Grab a Stiff Drink….

Richard Heinberg is one of the leading commentators on peak oil. Energy Bulletin published his latest Museletter article in it’s entirety here. This was posted shortly after Heinberg attended the yearly ASPO conference in Italy.

In my last post, I mentioned that Mexico’s Cantarell field is the second largest in the world behind Saudi Arabia’s Ghawar field, and that it’s daily production was declining fast. Toward the end of Heinberg’s piece, he drops this litte nugget of information:

Even worse news, potentially, comes from Saudi Arabia, where oil flows have shrunk by some 400,000 barrels per day over the past few months, despite astronomic prices. No one knows for sure what is going on. The Saudis themselves say the production cuts are due to lack of demand, but this hardly seems plausible, unless the kingdom is only able to deliver unwanted heavy, sour crude to market—but even in that case, one would expect flows to increase, with a price discount factored in for resource quality.

At the same time, the Saudis are hiring just about every spare drilling rig in the world, resulting in a dramatically falling rig count in the Gulf of Mexico—a place that would otherwise be seeing an increasing count, given the fact that Mexico’s giant Cantarell field is in now in steep decline, with dire implications for the nation’s economy.

Matthew Simmons (Twilight in the Desert) has been insisting for the past few years that Saudi production is close to peak and that Ghawar, the world’s biggest field, may be in decline. Now many others are speculating that this is the real reason for the falling production figures.

What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline. At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.


Ugh…

Ghawar and Cantarell combined produce around 10% of the world’s oil every day. If this is even close to being true, we’re in a world of hurt sooner than even the most ardent doomer has been hoping for. Get ready to watch gas prices climb (slowly, but relentlessly), and drag the price of pretty much everything else along with it. I don’t expect sudden shifts in pricing… more likely it’s the ‘slow squeeze’ that some peakers talk about.

We’ll know for sure how things stack up one way or another by Christmastime I expect…

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