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?