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Green New Deal VI - Urgency and oil production constraint

Amid an ongoing Arctic heat wave, the Greenland ice sheet is in the middle of its biggest melt season in recorded history. It’s the latest worrying signal climate change is accelerating far beyond the worst fears of even climate scientists. This is how the RollingStone put it, following an unspoken rule of never discouraging too much the clueless and faint at heart.  The reason is clear, we don't want 299 million Americans to freeze like deer in headlights, and exclaim: "Let's have an insanely rich farewell party before it all ends!".

Free-floating ice floats jammed into the Ilulissat Icefjord during unseasonably warm weather on July 30, 2019 near Ilulissat, Greenland. Ten billion ton of water melted in a single day. I am a geoscientist, and in my book this is an instantaneous positive feedback to global heating that must be very bad for humans. Image Source: Sean Gallup/Getty Images.

My take on this 100-year ice melt on Greenland that just happened for the second time in seven years is summarized by the cartoon below. And if this cartoon leaves you cold, get yourself launched to Mars by Elon Musk and Other Terminal Fools.

We are now well into the "Oh fuck!" stage, my dear fellow Americans. An unflappable British friend, Mike Haywood, sent me this image on 7/28/2019. He has a priceless gift for finding cartoons that illustrate the unbearable foolishness of human being. Most cartoons you see in my posts originate from Mike.


My Spanish friend, Pedro Prieto, reminded me in turn about this Churchill quote:

 “The era of procrastination, of half-measures, of soothing and baffling expedients, of delays is coming to its close. In its place we are entering a period of consequences.

Sir Winston Churchill, arguably the greatest Briton of all times, definitely was in a different league than that unshaven orange orangutan, Boris Johnson, who wipes off his foul mouth with Churchill's name to hide his own childish irresponsibility and Brexit scheming.

But I digressed. Let's go back to Churchill and his speech in the House of Commons in late 1936, well before the foolish and weak British prime minister, Neville Chamberlain, concluded his famous 1938 speech after having flown back to London from Munich, with what he thought was a good deal from Herr Hitler:

"My good friends, for the second time in our history, a British Prime Minister has returned from Germany bringing peace with honour. I believe it is peace for our time. We thank you from the bottom of our hearts. Go home and get a nice quiet sleep."

Chamberlain had pronounced his ever-lasting peace pact with the Nazi Germany 11 months before World War II broke out on September 1, 1939 in my home town, Gliwice. WWII was the largest conflagration that ever engulfed humanity, and 60 million dead people later it ushered nuclear weapons that will be used in major future conflicts.

Tragically, the similar Chamberlains/Trumps/Johnsons abound in governments, academia, and corporations in 2019. They are completely selfish and irresponsible, and nibble on the tiny pieces of major issues that face humanity while the Earth is burning.  Every day, I see this self-serving, career-protecting myopia in academia.

So what are we to do?  Churchill understood that in very hard times, unity, universal sense of purpose and steel resolve are the most powerful weapons a democracy can muster against vile oppression.  Let me ask you this:  Are we united in the face of the greatest challenges that ever faced humanity?  Or do we escape to a disgusting OrientalReview.org or other white supremacy websites that just precipitated another mass murder in Texas? Do we then vote for a Trump or a Johnson, or other similar, slimy hateful creatures?

Incidentally, Trump's powerful handler, Putin, is in a sea of trouble at home. Putin simply does not understand that Russia has outgrown his KGB past and poisonings. Putin's thugs, err, state police, are trying to arrest every opposition candidate in the city council elections in Moscow. I think that this is the beginning of Putin's end. Even Putin's priceless foreign asset, US President Donald J. Trump and his coterie of greedy traitors, will not help him. All politics is local in the end.

Are you now focused on the supercharged global heating, resource exhaustion, and overpopulation? I am sure you are, so let me proceed to another major constraint that is facing humans, just as we have created a virtual Shanghai on 30,000 planes in the sky each day. As improbable as it may sound, this constraint is supply of crude oil (and little later of natural gas) to the world. As you might remember, in Part II, Part III, and the following, I referred to crude oil as the major source of power subsidies for the Green New Deal.

In the four figures below, you will see the 170 years of the past and 130 years of the possible futures of our time on the Earth. This is -  and will continue to be for a while longer  - The Age of Oil. No matter what they tell you, we are pretty much at the peak of production of crude oil and associated lease condensate. Currently producing oil fields around the world will be declining at about 7% per year on the average, as I calculated some 13 years ago (6.8%/year on the way up in my Figure 3 = 6.8%/year on the way down in Figure 4). Today, most major oil companies share my view, and if anything are even more pessimistic than I am.

