Peak Oil News: Peak oil theorists don't know Jack

Wednesday, September 06, 2006

Peak oil theorists don't know Jack

By Patrick Brethour

The elephants aren't extinct yet.

Chevron Corp. and its partners say they have tapped into an area that may contain as much as 15 billion barrels of oil in the ultradeep waters of the Gulf of Mexico — the kind of massive reservoir of crude that the industry dubs an elephant discovery.

The days of such discoveries were supposedly gone, with oil supplies peaking as the world simply ran out of big oil-producing fields, according to pessimistic forecasters. Instead, high technology and sky-high oil prices have combined to transform dud prospects into billions of barrels of crude.

“The industry is still very capable of coming up with new ways of producing oil,” says Michael Lynch, a prominent opponent of the notion of peak oil — that global supplies of crude are set for a marked decline.

The exact size of the reserves at the Chevron well, called Jack, aren't yet known. But the company said the wider area, known as the Lower Tertiary, could contain between three billion and 15 billion barrels of recoverable oil. At the upper end of the range, that would rival the Prudhoe Bay deposits in Alaska.

And it could increase U.S. domestic reserves by 50 per cent. Only part of that overall total, however, could be attributed to the Jack prospect, which some analysts said Tuesday is likely to amount to 500 million barrels.

Whatever the ultimate size of Jack, its true importance lies in when it was discovered — earlier this decade, rather than in the 1960s or 1970s, said Mr. Lynch, president of Strategic Energy and Economic Research Inc. It is proof positive that higher commodity prices and improvements in exploration technology can result in major new discoveries, he said.

That is the case at Chevron's Jack well in the Gulf of Mexico, nearly 300 kilometres from the U.S. coast. Massive caps and peaks of prehistoric salt had defeated earlier exploration efforts, chewing up the sound waves that the industry uses to create seismic pictures of reservoirs.

“It soaks it up, distorts it,” said Stephen Hadden, senior vice-president of exploration and production at Devon Energy Corp., which has a 25-per-cent stake in Jack and other prospects in the Lower Tertiary region.

Devon, with proved reserves of 2.1 billion barrels of oil and gas, said it could more than double its reserves from its holdings in the area. Devon said its Lower Tertiary prospects could contain the equivalent of six billion barrels of oil, using the expansive measure of unrisked resource potential. Despite the caveat, Devon shares jumped 12 per cent, with analysts saying the firm is an alluring takeover target.

“The larger companies are running out of room to grow and the deepwater Gulf of Mexico is right down their alley,” said Oppenheimer & Co. analyst Fadel Gheit. “They really have no options left — Russia is for all practical purposes closing its doors, the Middle East is radioactive, Venezuela is kicking us out, and the Canadian oil sands, I think, are played out.”

Devon's Mr. Hadden said several new technologies and techniques were brought to bear on Jack, combining to allow the partners to fashion a picture of the reservoirs underneath the previously impenetrable salt caps. More powerful computers and refined algorithms were part of that success. “It's a technology that's really evolved over the last six or seven years,” he said.

Such technology reduces the risk of ultradeep exploration in the gulf, where future wells are likely to cost up to $120-million (U.S.), Mr. Hadden said, declining to say how much Jack cost.

Jim Lovasz, senior engineering analyst at Ross Smith Energy Group Ltd. in Calgary, said new simulation technology is also playing a part in opening up new frontiers to oil exploration.

New frontiers such as the Lower Tertiary will keep the global supply of oil growing, Mr. Lynch said — although it's not likely to silence the advocates of peak oil.

“This won't convince the bulk of them. For the rest of us, it does serve as a reminder that there are still a lot of things that can still be done.”


At 11:15 PM, November 22, 2007, Anonymous Anonymous said...

Concerning the Article:
Peak oil theorists don't know Jack

Mr. Brethour seems to have missed the real significance of the 'Jack' oilfield in the deep gulf water.

Reported to be between 3 and 15 billion barrels of oil, taking the higher figure and giving the oil companies the benefit of the doubt about their reserve estimate, the size of this find must be put into perspective by comparing it to the world's present rate of consumption.

The World is presently consuming something like 80 million barrels of oil per day. 15 billion divided by 80 million is the math.

15,000,000,000 divided by 80,000,000 is the same result as 15,000 divided by 80, which gives a result of 187.5 days worth of oil production for the entire World at the present rate of use. Not very much oil when looked at in this way.

This field may be an elephant field, but it is only one quarter the size of the world's largest in Saudi Arabia, the Ghawar field, at 60 Billion barrels, which incidentally is beginning to go into terminal production decline.

Additionally, oil from Ghawar is easily recovered from a few very large, relatively shallow wells. The cost of recovery is much less than from deep marine deposits.
As oil is developed from deeper and deeper wells, the net energy product shrinks and the production expenses skyrocket. And the Jack field will take as much as five years to bring on line.

Canterell, the world's second largest field is 17 - 20 billion barrels and also located in the Gulf of Mexico. It was discovered in 1976 and began producing in 1980. In 2004, Canterell began it's terminal decline in production from around 2 million barrels a day. Since then, the field has been declining at a rate of about 15% per year. It's production will taper down to less than 1/2 million barrels per day over the next 5 - 7 years. Canterell will only have been a significant producer from 1980 to 2012, 32 years. It will have produced around 15 Billion barrels of oil, most of which has been shipped to the United States. Think about this! From unknown, to the world's second largest field, to terminal production decline in just 24 years.

The point of all these figures is that huge oil formations are rarer than hen's teeth, extremely expensive to develop and bring on line, and they don't last very long any more, drained by the World's voracious demand for oil. No matter how many 15 billion barrel oil fields are found in the next decade, production will not keep up with demand, which is expected to rise by 50 million barrels, to 130 million barrels per day by 2025, only 18 years from now. This is a yearly consumption of 47,450,000,000 barrels. That's 47.5 billion barrels per year!! This means the world will use all the oil produce by the jack field during it's 30 year production period in just 115 days!! This means there will have to be three 'Jack' size fields discovered every year just to keep up with demand and there has not been even one discovery a year of this size for more than a decade. Where is all this new oil going to be found, to say nothing of producing it?

Perhaps it would be better for the United States to begin developing industrial sized solar power plants on Terra Firma and in every state, with the goal of letting the sun power our energy demanding society. This would revitalize our industrial and technical plant, boost our economy, make the country secure in it's energy sources and create millions of good paying, non-exportable jobs. It would also solve the energy problem for ever. It would be less expensive and it would do much less harm to our planet's biosphere, where you and I and our children will still have to live for a very long time.

James Flaherty
Guilford, CT


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