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One of the live oaks that bless my home

Friday, May 4, 2012

Peak Oil? - In Norway

Who would you rather believe, a renowned professor at BI Norwegian School of Management and consultant to IMF, The World Bank, the governments of Denmark, Norway, Canada and the U.S., etc., or your own lying eyes? If you follow the April 2012 issue of the World Oil, the good professor wins.

After having read the convincing "Peak Oil? - Not in Norway" piece in the World Oil, you may want to recalibrate your senses by looking carefully at the four graphs below. Click on each one of them if you want to see a high-resolution image.
Oil production rates from the North Sea and Norwegian Sea oilfields on the Norwegian continental shelf are a set of 65 approximately independent random variables. The total production from these 65 fields is then a random-sum process that yields a Gaussian distribution, in this context known as a "Hubbert curve" or "Hubbert peak." The thick blue line is the rate of oil production from Ekofisk. The Ekofisk production curve has two peaks and is highly asymmetrical. Note that in 2007, the Ekofisk field was producing at a higher rate than in 1978. This means that Ekofisk will continue to produce substantial amounts of oil for years to come. Data sources: The Oil and Gas Journal (2009), The Norwegian Petroleum Directorate. For more discussion, see Appendix A in Patzek and Croft (2010).
The cumulative oil recovery from Ekofisk (the area under the thick blue line in the plot above) expressed as a percent of the oil in place (OIP). Oil production started at Ekofisk in 1972, as a compaction drive. The reservoir pressure decreased below the bubble point (gas started to evolve from the depressurized oil) in 1976. The solution gas drive production peaked in 1978, and water injection to maintain the reservoir pressure and displace more oil was started in 1983. Since 1995, horizontal wells, multilateral wells, and infill wells have been drilled. The cumulative oil production reached 40 percent of OIP by 2007, and was still going up nicely. Because of the improvements in well technology and secondary recovery processes, Statoil expects to recover well above 50 percent of OIP from Ekofisk. And this will be a world-class achievement of petroleum engineering.
When oil production rates from all the 65 fields in the first graph are summed up, a fundamental Hubbert curve emerges with a clearly visible peak in 2001-2002.  The most recent data (the blue step line) from the Energy Information Administration end in 2011.  The new deposits of oil in the old fields - accessed with waterfloods and smart multilateral wells - give rise to the small blue Hubbert curve that in no way can reverse the overall decline.

The same data and Hubbert curves as in the graph above, but now we assume that an additional 7 billion barrels of oil will be rapidly produced from the newly discovered and undiscovered reservoirs in the North Sea. Today there are 51 active oil and gas fields on the Norwegian continental shelf, and even after 35 years of production the Norwegian Petroleum Directorate believes that Ekofisk still has the largest reserves. In total, nearly 40 percent of the discovered marketable oil resources on the Norwegian shelf have not yet been extracted, they say. In addition, there are probably many undiscovered fields. The Petroleum Directorate estimates that the undiscovered resources alone amounts to 7.3 billion barrels of oil.  Read more here. You may agree that the peak of the total oil rate from the Norwegian offshore fields was reached in 2002, assurances to the contrary by the good Norwegian professor notwithstanding.

So here is the bottom line:
  • Am I suggesting that no more oil will be discovered on the Norwegian continental shelf, especially up north towards the North Pole?  Of course I am not, and significant new oil will be discovered.  
  • Will the ultimate oil production from the Norwegian shelf be more than shown in the last figure?  Yes.  
  • Will Statoil and other operators be able to reverse the generally declining production rate and exceed the 2002 peak?  Almost certainly not.
  • Will Statoil rest on its considerable laurels?  Never. Statoil is rapidly expanding its operations to North and South America, and Africa.  Statoil's research budget in North America is now 1/2 of its global research outlays. 
  • Do most professors of management, and IMF or the World Bank experts, understand rudiments of oil production?  Choose your answer carefully, because this is a test.  If you answered "no," you passed.  

1 comment:

  1. Thanks for thorough analysis of the situation. It is sometimes surprising how the words of authorities are in contradiction with reality. I have read a lot about peak oil, but just recently I have found one interesting article - Which Resource Will Run Out First?, in which its author argues that our real problem now is not the peak oil, but the lack of other resources - such as rhenium or erbium. Both are inevitable for hi-tech industries and we do not have any alternative. The only solution in this case is probably recycling.

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