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Visitor Seinfeld routine by David Middleton

The plots of the Seinfeld TV present typically revolved round trivializing essential issues and blowing trivial issues out of proportion. Whereas not a Seinfeld fanatic (I’m extra of a Frasier fanatic), I assumed the comedy routines have been typically sensible and fairly efficient.

Peak Oil, abiotic oil and EROEI (vitality returned on vitality invested) are largely tutorial ideas. They’re the topic of books, tutorial publications and Web “debates” The “debates” about Peak Oil, abiotic oil and EROEI are lots just like the Seinfeld present. They enlarge the trivial and trivialize issues that truly matter. The “debates” typically divide into two camps:

It’s the top of the world (Peak Oil, EROEI).It’s our salvation from the top of the world (Abiotic oil).

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Whereas all three of those energy-related subjects are, no less than to some extent, actual, none of them have the slightest relevance to vitality manufacturing… aside from Peak Oil… However the relevance is usually missed by each side in Web “debates.”

I had initially meant on combining Peak Oil, abiotic oil and EROEI into one submit; however realized that it might have been longer than Tolstoy’s Conflict and Peace. So, this submit might be restricted to Peak Oil. Half Deux will deal briefly with abiotic oil and Half Trois will deal extra extensively with EROEI.

Peak Oil: A Actual Factor That Doesn’t Matter

What’s Peak Oil?

In its easiest kind, “Peak Oil” is the purpose at which petroleum manufacturing reaches its most charge. It’s based mostly on the work of Shell geologist M. King Hubbert (Hubbert, 1956). It’s merely a mathematical approximation of how the manufacturing charge of oil, gasoline or every other depleting useful resource will change because the useful resource is recovered. Hubbert’s logistic operate yields a most manufacturing charge on the time half of the useful resource has been produced. Actuality is messier than this; however Hubbert’s logistic operate is an honest approximation, significantly for regional analyses. In its commonest kind, “Peak Oil” is utilized to grease producing areas, nations and the world.

This was Hubbert’s 1956 “forecast” for Peak Oil within the US:

Determine 1. Hubbert’s 1956 Peak Oil forecast for the US. (Hubbert 1956).

Peak Oil is extremely depending on the full quantity of a useful resource that might be recovered. Observe how the “peak” strikes ahead in time as the full quantity of recoverable oil is elevated. Hubbert’s forecast wasn’t wanting too unhealthy as lately as lately as 2008. Nonetheless, the recoverable useful resource was a lot bigger than 150 or 200 billion bbl.

Determine 2. Hubbert 1956 with US oil manufacturing by means of 2017.

By 2017, cumulative manufacturing totaled over 222 billion bbl and proved reserves stood at just below 40 billion bbl.

Determine three. Determine 2 with US proved oil reserves.

With a purpose to estimate when US Peak Oil will happen (or has occurred), we would want to understand how a lot of the oil assets, not categorized as proved oil reserves, might be recovered. At greatest, it is a SWAG. The Bureau of Ocean Power Administration (BOEM) estimates that there are about 90 billion bbl of technically recoverable oil remaining on the US Outer Continental Shelf (OCS). Till proved reserves and the estimated undiscovered useful resource start to say no, will probably be unimaginable to forecast Peak Oil.

How do we all know that Peak Oil is actual?

Let’s begin out with a easy, generalized depiction of an oil reservoir.

Determine four. Generalized oil & gasoline reservoir. (Petropedia)

Each oil effectively, each reservoir and each oilfield has or will attain a peak oil manufacturing charge, adopted by a gradual decline. The speed of decline and restoration charge are typically features of the reservoir drive mechanism.

The reservoir drive mechanism provides the vitality that strikes the hydrocarbon situated in a reservoir container towards the wellbore as fluid is eliminated close to the wellbore. There are 5 frequent drive mechanisms:

Water drive

Gasoline enlargement

Resolution gasoline

Rock or compaction drive

Gravity drainage

One kind often dominates, however drive sorts can happen together. Relying on the drive mechanism, attribute restoration efficiencies may be anticipated for a given reservoir.


