I am not so sure about the reality of different policies.
But my concerns stem from the closeness of the time when oil supplies will start to fall. To have the USA/Israel brinkmanship threaten the number 4 global producer is a real worry.
IMHO if energy supplies fall in total, there cannot be any global economic growth. This is likely to happen by 2013 due to...
1. Fukushima has sidelined almost all of Japan's nuclear capability.
2. In 2013 Russia removes 20 million lbs pa from the global supply of U3O8.
3. My calculations show a fall in global annual supply of conventional oil starts in 2013.
My latest comment on oil to my circle of email recipients is as follows:
This is just for energy buffs who are interested in oil. Criticisms are welcome .
To recap, the oil producer countries are ranked as follows:
1. Russia (Putin has a policy of high taxation to suppress exploration and thereby conserve oil for the future)
2. KSA (King Abdullah has a policy of keeping back oil for future generations – hence they have some capacity that is shut in)
3. USA (also the world’s largest consumer and the instigator of technology to develop oil and gas shales)
4. Iran (under comprehensive commercial attack – which may soon become a military threat to oil supplies in the region)
Right now, global supply and demand are finely balanced. Saudi Arabia is reputed to have 2.5 million bbls/day of swing facility consisting of oil shut in. This is 90% of the notional global surplus of supply over present demand. But there are a couple of things wrong with this assessment.
1. Their biggest fields are the oldest fields and these are for the main part post peak.
2. They have a lot of heavy sour crude that is not able to be processed by a number of the aging refineries in the OECD.
3. They acknowledge that it will take at least a couple of months to bring some 700k bbls of the swing facility on line.
4. Their oil reserves and resources are unknown. In 1987 they increased their declared reserves by 50% and despite heavy production since then, have maintained that reserves declaration.
5. KSA has a policy of leaving oil in the ground for future generations – which means they must be persuaded to release reserves.
6. KSA domestic consumption is ramping up as population explodes – so a greater proportion is unavailable for export.
There is further concern that the future of oil production in the KSA is dependent on what happens at Ghawar because it produces about half of the KSA’s total oil production. The Ghawar oil field started producing in 1951. Ghawar peaked at 6.6 million bbls per day and is now about 4.5 million bbls per day. In terms of an analogy I have used earlier, the volume of production from this field is only being maintained by “sticking more straws in the milkshake”. But also the field has been under intensive waterflood for about a decade in order to maintain pressure in the reservoir – so, many of the new wells are for water injection (this is also happening at a number of the other larger older fields). There is a programme of also installing submersible pumps in many of the extractor wells.
To repeat myself, I believe that when Ghawar’s output suffers a significant drop will be when the peak oil plateau of global production ends and global output of conventional oil, starts to fall.
Since 2006 the number of rigs employed by KSA doubled. About 18 months ago Saudi Aramco announced they had appointed Halliburton to provide expertise on enhanced oil recovery (EOR) techniques for Ghawar. Even so, this would involve access to large quantities of CO2 or solvents for injection. Hence I am inclined to wonder how successful they will be with EOR. Anyway, this announcement seems to be something of an admission that all is not well in the world’s largest oil field. Further, over the last two years, KSA have been redeploying other technology to replace oil for power generation – stating they need to leave more for export.
Reports have been filtering through that the cost of oil production has increased rapidly due in part to rapidly escalating capital expenditure and new technology costs. Given the cost of maintaining national loyalty and supporting social programmes, it has been suggested that the government of the KSA now needs an oil price of USD100/bbl to meet budget expenditures.
Ghawar is so old it should in theory (like Mexico’s Cantarell field) be dying. Certainly, depletion rates in their four largest old super giant oil fields must be putting pressure on KSA’s oil production. We can now only wonder at what KSA’s true oil reserves and resources are.
So the way the Israelis are playing fast and loose with Iran doesn’t seem particularly sensible to me right now. Sanctions yes, attack no.
The latest reasonably comprehensive look at Iran’s markets and the KSA oil production - giving something of a field by field analysis is available at this link below...
May Ghawar live long and prosper .
Last edited Sun, 18 Mar 2012, 5:02pm
by energy investor