1. PETRO ECONOMICS ASSIGNMENT
-BY
JYOTI KUMARI,
RAHUL KUMAR,&
NAVNEET BISHT.

2. NASA

4. 80
70
60
Million barrels per day
50
40
30
20
10
1950 1975 2000

5. 9%
5%
66 %
4%
9% 7%
Source: BP Statistical review of world energy

6. 2500
Cumulative Discovery, Gb
Illusion
2000
Inflexion due to
Reality
falling Discovery
1500
1000
OPEC “quota war”
500
“Back dated” reserves Reserves as reported
0
1930 1950 1970 1990 2010 2030

7. 60
Past discoveries
50
Future discoveries
40
Gb
30
Production
20
10
1930 1950 1970 1990 2010 2030 2050
Past discoveries by ExxonMobil

8. Proved Reserves, Gb
Saudi
200
Iran
Iraq
Kuwait
100 UAE
Not proven
by anybody!
0
1980 1990 2000
 Accurate reserve estimates for OPEC countries are closely guarded state secrets
 Values for 1983 are probably accurate (for 1983)
 430Gb rise in reserves, no adjustment for 193Gb produced since 1980
 These questionable reserves are 45% of world oil reserves used by IPCC!
 A recent leak of Kuwait Petroleum Company documents showed the actual reserves are only 48Gb
(official reserves are 102Gb)
 1980 Kuwait reserves adjusted for production since then are 55Gb
From BP Statistical Review Gb = billions of barrels

9. What Is Peak
Oil?reaches its
The date an area‟s oil production
maximum
Means that about half the oil has been produced
Does not mean “running out of oil”
Does mean a continuous decline in
production
When oil half gone, the flow of oil begins to fall
Not like a gas tank
Oil in the ground is not in a pool but in tiny
droplets
Droplets move slowly through the earth due
to pressure
At halfway point pressure drops – flow
decreases

10.  Geophysicist at the
Shell lab in
Houston
 In 1956, he
presented a paper
with predictions
for the peak year of
US oil production

11. A model
logistic
distribution
Oil Wells and Fields Peak --- Regions Peak --- The World will peak
Everyone agrees that world oil will peak – controversy on the date

13. Lots of bad news, but
It‟s not hopeless!!
Human ingenuity and technology are remarkable.
Appropriate policy choices are available to
minimize and adapt to climate change.
Maybe we‟ll be lucky, and unanticipated factors or feedbacks may slow the
rate of change.
Perhaps we (esp. U.S.) will be forced to change by the price and
availability of fossil fuels.
13

14. L.A. smog plus invisible GHGs
Chief source: combustion of petroleum products
14

15. Petroleum:
a thick, flammable mixture of solid, liquid, and
gaseous hydrocarbons (organic compounds with H and C)
that occurs naturally beneath the Earth's surface.
Crude oil (aka “oil”)
* Liquid mixture of naturally occurring hydrocarbons
* After refining: the chief source of transportation fuels
Natural gas
•Gaseous mixture of naturally occurring hydrocarbons
* After processing: used for power generation,
residential,
fertilizers, manufacturing, transportation (still very
limited)
15

16. 16

17. 17

18. 18

19. 19 19

20. 20

21. 21

22. 22

23. Petrochemicals Chemicals produced from petroleum
23

24. “Plastics.”
The Graduate 1967
ALL PLASTICS are petrochemicals.
24

25. polystyrene epoxies
25

26. 26

27. PVC
solvents
27

28. Polyester: the most widely
used artificial fiber in the U.S.
apparel & home furnishings, plus bottles, fiberglass, LCDs,
holograms, filters, insulators, auto body parts
Other synthetic fibers, such as acrylics & dacron: clothing, yarn, rugs, rope, sails,
grafts, containers, resins
28

29. Nylon
Apparel, carpets, musical strings, fishing line, racket strings, rope, auto parts,
machine parts, sutures
29

30. antiseptics detergents rubbing alcohol
vinyl synthetic rubber MTBE dyes
Modern developed societies
depend on petroleum in
innumerable ways. We are
petroleum-dependent.
“No civilization can survive the
destruction of its resource base.”
30

