Monday, December 12, 2011

Peak Oil and Our Mental Models. The WikiLeaks Cable and The World’s Largest Oil Fields.

In the two previous articles on Peak Oil I have discussed the future Outlooks concerning Oil made by the International Energy Agency (IEA) and the US Energy Information Administration (EIA). In this article I will focus on two aspects in depth. The first aspect is to focus on the World’s largest Oil Fields and see what importance they play for the world oil production. The second aspect is to focus on the secret diplomatic cable released by WikiLeaks from US embassy in Riyadh in Saudi Arabia.

In the 2011 World Energy Outlook by the IEA the Production of Crude Oil from the oil fields that produce oil in 2010 in expected to drop by over Two-Thirds by 2035. Quote: “We project that crude oil production from fields that were producing in 2010 will drop from 69mb/to 22mb/d by 2025 – a fall of over two-thirds”. But the IEA still expects the crude world production to remain at 67,9 mb/d per day 2035 from Crude Oil Yet to be found and Yet to be developed (WEO 2011: 122-123).

The WikiLeaks Cable
In 2010 WikiLeaks made the largest publication of classified material in history when a large number of US diplomatic cables were released. Among these cables one cable from the US Embassy in Riyadh from the 10th of December 2007 was released. This cable focus on an interview with Dr Sadad al-Husseini. Al-Husseini was formerly the Executive Vice President for Exploration and Production at Saudi Aramco, he also has Ph.D. in Geological Sciences. In this interview al-Hussseini warns that the Saudi Oil Reserves may be overstated by as much as 40%. Concerning the implication of this statement al-Husseini believes that:

“In al-Husseini’s view, once 50 percent depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini’s calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years.”

“While al-Husseini believes that Saudi officials overstate capabilities in the interest of spurring foreign investment, he is also critical of international expectations. He stated that the IEA’s expectation that Saudi Arabia and the Middle East will lead the market in reaching global output levels of over 100 million barrels/day is unrealistic, and it is incumbent upon political leaders to begin understanding and preparing for this “inconvenient truth.””
According to the cable al-Husseini describes himself as optimistic about the future outlook of energy even if he contradicts the official Aramco line. It’s clear that al-Husseini probably is one of the people in the world with the best insight concerning the future of oil production in Saudi Arabia based both on the man’s education, experience and firsthand knowledge from leading the Exploration and Production unit in Aramco.

The World’s Largest Oil Fields
The number of producing oil fields 2007 was around 70.000; in total these fields produced around 70 million barrels oil per day (WEO 2008: 225-226). As previously noted the IEA expects that production from fields that was producing oil in 2010 is expected to drop from 65 mb/d to 22 mb/d in 2035. But the IEA still expects new finding to replace this lost production. This raises the question about what type of future findings we can expect. So let’s take a look at the World’s Largest Oil Fields.

The Top 10 Producing Oil Fields in the World 2007
1.) Ghawar 5,1mb/d
Ghawar In Saudi Arabia in undoubtedly the King of Kings. Ghawar was discovered in 1948 and has been producing enormous amount of oils ever since. Ghawar alone has historically produced somewhere between 55-65% of all oil coming from Saudi Arabia. The Fields Peaked in its production 1980 with a production of 5,58mb/d, the production was still at an amazing 5,1mb/d 2007.

2.) Cantarell 1,6mb/d
Cantarell in Mexico is the World’s Second most producing Oil Field. The Field was discovered in 1977, peaked in its production in 2003 with a production of 2,05mb/d a figure that had dropped to 1,6mb/d in 2007.

3.) Safaniyah 1,4mb/d
Safaniyah in Saudi Arabia was discovered in 1951. The field Peaked in its production 1998 with a production of 2,12mb/d, in 2007 the production has dropped to 1,4mb/d.

4.) Rumaila 1,25mb/d
Rumaila was discovered 1953 in Iraq. The field Peaked in its production in 1979 with a production 1,49 mb/d, in 2007 the production had dropped to 1,25mb/d.

5.) Greater Burgan 1,17mb/d
This oil fields in Kuwait was discovered in 1938, the production peaked in 1972 with a production of 2,415 mb/d a figure dropped to 1,17mb/d in 2007.

6.) Samotlor 0,903mb/d
This Russian Oil Field was discovered in 1960, it Peak in its production in 1980 with an enormous production of 3,435mb/d, a figure that had dropped sharply to 0,903mb/d in 2007.

7.) Akwaz 0,77mb/d
This Iranian Oil Field was discovered in 1958 and peaked in its production in 1977 with a production just over 1 million barrels and dropped to 0,77mb/d in 2007.

8.) Zakum 0,674mb/d
This oil field in Abu-Dhabiwas discovered in 1964, peaked in 1998 at 0,795mb/d and had dropped to 0,674mb/d in 2007.

9.) Azeri-Chirag-Guneshli 0,658mb/d
This oil field in Azerbaijan was discovered in 1985 and hadn’t peaked in yet in 2007 with a production of 0,658mb/d.