A giant investment is needed around the world to prevent global oil production from plummeting to 1/3 or 1/4 of its current level in 20 years from today. This 20-year investment is counted in tens of trillions of dollars.  The investment estimates differ; OPEC says 9-11 trillion dollars must be invested into oil production. BP says the investment should be 14 trillion dollars into new oil production and 8 trillion dollars into new gas. (See page 19 of the link above with no numbers. The numbers I cite are from BP Chief Economist's presentation at the IEF/OPEC/EIA Energy Forum on 28th February 2019, in Riyadh). Exxon Mobil suggests over 21 trillion dollars of new global investment, based on the IEA's outlook.  On 8/3/2019, Dr. Art Berman told me that Exxon Mobil reported a negative cash flow in their SEC filing for the second quarter of 2019.  So how is Exxon Mobil, the largest private (also called "public" to mislead us) oil company in the world, going to invest $33 billion per year for the next 20 years? To visualize what is needed, say, $20 trillion of oil and gas investment over 20 years is one trillion dollars per year on the average. It is an amount of money that is larger than the GDPs of all but 15 largest economies in the world.

In reality, no one knows how much money will have to be invested, and no one knows exactly what the future production outcomes of that investment will be. One thing is certain. Without the unprecedented investment into new oil fields and new projects, we can kiss good bye most of civil aviation in less than a decade, and much of car transportation soon thereafter. Since many of you, my dear green friends, hate oil, I also need to inform you that nothing but the really dirty coal will then pay for a very limited Green New Deal. But I already told you this in Part III. Coal alone will not be able to subsidize a green transition, given the epochal disruptions caused by severe shortages of oil and high transportation fuel prices. And - no -, half of the cars on the road today will not be electrified in 20 years from today.

Which brings me to the next obvious conclusion.  Given the scope of investment needed in the oil and gas sector of the global economy, private investors will not be able to finance it. This inevitably will mean interventions by individual nation states and either massive subsidies of the oil industry or state takeovers outright.  Oil and gas are simply too important to repeat worldwide the frenzied Texas Permian oil speculation. Of course, there are side effects of state interventions. These are local conflicts (wars) among the competing states, such as the brewing confrontation between Egypt and Turkey over the big discoveries of natural gas in the Mediterranean, or the Straits of Hormuz mess.

I know, I already said this fifty times in the previous five parts of this post, but we really, really must limit human numbers and consumption of everything. There simply isn't any other way, including that fusion that looms around the corner as it has for six decades. Now, please start reading this post from Part I, which explains why you shouldn't believe everything a journalist posing as a scientist tells you, especially when it comes to fusion or carbon nanotubes on solar cells. 

Global oil production

Figure 1. Crude oil and associated lease condensate (LC) production rate in the world. The blue step line is the reported annual production of oil and condensate - not other liquid fuels - for the world.  Here you see 1/3 of the power that drives our global civilization. The latest spike in global crude oil production comes mostly from the US oil shales and new offshore projects in the Gulf of Mexico, North Sea, offshore Africa and Brazil. There will be another, smaller cycle in the future to account for extensions of the existing shale oil projects. Notice the rapid rise and decline of shale oil production. If we fail to start a single large new field project and just repair/maintain the existing fields, the global crude production rate will drop like a rock to 35 million barrels of oil per day (Mbopd) by 2040, when I calculate it with the Gaussians, or to 20 Mbopd, according to BP's predictions in their World Outlook 2019. In the BP presentation I linked above, they go down to only to 35 Mbopd in 2040, essentially following my curve, see Figure 1a. In the Riyadh presentation, however, BP went all the way down to 20 Mbopd.


Figure 1a. BP's scenarios for the global supply of crude oil plus some, but not all other liquid fuels. Notice that BP's "supply with no investments in new fields" scenario overlays mine in Figure 1. Again how many trillions of  dollars in new oilfield investments will be needed, depends on our choices for one of several futures BP hopes are possible.  I think that the "More energy" demand future would convert the Earth into a Mordor-like hellish planet. Source: 2019 BP Energy Outlook.  


