Sprott says 8% decline... that's a 9-year halving time

khebab · Moderator Joined: Sep 27, 2004 Posts: 935 Location: Canada

if we assume a alpha= 8% depletion rate, past peak production with a maximum noted P0, the area (Q) on the right side of the curve is:

aahala · Intermediate Crude Joined: Feb 03, 2005 Posts: 954

Sprott is NOT predicting peak this year. He is stating peak MAY occur
this year.

I can state the Yankees may win the World Series this year. My statement
would be considered a WAG(wild ass guess).

Sprott's statement includes numbers, so his is a SWAG(statistical
wild ass guess.)

Eli · Posted: Thu Jun 30, 2005 8:56 am Post subject:

Opec is the key to world decline and specifically SA.

Looking at the evidence they did cook their books back in the 90's and all of them doubled there known reserves with no evidence to support their claims.

The argument can also be made for a quicker decline because of how the oil has been extracted.

Horizontal drilling and 3-d seismic imaging have made the North Sea the example of what has happened with the use of greater technology in oil extraction. It does allow for higher peak extraction but then a corresponding steep decline.

The SA fields have also been using secondary recovery techniques (pumping in sea water) for years which boosts peak extraction but also decline rates when the field passes prime production. Pumping in see water is also inferior to tertiary extraction in which co2 is pumped in to the field to push the whole reserve towards the well head. Secondary extractions weakens the field and the water breaks through the oil and does not push the whole field.

The large oil fields that the US did not see the these techniques used until much later in there lives so that helps explain why they did not see as steep of declines.

Dan1195 · Heavy Crude Joined: Mar 19, 2005 Posts: 262

There are a couple reasons we should be concerned bout a faster decline rate:

1. Use of secondary and tertiary methods. These keep field production rates up, but make for a steeper decline. This is possible for many of the larger fields, including Canterell an Ghawar those 2 fields along current account for ~10% of world production.

2. Offshore fields. These have been source of much supply growth in the past 10 years, and tend to have shorter lifespans with steep decline (e.g. North Sea) due to higher costs they pump full tilt.

3. Mathematical relationships:

Rate of discovery rose then fell (peak ~1960)
total reserves rose then fell (peak ~1980)
production rose and will fall
Rate of depletion is just beginning to rise (and wont decline under most oil is gone)

Sparaxis · Posted: Thu Jun 30, 2005 7:42 pm Post subject:

pepper2000 is correct. This article makes no distinction between the various types of depletion--type 1, 2, or 3. Type 3--national depletion--is our signpost to world decline, not that of individual fields. An 8% depletion rate in an existing field or well is not unusual, but it is constantly offset by new drilling and production. At some point, these new wells don't offset the decline from others and the entire field enters depletion, and when all new wells and new production don't make up for the decline in all the fields in a country, you have type 3 depletion. The ODAC estimates that at about 1-1.2 mmbd/year.

0mar · Posted: Fri Jul 01, 2005 12:44 am Post subject:

JBinKC · Heavy Crude Joined: Aug 14, 2004 Posts: 251

I have been a big fan of Sprott since the crash of 2000 where he has been the best performing money manager since the internet bubble. I believe his fund groups had the best return in 2001. I know he made a fortune with PetroKazakhstan buying it under $1 among other stocks. I know I spend big time checking out what he is doing on the Canadian SEC equivalent Sedar.

Regarding this latest piece on oil I am not sure that his figures are accurate but he has been uncanningly accurate on the timing of many of his investments. Its hard to dispute him when he has been right so many times. I know he also has written a piece also on our real estate bubble and mortgage debt and that was also a scary scenario.

Quizzle · Coal Joined: Jul 04, 2005 Posts: 3

trespam · Posted: Mon Jul 04, 2005 10:55 am Post subject:

Speculation about depletion rates must take into account consumption. Long before 8% annual depletion rates are a proven fact the world economy will produce an extraordinary amount of demand destruction that will push the decline out by many years--and put many people out of work.

Answer these questions:

How many of your purchases are necessary? How many of the automobile purchases are necessary? How many vacations are necessary? How many vacations to far off places on jet planes are necessary?

Needs versus wants. Wants will decline to meet needs. I don't think 8% declines will happen. Demand will drop to produce period gluts of oil.

khebab · Moderator Joined: Sep 27, 2004 Posts: 935 Location: Canada

trespam · Posted: Mon Jul 04, 2005 12:03 pm Post subject:

MagnoliaFan · Heavy Crude Joined: Apr 17, 2005 Posts: 121