When an oil and/or gasoline effectively is accomplished, the manufacturing casing is perforated on the stage of the reservoir. The virgin reservoir stress is significantly greater than the stress within the wellbore. This causes the oil and/or gasoline to circulation into the wellbore and to the floor. Because the oil and/or gasoline are eliminated (voided) from the reservoir a mixture of two issues typically happens.

The reservoir stress begins to say no.Formation water begins to maneuver up-dip.

Water drive and gasoline enlargement (stress depletion) drives are the commonest drive mechanisms.  One characteristic shared by all drive mechanisms is that the utmost manufacturing charge happens early in a effectively completion’s life cycle.

Determine 5. Oil reservoir drive mechanisms. (AAPG Wiki)

A water drive reservoir will exhibit growing water manufacturing as oil manufacturing declines. The oil is “swept” up-dip because the water desk rises to accommodate voidage of the oil. Robust water drives are the most effective oil reservoirs; however not superb gasoline reservoirs.

Determine 6. Water drive reservoir. (AAPG Wiki)

Gasoline resolution (stress depletion) drive reservoirs will exhibit a drop in reservoir stress and a rise within the gasoline:oil ratio (GOR) because the oil manufacturing charge declines. These are poor-performing oil reservoirs; however the most effective performing gasoline reservoirs.

Determine 7. Resolution gasoline drive reservoir. (Schlumberger)

The drive mechanism determines how a lot of the unique oil in place (OOIP) may be recovered:

MechanismEnergy SourceRecovery (% OOIP)Resolution gasoline
driveEvolved resolution gasoline expansion5–30Gasoline cap driveGas cap and advanced resolution gasoline
enlargement20–40Water driveAquifer enlargement35–75Gravity
drainageGravity5–30 (incremental)

Desk 1. AAPG Wiki

These percentages may be elevated by means of secondary (water flood) and tertiary (carbon dioxide injection) strategies. Future technological advances will in all probability result in improved restoration charges. Nonetheless, 100% restoration charges are extremely inconceivable.

Oifields are teams of effectively completions in reservoirs. They behave very similar to the person reservoirs do. All oifields ultimately peak, as will international oil manufacturing. When will this occur? I don’t know.

Eugene Island 330 was as soon as the most important subject within the US Gulf of Mexico in complete oil & gasoline manufacturing (BOE). Though it has been surpassed by Shell’s deepwater Mars subject, it’s nonetheless one of many largest oilfields within the Gulf and the most important (BOE) subject on the shelf (<1,000′ water depth).

Determine Eight. Eugene Island 330 Area, oil manufacturing charge vs cumulative oil manufacturing (David Middleton, information from BOEM).

Eugene Island 330 subject has produced virtually 500 million bbl of oil and 1.9 TCF (trillion cubic toes) of gasoline from September 1972 by means of January 2019. The sphere averaged Eight,200 bbl/d in 2018. Observe how the manufacturing ramped up shortly, peaked after which tailed off slowly.

Once we take a look at the combination oil manufacturing from US Gulf of Mexico shelf, we will see a Hubbert-like sample:

Determine 9. US Gulf of Mexico shelf (water depth <1,000′)
oil manufacturing charge vs cumulative oil manufacturing (David Middleton, information from BOEM).

The US Gulf of Mexico shelf has handed “Peak Oil.” A gap of the Japanese Gulf of Mexico to E&P operations would in all probability yield a brief resurgence in oil manufacturing; however when it comes to oil manufacturing, the shelf is in everlasting decline. There’s nonetheless numerous potential for gasoline on the shelf; however a lot of that is uneconomic at in the present day’s pure gasoline costs. Fortuitously, the Gulf of Mexico doesn’t cease at a water depth of 1,000′.