Figure 2. Cumulative oil produced in the world is obtained by integrating  the rates in Figure 1. The blue line is the reported data. The ultimate recovery with little new investment will be around 2 trillion barrels of oil and lease condensate. Please remember that Figure 1 carries no information about future projects and field discoveries. Also there is no information about improvements to the existing projects, such as introduction of peripheral waterfloods, pattern waterfloods, multilateral horizontal wells, improved oil recovery, enhanced oil recovery with steam, miscible CO2, and polymers, carbon dioxide injection for sequestration plus incremental oil recovery, etc. Therefore, 2 trillion barrels of ultimate oil recovery on the Earth is an absolute bottom estimate of what will happen in the future, barring a global nuclear war or a wipe out of the Middle East.
Figure 3. World crude oil production with very major new field discoveries and investment over the next 80 years. This giant investment and major new oil production are highly improbable outside of the Middle East, US, Canada, Russia, FSU, Norway, UK, Angola, Brazil, Mexico, Colombia, and perhaps Venezuela. The two future field development cycles are in the dark green color.  Notice their heights and widths. Compared with Figure 1, these two cycles might produce 1/2 more oil. The sizes of these two future cycles dwarf the US shale oil production cycle to date. I have no idea what new giant offshore and onshore oilfields will be found and developed, but it is extremely unlikely. I made up this future, so that you can see what will have to happen to sustain oil production at 2/3 of the current peak, and decline it smoothly to less than 1/2 of this peak over the next 50 years.

Figure 4. With the high future oil production rate from new fields and new projects in existing fields, the world will ultimately produce 3 trillion barrels of crude oil and condensate. The existing US shale projects contribute next to nothing to ultimate global oil recovery, but the contributions of the two future cycles I contrived are giant. Here is the consistency check:  Cumulative crude oil production = 1.4 Tbbl, proven oil reserves in the world 1.4 Tbbl (source OPEC, 2019).  I am a little optimistic.

P.S. (08/06/2019) For clarity, I should remind the readers that I am talking here only about crude oil and the associated lease condensate. There are other light hydrocarbon liquids, such as non-associated gas condensate, that are produced at an increased rate, but they are not petroleum, and their conversion to heavier petroleum fractions is fabulously difficult and expensive. Then there is an increase of volume of petroleum products relative to feedstock crude oil [no gain of energy per unit mass]; syncrude from tar sands; ethanol from corn and sugarcane; palm oil, soybean oil and jatropha oil converted to biodiesel; Fischer-Tropsch oil from coal, etc. Together, they amount to roughly 20 million barrels of liquids per day. I defined most of these fuels seven years ago.  In particular, crude oil and lease condensate were defined as the second category of petroleum liquids.

With the exception of gas condensate and maybe syncrude, production of these other liquids cannot increase much without destroying the major life-giving ecosystems on the Earth, and they will not be able to substitute for the declining petroleum production. Our own still mostly unpublished work on the US shale oil production points to a $1.5 trillion investment in the near future. This will be the main US contribution to the 2020-2040 petroleum and gas production investment. Finally, for the US, there is ultradeep Gulf of Mexico that will cost many billions of dollars more to maintain and expand.

P.S.P.S. (08/09/2019)  EOS reports that the largest-ever recorded ice melt on Greenland consumed 12.5 Gt of ice on August 1, 2019.

P.S.P.S.P.S. (09/21/2019)  The estimated ultimate oil recovery of three trillion barrels in Figure 4 agrees with the 2018 reserves of technically recoverable crude oil in the world in Figure 5 below. Only when you look at the massive two future Gaussians in Figure 3, you realize what must happen to reach the already booked 3 trillion barrels of oil. I personally doubt whether this three-trillion bbl future will ever happen.

The three-trillion barrel ultimate oil recovery future agrees with the 2018 booked reserves of technically recoverable oil (black dotted line). In order for this future to happen, the world will need to produce almost 50% more oil than all current wells will (the uppermost green curve) .

Comments

  1. Professor Patzek,

    Thank you for posting yet another informative article.I have some questions regarding Figure 3 that you have posted.

    The cumulative production of oil (Crude+Condensate) till 2018 has been about 1.4 trillion barrels.The BP official reserve estimate at the end of 2018 is 1.7 trillion barrels.Out of this about 350 billion barrels are tar sands and extra heavy oil leaving 1.35 trillion barrels as Crude and Condensate.

    https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/oil.html#oil-reserves

    Why doesn't this number (1.7 trillion) go down despite pumping out more than 30 billion barrels out every year despite discoveries only amounting to 4-5 billion barrels every year?

    Is it because improvements in technology and price increase turn known resources in existing fields into reserves thereby adding it to final reserve calculation?

    You mentioned that this scenario is highly unlikely because of lack of investments but can you clarify whether it is physically possible or not?
    What I mean is if we ignore the economic constraints and look purely through the lens of EROI then a minimum EROI of at least 4:1 is needed for the oil to be useful for the society as a source of energy.
    Do you think that EROI will slip below this? (as it has for some shale deposits)

    If oil discoveries continue at the present rate we are likely to discover another 200 billion barrels in next 30 years bringing it closer to your estimate of 3 trillion barrels. Despite this scenario happening the output in 2060 will be half of what it is today.
    Doesn't that almost guarantee an economic collapse if not a societal collapse?

