The Death of Conventional Oil

Written By Keith Kohl

Posted April 16, 2007

Baltimore, MD–Remember the good old days when oil was $50 a barrel? I know that was only a few months ago–but just wait a few years from now when you’re wishing the price for a barrel of sweet crude was below $100. The reality is that peak oil is a lot closer than you think.

Twelve million barrels a day is a lot. That’s how much more oil we’ll need just to satisfy our addiction in eight years. The EIA estimates global demand for oil will reach 98 million barrels per day by 2015 (the demand is almost 86 MMbbls/day right now).

Allow me to put that into perspective for a second. The world’s largest oil field–the mammoth Ghawar field in Saudi Arabia–churns out roughly five million barrels of oil every day, meeting nearly 6% of the world’s demand.

That means we need to find more than two Ghawar fields in just a few years!

But that’s not even the bad news . . .

Fact is, the world’s three largest oil fields are in serious trouble. And out of the ten largest oil fields in the world, only one (Tengiz, Kazakhstan) is expecting to increase production within the next ten years.

Take the Cantarell field in Mexico. Production peaked in 2004. Recently, this falling giant has lost 20% of its production. Cantarell is now pumping 1.6 million barrels per day, as opposed to the 2 million barrels it averaged a year ago.

And get this . . .

 

In about three years, experts believe Cantarell will produce less than half a million barrels per day!

Okay, so that knocks out the world’s third largest oil field. The top two will make up for it, right?

Unfortunately, the picture doesn’t get brighter.

Kuwait has been fighting tooth and nail to maintain production rates at its Burgan field. It was announced in 2005 that Burgan had started to decline. The Burgan field represented almost half of Kuwait’s oil production that year.

Kuwait estimates Burgan has another thirty or forty years of production left. But don’t forget that production costs are going to rise sharply as the oil becomes more difficult to extract.

Without question, the mother of all oil fields is Saudi Arabia’s Ghawar field, measuring 280 by 30 kilometers.

We’re talking huge here. This field produced about 65% of Saudi Arabia’s oil from 1948 to 2000. And newer oil discoveries have never come close to matching Ghawar’s size.

Here’s the problem . . .

Ghawar is wholly operated by the state-owned company Saudi Aramco. Any data from this field is a closely guarded secret, so there’s no way of knowing just how much oil is left. Experts have estimated the amount of oil reserves to be somewhere between 70 and 85 billion barrels.

I hope you weren’t expecting to hear good news, because Saudi Aramco reported last year that Ghawar’s production has been declining by 8% per year.

However, the oil in the ground isn’t the major issue, but rather how much of that oil can be extracted before production costs become prohibitive.

The key for the Saudis is utilizing new technology to save their precious Ghawar. To ease the process of extracting oil, they pump large amounts of water into the oil fields. This effectively builds up the pressure and increases oil production.

The amount of water being pumped into an oil field is a good indicator of how a field is doing. Over time, the amount of water being pumped out will increase and the amount of oil will decrease.

So how’s old Ghawar doing?

Saudi Aramco has been pumping more than seven million barrels of water per day into Ghawar. Roughly fifty-five percent of production is gushing out water. That number will continually rise as the field depletes–not to mention the escalating costs that come with maintaining production.

With Cantarell dead, Burgan fighting for dear life and Ghawar "unofficially" in decline, the lack of newer conventional, easy to access oil field discoveries means one thing . . .

Death is knocking at oil’s door.

Rough Times, Cold Cash

Granted, throwing in the towel is one possibility. However, lamenting about the future is one thing, preparing for it is entirely different.

Fortunately, there are hundreds of way to play oil’s demise. If you’re interested in exploiting these opportunities, check out the Pure Energy Report here.

Until next time,

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Keith Kohl

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