Declining Crude Oil Production

Declining Crude Oil Production

The chart above shows the production of the 20 countries in probable decline. The peak was in 1997.

This is an effort to show what is going on with oil. It is a complete work and it has actually been finished for almost a year. What isn’t done is are the words. So I’m just going to take this very slow and build on it. There is no name for this and there is and hopefully won’t be any conclusion. I started this project in 2005.

~zk~

Part V – Declining oil production

There are many countries that produce crude oil. 50 produce about 99%. I have arbitrarily divided these 50 countries into 5 groups. 2 of these groups can be condensed into one, but we will get to that later.

I wanted to start with the last group because I believe I can actually present a very accurate prediction with it.

There are twenty countries whose oil production has peaked and doesn’t show any realistic chance of rising again in the long term. In any given year the production for these countries may be higher than the year before, but as a group, their production has fallen every year since about 1997.

The criteria for being placed in this group is simple and yet arbitrary. A country’s production has fallen three years in a row. I could have used two years, I could have used 4. If you look at the long term rates of some of these countries you will see that in some cases their production has risen the last couple of years, but overall, they have been declining for a long time. I’ve provided the year of highest production.

The average annual decline rate calculated monthly for the last 5 years or so is about 3.5%. 5 years from now this will still probably be around 3.5%. That means that in 5 years this group will have lost approximately 3 mbpd in production from current levels that either have to be dealt with domestically/globally or somehow made up by countries with increasing production.

The following table uses numbers from BP’s annual statistical survey. This survey includes what are called NGPLs and other forms of “oil” so the total global output you should measure these figures against is 85 or 86 mbpd.

So roughly 20 or 25% of global production should be considered in verified geologically-driven decline when calculated on a country-by-country rather than field-by-field basis.

This is a true bottom-up analysis. There is nothing hidden here. There is nothing that the author thinks is too complicated for the reader to handle. The numbers are available from BP through their homepage.

Rank Exp Prod Country Peak 2005 2006 2007
1 x 3 United States 1970 6895 6841 6879
2 4 6 Mexico 2004 3760 3683 3477
3 9 11 Norway 2001 2969 2779 2556
4 x 18 UK 1999 1809 1636 1636
5 x 21 Indonesia 1991 1087 1017 969
6 18 25 Oman 2001 787 752 718
7 x 26 Egypt 1993 696 697 710
8 x 27 Argentina 1998 725 716 698
9 x 28 Columbia 1999 554 559 561
10 x 29 Australia 2000 580 554 561
11 x 32 Syria 1995 450 421 394
12 x 34 Vietnam 2004 377 342 312
13 x 35 Yemen 2002 416 380 336
14 x 36 Denmark 2004 377 342 312
15 x 38 Gabon 1996 234 235 230
16 x 39 Congo 1999 246 262 222
17 x 45 Uzbekistan 1999 126 125 114
18 x 47 Romania 1977 114 105 105
19 x 48 Tunisia 1992 73 70 98
20 x 49 Cameroon 1985 82 87 82
x x x Total x 22378 21627 20998
x x x Percentage x -4.3% -3.4% -2.9%
x x x Barrels x -998 -751 -628

The rank given is simply the position within the twenty determined by production. The other two columns are rank within the group of top exporters and rank overall in the group of top 50 international producers.

None of these countries is in OPEC. Indonesia was, but has left or been removed after failing to be a net exporter for years. As you can see, Indonesia’s production stopped rising in 1991.

This entry was posted by JR.

45 thoughts on “Declining Crude Oil Production

  1. A question that comes to my mind is , of the exporting countries, what percentage of their wells are being rested?
    In my mind, a reservoir engineer would probably like to rest wells, as it reduces water cut and other effects of miscability. On the other hand, that same well, although it will alomost certainly produce more when back online, will decline more steeply once the field depletes.
    TOD started something on this once, but they didn’t follow through.

  2. Uncle, could it have something to do with the physical property of the reservoir rock, a certain spongeyness that is increased as the well sits unpumped for awhile? The pumping rest may separate the oil from the water better, but meanwhile moron oil is lost to the reservoir rock?

  3. Doom,
    My understanding is that due to the distance of water or CO2 injection wells, and the time it would take to ‘re-pressurise’ a field, that they don’t actually let the pressure off. Only individual wells are rested, not a field.
    So the way I was looking at it was that if demand is down, the reservoir engineer has more clout with regards to shutting off individual wells. He doesn’t care about finding a new field (not his job), he wants maximum output from the field he manages, with as little maintenance on GOSP or WOSP infrastructure as possible for each barrel produced.
    The alarmist point of view would be “oh no, x% of wells in KSA are producing zero bpd!” but a more informed view on how many wells are simply being rested would temper such an opinion.