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  2. Prof Patzek hits us up front with with growing evidence of feedback-driven runaway climate change which seems to be "accelerating far beyond the worst fears of even climate scientists" -- he argues we are at the "Oh, fuck!" stage of public recognition of the problem.

    Further along he underscores techno-industrial society's utter dependence on fossil fuels, particularly oil and gas, pointing out that "A giant investment is needed around the world to prevent global oil production from plummeting to 1/3 or 1/4 of its current level in 20 years from today."

    What Tad might also have reminded us is that such a reduction in fossil fuel consumption is close to what the IPCC says is required to limit global warming to <2 C degrees (a 48% reduction in emissions by 2030).

    And with this we are slammed in the face with what I call our climate-energy conundrum:
    If the world community were able to raise the needed investment and succeed in maintaining FF supplies for a few more decades, we will be condemned to the consequences of catastrophic climate change (3+ C degrees of mean global warming), including a breakdown in global order and a collapse of global and national economies.

    On the other hand, if we don't find the needed fossil fuel and there are no quantitatively and qualitatively adequate substitutes (there aren't), the world will be condemned to accelerating energy shortages, a breakdown in global order and a collapse of national and global economies.

    Your pick.

    To my mind, the indisputably most important line in the Prof Patzek's blog is high-lighted toward the end: "...we really, really must limit human numbers and consumption of everything."

    Problem: Any politician running on this platform is doomed. Ergo society is doomed to face a breakdown in global order and a collapse of global and national economies.


    Enjoy the cresting wave.

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  3. Dear Unknown,

    You have pinpointed the essence of our planetary conundrum. We need to change our ways in order to preserve our civilization and ourselves. But to preserve ourselves we need to have a global <2 children per couple policy that might be even more restrictive in January of 2020, when the UN General Assembly passes the required resolution. Moreover, to everyone’s surprise, the UN Security Council, G20, MENA, OECD, EU, and all large nation-states support this resolution unanimously. This policy, effective January 2, 2020, means that <2 children per couple are to be supported by state governments, and the costs of all children above that limit will be on parents and extended family.

    Of course, you realize, that I am writing a science fiction story here. No international political body has ever expressed interest in such a resolution. No international political body can even pronounce the word "decrease." Instead, they all talk about perpetual growth, even though this growth all but ensures the collective suicide of our species. Period. This contemporary Greek tragedy is unfolding on the scene of our global theater. The difference is that in an ancient Greek tragedy, the protagonists (actors) did not grasp the inevitable, but the audience knew exactly what would happen and mourned the expected outcome. In the modern theater of life, neither the protagonists nor the audience seems to understand what is about to happen to all of us. They don't understand, because they choose not to. Shame on us!

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    1. Of course "UN Security Council, G20, MENA, OECD, EU, and all large nation-states support this resolution (a global <2 children per couple policy) unanimously as they are all there are just about there - see data from Factfulness - Hans Rosling with data from UN-Pop[3].

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  4. Gail Tverberg, over at ourfiniteworld.com, argues that we may end up with a different energy problem than most have expected: energy prices that remain too low for producers. She maintains that “after a point, energy prices “top out” at what is affordable for citizens.” U.S. shale oil is the swing producer right now, but they are constantly having to employ technological workarounds to find the Goldilocks oil price where they can break even—while burning through billions of investor cash flow with little or no ROI. What’s your take on this?

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  5. Dear Monte,

    If you look at current oil price and shortage of investment capital, what Gail says is happening today. The Journal of Petroleum Engineering just commented on the curtailment of drilling activities in the US, https://www.spe.org/en/jpt/jpt-article-detail/?art=5777

    The global economy cannot withstand high oil prices. Thus, I do not see how the short-term profit-seeking investors will shell out $1 trillion per year, for the needed investment in oil and gas. At the same time, if layoffs continue in the industry, there will not be enough qualified people to implement the large investments, should they materialize. It seems to me that we are entering a vicious downward spiral.

    The industry needs to learn how to inform people that oil will be required for any large-scale transition to renewables, and that petroleum engineers are an important part of the solution, not of the problem. This in turn will require that all petroleum engineering departments will educate their engineers differently, and that Nate Hagens et al.'s “Reality 101” course will become a part of the undergraduate curricula in PE departments around the world. Graduate courses, such as my “E^4: Earth, Environment, Energy and Economics,” must also be required everywhere.

    It sounds, self-serving, but it is true: Everything starts from proper education. Today, most people are ignorant of the huge problems that are facing humanity and cannot make informed decisions.

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    1. Yes, ignorant, and in denial, as well. People look at me funny when I tell them that the build-out of renewables for a "Green New Deal" will be new energy "consumers" of fossil fuels until such time as the energy pay-back time has elapsed. It would also appear that peakoil may well arrive due to lack of CAPEX investment, rather than an inability for well-capitalized production to meet demand.

