Oil Field MegaProjects – Why Did the
Prime Dates Change ?
ODAC Commentary
Introduction
Several people have asked
ODAC why it is that until the end of 2005, in his Oil Field MegaProjects analysis
Overview of how the Oil Field MegaProjects Report
works
Many discussions around Peak
Oil focus on reserves, how much oil is left in the ground that can be extracted
economically using current technologies. Assumptions
are then made about how fast we can extract the oil over the coming
years/decades. The Oil Field MegaProjects analysis avoids any discussion of
reserves, and focuses on actual oil production, existing and planned. Current
global production rates are known reasonably accurately, assumptions are made
about the depletion rate from existing oil fields, and it is possible to
calculate fairly accurately how much new oil is coming onstream for the next
5-6 years. This is because all major new oil projects are well documented in
the public domain, and they typically take 5+ years to complete. We can
therefore model oil production over the next five years:
projected oil production
= current production – oil lost to depletion + oil from new projects.
Of course, the details are a
bit more complicated, but well documented. The latest full version of
2005 Oil Field MegaProjects Report Reviewed
By early 2006, Chris had
three years worth of MegaProjects data, 2003-2005, and decided to review the
2005 analysis to see how accurate it reflected reality. The depletion rate he
used 2003-2005 was 5%. This implied that roughly 83.5 Mb/d * 0.05 = 4.18 Mb/d
were lost to depletion each year. Here is the actual data used in the 2005
MegaProjects report:
Year 2005 2006 2007 2008 2009 2010
Depletion Rate (Mb/d) 4.2 4.3 4.4 4.4 4.5 4.6
For 2005, Chris found that
the actual global oil production rate was about 3 Mb/d higher than the MegaProjects
review had forecast. He concluded that the depletion rate was too high. Applying
the 5% depletion rate to only the countries that are known to be past peak,
i.e. production is falling, resulted in a final production rate close to the
actual rate. During 2005, the countries in decline represented 28% of oil
production. This gave a depletion rate of 0.05 * 0.28 * 85 Mb/d = 1.19 Mb/d.
Here is the actual data used in the 2006 MegaProjects report:
Year 2005 2006 2007 2008 2009 2010
Depletion Rate (Mb/d) 1.226 1.400 1.600 1.750 1.800 1.850
Up to the end of 2005, the
MegaProjects report included all known new oil fields that were forecast to
produce at a minimum rate of 75,000 barrels / day. As from 2006, the rate was
lowered to 50,000 barrels / day. What about all the oil fields that produce at
lower than these rates? Most if not all new fields from
Summary
In summary, the period when
demand outstrips supply as modelled by the MegaProjects report moved from
2007/2008 to 2010/2011 because of the different depletion rates applied to the
data.
Emerging Wild Card
In addition to the
calculation which gives the potential available new supply, there is an
emerging wild card which is that most producer nations subsidise fuel prices in
their countries. The result is very fast oil demand growth which is quite
unaffected by high oil prices. The subsidies are easy to finance because of the
large oil revenues. For example gasoline prices are 40 cents/gallon in