01/30/2007 04:10:16 PM EST

Production at world's 3rd largest oil field down 25% in 06!

posted by adamg

http://www.greencarcongress .com/2007/01/oil_production _.html#comment-28473200

Email Print
Google Technorati del.icio.us digg reddit Facebook
Speaks volumes, peak oil is getting very near.

Total production of Mexico, US's second largest supplier, dropped 12% in 06.

Oil up over 5% today, Natural gas 11%.

For those that don't know the 4 largest oil fields in the world are:

1. Ghawar in Saudi Arabia
2. Burgan in Kuwait
3. Canterell in Mexico
4. Samatlor in Russia

All except Ghawar are in decline, and Ghawar is unable to increase production, only maintain it, for now.

I stand by my prediction of $80 oil by summer 08, and $100 by summer 2010.

Thoughts?

< Impeachment is Just Alright With Me! | Jack Valenti making sense on Hardball >
 Display:
Production at world's 3rd largest oil field down 25% in 06! | 9 comments (9 topical, 0 hidden)
bump (none / 0)
bump

by adamg on 01/30/2007 04:10:48 PM EST

Probably (none / 0)
"I stand by my prediction of $80 oil by summer 08, and $100 by summer 2010."

That sounds pretty reasonable to me, it comes out to around a 15-20% aunualized gain, although i think most of the gains will be in quick spurts.  If i had to guess i would say oil will stay between 50-65/barrel through most of '07. By the way do you have any strategy to capitalize on these predictions? 

I still see peak oil potentially occuring in the near future, but i'm starting to think that it may be more in the 10-15 year range of estimates rather than the more imediate estimates.  I also expect production growth to lag demand growth over the next decade or so putting continued upward pressure on prices.  The wild card in all this are the significant advances we're seeing in alternative energy technologies which have the potential to displace some demand.   

by alphasigmookie on 01/30/2007 05:14:44 PM EST

I agree (none / 0)
I agree with yor 5-10 year timeline, but fear that anyone who thinks we can increase annual production is certifiably insane.

We are in for rogh times ahead, but there is always hope.

As for the financial strategy there is an obvios one.

Oil service companies, specifically geosurvey companies.

I own 2, Oyo Geospace and Dawson Geophysical. They make and operate tech that allows companies to locate oil and natural gas deposits. They are small caps that mostly work for smaller outfits, but they have the brightest future.

Companies like Exxon are running out of places to get oil. All the big fields are nationalized and their investors demand top shelf growth.

How can a giant such as XOM grow at 10% a year? Well they certainly can't increase reserves?

They can't. But for a smaller comapany 100 million barrels is a treasure trove. Worth potentially over $10 billion in revenue. Such a company will pay hansomly to a company such as DWSN or OYOG.

So far they are doing pretty well, though the recent oil price decline hurt them. I took the oppertunity to buy more and am looking forward to the end of the oil era.

Of course these stocks are 5-10 year holds, 15 tops, but by then DWSN could easily be a 30 bagger.


by adamg on 01/31/2007 12:20:47 AM EST

Decent Analysis (none / 0)
I agree 100% that the oil majors will have difficulty replacing the reserves they pump out of the ground and are probably not a good investment.  If you look at any of them closely enough you'll notice that most of their "new" reserves are in the form of natural gas or unconventional crude like canadian oil sands.  I think BP and Shell are the smartest since they seem to be investing the most in alternative energy technologies.  This indicates to me that they recognize the difficulty the industry will face in the future and that growth will have to come from a different direction. 

I'll look into the two you suggested.  I think you are right about oil services.  As oil gets harder to find thier market becomes much bigger while producers become more risky.  I also like some small cap producers, but my favorite (KCS) got bought out in what i thought was an unfavorable move.  I've yet to find another that i like as well. 

by alphasigmookie on 01/31/2007 09:29:36 AM EST

[ Parent ]
MSN money story (none / 0)
Here's an MSN money video journal about the same oil field.  Aparently the field may be down to 1million BPD by the end of 2007

Video: How fast is oil supply declining?

by alphasigmookie on 02/02/2007 10:59:23 AM EST

around in circles we go (none / 0)
I know you're just posting this to push my buttons but you know me, i can't help but take the bait. 

First of this has nothing to do with whether or not peak oil is occuring, will coccur soon, or will ever occur. 