  4. don’t know what you’re getting at. how does 3 years of straight decline on a country by country somehow prove geologic peak within that country. might be for other reasons, not that it matters in my book. peak is peak and that can be a rough number, so who cares.

    anyway, as pitt the elder might say, (now there’s a fucking retard if there ever was one) you missed SA, so everything you did is wrong and meaningless, just sayin’. unless your criteria automatically excludes opec, and if so why, and how does any of this shed any light whatsoever on “what’s really going on withoil”, or something like that.

    so again, what’s your point?

    http://tinyurl.com/64y4o5

  5. Speaking of number crunching and incomplete correlative thinking (as if mere monkeys can take into consideration all actual and potential influencing factors), here’s a pretty decent overview of how math- and common sense-challenged finanical douche bags fell in love with the wanton simplifications provided by quants.

    http://www.wired.com/techbiz/it/magazine/17-03/wp_quant

    Li wrote a model that used price rather than real-world default data as a shortcut (making an implicit assumption that financial markets in general, and CDS markets in particular, can price default risk correctly).

    Which isn’t to say that price isn’t relevant to many things… ehh, JR?

    It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number—one clean, simple, all-sufficient figure that sums up everything.

    Round eye banker fool only care about gamma!

    The effect on the securitization market was electric. Armed with Li’s formula, Wall Street’s quants saw a new world of possibilities. And the first thing they did was start creating a huge number of brand-new triple-A securities. Using Li’s copula approach meant that ratings agencies like Moody’s—or anybody wanting to model the risk of a tranche—no longer needed to puzzle over the underlying securities. All they needed was that correlation number, and out would come a rating telling them how safe or risky the tranche was.

    As a result, just about anything could be bundled and turned into a triple-A bond—corporate bonds, bank loans, mortgage-backed securities, whatever you liked. The consequent pools were often known as collateralized debt obligations, or CDOs. You could tranche that pool and create a triple-A security even if none of the components were themselves triple-A. You could even take lower-rated tranches of other CDOs, put them in a pool, and tranche them—an instrument known as a CDO-squared, which at that point was so far removed from any actual underlying bond or loan or mortgage that no one really had a clue what it included. But it didn’t matter. All you needed was Li’s copula function.

    The CDS and CDO markets grew together, feeding on each other. At the end of 2001, there was $920 billion in credit default swaps outstanding. By the end of 2007, that number had skyrocketed to more than $62 trillion. The CDO market, which stood at $275 billion in 2000, grew to $4.7 trillion by 2006.

    At the heart of it all was Li’s formula.

    I blame the Clintons for all of this.

    Nassim Nicholas Taleb, hedge fund manager and author of The Black Swan, is particularly harsh when it comes to the copula. “People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked,” he says. “Co-association between securities is not measurable using correlation,” because past history can never prepare you for that one day when everything goes south. “Anything that relies on correlation is charlatanism.”

    That’s going a bit too far. A god can model anything.

    Li has been notably absent from the current debate over the causes of the crash. In fact, he is no longer even in the US. Last year, he moved to Beijing to head up the risk-management department of China International Capital Corporation. In a recent conversation, he seemed reluctant to discuss his paper and said he couldn’t talk without permission from the PR department. In response to a subsequent request, CICC’s press office sent an email saying that Li was no longer doing the kind of work he did in his previous job and, therefore, would not be speaking to the media.

    What’s that supposed to mean? Did they take away his supercomputer and fit him for a jump suit and plunger?

    In the world of finance, too many quants see only the numbers before them and forget about the concrete reality the figures are supposed to represent. They think they can model just a few years’ worth of data and come up with probabilities for things that may happen only once every 10,000 years. Then people invest on the basis of those probabilities, without stopping to wonder whether the numbers make any sense at all.

    Monkeys don’t care about the next 10,000 years. They just want the stinking model to work for the next several decades. Any more than that is someone else’s problem.

  6. I thought it was Madoff (made-off, get it?) but noooo, it was Li. I’m sure he had helpers, though.

  7. back in the day, i used to model hydrology. we’d, i’d, come up with a number( a number) that was used to size pipes, culverts, aquaducts, &ct. anyhoo, as a junior engineer type one time i came up with a number. a lot of people looked at the number and said, ya, good number. it was small number, hence a small pipe, hence cheap to build, all good, very good things. of course i went to look at the site during a good sized rain storm and the fucking mississippi river was flowing there.

    anyhoo, as i gained experience in these matters, first i would look at the site, or the problem at hand, and decide on a solution. then i would run the model, substituteing variables along the way, until the number it spit out matched my solution. my life was much better after that.

