raises in trying to estimate changes in underlying production capacity.

And before my comment is misinterpreted, I will add that in my judgement, these problems of analysis, on balance of probability, are causing the rate of decline in underlying production to be underestimated.

Thanks !

One more factor that important. Is if we are so technically advanced at extraction why do level off at the top ? I mean if we can extract so fast why not keep growing production rate in a field. The reason is fairly simple all the other oil parts of the oil field outside of the wells are designed for a certain flow rate or capacity. Even though you could theoretically put in a lot of fancy MRC wells and get higher flow rates even as the field ages the cost of upgrading the above ground equipment is huge. So it makes sense that once you get a field at maximum production you keep it at this level. And of course as the field get older it makes even less sense to push production higher than the original design capacity.

So from a technical perspective the undulating plateau could be explained by the fact its easier to keep existing fields at the design capacity than to expand the facilities.

The fact that production is no longer strongly increasing indicates that new production is not keeping up with real declines and probably more important that infield work overs may no longer be possible in a lot of fields.

The shark fin curves result when one or more of the factors keeping the system stable changes dramatically. In my opinion the biggest change is probably that we have worked over most of our older fields and upgraded the extraction technology to close to the best possible. This means that these fields will all go into steep decline soon if that are in the 10-20% depletion rate level thats possible with current technology. New production is far less important in my opinion than the fact that modern extraction methods on old fields rapidly depletes them in exchange for maintaining production rate.

I happen to believe we are well past 80% URR thus we can expect the upgraded fields that make up the bulk of our current production to begin collapsing any day now.

In the report I noticed the sharp down turns in US production. If I'm right the North Sea and US since they represent the cutting edge of technical extraction will fall first followed by the rest of the world. I also found a cool link that the North Sea is now declining faster than most models predict.

http://peakoil.com/fortopic9390.html

Notice that WHT used a shock that went for 10%-20% depletion rate to fit the production.

http://peakoil.com/fortopic9390-0-asc-15.html

and here

http://mobjectivist.blogspot.com/2006/01/norway-offshore-depletion.html

It stands to reason that if we are running 10-20% depletion and rates and based on water cut the world is probably 80% depleted.

http://www.touchbriefings.com/pdf/2590/Ferro.pdf

We are going to see a steep drop in production rate effectively any day now and it will be fairly sudden i.e we will run close to where we are at now then potentially drop 5-10mbpd or more in a year or so.

It all depends on how fast we can replace rapidly depleting fields once we can't production will drop off quickly. The maximum replacement would be all the worlds oil production every five years. Obviously all fields are in different stages of depletion and all are not extracted at a 20% depletion rate but it gives you and idea of the type of wedge that building up as we continue to extract at high depletion rates. I estimate that we are probably going to have to replace close to 20mbd this year and next year 30mbpd. If we are at the end of in field workovers.

If we still have a lot of room to workover older fields then this wedge starts later. Given that I think its been a major factor in our ability to maintain current production rates and we have been doing it since about 2000 for sure. I think the party is close to over and we should start seeing steep drops by then end of 2008 at the latest. Obviously given my model technical attempts to surge production just make the matter worse pulling in and steeping the drop off date.

Trying to even guess at a date for this type of curve however is non-trivial but given that the North Sea and US seem to be following what I'm saying and that I consider them the leading indicators then a world wide drop can't be that far off.

The EROEI for oil sands is terrible, using much natural gas that will be critical to the U.S. Canada, and Mexico soon, as imminent shortages loom.
http://64.233.169.104/search?q=cache:pp0Qc4xi6ecJ:en.wikipedia.org/wiki/...
http://www.fromthewilderness.com/free/ww3/062303_nat_gas_crisis.html

For most ethanol the EROEI is negative; Brazil's hand farmed sugar cane is an exception.
http://petroleum.berkeley.edu/papers/patzek/CRPS416-Patzek-Web.pdf

Hi Solarhouse,

I'm still working on the EROEI thing. I already promised to incorporate it two months ago but still didn't find the time. I hope to do some work on this in the christmas period.

Rembrandt

Pilot,

As I understand it, the position is that the big threshold for oil producers, used to be to maintain the long-term expectation of oil prices below about $25/bl, as anything above that risked a long-term loss of market share. At anything above about $40 per barrel, long-term substitution investments are extremely likely. Over the last few years it has become likely that oil will stay above $40 for a long long time, so the first objective has been abandoned.

I suggest there are now three new objectives.

The first is, as you describe, to avoid demand destruction to the point of risking demand and price collapse as occurred after the Iranian revolution. The problem here is that human nature will likely cause this to be mismanaged, with the producers giving into the temptation of thinking that (seductively high) oil prices which have not immediately triggered a recession are ‘OK’. The problem with this is that most demand substitution, which is a significant element of demand destruction, impacts after a delay of a few years, and so eventual demand destruction will likely overshoot the producers hopes.

If I were an oil producer, my second new objective would be to convince the consumers (for as long as possible) that peak oil / oil crunch was never going to happen. As for all best ‘con tricks’ the best way to do this is first to convince oneself. I think that a lot of the peak oil/oil crunch denial/delay/fog is associated with this third objective.

The third new objective is in direct conflict with the first to objectives, but it is so effective in raising prices that it must be a significant temptation. This is the discovery/demonstration, for the first time in the oil era, that market perception/reality that there is little spare capacity is of itself able to significantly raise prices even if the market is adequately supplied with oil.

Whilst it may be a co-incidence, I think that the current mixed messages from the oil producers are consistent with the contradictions of theses last two objectives. So on the one hand, the producers are not doing much to allay fears of tight capacity (such as opening up their books, if indeed there is a lot of reserve capacity), and in practice this may well be coupled with deliberate actions (or lack of action) so as to maintain a real tightness in underlying production capacity. On the other hand the producers are also trying to maintain the idea that there will be no peak oil / oil crunch.

Having said all of this, I still agree with the view that the current high prices reflect the reality, that at the current time there is relatively little useable spare capacity.

It's quite simply, one of the lines is all liquids the other is crude oil + condensates.

Maybe I don't know how to extract the data, but following just the EIA information shows total Oil supply which reads like all liquids from table t14.xls in May 2005 to be 85,379 and in September 2007 to be 84,929. No October data visible in "United States, Persian Gulf, Total OPEC, and World Total, Most Recent Months and Years" Total Oil Supply. So I don't know how the December Oilwatch comes up with the following:

"They (EIA) put August, September and October all liquids production at 83.93 million b/d, 85.58 million b/d and 85.96 million b/d respectively, while the IEA puts August, September and October all liquids production at 84.60 million b/d, 85.09 million b/d and 86.49 million b/d respectively."

August and September (EIA) all liquids read from t14.xls as 83,888 & 84,929

Maybe there is more updated data available than what I can find on EIA website?

So not only (according to my interpretation of EIA) has the total liquids peak of May 2005 not been breached, but the loss of crude including condensate from 74,298 may 2005 to 73,498 in September 2007 suggests a greater gross BTU loss than the data indicates.

Please show me the light gentlemen if I am wrong.