Determine 10. US Gulf of Mexico oil manufacturing, together with deepwater. (David Middleton, information from BOEM)

The factor about “Peak Oil” is that there are numerous various kinds of peaks.

Ingenuity/financial peaks

Peak Oil within the Williston Basin of North Dakota seems to have occurred in 1985:

Determine 11. “Complete annual oil manufacturing in North Dakota” tens of millions of barrels per yr. North Dakota Geological Survey.

Then the oil , largely led by Continental Assets, discovered methods to economically produce oil from one of many basin’s most prolific supply rocks, the Bakken formation.

Determine 12. Determine 9. merged with North Dakota crude oil manufacturing. EIA

The Bakken was a key issue within the “shale revolution.” Hubbert’s 1956 Peak Oil forecast for the US regarded fairly good earlier than the “shale revolution.”

Political peaks

Determine 13. North Slope exploitation situation if all areas have been open to E&P (exploration and manufacturing). (Thomas et al., 2009)

Oil manufacturing from the North Slope of Alaska peaked in 1990, because of the truth that ANWR Space 1002 and the Beaufort & Chukchi Sea OCS (outer continental shelf) areas have been typically inaccessible for political causes.

How do we all know that Peak Oil doesn’t matter?

Oilfields, like particular person reservoirs, typically exhibit exponential decline curves. The decline curve flattens out over time. The typical decline charge for mature oilfields is about 5%. Big oilfields common about three% decline charges.

Determine 14. Common decline charges of big oilfields. (Höök et al., 2009)

Nonetheless, this isn’t the one cause for the sluggish tail off. A lot of the capital expenditures happen early within the lifetime of an oil discovery. As soon as the sphere is on-line, the money circulation from the oil & gasoline manufacturing solely must cowl the prices of working the sphere. Moreover, the associated fee to plug and abandon (P&A) a subject may be fairly costly, significantly for offshore fields. Persevering with to function a money flow-negative oilfield is economically preferable to incurring the P&A prices.

The North Slope of Alaska is an instance of this. Manufacturing from the enormous Prudhoe Bay oilfield ramped up in a short time, peaked in 1990 and tailed off.

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Determine 15. North Slope oil manufacturing, historic by means of 2007, forecast 2008-2050 (Thomas et al., 2009), up to date with historic manufacturing by means of 2017.

The Trans-Alaska Pipeline System (TAPS) can’t operate beneath a charge of 200,000 bbl/d. Operators of North Slope oilfields have a really highly effective incentive to keep up manufacturing charges well-above 200,000 bbl/d.

When international Peak Oil really happens, it can in all probability be pushed by demand, slightly than provide. The provision is ample and numerous. Observe the influence that the decline of the most important oilfield on the earth, Saudi Arabia’s Ghawar, and the collapse of Venezuela’s oil manufacturing have had on international oil manufacturing:

Determine 16. Petroleum liquids manufacturing (contains crude, condensate, oil shale, oil sands and NGL). USA in pink, Venezuela in yellow.

Dean Wormer would describe the influence as…

Determine 17. “Zero-point-zero!”

Inflation-adjusted oil costs have exhibited no statistically vital development over the previous 50 years.

Determine 18. Annual common imported crude oil worth. EIA Brief-Time period Power Outlook, April 2019.

The “shale revolution” coincided with the 2006-2014 interval of typically excessive oil costs. It’s typically stated that $100/bbl oil was an even bigger issue than horizontal drilling and frac’ing. That is true to a degree. Nonetheless, the collapse in oil costs since 2014 pressured the shale gamers and the remainder of the oil to cut back prices… And the did this “with a vengeance.”

Determine 19. Shale play breakeven costs. (World Oil)

Continental Assets, the main Bakken participant, has generated constructive working money circulation yearly since 2014 and three straight years of constructive free money circulation 2016-2018.

EOG Assets, the main shale participant nationwide, has generated constructive working money circulation yearly since 2014 and constructive free money circulation in 2014 and 2017-2018.

