Production

Key Points

  • OPEC discoveries spiked in mid-1980's
  • Claimed reserves are nearly flat except at spike, implying that discoveries exactly offset production
  • In 1983, OPEC pegged production to claimed reserves
  • OPEC claimed reserves ~775 Gbl
  • Excluding spikes shows reserves ~475 Gbl
  • "As for Iran, the usually accepted official 132 billion barrels (2.10×1010 m3) is almost 100 billion barrels (1.6×1010 m3) over any realistic assay." - Ali Morteza Samsam Bakhtiari (Senior expert, National Iranian Oil Company)
  • Enhanced oil recovery techniques can increase production from 30% to 70% using fluid pumped under the field (CO2 or sea water) or horizontal drilling, but flow rates may be more important than ultimate recovery.
  • Public awareness of greenhouse gas emissions are putting pressure on oil companies to consider options other than tar sands, oil shale or coal-to-liquids which are all very energy intensive and emit more CO2 than conventional oil recovery operations. At present, there are no carbon sequestration plants in full scale use.
  • It (the IEA) looked at 800 of the world's oilfields and found the average rate of decline was 6.7 percent for those that have passed their production peak. It expects that rate to increase to 8.6 percent in 2030. (see IEA sees oil above $100, recognizes supply limit)

From Oilwatch monthly 19 November 2008
Average global production in 2007 was 85.41 million b/d according to the IEA. In 2008 an average of 86.82 million b/d has been produced from January to October. The US Energy Information Administration (EIA) in their International Petroleum Monthly puts average global 2007 production at 84.40 million b/d and average liquids production from January to August 2008 at 85.73 million b/d.

From The Oil Crunch, securing the UK's energy future
"In the 1980s, many OPEC nations announced that they had much bigger reserves than they had earlier declared. They did this at a time of low oil prices, which ought if anything to have been shrinking reserves. Many experts believe that this mass inflation of the figures happened not because they found more oil, but because OPEC began in 1983 to link its production quotas to the size of national reserves. As a result of this political game, the world’s supposedly proved reserves of 1,200 billion barrels are probably overstated by at least 300 billion barrels.

Kuwait was the first country to decide it had bigger reserves than it had earlier calculated. From 1980 to 1984, Kuwait declared 64-65 billion barrels of proved reserves each year. In 1985, it declared 90. It has announced “proved” reserves of 92-100 billion barrels each year ever since. The jump in 1985 was the subject of a certain amount of sceptical speculation, unsurprisingly, and in January 2006, Petroleum Intelligence Week reported that it had seen national oil company
documents suggesting that Kuwait has been overstating its proved reserves by more than half. In May 2007, after much vacillation, a Kuwaiti oil minister confirmed the revelation, and announced that the nation’s proved reserves would have to be written down, from 100 billion barrels to 48 billion.

… Sadad al-Husseini, who retired from the board of Saudi Aramco in 2004, is now on record as saying that global proved reserves are overstated by 300 billion barrels. This is a lot of oil: 10 North Seas, 10 years of production at today’s rate."

"In Iran, fears emerged in 2007 that domestic oil consumption has become so unconstrained the nation’s status as an exporter is coming under threat. The aged and neglected infrastructure combines with the problem of demand growing at up to 10% per year to suggest, in one estimate by analysts, that as soon as 2015 Iran will no longer be an exporter. In June 2007 the Iranian government brought in fuel rationing as a reaction to shortages caused by long-run domestic
under-investment in refining. Riots resulted, and in a foretaste of what awaits governments who fail to meet domestic expectations of oil supply, Iranians set fire to petrol filling stations. It will be difficult indeed for a government to export in the face of this kind of pressure at home, if domestic demand cannot be met."

OMAN'S OIL YIELD LONG IN DECLINE, SHELL DATA SHOW (New York Times)

  • The Royal Dutch/Shell Group's oil production in Oman has been declining for years, belying the company's optimistic reports and raising doubts about a vital question in the Middle East: whether new technology can extend the life of huge but mature oil fields.
  • Internal company documents and technical papers show that the Yibal field, Oman's largest, began to decline rapidly in 1997. Yet Sir Philip Watts, Shell's former chairman, said in an upbeat public report in 2000 that ''major advances in drilling'' were enabling the company ''to extract more from such mature fields.''
  • The internal Shell documents suggest that the figure for proven oil reserves in Oman was mistakenly increased in 2000, resulting in a 40 percent overstatement.
  • In the case of the Yibal field, for example, Shell and Omani oil engineers and auditors have expressed concerns that a technique Sir Philip said would recover more oil not only did not do so, but also increased the amount of water in the extracted oil to as much as 90 percent of the total volume, increasing production costs.
  • Perhaps more ominously for the world's oil outlook, he added that the failure of Shell's horizontal drilling technology in Oman suggested that even advanced extraction techniques ''won't bring back the good old days.''
  • In the last 10 years, horizontal drilling has become one of the most important innovations in the oil production business and is widely used around the world. If properly managed, it can extract more oil from some fields, and can pump it out sooner and more efficiently than traditional vertical drilling.
  • Oman's oil problems are relatively recent. Annual production rose from 1980 to 1997, when the 35-year-old Yibal field began to decline.

Why Aren't Oil Companies Drilling?

  • Oil companies are drilling on less than one-third of the acreage in this country that they have the rights to.
  • "The leases aren't being used because there's probably no oil there," said Felmi, the chief economist with the American Petroleum Institute.
  • The Department of the Interior estimates 68 billion barrels of oil lie in areas already accessible to drilling in the Gulf of Mexico and Alaska. But today, nearly half of the existing rigs sit idle. Setting the stage, experts insist, for yet another oil crisis when the economy comes back to life.
  • Note: 68 Bbl $\approx$ 27 Bbl URR, less than 1 year of world consumption

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