Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Joined: Sep 25, 2004 Posts: 4721 Location: Boston, MA
Posted: Sun Feb 27, 2005 10:27 am Post subject:
Not to repeat what I just said, but I recently took a very close look at ASPO's chart for peak oil in 2007-2008. I think they are wrong. Worse than that, they are WAY off.
Look at the chart one more time. In order for production to go up between now and 2008, there must be a massive increase in deep-water oil and in artic oil. I don't see that happening. If they have not found it by now, they probably are not going to find it. In the next couple of years, oil companies "have" to find tens of billions of new barrels of oil. I have seen no evidence of any major find. If they 100 billion+ left to discover is under 8000 feet of water, it's not useful. If it's underneath 1000 feet of ice, it's not useful. If it contains too much sulfur, it's not useful.
The only countries that haven't peaked yet according to their own data are; Canada, Iraq, Saudi Arabia, Kuwait, and a few of the smaller players. I can't see those countries being able to compensate for massive declines in the US, the North Sea, and possibly Russia.
In addition, ASPO uses Natural Gas Liquids and counts them as oil. The fuel I put in my lighter has far fewer uses than the fuel I put in my car. To compare NGL to crude oil is illogical. If we run out of oil but have plenty NGL, it does not really help us.
Furthermore, ASPO puts heavy crude in the same category as conventional oil. If we have to refine heavy crude using extra energy, its EROEI dips. A barrel of heavy crude is equal to roughly 2/3 of a barrel of conventional crude. ASPO should reduce its estimate for unconventional oil to reflect this.
Lastly, the oil infrastructure can't handle much more oil. We are running at nearly 100% capacity in tankers, refineries, and pipelines as it is. Without building more of each one of these, we will be unable to increase the supply of refined oil products substantially. I just thought I’d throw that out there. Based on the data I’ve looked at, I believe that conventional oil will peak this year (if it hasn’t already).
I have trouble believing a number like 10 dollars on the deep water oil.
How could a number like this be possible?
Some of you have questioned the $10/bbl production cost I suggested for deepwater fields. Happy to have my numbers challenged. Here is the back-up.
Each deepwater field is obviously unique, and has a specific field development plan – there is no such thing as a ‘standard’ project in this business. Hence, I propose some numbers for a fictitious field typical of many currently being developed.
Assume a 200 million bbl recoverable field in deepwater, remote from any infrastructure, which will produce 100,000 bpd at plateau and decline over a 10 year life.
Say you need 10 wells – 6 production and 4 water injection, which will cost $150 million to drill and complete.
Add the subsea hardware (Xmas trees and risers), which will cost another $200 million to procure and install.
Lease a floating production facility (FPSO). Typical all in lease rate could be around $200,000/day including crew, maintenance, spare parts, etc. Fuel to run the FPSO will come from the produced gas and is assumed to be accounted at zero cost. Surplus gas would be re-injected.
Add logistics and local support costs $50,000/day.
All up capital cost is then around $350 million, i.e. an average of $1.75 /bbl
Operating costs, including the FPSO lease cost, averages $4.5/bbl over the 10 years.
Oil shipping costs from the FPSO to a refinery would add say $1 to 2/bbl, depending on location.
In total, this gives $7.25 to 8.25 / bbl.
This excludes initial block license fee, seismic survey and exploration well costs, which could round the number up to $10/bbl total.
Local taxation is also ignored, since this varies widely from area to area.
This is obviously a simplistic analysis, ignoring time.
Run a more complex NPV calc on this at $40/bbl and you will find and NPV of around $4.3 billion for this project, i.e. an average of $21.5/bbl discounted (8% discount rate assumed).
Run it again at $25/bbl and you find the NPV drops to $2.2 billion.
Now you can see why the oil majors are reporting massive record profits this year.
You should not be surprised at the $10/bbl figure. Most offshore fields are only sanctioned for development if they can show an acceptable return at an oil price of $18 to $20/bbl. This number has slowly crept up over the past few years, but oil companies are notoriously conservative in this area.
The cost of development and production has nothing to do with the market price of oil, which is totally driven by supply and demand. Post PO when oil hits $100/bbl, it will still cost $10/bbl to produce in deep offshore (and much less onshore).