  8. of course, the above description is a very generalised and simplified model of the process.

  9. it’s kind of hubert’s detractors. i mean, it looks to me that he came up with a pretty darn good model for resouce excraction and depletion in general. when applieing it to world wide oil production, he missed, and how could he have known about?, a couple of huge variables, i.e., north sea and north slope. so you get retrds like PTE, just as a handy example, saying shit like, look, he was “wrong”. of course he wasn’t wrong. there was just some shit out there that he couldn’t take into account.

    so if there’s some more big finds out there, that no one knows about, he’ll be “wrong” again. but it don’t look that way, i guess.

  10. what about a horse? i’ll bet nate hagens, or maybe nudge, could come up with an answer.

  11. http://online.wsj.com/article/SB123588197770202929.html

    Mr. Chavez often threatens food suppliers he has accused of hoarding goods to sell on the black market for higher prices or waiting until price caps are raised. He first set his sights on Polar last year, calling it a “clear example” of the kind of business that is ripe for takeover.

    On Saturday, Mr. Chavez warned that any rice processing company that threatened to halt output would be permanently seized by the government.

    “I don’t have any problem expropriating,” he said. “And I’ll pay them with paper, too. Don’t think I’ll pay them with hard cash.”

    In the past two years, Mr. Chavez has nationalized four major oil projects and some of the country’s biggest electricity, telecommunications, steel and cement companies.

    Okay, I blame Bush for allowing this circumstance to fester for so long. Then again… we could be viewing, in hindsight, early stage preparations of a masterplan for eventually liberating the Venezuelans of their hydrocarbon burden. Pure genius.

    At this point, Obama might as well just kick back, after making some additional pro forma comments (at some point within his first 100 days) to superficially distinguish himself and his administration from W, and let low oil prices pay their full chaos dividend.

    Someone needs to strip Sean Penn of his American citizenship and deport him to VZ, where he can oversee and ensure implementation of enhanced production at rice factories in socialist paradise. There, he will no longer need false trapings of Oscar glory and other artifacts of loathsome capitalist empire and he can finally be his true worker self, equal in prestige with all others except for Hugo so beloved by the people. As to the bromide that everyone gets exactly what they deserve all of the time, well… IMHO it’s just not true. People have gods to pray to mostly because, one way or another, they want justice.

  12. Electric cars: chimps switch fuel source from dirty oil to even dirtier coal, via power grids. We’s so smart.

    By definition, one horse will consume one horse-power’s worth of fossil fuel in hay, oats (mined-processed-transported NPK plus mechanized planting, irrigation, harvest and transport). There’s some solar power in there, as well.

  13. Hey but that coal is going to be clean when burned I swear!!!

    BTW: Don’t look under the carpet for all the toxic waste created during the prosses to make that coal clean to burn.

  14. So Dave,
    Would you use curl, and curl-E maths to work out how fast water could flow?
    (no, I don’y know shit about curl, just that its used to describe how surfaces get wetted and some other stuff)

  15. “He first set his sights on Polar last year…”

    I hate hearing this. Damned chavistas. For god sakes is nothing sacred? This guy would fuck up a good brewery. The shit’s gone too far.

  16. dave, just tell me the answer now and bill me later. here’s the pitch/problem: we know increasing the speed of liquid flow (through some piping) makes our membrane moron sensitive to dissolved analytes. i think it’s just increasing the Reynolds number toward turbulence, which in turn cuts down laminar dead layers and increases analyte diffusion in the liquid toward the membrane. if we want to save power, but want to increase the R.N. and make turbulence, would we be better off just increasing the boundary shear stress some way, rather than increasing the pumped water flow, costing us power?

  17. yara,

    i did most of my modeling type work on overland flow type problems. this stuff is full of huge assumptions. many times, order of magnitude type answers are often acceptable, for many different reasons. a number of standard methodologies have been developed and are in general use. the most common are, to knowledge, the rational method, tr55, tr20 and hec2. the method selected depends on a number of factors, e.g., cost, design budget, size of watershed, &ct.

    never even heard of curly stuff.

  18. doom,

    not sure, but it sounds like you’re fucking around with RO. at relatively low volumes(means different things various pump manufacturors) a piston pump is usually the best, from what i know. you may want to stage differnt types of pumps.

    anyhoo, tell me what it is you’re trying to accomplish, then i can maybe help you out. i’ll send a bill, of course.