10.) Priobskoye 0,652mb/d
This Russian oil field was discovered in 1982 and hadn’t peaked yet in 2007 when it has a production of 0,652mb/d.

From these figures we can see several trends. The World’s Largest Oil Fields play a very important part for supplying the world’s energy demand. The Top Ten Fields produced 14,26 mb/d; around 20% of the World’s Total Oil Production. If the next ten fields were added the figure was around 25%. In total there was around 70.000 Oil Fields producing oil in 2007 and 20 of these fields produced a fifth of all the oil (WEO 2008: 225-226).

Another fact also stands out very clear; none of these fields has been discovered recently; the ones that was discovered the latest was discovered in 1982 and 1985. Only two of these fields hadn’t reached their Peak in production in 2007; the rest where on decline. During the summer of 2011 there were big headlines concerning an unusually big oil find outside the coast of Norway that is expected being able to produce up to 500-1200 million barrels of oil. Ghawar with its production of 5 million barrels of oil per day produces this amount of oil in 100-210 days. The trends of smaller and smaller findings are something often stressed by researchers within the Peak Oil movement; smaller and smaller fields of oil are being discovered even though the technological tool available to search for new fields constantly develops.

Peak Oil and Our Mental Models
If Peak Oil is truly here or not is not a question that I can answer. In this article I have lifted the trend of largest oil Fields in the World and classified information from WikiLeaks concerning the situation in Saudi Arabia. No matter what information that I present I almost always the same response; people simply agree or totally disregard the possibility of Peak Oil. One aspect that I would like to raise is mental models and mind-sets. This is one the major subjects that Richard Heuer lifts in the book Psychology of Intelligence Analysis. Heuer believes that people construct their own reality based on the information that they observe. We are influenced by many factors like cultural values, education and past experiences but also by factors like the role we are expected to fill and norms within organizations or communities (Heuer 1999: 4-5).

This is a critical aspect that is not lifted enough: We do not focus upon our own mental models. There was a time when most people believed that world was flat. Economical Growth and an increase in the standard of living has been the truth for a long period time. We expect things to get better and better, we expect that the standard of living will be higher and higher. This is one of our cultures most central ideas and a message that reach us every day from multiple sources. One things that Heuer lifts is that when a paradigm change, as the end of the cold war takes place the experts how knew the most about the subject is those how have the most to unlearn when it comes to adapting to a new reality (Heuer 1999: 5). Heuer also focus on the fact that when a mental form is created and the new information is assimilated into the existing model. We continue to use models that worked well in the past long after they have become outmoded (Heuer 1999: 8-11, 73).

If the IEA forecast concerning the fields that were producing oil 2010 turns out to be correct the production from these fields will drop by 45,9mb/d until 2035. By the same period of time Natural Gas Liquids, Unconventional Oil and Bio Fuels is expected to increase from 15,6 mb/d to 32,9mb/d, an increase with 17,3 mb/d. This would mean that we still need to bring oil fields that can produce 28,6 mb/d online just to remain on same total production that we have today of liquid fuels (WEO 2011: 122-123).

I would like to focus on some critical aspects from this information
• The positive forecast depends on two critical components
1.) The Production of alternative fuels will double during this period of time
2.) New Oil Fields will be found and developed that will able to offset the drop in 45,9mb/d in production from existing Oil Fields.
• This is assumptions that are required for this analysis to be correct.
• The analysis made by the IEA focus on a scenario when Saudi Arabia will increase their production from 10mb/d in 2010 to 13,6mb/d in 2035.

So how do the classified information from WikiLeaks and the trend concerning the World’s biggest Oil Fields fit in this projection? The IEA expects the production in Saudi Arabia to go from 10mb/d per day in 2010 to 13,9 mb/d per day in 2035. As the diplomatic cables from 2007 released by WikiLeaks even al-Husseini, the former Executive Vice President for Exploration and Production at Aramco is skeptical towards this prognosis. It’s fully possible that al-Husseini is incorrect in the assessment; but the central role within Aramco and the man’s technical expertise is hard to deny.

From looking at the World Largest Oil Fields today it’s clear that the greatest findings have taken place several decades ago. New findings have taken place but none of them have the capacity of the top 20 Oil Fields producing Oil today. The Top 20 Oil Fields in the World produce around 25% of the World’s Oil; around 19,16 mb/d. If you compare this to the 45,9mb/d required to compensate for the fall from fields producing in 2010 up until 2025 it clear that we will either have to be very lucky in our explorations or find an enormous amount of small fields.

Bloggers and researchers often tend to present dramatic forecasts that get a lot of attention. Instead I would suggest that you do something else. No matter where you stand concerning the subject of Peak Oil I would suggest that you ask yourself what your mental-model of the situations is and what assumptions this model relies upon? What data challenges your assumptions and what data confirms your assumptions? From there I suggest that you make up your own mind.

Other Articles
Is Peak Oil Already Here?
The US Energy Information Administration - No Peak in World Oil Production in another 23 years
Peak Oil

1 comment:

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