31. Make lists of the top 5 countries:
Petroleum production
to date (since ~1860)
USA Current (1997) rate of
FSU
KSA
petroleum production
Iran Remaining
Venezuela KSA petroleum
USA
FSU
Iran KSA
Mexico/Venez FSU
Iraq
Iran
FSU = former Soviet Union Kuwait/USA
KSA = Kingdom of Saudi
Arabia
31

32. The Benefits of Doing Business in
Saudi Arabia

33. Rank Rank State
Company Country
2006 2005 Ownership %
1 1 Saudi Aramco Saudi Arabia 100
2 3 NIOC Iran 100
3 2 Exxon Mobil US
4 5 BP UK
5 4 PDV Venezuela 100
6 6 Royal Dutch Shell UK/Netherlands
7 7 CNPC China 100
8 11 ConocoPhillips US
9 8 Chevron US
10 8 Total France

34.  Operations in:
 Exploration, production, refining, marketing, and
international shipping.
 The company has approximately one fourth of
world oil reserves
 The company is headquartered in Dhahran,
Saudi Arabia and employs about 52,100 people.
 State Owned

35.  Population Size
 Description of Labor
Force
 Consumer Purchasing
Power
 Distribution

37. Oil wealth has made possible rapid economic development,
which began in the 1960‟s and accelerated in the 1970‟s.
Saudi oil reserves are the largest in the world, and Saudi Arabia is
the world‟s leading oil producer and exporter.
A major new gas initiative promises to bring significant
investment by the US and European oil companies to develop
non-associated gas fields in three separate parts of Saudi Arabia.
In April 2000, the government established the Saudi Arabian
General Investment Authority to encourage foreign direct
investment in Saudi Arabia.

38.  The population of Saudi Arabia is approximately
22,757,092, which includes 5,360,526 non-nationals.
 42.52% of the population is aged 0-14.
 54.8% of the population is aged 15-64.
 2.68% of the population is 65 years old or older.

39.  Saudi Arabia‟s labor
force is 7 million people,
35% of this population
consists of non-nationals
 Agriculture 12%
 Industry 25%
 Services 63%

40.  Saudi Arabia‟s Purchasing Power Parity is $232
billion.
 GDP Real Growth Rate: 4%
 GDP per capita: $10,500

41.  Railways: 1,389 km
 Highways (paved): 44,104 km
 Ports and Harbors: total of 13
 Airports with paved runways: 70
 Heliports: 5

42.  Saudi Arabia's crude oil production peaked in 2005 at
9.6 mbd. In 2010 Saudi production averaged 8.2 mbd.
 According to official Saudi sources, Saudi oil
production will not increase beyond 8.7 mbd until
2015. And as domestic consumption is projected to
grow by 5% per annum, Saudi exports are expected to
shrink by 10% in the next 4-5 years (see Table 2).
 A steady production decline was forecast from 2010
onwards (see Figure 1).

43. Year Production Consumption Net Exports
---------------------------------------------------------------------------------------------------------------------
1980 9.90 0.61 9.29
1990 6.41 1.11 5.30
2000 8.40 1.54 6.86
2001 8.03 1.61 6.42
2002 7.63 1.68 5.95
2003 8.78 1.78 7.00
2004 9.10 1.88 7.22
2005* 9.60* 1.96 7.64
2006 9.15 2.02 7.13
2007 8.72 2.14 6.58
2008 9.26 2.30 6.96
2009 7.95 2.44 5.51
2010 8.20 2.70 5.50
2015 8.70 3.45 5.25
---------------------------------------------------------------------------------------------------------------------
% change 1980-2015 - 16 + 466 - 43
---------------------------------------------------------------------------------------------------------------------
Sources: US Energy Information Administration (EIA) / Official Saudi data.
* Peak production year.

45. 2005
140 12000
120 10000
Production kb/d
Discovery Gb
100
8000
80
6000
60
4000
40
20 2000
0 0
1930 1950 1970 1990 2010 2030 2050

46. Iraq Iran
Kuwait
Kingdom of Qatar
UAE
Saudi Arabia
46

47.  Most Middle East producers
have passed their prime.
 Iran peaked at 6 million
barrels/day in 1970s.
 Iraq, Kuwait, Oman, Syria
and Yemen have all
passed peak output.
 UAE and Iraq might have
growth prospects.
 Many giant Middle East
oilfields are far past Peak
Oil.
 Saudi Arabia has 36% of
Middle East reserves.