  19. see, again, no idea of what kind of volumes you’re talking about. but anyhoo, ro, if that’s what you’re working with, always results in a super saturated substrate in the vicininty of the membrane, that’s the intent. the waste brine must be dumped. then normally saturtaed solution can reintroduced. so anyway, with just guessing at what you’re doing, i’d say, mixing chamber to ensure a homogeneous solution to the membrane. use pistons to force it through the membrane.

    where can i send the bill?

  20. Dave, you son of a gun, you are a storm water guy. Those are all watershed models. Lets drink to Mannings equation and all the great roughness coefficients (as pondered with respect to favorite trout fishing streams).

  21. yara,

    also not sure what you’re dealing with, but calculating friction loss in pipes is a very common engineering problem. if youtell me what your specific application is, i can probably help you out.

    something like this might work for you.

    http://www.freecalc.com/fricdia.htm

  22. biff, i’m much more than a storm water guy. are you an engineer or hydrologist?

  23. my only real credential is: “retard who walks in the woods”, a lot. plus i happen to have a 10″ dick, just sayin’.

  24. Dave, no not a hydrologist or engineer. Environmental sciences and then planning (regional) by education. Have been involved in a bunch of watershed plans and studies over the years, which through an almost magical reverse osmosis allows me to engage in limited hydro-speak with members of various guilds, even the lawyers. However, I should also note that a portion of my youth was (mis)spent in various on- and offshore/transport areas of the oil bidness, and I only add that because of it I believe I can figure out how to keep shit moving through a pipe as well as the next monkey.

  25. dave, the volumes are small, a few ml, to tens of ml at most (1 ml = 1 cc). I want turbulence, but not by high flow rate (= power expended) if I can help it. We use an impeller pump. The membrane is hydrophobic, so only gases, volatiles and semi-volatiles pass through it, no liquids.

  26. sweet jesus, we might actually get some useful work done using zulu kilo, forum of many uses, and abuses.

  27. Thanks for all the replies. I’ve been gone for a few days and haven’t been able to think much about them. I should have some time today to respond. I’ve added a chart to start with in response to what Dave said about individual countries peaking. I mis-worded that.

  28. so anyhoo, it sounds like you’re trying separate volitiles from ground water through a membrane, and mostly for analysis purposes, at least at this point. maybe you have a pilot plant going? i guess you want to scale it it up at some point and that’s why you’re worried about power consumption?

    still sounds a lot like RO.

  29. and I only add that because of it I believe I can figure out how to keep shit moving through a pipe as well as the next monkey.

    i’d say you’re absolutely right about that.

  30. I have to continue pinching myself that the only reason I’m funded at the moment is I’m working for the military, a branch of the federal government.

    They have requested that persons such as myself (a vague reference to moi) should help them detect those compounds that may leak from munitions. This goes well with my desire (such a nice word) to make the analytical instruments as sensitive as possible, to compete with that complex biological sensor within a dog’s nose. Evolution is slow, but had a head start and lots of lead time.

    We could put the dog in a submersible and send him/her down to literally sniff around, but maybe an instrument would be moron PC and reliable, at least that’s the goal.

    JR, your changes make one wonder if they have the right site. Nice improvement with the sexy ads. Do we share the profits on the site rentals?

  31. Dave. no need to be sorry. Admittedly urban/regional planning and growth management have been a kind of black comedy endeavor, especially obvious now in the rear view mirror. They don’t listen to us though, they never really did, but in consolation they do allow us access to the data, and a front row seat, which is cool.

  32. That gizmo in the banner photo looks expensive, a real piece of engineering. No one would see it at first, but it’s a tool to provide our country with abundant cheap oil.

  33. Michael Phelps sold it too me. Said something about tandem shaped charges. I thought it was a bong, but when I looked it up on wikipedia it turns out it’s a AGM-114L Hellfire II “Longbow” missile. Who would have thought?

  34. I think it’s missing some critical parts, but it’s just a display model, of course.

    I recall in Vietnam the Vietcong could take out a 2 million dollar plane with a 12 dollar SAM. I think that lesson was learned well in the sense that no one takes out a Predator, but at what cost, bucky?

    So Phelps said it didn’t draw well and sold it to you for a song? Yankee Trader, JR.

  35. bunnbunn –

    I’ll be using your piece on Li as an introduction to Part IV: The Wrath of Plateauing Producers.

  36. Dave,
    No, no fluids involved, or any project.
    The reason I asked was that I got an electronics cookbook once and there was an explanation of why wires should be as thin as possible, using curl maths. Couldn’t follow it for shit. Asked a guy at work who had done maths at Uni and he essentially said the branch of maths was used for determining how flat surfaces and pipes got wetted (IIRC).

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