310. INTERESTING FLUB BY STUART STANIFORD
In Nov. 2005, peak oil wonderboy Stuart Staniford wrote an analysis claiming that the likely decline rate for fields in place (FIP) is 8%. What he means by this is that, if all new oil projects were stopped tomorrow, existing production would decline at an annual rate of 8%.
Staniford repeatedly stresses the importance of this number:
Most of us thinking about peak oil have been aware for some time that the central uncertainty is the decline rate on fields in production (FIP). This dramatically affects when one believes peak will be, and seems to be the main difference between more pessimistic projections such as Chris Skrebowski's , and CERA's. Source (Emphasis mine)
An analysis of Exxon's production suggests the problem. Their existing production apparently declines at rates varying from 6% to 14% per year. Thus all the new projects they bring on stream each year just serve to offset the declines in their current fields. [...]
The situation does not appear to be much better in OPEC. According to the US EIA, Saudi production is declining 5% to 12% each year. So they have to bring on that much new production just to stay level. Similarly, Iranian production is estimated to decline 8%-13% each year.
This to me is the most compelling argument that we must be close to peak oil production. The amount of new production required every year just to stay level is enormous. Source (Emphasis mine)
This 8% decline rate for FIP is a central assumption underlying Staniford's pessimism. So it's especially interesting that Staniford made predictions in 2005 based on this assumption. He took current production, subtracted 8% per year for decline, and then added projected new production from Chris Skrebowski's list of megaprojects. In this way, he created the following graph predicting production given various decline rates:
As you can see, the 8% line predicts production of roughly 75mbd for 2007, even though actual current production is roughly 84-85mbd. Something went very wrong, to the tune of 10mbd, with Staniford's assumptions. That is a HUGE discrepancy which needs to be explained.
At the time, Stuart listed 3 possibilities:
1) Chris Skrebowski has missed most of the volume of new projects in his analysis.
2) Andrew Gould [CEO of Schlumberger] is smoking dope, Exxon, Iran, and Saudi Arabia are an anomalously bad piece of the production mix, and the average decline rate is really much lower.
3) Life is about to get less fun, pretty quickly. Source
Clearly, possibility 3 did not pan out. Staniford's forecast based on an 8% decline rate for FIP was wildly, even ridiculously, in error.
So... I'm curious. Where did your analysis go wrong, Stuart? Did Chris Skrebowski miss most of the volume? Or is it the case that Andrew Gould is smoking dope, Exxon, Iran, and Saudi Arabia are an anomalously bad piece of the production mix, and the average decline rate is really much lower?
by JD
posted by JD @ 4:37 PM
8 comments
8 Comments:
JD! You're back!
Peak oil has been a total snooze fest without you.
Hey, JD, nice to have you back.
Doomers love to bash cornucopian forecasts when they get it wrong, but end up making forecasts equally as faulty. If you are claiming to be rigourous, you should simply refrain from making forecasts when you know the data is very uncertain. At least put error bars in, something I suggested to TOD but they never do. TOD also like to chop graphs to exaggerate trends, a classic trick from "How to Lie with Statistics". I also said on TOD that these are flaws which really damage their case, but of course they ignore that as well.
Some may say, "so what they got it wrong". The problem is that most doomers assume production will go off a cliff as soon as peak is reached. CERAs much derided bumpy plateau is a much more likely scenario, one that the thinking PO people always expected.
With the oil price nudging $100, many rabid doomers are again predicting collapse of the global economy within months. This assumption is as faulty as Stuart's prediction back in 2005.
We certainly need your input, JD. Post whenever you can, we all appreciate it.
Hey JD, Awesome to see you posting again. Actually randomly decided to check this blog today. Haven't even read about Peak Oil lately. It's funny how oil is now almost $100 and life is pretty much the same. Peakoil.com has been getting pretty excited lately as they try to guess when oil will hit $100.
Hm, I guess I expected a more convincing 'peak oil debunk' post for your return to this very witty blog. The latest one is just nitpicking. And I'm missing the incredibly funny way with words you have in other posts. I guess you're just getting revved up?
Why don't you debunk the IEA calling biofuels 'a crime against humanity'? Didn't you used to say that biofuels would pretty much save the day and make Peak Oil a non-event?
All the best.
Kay, I don't wanna rain on the parade here; lord knows I can't stand doomers who are just chomping at the bit for the sky to fall, but...
It is a fact that oil is 100 dollars a barrell now. A few bills on that can be attributed to the slide in the dollar (another thing that has me really worried...). But a hundred clams? It is one thing to say these are 'transient events' like global unrest, market speculation and what not. But have we any solid proof that this is the case? Is it that or is it an actual physical problem; ie shortages or refining capacity? A hundred bucks a pop is a bit much to swallow with a smile. Hate to think the day is lost; lord knows it looks that way at the po.com message board.
Hey JD,
Stuart thought that the decline rates would be even greater over time.
See his comment below the article:
"I think we can expect the rate of aggregate decline of FIP to go up over time. However, the total decline rate will depend, to some extent, on how hard we work to offset that. Just as now in North America, we have a 31% average decline rate on individual wells, but by furiously drilling all over the place we are almost (but not quite) managing to hold production."
So, if anything, Stuart was predicting the 8% rate would only go up from there!
Stuart's model is oversimplified, that's why his prediction is wrong.
Let's assume that 8% decline is correct. It is only happening in fields that have passed their halfway point. So... to assume it applies to all existing fields is a gross oversimplification.
The second oversimplification is only adding oil from the new megaprojects. You need to also allow for the increasing rates of flow from projects that recently came online and have not yet hit their peaks.
The total effect is that until we definitively hit the worldwide peak in oil production, applying this 8% across the board is not really a valid approach. I would argue that once we know (by looking in the rear view mirror after several years) that worldwide production has peaked, we can expect an eventual 5% decline per year in world oil production after we go over the curve of the hump. By that time, there will be far fewer new projects coming online, and a greater proportion of fields will be in decline at around 8%. The few new oil fields coming online will bring that down to around 5% worldwide. Of course, these are just guesstimates using common sense.
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