48. Significant
traps are
extremely
localized in
space
oil = red
largest:
Ghawar

49. Persian Gulf
Close-up

51. The Middle East
contains 45–60%
of the world‟s
petroleum reserves.
Ghawar Ghawar: probably the
most important place
you‟ve never heard of
* World‟s largest oil field
* 60-65% of KSA production to date
* 6% of global production to date
* 6% of modern production
51

52.  Discovered in 1948
 Huge anticline structure 250km by 30km wide
 3400 wells
 Reserves when discovered 100 billion barrels
 Current production 5 million barrels per day
 7% of the Northern tip of the field produces 2
million barrels per day
 7 million barrels of water pumped in daily to
recover 5 million barrels of oil

53. Sideways Drilling – e.g., Ghawar
(increases flow by exposing longer length of
borehole to oil floating on injected water)
3-D view of
"bottle-brush"
well
completion
Greatly
increases
flow rate
from single
top view wells
(e.g., 10,000
barrels/day vs.
300
barrels/day)
from Matt
side view Simmons

54. Ghawar
Largest
Oilfield
(~5% world
production)
(from
reference on

55. Ghawar 3D Seismic Survey Closeup
Oil column thickness (orig: 1300 feet)
Shiv Dasgupta, “Reservoir
blue 0-30 feet monitoring with permanent
green more than 120 feet borehole sensors: Ghawar Arab
red boreholes (most now used for waterDinjection) 74th SEG
reservoir”,
http://abstracts.seg.org/ease/techprog/downloadpaper?paper_id=
Conference, 2004

56. possible location
of traverse on 3D
reconstruction
from garyp http://www.theoildrum.com/node/2441#

57. Ghawar
Boreholes
blue: oil
brown: water inj
(approx. overlay)
http://pangea.stanford.edu/~jcaers/theses/thesisJoeVoelker.pdf

58.  Ain Dar,
 Shedgum,
 Uthmaniyah,
 Farzan,
 Ghawar,
 Al Udayliyah,
 Hawiyah and
 Haradh.

59. Ghawar
largest resevoir in world
(looking south)
surface defined by http://www.searchanddiscovery.net/documents/2004
impermeable cap
(anhydrite bed)

60. Ghawar Depletion
by Region
Ghawar Base Case
Production Model
total prod. ‟02 to ‟28 = 30 Gb 5
Mb/d
4
Mb/d
3
Mb/d
2
Mb/d
2007 2014
from Euan Mearns
http://europe.theoildrum.com
http://europe.theoildrum.com

61. Rock permeability is
spatially complex
(model of 'Ain Dar and
Shedgum, northern Ghawar)

62. Depletion of North ‘Ain Dar
Oil
Oil
Oil
Oil
http://www.theoildrum.com/node/2441 Staniford
from Stuart
http://www.spe.org/elibinfo/eLibrary_Papers/spe/2005/05MEOS/SPE-93439-M

63. Ghawar Field Oil Saturation Plot, 2002
(presumably just under anhydrite cap)
„Ain Dar
[blue is now oil,
not water]

64.  “Oil has never run out.”
 Great new discoveries “must be around the
corner”.
 Proven oil reserves (1.2 trillion barrels) equates
to 40 years current use.
 Oil sands and other unconventional oil wait in
the wings.
 High oil prices will likely create new energy
supplies, economists are our „high priests‟.


65. THE DEBATE OVER RESERVES:
PESSIMISTS AND OPTIMISTS
During the 1990‟s, the debate over oil reserves generated
controversy between the "pessimists" and the "optimists".
Oil is so important that publishing reserve data has
become a political act. Most of the dispute between the so-
called pessimists (mainly retired geologists) and the
optimists (mainly economists) is due to their using
different sources of information and different definitions.
The pessimists use technical (confidential) data, whereas
the optimists use the political (published) data. “

66. PESSIMISTS
•the world is finite and so are its recoverable oil resources
• all of the oil-bearing regions worth exploring have already been explored
• the big fields have already been discovered
• claim that official figures for proven reserves have been overestimated
• world oil production is currently at its optimum (peak) and will decrease
steadily
•Geologists and physicists tend to hold this position.
OPTIMISTS
•hold a “dynamic” concept of reserves
• believe that volumes of exploitable oil and gas are closely
correlated to technological advances, technical costs and price
• tend to be economists

