Energy discussions and rumors from the SEG.

This week, I attended the Society of Exploration Geophysicists conference in
Denver. Several things depressed me more than I already am.

Robert Gistri, Manager New Bisiness Identification, for ExxonMobil started
the keynote session. He showed a couple of charts which showed that we had
produced and burned almost half of the discovered oil. This means that
ExxonMobil beleives that there are only 2 trillion barrels of oil which are
ultimately recoverable from the earth. Why is this important? Because the
USGS has, ridiculously IMO, suggested that the earth has 3 trillion barrels
of reserves to be recovered. Because of this, the politicians are asleep at
the wheel on this issue.

Another chart he had showed that natural gas discoveries peaked in 1973 and
that we have burned 1/3 of the world's natural gas.

The next speaker was Robert Brunck, chairman and president of Compagnie
General de Geophysic, a French geophysical company. He noted that China's
consumption was up 1 million bbl/day in 5 years and that this would have
profound implications for the energy economy of the world. But worse demand
data came out later in the morning.

Joao Figueira, Executive manager International E&P of Petrobras, noted that
in 2003, we produced 76.8 million bbl/d. today it is 81 million bbl/d. In
2025 he said that demand would be 118 million bbl/d. I don't think many in
that room (approximately 600) thought that meeting this demand was possible.

Then Matt Simmons, Chairman of Simmons & co., an investment banker, came to
the podium. He made the statement that Hubbert's peak is at hand. It isn't
tomorrow, or next week, but it is NOT, he said, 2015 or 2037. It is within
the next couple of years. He said that oil demand is a run away train.
Between now and December, demand for oil would increase by 2.4 million
barrels per day,meaning that the 4th quarter 2004 would have an average
demand of 86 million bbl/d.

In the next 15 months, he expected demand to increase by 4.3 million bbl/d
over the present value. Now here is where mission impossible comes in.
Given that most fields decline at a rate of 5% per year, this means that
given an additional 4.3 million barrel per day demand, and a decline of 4
million barrels, we need to find another Saudi Arabia in production IN THE
NEXT 15 MONTHS! The Sauds have generally produced between 8-9 million
barrels per day.

He then noted that the world has NO plan B. He then sent shivers up my
spine when he said he had read a report out of China that they had used up
their last high quality seam of coal and were not forced to use lower
grands. He also noted that 98% of the world's natural gas is stranded and
has never seen a drill bit. This means, that those estimates of gas
resources are that, mere estimates---guesses if you will.

Going to nuclear power, he said would use up the available uranium resources
very rapidly. And when it comes to hydrogen fusion, he noted that it took 50
years to commercialize nuclear reactors after nuclear processes were
discovered. Can we wait another 50 years for fusion?

He said that a major efficieny breakthrough is essential. A majore
conservation breath through is also essential. And, chillingly, he said
that creating an energy peace treaty was an absolute must.

He noted that if we don't solve this problem, then

1. Globalization (where we manufacture parts in different countries and
bring the components to a single site for assembly) would cease. No more
strawberries in winter, as I often say.

2. Food production would decline

3. potable water goes away

4. transportation goes back to wind and foot power.

The next night at one of the parties, I spoke to a person who was involved
in the session (he will remain nameless as he is an old friend and a real
bigwig at an important company). I told him some of my ideas about the
future of oil and Ghawar in particular. He said that this would explain
something he had heard--that Saudi Arabia was desperately trying to hire
western explorationists to explore Saudi Arabia for more fields. Why would
they do this if they had all sorts of excess oil production capacity.

Speaking of Ghawar, I went to a talk on an attempt to collect 4D seismic
over that field (4D is time-lapse 3d seismic. Two surveys are acquired in
identical patterns after a period of time in which oil is produced from the
field. we use it to monitor fluid flow). At Ghawar, the world's largest
field, they began water injection when the field was put on line back in the
early 50s. I will draw the picture, eventually I will get it onto my web
page, but I am tired tonight having just returned to Houston. Below, I's
are injectors, P's are producers and O is areas occupied by oil. The
initial injector well were just beyond the initial oil water contact of the
Arab D reservoir. As the oil was extracted, a formerly producing well would
be turned into an injector (a P would become an I), so you will see what it
looks like today after lots of producers have been turned into I's. Water is
injected into the carbonate reservoir in order to maintain reservoir
pressure and allow the field to be produced at 5 million barrels per day. If
the pressure were to drop, the production rate would fall quickly. Here is
what I saw.

I..I...I...I....I....I....I........I..OPOOPO.I....I...I....I.....I......I...
..I
I..I...I...I....I....I....I......I..OOOOOOOOOOO....I...I....I.....I......I..
...I
I..I...I...I....I....I....I.....I..OOPOOOOOOOOOPOOI...I....I.....I......I...
..I
I..I...I...I....I....I....I........OOPOOOOOOOOOPOOI...I....I.....I......I...
..I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I........OOPOOOOOOOOOPOOI...I....I.....I......I...
..I
I..I...I...I....I....I....I........OOPOOOOOOOOOPOO.I...I....I.....I......I..
...I
I..I...I...I....I....I....I........OOPOOOOOOOOOPOO.I...I....I.....I......I..
...I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I.......OOPOOOOOOOOOPOO.I...I....I.....I......I...
..I
I..I...I...I....I....I....I...........0OOOOOOOO....I...I....I.....I......I..
...I
I..I...I...I....I....I....I........I..OPOOPO.I....I...I....I.....I......I...
..I

Notice how little oil there is. Oil used to cover the entire area, 30 km
across.This is approximately the right relationship of the old field size to
the present field size in Uthmaniyah area of Ghawar.

That picture verified what I had been told privately by reservoir engineers
who have worked Ghawar. If anyone remembers my post on the reservoir
engineering conference last March, you will recall that I was told that
reservoir simulation models had predicted that Ghawar would undergo a
massive decline in production in 2008-2009. But reservoir models alway
overestimate the amount of oil one gets.

And in conjunction with what Mexico says about their own future oil
production, (http://home.entouch.net/dmd/mexbrickwall.htm) the future truly
looks a bit bleak.

For more on Ghawar, see http://home.entouch.net/dmd/ghawar.htm
Received on Fri Oct 15 23:17:29 2004