Ghawar in decline?

Evidence is mounting that Saudi Arabia's Ghawar, the world's largest oil field (the king of kings...), is in decline. Here's some excellent analysis from Stuart Staniford on 2006 production data. Particularly telling is the rapid growth in new wells as production falls along a steady slope (a classic warning sign):

The Oil Drum: Overall, I feel this data is clear enough that I'm willing to go out on a limb and conclude the following:

• Saudi Arabian oil production is now in decline.
• The decline rate during the first year is very high (8%), akin to decline rates in other places developed with modern horizontal drilling techniques such as the North Sea.
• Declines are rather unlikely to be arrested, and may well accelerate.

I suggest that this is likely to place severe political strains on Saudi Arabia within a year or two at most.

Makes me think of Joseph Tainter's premise: that complex civilizations can only continue to add complexity (to solve ever more complex problems) as long as they have access to an inexpensive/inexhaustable source of energy. The type of the energy input changes from civ to civ, but the premise doesn't.

Comments

[Fabius Maximus]

Don't take the material on The Oil Drum too seriously. Their technical data is often excellent; the opinions often just wild guesses. Sometimes utter nonsense.

The new GAO report will be out soon, and will probably say -- like every other expert report -- that we do not have sufficient data to forecast the date of peak production of conventional oil within a rough 20-year window. Much of the relevant data, like the status of Ghawar, are state secrets.

It is not possible to distinquish "political" from "geological" peaking. The Saudis might be able to produce more, but choose not to do so. Once they've paid the bills, excess oil might be worth more in the ground than pumped and the proceeds invested in t-bills.

Platt's story on the GAO rpt:
http://www.platts.com/Oil/News/6360268.xml?p=Oil/News&sub=Oil&src=energybulletin

[londamium]

I've no idea whether Saudi has peaked or not, but the data is now there for us to be able to "integrity test" claims regarding their ability to sustain output rises to moderate future price spikes.

That said, the fundamental pricing dynamics of the global oil markets have changed. The price run-up since 2003 has conclusively demonstrated that the prevailing conventional wisdom regarding recessionary price levels was false, and that the global economy can easily bear a $55-65 per barrel price range without any observable or damaging impact on demand growth. All the major producers have revised their revenue maximisation models to account for this. OPEC production growth/production quota is liable to lag demand growth, thereby ensuring a lock-in of price levels above $50 per barrel.

Mexico, the US, and the North Sea are all pumping flat out; their aggregate production levels are, nevertheless, relentlessly declining.

[Fabius Maximus]

No question, estimates of the sensitivity of GDP to oil prices were far too low. Although economists were, so far as I know, all wrong about this, some in the oil field were right. Such as Matthew Simmons, the investment banker.

Athough many major fields are peaking, there is a consensus that substantial new conventional fields are coming into production over the next 5 years. Both the bulls (e.g., CERA) and bears (e.g., Chris Skrebowski's megaprojects forecast) agree on this.

Also note substantial new unconventional sources. Deepwater, bitument (aka oil sands), heavy oil, and biofuels. The latter is often underestimated. Current production is aprox equivalent of 800 thousand barrels/day of oil -- almost 1% of oil demand.

The "wild card" is rate of production decline of existing fields. Little agreement about these forecasts over a five year horizon, and a wide range of estimates over longer horizons.

Unfortuntately londamium's comment about "integrity test" of Saudis is not correct. Political and geological peaking are impossible for us to distinguish. Can they produce more, or do they just choose not to? As for what they say, we cannot burn their words.

[french swede the rootless vegetable]

Dearth of oil will not threaten our civilisation.

Already with today's oil prices, nuclear energy is profitable.

Solar energy is a bit further away from profitability, but photovoltaic components are following a Moore's Law-like development trend.

What could be a problem is our transport system, which is not easily switched to non-petroleum fuels, and where negative impact international trade would have a multiplier effect for the economy.

Though, due the massive demand for better mobile phone & laptop batteries, that technology has now a financial reason to be developed, which could be used in efficient electric vehicles.

The only question is if the transition will be smooth or turbulent.
For the moment, it looks like the second option, what with the middle-east clusterfuck and all that.