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Matt Simmons Ape Akin to Real Oil Issues

Matt Simmons Ape Akin to Real Oil Issues

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Published by: Mark Gilbert on Aug 11, 2011
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TAKING A PEEK INTO REAL PEAK OIL ISSUES

Billion Barrels Oil Equivalent Per Year (EBOE)
Estimates Of 21 At Century United States Oil & Gas Supplies 13 12 11 10 9 8 7 6 5 4 3 2 1

0 1900 10 20 30 40 50 60 70 80 90 2000 10 20 30 40 50 60 70 80 90 2100 Source: Oil & Gas Investor Imported Natural Gas 450 GBOE Imported Crude And Products 390 GBOE Natural Gas 217 GBOE CUM 30 GBNGL Natural Gas 105 GBOE CUM Crude Oil 166 GBO

Oil Depletion Conference Edinburgh, Scotland April 25, 2005 By Matthew R. Simmons

Is Peak Oil At Hand? Or Years Away? 

Some Peak Oil advocates argue ³Peak is at hand.´ Skeptics put Peaking decades or a millennium away. Super skeptics think oil use will wane, eliminating any stress on peak supply. To date, only diagnostic tool to prove issue is ³rearview mirror.´ Energy data reform would provide hard ³answers.´
SIMMONS & COMPANY
INTERNATIONAL    

Traditional Peak Oil Analysis Still Applies Hubbert¶s 50% Recovery 

Hubbert¶s thesis: When in output. Current flaws to this technique:

% of a recoverable resource used, remainder declines

± Long life heavy oil co-mingled with light oil. ± Reservoir pressure maintenance prolongs peak output. ± Modern technology extends high flows of recovered oil.

illion arrels

il quivalent Per Year (

± ³Proven Reserves´ have no audits.

Imported atural atural as atural as 

ll these flaws create illusion peaking is further away. SIMMONS & COMPANY
INTERNATIONAL

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Flaw #1: Proven Reserves Are Not ³Proven´ 


Genuine proven reserves are only known when oil is gone. Conceptual proven reserve estimates are complex series of reservoir factors, oil viscosity, economics and technological guesses. Best intentioned estimates can vary by 50%. When no ³third-party´ review is conducted, reserve estimates become ³Beauty in the eye of the beholder.´ 95% of the world¶s ³Proven Reserves´ are unaudited.
SIMMONS & COMPANY
INTERNATIONAL 

 

Source: London Times, January 26, 2004.

Flaw #2:
Co-mingling Reserves = Meaningless Average
Heavy oil cannot be produced fast. It oozes out. Extra light oil in pressurized reservoir can flow at extremely high rates. Combining the two creates ³units of fruit´ on a vegetable stand. Two sphere depletion contest highlights this flow.
SIMMONS & COMPANY
INTERNATIONAL 

  

Flaw #3: Pressure Maintenance Programs 

High reservoir pressures create abnormally high flow rates. When pressures wane, oil flows decline. Water/gas injection can artificially prop up high pressures. When pressures finally ebb, there is no secondary game to play.
SIMMONS & COMPANY
INTERNATIONAL 

 

Flaw #4: Modern Technology Created ³Turbo-Straws´

SIMMONS & COMPANY
INTERNATIONAL
Source: ³Fifty Year Crude Oil Supply Scenarios: Saudi Arabia¶s Perspective´, Saudi Aramco, February 2004.

Reality: ³Reservoir Mechanics´ Still Rule The Day

Blowout Depletion 20%

IRR Driven Pressure Maintenance
Est. Recovery Rate

Conservation Recovery

25%

30%
SIMMONS & COMPANY
INTERNATIONAL

³Peak Oil´ Does Not Mean Peak Day¶s Supply 
   

High pressure oil reservoirs can always produce higher oil flow. This fast forwards passing ³Bubble Point´ enroute to ³Dew Point.´ Sustainable peak output needs conservation recovery. This principle clashes with ³Maximizing Net Present Value.´ On sustainable peak oil, has the world passed peak?
SIMMONS & COMPANY
INTERNATIONAL

World Needs An Energy Warning System 

Energy Data Reform can create ³Vital Signs Clipboard.´ Some argue it is better to hide problems. Giant crises are always those unexpected arrivals. ³13 Points of Light´ data reform can create Vital Sign Clipboard.
SIMMONS & COMPANY
INTERNATIONAL   

What Are ³13 Points Of Light´? 

Field-by-field oil and gas statistics:
± 5 years (or 20 quarters) oil produced. ± Similar time frame for average well bores creating oil flow. ± Three reserve points of light (actual).
‡ ‡ ‡

Current estimates of Original Oil In Place (OOIP) (est.) (actual). Current estimates of Ultimate Recoverable Reserves (est.). Cumulative production to date (actual). 

Data must have 3rd party verifications of authenticity.
SIMMONS & COMPANY
INTERNATIONAL

Those Resisting Data Transparency Have Something To Hide  

New reporting standards need to be made mandatory. Everyone who resists should be branded:
³I am an unreliable energy supplier.´ 



Every significant oil and gas producer has this data. Implementing this reform can happen in months.
SIMMONS & COMPANY
INTERNATIONAL

Post-Data Reform: Timing of Peak Oil Can Be Resolved in 30 Days 

A 10-person study team can analyze top 100 fields within a month. If 60% to 70% of well flows are in decline, world has passed peak production.  

Reserve status merely confirms ³oil output´ is beyond ³easy to recover´ output.
SIMMONS & COMPANY
INTERNATIONAL

The World Can Cope With Post-Peak Oil 


Aftermath can be managed if truly understood. Crash course (cold shower) program:
± Understand true value of oil. ± Manage ultra-high wellhead revenue flows: 
  

Modernize energy infrastructure Create less energy-intense transportation Direct oil to its high value uses Create OPEC middle-class society

SIMMONS & COMPANY
INTERNATIONAL

Post-Peak Plan B: Bridges to Plan C 


Maximizing energy efficiency buys time. Consumption quotas create energy cooperation programs.
± China and India get 50% higher use ± OECD adopts an energy diet 



All supply limits need to be opened (buys time). R&D Manhattan projects need to invent a new energy plan.
SIMMONS & COMPANY
INTERNATIONAL

Have We Waited Too Long? 

The longer we postpone ³finding the facts´, the deeper hole we dig.

RULE #1:
When in a deep hole, STOP DIGGING! 

The world is currently accelerating the dig!
SIMMONS & COMPANY
INTERNATIONAL

Passing Peak Oil Is A Major Event

³Oil has become more and more necessary to everyone. At first it was used for medicine, for lamps, and for lubrication. Now, if the supply of oil were cut off, our manner of living would change completely until something to take its place was found.´ (Written in 1935 by Maud and Miska Petersham
when the world used 3.5 million barrels of oil each day)

SIMMONS & COMPANY
INTERNATIONAL

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