World Oil Production

It is obviously important to know the extent of the world's oil reserves, but it is equally important to know the rate at which oil can be produced (pumped). All oil producing countries of the world, save for one, produced oil at nearly the maximum rate in 2003. That exception is Saudi Arabia. Both Iraq and Venezuela had production interruptions in 2003 but world oil production stayed nearly constant because Saudi Arabia made up the difference.

Saudi Arabia was able to significantly increase production on a short term basis in 2003, but probably not in 2006 according to Matthew Simmons. (see the book review section)

[world Hubbert curve] Oil statistics usually include the ratio of reserves to production (R/P). It would seem that this is a measure of how long the oil will last. This is misleading because this assumes that production will remain constant until the last drop is produced. Here is description of what really happens when an oil field is discovered; At first, production grows exponentially as each new well adds its output. Eventually production for the oil field reaches a peak as each new well produces less oil and the older wells run dry. Then there is an exponential decay as more and more wells run dry. The productivity of a particular well depends on the rate at which oil flows horizontally toward the well head, the pressure within the oil bearing formation and the viscosity of the oil. There is an optimum rate of production for any well. If oil is produced too fast, some of the oil is left behind and the amount ultimately produced is reduced. The productivity curve of the oil field looks like a bell curve with the midpoint corresponding to the point when half of the oil is gone.

M. King Hubbert, of Shell Oil, observed this in 1956 and he used this information to predict a peak in production in the U.S. in 1969. [1] His employer tried to stop him from making his prediction and he was ridiculed. He missed by only a year. It should be noted that the bell curve idea is mostly a rule of thumb but it seems to work well. It works with oil but not with natural gas. It works so well that productivity curves for oil fields, and even other things, are now called Hubbert curves.

Here are some numbers from the Oil & Gas Journal, Dec. 23, 2002. The interesting numbers are highlighted.

	Reserves (bb)	Production (bb/year)	R/P (years)	Producing wells	Production (barrels/well/day)
Canada	180	0.80	225	54061	41
China	18	1.24	15	72255	47
Iran	90	1.26	71	1120	3080
Iraq	112	0.74	152	1685	1204
Kuwait	94	0.58	162	790	2025
Norway	10	1.15	9	833	3782
Russia	60	2.70	22	41192	179
Saudi Arabia	259	2.69	96	1560	4730
U.S.	22	2.11	10	521070	11
Venezuela	78	0.88	88	15395	157

Canada had 6.5 billion barrels in reserves in 2001 but now it has 180 billion barrels because of the inclusion of tar sand, as mentioned earlier. Norway is a major producer now but it passed the peak of the Hubbert curve in 200. Productivity is now on the down sloping side of the bell. This is happening fast as indicated by the an R/P of 9.

The U.S. is attempting to influence the shape of the right side of the bell curve by drilling more than a half million wells. But U.S. production is much less than the peak year of 1970 and the R/P of 10 means that the end is in sight. More wells and better technology increases the rate of oil production. The total amount of oil produced is increased only a little. But the final plunge in production will be steeper. Compare the productivity per well of the U.S. (11 barrels per day) with Saudi Arabia (4730 barrels per day).

ROI (Return on Investment) and EROEI (Energy Return on Energy Investment)

At 3782 barrels per day, Norway's oil wells are highly productive. The productivity of each well must be high to justify the enormous expense of drilling from platforms in the North Sea. A major portion of the expense of drilling for oil in the North Sea can be attributed to energy. It is possible to do the accounting in money (ROI) or in energy (EROEI). It takes energy from coal to make steel for the platform, pipes, etc. It takes energy from oil to drill for oil, to mine coal, etc. When EROEI goes negative, it make no sense to drill in the North Sea for energy. The oil might be valuable for fertilizer or plastics, etc., but not for energy.

[1] Hubbert's Peak, The Impending World Oil Shortage by Kenneth Deffeyes is now in its 6th printing as of October 2003. Published in 2001 but now available as a revised and updated paperback edition. The "overview" is excellent.