RESOURCE DEPLETION: Modeling and forecasting oil production

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RESOURCE DEPLETIONModeling and forecasting oil
production
for OAK RIDGE NATIONAL LABORATORY (April 2006)
Dr Michael R. Smith, Chief Executive, Energyfiles
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Discussion points

• Why all the uncertainty?
• A hypothetical model
• Compare real cases
• Why all the uncertainty revisited?
• Our true global condition

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Why all the uncertainty (1)

• Bias

• When geologists say they are optimistic, the
  truth is that realism will give a different
  result
• Industry may under report for regulatory reasons
• Industry may over report to maximise value
• Governments over report for promotional reasons
• Both governments and industry do not update
• Conflicting public data sources
• Oil Gas Journal, World Oil, BP, Oil industry
  databases, USGS, Energyfiles etc. give different
  numbers so individuals pick the one that suits
  their argument

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Why all the uncertainty (2)

• Ambiguity

• There are no standard definitions
• Treatment of unconventional sources varies do
  you include or exclude oil with different
  economics? (oil sands, NGLs etc.)
• Estimates are technically uncertain
• whats proven, probable or possible?
• Misunderstanding the time element
• Reserves divided by production (R/P ratio) is
  thought to be years of supply remaining a
  meaningless number in practical terms
• Production peak is not dependent on reserves
• You only truly know what reserves a field holds
  after it has been abandoned but you know its peak
  well before

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A hypothetical model

• A sedimentary basin anywhere in the world
• First fields discovered are large and relatively
  easy to find
• They come onstream within 3 or 4 years of
  discovery
• All fields have a production profile set by the
• reservoir characteristics (poroperm, etc.)
• fluid type (oil, gas, viscosity, etc.)
• pressure, temperature
• environment of production (on or offshore,
  market, etc.)
• and investment level and timing
• Output for each field rises to a plateau within 2
  or 3 years, stays at plateau for two or three
  years then declines at 5 to 15 depending on
  above
• As time passes discovered fields generally get
  progressively smaller

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• Last fields do not affect peak they slow decline
• After peak technology (e.g. EOR) can also only
  slow decline

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• Production peak lags discovery volume peak by
  around 25 years
• Discovery peak is a signal

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• Flattening cumulative discovery curve can be
  extrapolated to define total reserves

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Piper Alpha disaster
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How many countries past peak?
UK Oman South Africa Denmark Norway
Bangladesh China Yemen Australia Guatemala
Surinam Mexico
Syria Czech Republic Slovakia Gabon India
Italy New Zealand Argentina Barbados
Uzbekistan Colombia
Georgia Russia Tajikistan Ukraine France
Senegal Turkey Japan Egypt Papua New
Guinea Kyrgyzstan
Poland Austria Germany Bulgaria USA Bahrain
Israel/Palestine Romania Iran Trinidad
Tobago
Myanmar Ghana Tunisia Chile Croatia Bosnia
Serbia Morocco Peru Albania
Spain Cameroon Greece Hungary Benin
Netherlands Taiwan Congo Kinshasa Jordan
Belarus
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Past-peak modelling

• To evaluate all countries past peak
• Analyse sedimentary basins (plays) individually
• Review any special circumstances in the history
  of production
• If possible look at every field production
  profile
• Define individual and group decline rates
• Assess yet-to produce and yet-to-find including
  through EOR
• Compare the results with other areas
• Do they make sense!

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Pre-peak modelling

• There are 64 countries currently past peak but
  there are 35 countries pre-peak
• Discoveries are a signal. They peak around 25
  years prior to production peak
• Individual fields already past peak indicate
  decline rates
• Plateau/peak followed by permanent decline is
  inevitable
• Cumulative plots give idea of yet-to-find and
  yet-to-produce
• Must review special histories

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Why all the uncertainty? (3)

• Around 35 countries are yet to reach peak
• Offshore areas and those developed with newer
  technologies peak faster (especially deep water)
• Areas with production restrictions peak later due
  to
• Conservation of resources (mostly OPEC countries)
• Unable to export (e.g. Iraq)
• Price support/conservation (US pre-1970, OPEC
  1984-2003)
• Lack of investment (e.g. FSU in the 1990s)
• High prices hit demand which increases spare
  production capacity (lowering prices and reducing
  investment)
• Bias and ambiguity
• Wishful thinking amongst the protagonists

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Why all the uncertainty? (4)

• Nevertheless all production peaks are broadly
  predictable provided you have some knowledge of
• Detailed field production and discovery histories
• Discovery peak
• Current depletion rate
• Exploration and development histories
• Political and fiscal histories
• Must look at individual field profiles
• and assess yet-to-produce and yet-to-find based
  on geological and engineering principles in
  specific areas

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Global oil peak estimate
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CONCLUDE Companies and governments must take
more energy risks With capital intensive
projects, alternative energy sources, new modes
of transport and with taxes
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CONCLUDE Companies and governments must form
mergers, alliances or partnerships Connecting
those who have expertise, with those who have
resources, with those who have capital or
global conflict will escalate further
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CONCLUDE Energy efficiency is not enough as
demand grows faster than savings are
made Conservation is a necessity but it will
be painful
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FORECASTS OIL GAS PRODUCTION, CONSUMPTION AND
ACTIVITY USING GEOSCIENTIFIC AND ECONOMIC METHODS
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correct, no representation or warranty, express
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