The only way out of this is to break the supply/demand equation by securing a dedicated supply sufficient to meet a countries demand, and bypass the international oil market. For example, if the US was to secure supplies from Iraq, Iran and Saudi they could dicatate their own internal sales price, oustide of the chaos in the rest of the marketplace....
If it is dressed up a spreading freedom, ridding the world of nuclear terrorist threats and liberating opressed people, maybe they could get away with it like the last time (remember the WMD scam which netted 110 GB?).
Who exactly would stop the US? The UK would tag along again to get a % cut of the spoils. Russia has enough of her own reserves for now. China has seen this coming and is already trying to line up Plan B. The rest of Europe would of course bitch and be ignored like last time.
Joined: May 24, 2004 Posts: 1938 Location: Richland Center, Wisconsin
Posted: Sun Feb 27, 2005 5:52 pm Post subject: Interlink.
Pup,
Have you seen this: http://www.peakoil.com/fortopic5305.html _________________ --------------------------------
| Whose reality is this anyway!? |
--------------------------------
(-------< Temet Nosce >-------)
____________________________
The cost of development and production has nothing to do with the market price of oil, which is totally driven by supply and demand. Post PO when oil hits $100/bbl, it will still cost $10/bbl to produce in deep offshore (and much less onshore).
The only way out of this is to break the supply/demand equation by securing a dedicated supply sufficient to meet a countries demand, and bypass the international oil market. For example, if the US was to secure supplies from Iraq, Iran and Saudi they could dicatate their own internal sales price, oustide of the chaos in the rest of the marketplace....
Oh man, can you imagine the tremendousness of the financial incentive to buy oil at the internal price and sell it at the external one in such a system?! Good lord, the thought makes me almost giddy!
I had not seen this but this is quite well done. Thanks for the post.
The weak link in the analysis seems to be the assumption of a mere 1 mbpd growth between now and 2007. If it's more like 3% like the global economy is supposed to grow, this could get more interesting.
It would be interesting to be able to track how these startups are doing. I will print this out and save it for tracking later.
Posted: Thu Mar 03, 2005 10:38 pm Post subject: Excel Model
I have created a model using an Excel spreadsheet and these are the numbers I come up with using different scenarios.
I started all the charts at 1 GB/Year during year 1 production and used varying rates of growth and decline. These charts assume a perfect bell curve.
Scenario 1
First year growth is 10%
Growth declines at 0.144%/Year
Total Production is 2021 GB
Peak Production of 30.3 GB/Year
Peak year = 71.0
50% of peak production = Year 102 (31 years for first halving)
25% of peak production = Year 115 (13 years for second halving)
Scenario 2
First year growth is 12%
Growth declines at 0.207%/Year
Total Production is 1680 GB
Peak Production of 30.13 GB/Year
Peak year = 59.5
50% of peak production = Year 85.5 (26 years for first halving)
25% of peak production = Year 96.5 (11 years for second halving)
Scenario 3
First year growth is 9%
Growth declines at 0.117%/Year
Total Production is 2230 GB
Peak Production of 30.15 GB/Year
Peak year = 78.5
50% of peak production = Year 113 (34.5 years for first halving)
25% of peak production = Year 127.5 (14.5 years for second halving)
Certain trends are noticed:
Every year the decline as a % of prior year production increases.
The time to lose an additional half of current production decreases with each halving. This is consistent with the prior statement.
Gross production declines increase every year until about 60% of peak production is reached.
Considering the oil embargo effects it is highly likely that our ultimate peak will be less than we could have achieved and that we will hit Peak Oil past the original halfway point.
Joined: Apr 17, 2004 Posts: 984 Location: Tulsa, Ok
Posted: Fri Mar 04, 2005 5:12 am Post subject: ECM
Can you post these curves? Interesting results.
Particularly,
Quote:
Considering the oil embargo effects it is highly likely that our ultimate peak will be less than we could have achieved and that we will hit Peak Oil past the original halfway point.
The part about hitting peak past the original halfway point. _________________ Peace out!
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Good lord, the thought makes me almost giddy! 