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    2. Indeed, as you said, "lack of CAPEX investment, rather than an inability for well-capitalized production to meet demand," is my biggest worry. But there is more to this story. The oil and gas industry is not regarded as sexy enough by the investors and young people. This lack of interest, compounded by confusion surrounding the Green New Deal, may mean severe fuel shortages in 10 years from today, while defeating much of the transition at the same time.

      Funny enough, Michael Moore has come to more less the same conclusions:
      https://ktla.com/2019/08/07/new-michael-moore-backed-documentary-takes-critical-look-at-alternative-energy/

      And I have not even started talking about the shortages and lack of drinking water, and multiple breakdowns in the completely unsustainable food production systems around the world.

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    3. Yes, we are approaching the bottleneck that William Catton spoke of in his books on Overshoot. Too many people insist that technology will, once again, circumvent the correcting feedback mechanisms of Nature. I ask them, how does perpetuating overshoot make it more sustainable? I look forward to your blog on the issues you just mentioned.

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  6. Panie Profesorze,

    Miałem dłuższą przerwę w podążaniu za informacjami z mych źródeł blogosferowych.
    Kiedyś skomentowałem jeden z Pańskich wpisów.
    Ale nie mogę sobie przypomnieć który, i czy wynikła z tego jakiś "folołap".
    Tu chciałbym tylko powiedzieć, że bardzo mi miło, iż istnieje Persona tak umna o polskim rodowodzie
    Niestety, jak już wspominałem czuję się tu mocno osamotniony w mych poglądach całkowicie zbieżnych z Pańskimi, a przegapiłem niestety informację, iż będzie Pan w Polsce (a pewnikiem nawet w Gliwicach) tracąc tym samym okazję by móc uścisnąć Pana prawicę.

    Czy w związku z Pana wykładem wynikł może jakiś "ruch", krąg towarzyski, stowarzyszenie.. etc, które mogło by w PL zaścianku nagłaśniać realne problemy?

    Serdecznie pozdrawiam

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  7. "Everything starts from proper education. Today, most people are ignorant of the huge problems that are facing humanity and cannot make informed decisions."
    Is education in our situation still of any use or is it just depressing, unwanted or even dangerous? It depends. We, and much, much more China, are coming into almost the same situation as Hitler has perceived Germany's situation, when he came to power. Timothy Snyder calls such a situation "ecological panic". The main difference will be that the firepower is much bigger now, as is the size of the populations and the fragility of the food supply.
    7 years ago I started educating me on these subjects and searched for solutions. A result is my German blog freizahn.de (with articles on "Drilling Down", complexity, energy, history, agriculture, economy and much more. But what is the result? I am rather sure now, that a new world war is almost inevitable, as is a tremendous reduction of our societies complexity (which such a war will deliver). The survival rate, as well as the average standard of living in later years (and thus the possible standard of education), will depend mostly on the preparations of the war in which Russia may rather become again the victory saving ally and not an enemy, AND the knowledge and methods used in agriculture and forestry. Western Europe is not prepared for such a war. Nor are agriculture and forestry prepared for a future with less or no oil, chemicals and global trade.
    An interesting question may be whether the smaller nations in eastern Europe would be able and flexible enough to to adapt fast and good enough. There, in the Baltics, in Hungary and may be in Poland, education may still be meaningful, but in many places it will turn out to be useless. Remember the Polish and the Jews in Eastern Europe in the face of the results of Hitlers "ecological panic". Would more education have saved them?

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    1. Dear Christoph,

      Your question is very difficult to answer satisfactorily, but let me try. I am deeply convinced that better technical and liberal education are a necessary condition for a prospering wise democracy. However, education is not a sufficient condition. The sufficient condition can be formulated as follows. The society has to be content with where it is. Large groups of people cannot feel excluded for whatever reason and they cannot feel that justice is not done in their society.

      One can easily argue that in 1930, Germany was among the most educated, scientifically and culturally sophisticated countries on this planet. Perhaps the most sophisticated one. Therefore, what sickened Germans was not lack of higher knowledge they had, but rather a viral infection with the virulent, brutish racism, and a need for vengeance for everything that happened to Germany during and after WWI, including reparations and the market crash of 1930s. Hitler gave the Germans a scapegoat, Jews, he immediately dehumanized, just as Trump dehumanizes Hispanics today. Hitler was not smart enough to come up with such an idea. It belonged to a Briton, who was a relative Neville Chamberlain, an infamous British prime minister. His name was Houston Stewart Chamberlain, and he was Hitler’s “John the Baptist”. You can read more here:

      https://en.wikipedia.org/wiki/Houston_Stewart_Chamberlain

      In short, Germany in the 1930s was a sick country, with >90% of the German population at the time affected. Similarly, many educated people in Russia were pulled to insanity and blindly followed Lenin and Stalin.