67. Remaining in place Produced;
27 billion bbls
17 billion bbls
25% 40%
10%
Possible; 5% 20%
7 billion bbls
Probable
Remaining proved;
(incremental);
14 billion bbls
3,5 billion bbls
OIIP: 68.1 billion barrels
Proved reserves: 41 billion barrels ( 60% of OIIP)
Estimated ultimate recovery: 51 billion barrels (75% of OIIP)
Source: Saudi Aramco, 2004

68. from WSJ, Feb 9, 2006

69.  Ghawar has produced about 60% of all Saudi
Arabian oil from 1951-2004 and still accounts
for some 50% of the Saudi production
 When Ghawar output declines, Saudi
production will most likely have peaked
 After peak in Saudi Arabia it is difficult to
envisage a global increase in conventional oil
production

70.  The entire world assumes Saudi Arabia can carry
everyone‟s energy needs on its back cheaply.
 If this turns out to not work, there is no “Plan B”.
 Global spare oil capacity is now “all Saudi Arabia”.
 No third-party inspector has examined the world‟s
most
important insurance policy for years.
 Conventional wisdom says “Do not worry, Saudi
Arabia has always come up with the goods.”
 If conventional wisdom is wrong, the world faces a
giant energy crisis.

71. Saudi Arabia problems
Since 1970, Saudi Arabia has been the world‟s “swing
producer” of petroleum: the only country capable of
greatly increasing production in a short time (in response
to supply interruptions such as hurricanes in GOM,
violence in Nigeria, war in Iraq).
KSA insists it still can fulfill the role of swing producer,
but releases no verifiable data....its attitude is “trust us.”
Analysts are (finally) starting to get very concerned (Matt
Simmons).
A. Unexplained jump in reserves in 1990 (170 to 258
Gb).
B. Ghawar reserves? 70 Gb (SA); 25–40 Gb (analysts).
71

72. C. Almost all KSA production comes from 6 supergiant
fields, and >60% comes from Ghawar. All six were
discovered 40–60 years ago. Five of the six have produced
at very high rates for most of their history.
D. At least some of the wells in these super giant fields
are producing very, very high amounts of water with
petroleum(70% to 90%; 30% is typical trouble level). In
other fields, these levels have led to very rapid
production declines.
E. Saudi Aramco says production from existing fields
declines 8% every year. Thus, KSA needs to increase
production by up about 1 million barrels/day every year
just to compensate.
72

73.  The Ghawar field found in 1948 has produced
60% + of Saudi oil, is now producing approx. 5
million bopd and is approaching its tail.
 When Ghawar peaks, Saudi will have peaked
and so will the world.
 Indications are that the OPEC “swing
production is about to be exhausted

74.  Peak means that production can no longer be
increased; we have then produced about half of
the oil
 After peak the price of oil will be market
driven

81.  Multinational companies depend on cheap
energy for global trade.
 The whole economic model of more and more
each year will have to be re thought.
 Everything possible will be brought into
service to maintain the current economic
system.
 Unpredictable consequences.

82. ► Last man standing
► Wait for the techno fix
► Powerdown
► Create lifeboats

83. Action required on two fronts (Think globally; act locally):
Personal lifestyle changes
Achievement of world wide political consensus and
action.
- Shift of consciousness?

84. ► Adopt the Uppsala protocol
- Distribution of remaining energy, rather
than fight over it.
► Reduce population and consumption to long
term carrying capacity by each country living
within its ecological footprint
►Oppose the scandalous promotion of Nuclear
power
►Press for meaningful debate about our energy
future.

85. ► Let as many people as possible know about
peak oil
 www.Livingonthecusp.org
 www.peakoil.net
► Get informed
 Web based news
 The Ecologist, Resurgence, Positive news

86. ► Chose a low energy lifestyle.
► Learn to live and really live with less not just
make do.
"Faced with a choice between
the survival of the planet and
a new set of matching
tableware, most people
would choose the tableware"
- George Monbiot

87. ► Create communities. You can‟t go it alone.
► Re-localise economies and energy production.

88. Vision
the
Future

90.  If we use this opportunity to radically change
what we do and how we do it, (adopt a post
industrial society), then something positive can
emerge.
 However, if treat this as just an energy crisis
then we are setting ourselves up for a bigger
fall further down the line.