Re: Oil....Gold prices Will Go Up This Week!
Milk Man said:
Don't the Saudi's pump water into their oil fields to make the oil come out faster too? This would mean that supply in these fields wil not slowly dry up but come to an abrupt halt when water comes out the rigs (because oil floats on water). Is this correct? I dont know about the ramifications are for damage but if you pump too much out of a bore then the bedrock wears away around the casing, and if too much wear occurs then the water will escape out the top of the bedrock and the bore is FUBAR. Im pretty sure thats how it works, bottom line: pump to much then bore is FUBAR.
Saudi's = FUBAR
This is a very complex topic but in short, yes the Saudis do pump very large volumes of sea water into their oil fields, particularly at the Ghawar field (the world's largest).
In simple terms an oil field without enhanced recovery techniques in use will experience a gradual decline in output over a long period of time. A bit like how a torch battery runs down only it's over a much longer time period. In parts of the USA there are "idle" oil field pumps all over the place. Actually they're not "idle" at all but are simply switched off until the oil fills the bore up again and then the pumps are switched on to pump it out and then switched off again. The reason being that the fields are so heavily depleted that the oil just doesn't flow at all rapidly these days.
The reasons are geologically quite complex (and I'm not a geologist) but suffice to say that it's wrong to think of an oil well as being like a straw into a glass of water. Think of it more in terms of a straw stuck in a sponge soaked with thick honey and you'll understand what the problem is with getting it out quickly.
And the thicker (heavier) the oil, the bigger the problem with production rates such that some heavy oil fields are still pumping over a century after they started. They never did flow quickly, they still don't and probably never will. They will ultimately produce a lot of oil, but over a long period of time and that is what the issue with oil is. It's not about "running out" of oil but rather a question of the rate at which it can be produced.
This situation creates the misleading impression, especially to tourists, that the USA has numerous oil wells simply sitting idle when in fact the reverse is true. They're running flat out but that doesn't result in a lot oil being produced these days.
To maintain production rates as the field ages (depletes) a number of techniques are used with water flooding being the most well known and amongst the simplest and oldest. Pumping steam, natural gas, carbon dioxide etc. in is also used as are detergents in some situations. And of course there's also the drilling of production wells into small surrounding fields (usually falsely announced as a recent discovery) etc.
With water flooding what basically happens is that huge volumes of water are injected to both maintain reservoir pressures (which drop naturally as the oil is extracted) and also to "sweep" oil across the field towards production wells.
Another, far more modern, technique is horizontal drilling. In very simplified terms think of a well drilled in a curved manner so it runs horizontally through the oil with several "legs" coming off it reaching to the sides. This can produce a lot more oil on a daily basis than a conventional vertical well. Such wells sit above the water below and below the natural gas above the oil. It's literally a case of extracting an ever thinning layer of oil from between water and gas. Production stays very high until suddenly all you have is gas (which is either used, flared or reinjected) and water with a bit of oil.
According to Saudi Aramco (the Saudi national oil company) both water flooding and horizontal drilling are extensively used by them. Two very significant points arise from this:
1. The fact that they are injecting such huge water volumes and spending a fortune on horizontal drilling very strongly suggests that they would otherwise be unable to meet production targets. This in turn implies that the Ghawar field in particular has passed its natural peak production and is only being propped up by the use of such technologies. If this is correct then it would also strongly suggest that Ghawar is more than 50% depleted. It is known publicly that the reason for starting the water injection in the first place was alarm at the rapidly falling reservoir pressure levels
in the 1960's. Ghawar was only discovered in 1948 and commenced production in 1951.
2. The use of horizontal maximum contact drilling combined with water injection has the potential to lead to a rapid fall in production once water reaches the producing wells. Rather than declining slowly, they would simply die, one at a time, almost literally overnight.
Now, there are a lot of wells drilled into Ghawar but if they start just dropping off one at a time then that leads to a production decline which in due course becomes a major problem. This situation is exactly what happened at the Yibal field in Oman. Production was at 250,000 barrels per day a few years (1997) after the introduction of maximum contact horizontal wells and Shell convinced the government there that a 30% production increase over the next 10 years was the thing to do. Just months later the collapse began and now, depending on which reports you read, production is between 40,000 and 80,000 barrels per day. A rather spectactular collapse in production which was totally unexpected judging by Shell's actions. Oh, and it flows about 900,000 barrels of water per day in addition to that little bit of oil that comes up with it.
It is not my intention to be overly pessimistic about oil and suggest the end of the world etc. But it is anything but easy to maintain production going forward with meaningful increases being highly unlikely in my opinion. The new development that would be needed to facilitate sustained production increases just doesn't seem to be happening and there aren't the known undeveloped reserves for that development to occur. The underlying reason for this is that exploration has been increasingly unsuccessful over the past four decades with a sharply falling discovery trend. What was considered too small for a major oil company to bother with in the 1970's is now announced as a major discovery. A major discovery which over the next decade will produce enough oil to run the world for 5 days. That last sentence says it all in my opinion.