      I left Poland in January 1981. Fast forward to 2019. Yesterday, I reflected about the 1000 years of Polish history that was an almost unceasing struggle with brutal invasions and aggression from the east, west, north and south.
      Indescribable atrocities were committed on the Polish soil. Just during WWII, an equivalent of 56 million Americans today were murdered in Poland. And what have the Poles learned? I think that they mostly learned to hate and exclude anyone, and I mean anyone, who is not exactly like their tribe: a native Polish language speaker, white, heterosexual, Roman catholic, xenophobic, homophobic and misogynistic at the same time. According to these criteria, my wife and I are unacceptable foreign aliens in Poland. So what have we learned from our Polish history and all that education that put me at Berkeley as a professor? Well, nothing for most of the Polish patriots.

      Thus, the acute or terminal social diseases are not cured by superior education, but often exacerbated by it. Dopamine-driven happiness always wins with analytic thinking. This is why people like me are ignored until it is too late.

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    2. I was wrong. These two Chamberlains were not related. Here is an explanation:

      Houston Stewart Chamberlain was the son of William Charles Chamberlain, who was the son of Sir Henry Chamberlain, 1st Baronet (1773-1829). Sir Henry was the illegitimate son of the M.P. Henry Fane, but I cannot find who his mother was or where he got the surname 'Chamberlain'. Neville Chamberlain was the son of the prominant politician Joseph Chamberlain, who was the son of London shoe manufacturer Joseph Chamberlain (1796-1894). The source of some claims that they were related may be the fact that Houston Stewart Chamberlain had an uncle named Field-Marshall Sir Neville Chamberlain (1820-1902), who earned a military reputation in India. Interestingly, Prime Minister Neville Chamberlain was a member of the Eugenics Society, a racial theory which was supported by Houston Stewart Chamberlain and which informed the Nazi party (of which he was a member before his death in 1927).

      Source: https://www.answers.com/Q/Are_Houston_Stewart_Chamberlain_and_Neville_Chamberlain_related

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  8. 1. I fail to see the benefit of using Gaussian curves to model time series. I could as easily have used a polynomial. If we were looking at a distribution, I might see the benefit of a normal (or more likely log normal) distribution. But this is very different from a time series.

    2. There's no real predictive benefit of the Gaussians. In fact, looking at the Haynesville, it has TWICE required adding more Gaussians than originally planned. First when we got the pause in decline. Many peakers like Berman/Hughes emphasized the beautiful Hubbert shape when it had started it's decline. But they were extremely slow to deal with the deviation (pause). To your credit, you were quicker to recognize it...but you sure didn't ANTICIPATE it. And then even after adding a little Gaussian for the pause, you failed to anticipate the massive recent rise that we've had (and at sub $3 prices!)

    3. The addition of Gaussians feels like adding epicycles to the Ptolemaic earth-centric view of the planets in the solar system.

    4. The only big benefit of the Gaussians is that they are "even-ish" functions (i.e. decline back to zero, versus taking off to infinity. Which intutively makes sense for a fossil fuel. But we could use any bounded integral function to do the same thing. And really, some geologic (or even demand based) argument would be much more meaningful in predicting ultimate recovery.

    5. Your discussion of condensate seems confused, with the term gas condensate differentiated from lease condensate. Lease condensate is the associated liquid oil FROM a gas well. Separated at the 3 phase seperator at the plant site. It is essentially "associated oil" FROM a gas well. (Many states don't even differentiate lease condensate from crude...as most wells make both oil and gas...there is no magic line, other than legal decisions in SOME states for taxation purposes, as to what is a "gas well" or an "oil well".)

    When you say "gas condensate", do you mean PLANT condensate? [I.e. a "second squeeze" of the gase, done off the leasehold, at a large central gas plant. In which case, sure, I am fine with not counting it as C&C (and few ever do). Although technically, it is much closer to crude than to gas. (Yes, even at gawdawful API gravities of 60+...it is still only ~ a 20% hit versus WTI/Brent. Not the 50-70% haircut that propane/butane get.) It is a liquid at room temp, has mixed hydrocarbons and essentially competes with naphtha. . And is often blended into gasoline, this IS used in motor transport. But still, I'm fine with excluding it since we don't want to double count it (as it was already part of the wet gas stream...and after all there is remnant methane and other light ends in crude also...but we don't consider light ends at a refinery as gas production from the lease. So fair is fair.)

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    1. @Besselfunctionlvr,

      For a while now, we have been discussing this particular aspect of the expansion of production of oil, gas, coal, copper, etc. into Gaussians. These Gaussians arise from the Central Limit Theorem, as you easily can see for global gas production. Thus, Gaussians have predictive power and are a meaningful set of base functions. Polynomials are an ad hoc tool used carelessly by engineers to mask the fundamental deficiencies of their thinking. Please go back to Lagrange himself to check the inherent dangers he already saw in the use of polynomials.

      I cannot continue to comment on the same problem any longer, simply because we have had the same discussion on-and-off for the last 3-4 years. So let's agree that we disagree. Also, I have cited my 2010 Energy journal paper on global coal more than once. Please read some of it. Nothing has changed since then, except that ever more data support the Gaussians with ever more weight. I rest my case.

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    2. Fair enough on the basis function math debate. I will try to remember not to raise it again.

      Your comment dissing engineers amuses me--reminds me of a chem physicist friend of mine who said that chem engineers just want a black box to crank out numbers versus microscopic insights into how things work. Hopefully, I don't come across as a chemE. ;-)

      I do reserve the right (and expect to exercise it) to point out if your current predictions go wrong in the future. In particular the massive shale gas drop-off in this post.

      It's instructive to look at your MAR2016 article and how shale gas has done since then:

      2019 TCFpy from your MAR16 charts*:
      Barnett: 0.5
      Fayetteville: 0.2
      Haynesville: 0.2
      Marcellus: 2.0

      Actual YTD 2019, from EIA data**:
      Barnett: 0.9
      Fayetteville: 0.5
      Haynesville: 0.2
      Marcellus: 2.0

      So, only three years later:

      Your guess for the Barnett is 0.4 TCFpy short and is 57% of the actual. Your guess for the Fayetteville is 0.3 TCFpy short and is 43% of the actual. These are the fields where you were more accurate. Since these plays are mostly shut down, it should be easy to just model the decline. The Fayetteville has had zero rigs for most of the period. The Barnett has had a very small handful. Yet you are still consistently low.

      I think there is a reason for this. The reason is that field production over time does not tend to be symmetric! The rise in production tends to be faster and the fall more gradual. Imagine a single well field and this should be apparent. The "rise" is instantaneous and the dropoff is some form of exponential/hyperbolic looking thingie. The exact same thing would apply in a thought experiment with a 100 well field, but where we brought on all the wells simultaneously (just it would be some factor, 100 on average, times higher). Now in actuality development happens over time. Thus there is some ramp on the left side of the peak curve. But still, it is usually a much faster ramp up than down. If you assume the tail has the same shape as the rise, you will usually be wrong (and in a too pessimistic direction).

      For the Haynesville, you are 3 TCFpy short and are only predicting 6% (!) of the actual result. The reason here, is that in addition, to the aforementioned problem, there has also been a revival in Haynesville drilling. While you had already added a second Gaussian for the inconvient stall, you really needed a third Gaussian (or a much more dramatic second one). Note that the Haynesville is setting new records and is still rising. And this at sub $3 gas prices. You can say "how should you know" that the Haynesville would revive, but the point remains that your approach was too deterministic. It's not like evolution/improvement is a thing never heard of in the E&P industry or in shale in particular.

      For the Marcellus, you are a massive 6 TCFpy short and are predicting only 25% of what we ended up doing. Granted, you did say the Marcellus was hard to predict. Still, you were rather far off. And in the (consistent) over pessimistic direction.


      *by eye estimate, including 0.8 conversion. Sorry if imprecise, but I tried to be fair. Order of magnitude should still be on target.

      **see EIA spreadsheet on the weekly gas summary (bottom of post) that shows gas per play. I averaged the 2019 monthly BCFpd figures and converted to TCFpy.

      Delete
    3. OK, I am a ChemE and a physicist. And I am an engineer through and through. One day you should visit my property in Austin and see what I have engineered there.

      Now onto the real precise predictions of the likely futures of most US shale plays. The first two are (Barnett and Bakken) out, and they are open access:
      https://www.mdpi.com/1996-1073/12/19/3641/htm
      https://pubs.acs.org/doi/abs/10.1021/acs.energyfuels.9b01385

      We are finishing the Haynesville and submit it for publication in another month or so. Please do fine weaknesses of our reasoning there. :) Marcellus is next, and then the Permian. It is a lot of work so we will take several month to finish it. Then the Gaussians will come for all of these plays. Today I can tell you that all of them can be resolved into 1-3 Gaussians + the future Gaussians that approximate the possible future drilling schedules.

      P.S. The worst offenders in the area of polynomial fits are petroleum engineers, who use endless correlations excessively and with little regard to common sense. Quality of SPE conference papers has really gone down. Today, dumb regression is called AI, deep learning, and other B.S. I did all three in 1994-1997, when I was still at Berkeley. I concluded then that these methods had limited utility and fail in all interesting circumstances outside of image recognition (petrophysics and geology). One gram of physics weighs more than 100 kg of AI.

      Delete
    4. The Bakken report was excellent. I even defended it on another blog. Reacting more to the blog's graphs, now.

      I will try to get around to the Barnett. Less interesting really as it would take a big increase in price, not anticipated by the futures market, to get rigs back there. But still, I'm interested to see if you just iterate the Bakken algorithm or have something different.

      Machine learning is silly in the context of looking at well performance or the like. I just see multivariable regressions...and then people using a buzzword. I actually think you get more insight from thinking about it as a regression, because you look at factors, interactions, higher powers, etc. and potentially find physical insights.

      Delete
    5. For the record, the Barnett paper and code were written by me 1 year before the Bakken paper and served as a template for the far more interesting Bakken paper. The GEV approach was conceived 8 years ago:

      https://dataverse.tdl.org/dataset.xhtml?persistentId=doi:10.18738/T8/3MLRLO

      You are correct, the Barnett play is pretty much done for the many reasons mentioned in the paper, and it is unlikely that Barnett will be resuscitated any time soon. If you click on the link above to my BEG presentation, you will see that using the Gaussians I predicted then (as the "high case") exactly the ultimate recovery we predict now for the Barnett. Thus, a combination of experience, intuition, and Gaussians can yield pretty good predictions. In comparison, at the time of my 2011 presentation, the BEG engineers were claiming 200-400 Tscf as the EUR from the Barnett. I almost died laughing, but no one else was amused.

      Delete
    6. More physicist thinking, please. Did you understand my point on false symmetry? Did you consider the thought experiment of a one well development?

      If I look at your base case (slide 2), you're amazingly LOW on Barnett production. Your high case is OK. But you've given yourself a range from 1 TCF to 26 TCF, for the two cases. That's a pretty wide set of error bars.

      Agreed, the 200-400 TCF sounds silly.

      Prices have been quite a bit under your $4/mmbtu assumption. https://www.eia.gov/dnav/ng/hist/rngwhhdA.htm

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    7. OK, slide two shows the overall gas production rate in the Barnett in EJ/year ~ 1 Tscf/year. The corresponding EUR was ~16 Tcf on slide 3. This prediction was based on the December 2010 data, kind of early in the Barnett play life. As an experienced reservoir engineer, I followed with slides 4 and 5, which in my mind represented the future more fairly in January or February 2011, when I did these calculations for the UT Austin's College of Engineering Advisory Board meeting. At that meeting, I went on record saying the Barnett ultimately would produce 26-27 Tcf. My distinguished colleagues were quite amused. As you can see, the result was 26-27 Tcf that happened to be just right 9 years later.

      So cut me some slack, will you? And please compare cums with cums, not rates with cums. I forgot to add that another popular prediction at that time was 600 Tcf for the Barnett, as hard as it is to believe today.

      Delete
  9. You're right--I made an error. It is 16 versus 26 TCF cum, which is a reasonable spread. I know to compare cum to cum, but made a mistake, reading too fast.

    I think you did OK on the Barnett. Of course, it's essentially a play that is done, so easier to model. And price kinda helped you some. We averaged $3.25 from 2011-2018--your assumption was $4. But still, not bad.

    ReplyDelete
    Replies
    1. Predicting future is difficult, as we all know. Go to slide 178 and the following. We have stayed away from the economics of producing oil and gas in shales, but the GEV approach allows us to calculate exactly the annual distributions of income per field region, and the expected value, mode and median of income. For example, by the end of 2010, in the Barnett, it was already painfully obvious that most wells were not making money at $4 per mscf.

      I can say now that we have also fully predicted the futures of the Bakken and Haynesville, and they are not what the EIA and USGS are telling us. Marcellus is tricky, but will likely be surprisingly less that the established predictions. Fayetteville was already dead in 2012, in no small measure because of the negligence and bad decisions by the SouthWestern. We'll go back to the Eagle Ford as well, because there is some unfinished business there. Our Eagle Ford paper was rejected by SPEJ two years ago, but today our analysis will be far more complete.

      It is good that you and many others will continue to challenge me and my group, but the truth is what it is, not what we wish it to be. And the truth is that the shale miracle is going away within a decade or so. By then the US - and Texas - will have squandered the only chance we will *ever* have to modernize our economy, limit consumption, and go towards renewables as much as possible. The dominant principle of the predatory US capitalism says that profit today wins; all else be damned, and screw the people and the planet. We will pay dearly for upholding this principle. Please mark my words, while disagreeing with them vehemently.

      Delete

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