Chevron, the highest US oil producer and main Permian Basin participant has generated constructive working money circulation yearly since 2014 and constructive free money circulation 2017-2018.

It was really tougher for shale gamers to generate free money circulation with $100+ oil costs than it has been at $50-60/bbl. $100+ oil made it virtually unimaginable to regulate spending. The drop from $100-$30/bbl made it worse. Nonetheless, the drop in costs created leverage to cut back prices, significantly rig charges and repair firm bills. Everybody, standard and unconventional gamers alike, ratcheted down spending from 2015-2017. Breakeven costs for the shale performs plummeted over this era.

Observe: Unconventional oil is commonly no totally different than standard oil. The Bakken shale was the supply rock for a lot of standard migrated oil accumulations trapped in porous and permeable sandstone and carbonate reservoirs within the Williston Basin. The “unconventional” facet is in using horizontal wells and big frac jobs to allow oil manufacturing immediately from the low permeability supply rock.

When oil costs go up, prices go up. All the pieces from rig day charges, to frac fluids & sand, to offshore workboats, to motel rooms within the Permian Basin. $100 oil kicked off the “shale revolution”… However wasn’t essential to maintain it.

Over the past couple of years, E&P corporations have grow to be extra environment friendly, pressured to create investor returns at $40 – $50/barrel oil. Effectively productiveness has improved as corporations drilled longer laterals and used much less proppant. After the crash in oil costs, oilfield companies corporations lowered their costs to compete for restricted work. As oil costs recovered, the value of oilfield companies was sluggish to catch up. Moreover, corporations have extra capital self-discipline than they ever did at $100/barrel oil costs.

Whilst oil costs have began to get well, corporations are displaying decrease breakeven prices than ever earlier than. As proven within the chart beneath, breakeven costs within the Midland Basin fell by 50% from $87 in January 2014 to $44 in September 2018.

Mercer Capital

The associated fee-cutting was industry-wide:

Determine 20. Breakeven costs for main oil corporations and shale gamers. (Oil Worth)

Breakeven costs have been decreased onshore and offshore, standard and unconventional.

Determine 21. Breakeven costs have been decreased in a broad vary of performs. (FT)

Business has no management over costs; however can all the time cut back prices by doing issues extra effectively. This is the reason deepwater Gulf of Mexico E&P is booming at $50-60/bbl oil costs:

Determine 22. US GOM deepwater breakeven prices for greenfield (new discoveries) tasks. (Offshore)

Most oil corporations make ultimate funding choices (FID) based mostly on the present worth of oil, adjusted for the anticipated inflation charge over the length of the anticipated mission length. Excessive oil costs drew the to shale performs just like the Bakken and Eagle Ford and out into deepwater. The ’s “studying curve” made these performs much more economically viable at $60/bbl than they have been at $100+/bbl. Peak Oil, as actual as it’s, merely doesn’t matter.

So long as oil costs proceed to climb no less than as quick because the inflation charge, the will be capable to meet the demand for refinery and petrochemical feedstocks for a very long time to come back… And North America is well-positioned to dominate the 21st Century.

Determine 23. World petroleum cumulative manufacturing, proved reserves and useful resource potential. (Jude Clemente).

Keep in mind that I didn’t think about pure gasoline and a lot of the manufacturing information I used didn’t embrace pure gasoline liquids (NGL). Pure gasoline assets are much more ample than crude oil and might, to some extent, function a alternative… Rendering Peak Oil much more irrelevant.

To Be Continued

Half Deux will tackle the true(ish) nature of abiotic oil and its irrelevance.

Half Trois will tackle the true(ish) nature of EROEI and its Seinfeldian place amongst irrelevant issues.

Concerning the Writer

I’ve a B.S. diploma in Earth Science (1980) from “that wonderful oil faculty,” Southern Connecticut State College. I’ve been employed within the US oil & gasoline as a geophysicist/geologist since 1981, largely working the Gulf of Mexico for corporations you in all probability by no means heard of.


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