Second the corn ethanol (and H2 fuel cell for that matter) boondoggle is being pushed by REPUBLICANS so you own it so don't try and push it on me.  I realize both of these technologies suck, which is exactly why the shrub is pushing them.  This is exactly what happens when politics trump science. 

Third the most efficient means to develop alternative energy technology is to manipulate market forces in their favor (gas tax, carbon tax, ect), not arbitratrally supporting one technology over another.

Fourth the Y2K scare didn't materialze exactly because it was anticipated in advance and billions of dollars were spent to avert the problem before it became one.  Peak oil and global warming can also both be averted if we use the same strategy, but the problems won't avert themselves.   

by alphasigmookie on 02/02/2007 11:47:00 AM EST

[ Parent ]
comming clean (none / 0)
"Your work must somehow tied to a research grant related to alternative energy. Do you work for ADM or OSU? "

Actually i currently work for government contractor working on DOD contracts related to bioterrorism.  Basically i get paid to think like a terrorist.  However I did just get offered a fellowship to go back to OSU and get my Ph D.  If i do i will probably work for a professor who has an NSF grant to OBJECTIVELY assess the viability of various biofuels through lifecycle analysis and exergy analysis. 

"You are smart enough to recognize that if oil remains plentiful for decades, we will never see alternative energy in our lifetimes."

That is a huge IF.  It is always important to have a contingency plan.  If terrorists never release a cloud of anthrax in the US the billions of dollars we've spent building up vaccine stockpiles would be wasted too, but i don't see you complaining about that.  I think the odds of us needing alternative energy technology are many hundreds of times higher than the odds that we'll ever need to use our anthrax vaccine stockpile. 

Plus i don't know if you're completely correct in your orignial statment either.  The exponential advance in information and nano technology will eventually lead to extremely cost effective solar technology and wind power is already cost competitive with coal in some areas.  Also i am confident that advances in biotechnology will allow us to efficiently exploit natures solar cell (photosynthesis) economically in the form of biofuels.  Economies of scale will also work in the favor of alternative energy.   

"We might as well play the politics for our advantage."

How do you recommend we do that?

by alphasigmookie on 02/03/2007 12:06:36 PM EST

[ Parent ]
Not true (none / 0)

According to statistics from the NREL (National Renewable Energy Laboratory), current production of Ethanol has an energy return of about 1.2, meaning we get 1.2 times the power out that are required to produce it. This is not good, but it is a positive return. This is mostly because our current ethanol production only uses the corn kernels. We throw out the whole rest of the plant.  They have taken this measurement for other potential fuels, and they are much better:

Fuel                                               Energy Return

Ethanol (US Corn-current methods)           1.2

Ethanol (Brazilian sugar cane)                    ~8

Ethanol (Using whole corn plant)                ~9.5

Biodiesel from switch grass                        ~11

Sustainable alternative liquid fuels do have the potential to economically mitigate the loss of fossil petroleum. However, ethanol, as we do it now, is clearly not the answer.          

by Tergenev on 02/02/2007 11:56:10 AM EST

[ Parent ]
Down 25% in 2006, 33% in 2007 (none / 0)
Sounds like Canterell will be completely tapped soon.

Declines are accelerating. Let us consider some simply math.

Bt first realize why production is falling so fast. They pmped the field too quickly and then in 1997, when it was peaking, they started injecting Nitrogen at exponential rates. This increased production until the peak in 2006, which no technology can reverse.

Linear exponential model: Production continues the trend, and drops 41% in 2008.

This would mean 590,000 bpd in 2008.

Production in 2009 drops 49%, to 301,000 bpd in 2009

Production in 2010 drops 57% to 129,400 bpd

After 2010 the field would have to shut down due to lack of profitability.

These numbers may be extreme but even if Canterell declines only 25% annually, then by 2010 its down to 633,000 bpd

And by 2015 its at 150,000 bpd and soon to be shut down.

Either way Mexico is finished as an oil producer, they will never be able to increase production without such a beast as Canterell. There are simply not any super giant fields left,(10 billion barrels or more).

The last one found was in Alaska in the 70's, and the last giant field was the very acidic(poor quality oil) field in Kasakstan, estimated at 9 billion.


by adamg on 02/02/2007 01:25:04 PM EST

[ Parent ]
Production at world's 3rd largest oil field down 25% in 06! | 9 comments (9 topical, 0 hidden)
 Display: