Interview with Sadad al Husseini - “The Facts Are There”
Portions of an interview filmed in London for the upcoming 2009 ASPO International Conference by ASPO-USA’s Dave Bowden, with Steve Andrews along on his own time and dime to ask some questions.
Sadad: I’m a geologist by training and a reservoir engineer—production engineer—by actual work experience. I started with Aramco back in 1970 and retired in 2004. Most of my time was spent with exploration and production activities but also in project management. I’ve carried on after that as a consultant.
Question: Assume for the moment that declines in demand have flattened and that we resume modest growth in demand in a year or so. Are there adequate new oil projects in the pipeline to meet rising demand for a few more years?
Sadad: I’ve been tracking the number of projects, globally, for a long time both in the Middle East and elsewhere—Russia, Brazil, west coast of Africa, and others. A lot of this information is in the public domain, so there is no mystery there. The International Energy Agency recently reported on the same numbers. The bottom line is that there are not enough projects. There is not enough new capacity coming on line, within say the next five to six years, to make up for global declines. And that’s assuming a very moderate level of declines—6% to 6.5% for non-OPEC, perhaps a 3.5% to 4% decline rate for OPEC.
Even at these modest decline rates, we are basically going to see a shortage of capacity within two to three years. We’re being lulled by this current excess capacity, which has more to do with lower demand than anything to do with supply. So we do have a problem in the near term. In the longer term it’s even worse because in the longer term the lead time to discover, develop and put on line production runs into 10 years. And there isn’t enough being done in the long term as well. So it’s both a short and a long-term problem.
Question: In Saudi Arabia, is 12.5 million barrels a day now sustainable and is there a plan to expand capacity beyond that?
Sadad: Saudi Arabia has a very credible and professional record in terms of declaring capacity and meeting its production targets. When the Kingdom announced a target of 12.5 million barrels of capacity, they actually committed funds to develop that capacity and we’ve seen them now commissioning those: 250,000 additional barrels in Shaybah; 1.2 million barrels in Khurais; 500,000 in Khursaniyah; 900,000 coming on stream in a couple of years in Manifa. So these are real projects and real capacities. I don’t think there is an issue that Saudi Arabia can deliver the oil it says it can deliver. The question is, what about the rest of the world? Is the rest of the world able to make up the difference? If we’re looking at 85 to 90 million barrels a day, and Saudi Arabia delivers 12.5 million, who’s going to deliver the rest and how much effort is going into that? And with decline rates of 7% to 8%, that’s four or five million barrels a year of net new capacity that has to come from new projects. So that’s where the challenge is. I don’t think the problem is Saudi Arabia. I think the problem is the rest of the world.
Question: Why do you think there is so much denial that world oil production is approaching or has reached a plateau?
Sadad: There is a push-back to the notion that there is a plateau in world oil supplies which is largely based on lack of information or lack of research. In fact, if you look at published information—for example, British Petroleum’s annual statistical report—it very clearly shows that from 2003 forward, oil production has hardly increased. So the information is there. If you look at some of the advertising that Chevron has been putting out for years now, they clearly say we’re half-way through the world’s reserves. The information is there. The facts are there. Oil prices did not jump four-fold over a three- or four-year period for any reason other than a shortage of supply. Yes, there may have been some recent volatility in 2008, but the price trend started climbing way back in 2002-2003. So, these are realities and the push-back is a sense that somehow the market is not able to deal with these realities, that somehow people can’t cope with these realities.
On the other hand, if you don’t talk about them, you never will fix the situation. This is not going to get any better. This is going to get worse because you have population growth all over the world, you have a standard of living that is improving all over the world, you have aspirations across the globe for a better quality of life, and people want energy, so it’s actually important to talk about the facts and come up with solutions rather than act as if these issues don’t exist and then wait for some solution to materialize out of nowhere. That’s a role of government—to highlight these issues and to fix them, or at least take a stand and try to fix them. So I think the push-back is probably ill-advised.
Question: What are your views about the roles of unconventional oil supplies going forward?
Sadad: I think it’s very important to understand the difference between conventional oil projects and unconventional oil projects—let’s say, the extra-heavy crudes. The IEA put out their report in 2008 on the long term. They listed a whole lot of projects. If you look at the conventional oil projects, which I have, and plot the cumulative capacity against cumulative cost, what you come up with is $30,000 to $32,000 per barrel of capacity for conventional oil. That’s for projects coming on-stream between 2008 and 2015. If you look at the unconventional—that’s the Canadian extra-heavy, and I included two Qatari gas-to-liquids projects—the cost per barrel of capacity is $92,000 per barrel. It’s three times the cost of conventional oil. That means that if you want 100,000 barrels of unconventional oil (syncrude), you’ve got to invest $9 billion. And those are just at current costs. For the conventional oil, when you can find it, it’s $3 billion per 100,000 barrels/day. But even the conventional has gotten very expensive. If you look at the Tengiz and the Kashagans, they’re running $40 billion to $50 billion to get 500,000 to 600,000 barrels of oil/day. So everything is getting far more expensive and slower to develop.
I think, yes, we will have synthetic crude oil. The Germans ran their World War II machine on coal-to-liquids, but that was a very expensive solution; we can’t replace 80 million barrels a day with coal-to-liquids. So they will be important supplements but not replacements.
Question: Will the net energy penalty associated with unconventional oil resources be a large drag on their development?
Sadad: There no doubt that the energy that goes into extracting extra-heavy crudes—be it in the form of fuels such as natural gas to heat the bitumens to get them to flow, be it in terms of the surface process of mining two tons of sand for one barrel of oil, then the cracking and refining to convert them to synthetic crudes—these are very high penalties. The same thing goes with gas-to-liquids; basically it takes one-third of the gas to deliver the other two-thirds as a liquid. So these have diminishing returns. Yes, you will be able to deliver, I think everybody forecasts 4 or 5 million a day from unconventional crudes, maybe going to 8 or even 10 million barrels by 2030. But that 8 million a day is only 10 percent of total consumption. It’s not a solution.
Question: There have recently been a lot of fairly recent announcements about new oil discoveries. Can you put those in context for us? How and when will they contribute to the world’s oil supply?
Sadad: There has been a regular number of discoveries in the last, say, five to ten years, in terms of major fields and even giant fields, in the ultra-deep-water in the Gulf of Mexico, for example. But these are very tight formations and very expensive. When you drill a well that costs you $80 million to $90 million, that one well doesn’t tell you what the reserves are so you have to go drill four or five additional wells to delineate the accumulation. And then you have to look at how you are going to stimulate and fracture what is basically source rock at that depth. These become very expensive accumulations to develop. The West African fields, say in Angola, are a tremendous exploration success, but they’ve now moved from the shelf to the deep continental shelf, and they’re running out of concession area, out of acreage. In Brazil, Tupi is a fantastic discovery; in a geophysical sense the seismic has been superb, the clarity of delineation is wonderful. These are formations that should have plenty of permeability.
On the other hand, [with some of these new finds] you do have issues of paraffinic crudes, of very sour gases that have to be separated from the production gas and reinjected into the reservoir. You have salt zones that are very plastic and may be an issue in terms of maintaining well integrity. So there are a lot of challenges that come with these fields that need technology breakthroughs in their own rights. So yes, we have had discoveries, they are important, they are slow to evolve. If the Tupi discovery, which happened a couple of years ago, is going to take until 2017 or 2018 to be online,
that’s a long time to wait. What’s the target? A million barrels a day. Declines will have overcome that rate a long time earlier, certainly in Brazil itself. So we’re basically staying even.
Comments
By Bill Simpson of Slidell LA. on September 28th, 2009 at 1:35 pm
“People are strange…”
Jim Morrison. The Doors
So many factors come into play in any discussion of why the coming peak oil catastrophe isn’t even being widely acknowledged, must less planned for, that a small book could be written about them. I’m too lazy to even attempt that, so here are just a few disorganized thoughts.
Evolution has probably programmed us to try to ignore unpleasant future events. We wouldn’t be around long, if we sat around all day wondering when we were going to die. Our inevitable death is such terrible news, that we have evolved not to dwell on it. It is interesting to note that one of the defining symptoms of clinical depression is a preoccupation with death. That is why many intelligent, well informed people, who know about peak oil, don’t want to make themselves uncomfortable by thinking about it. It is why some people will even get aggravated when you try to discuss peak oil with them. Who wants to think about possibly being unemployed or starving in five years? Just let someone else fix it. If things really get bad, the government will take care of it. File it way back there with nuclear war and the grim reaper.
Psychological factors may somewhat explain the reaction of many economists to the issue of peak oil. How many times have you seen economists on CNBC, Fox Business, or Bloomberg making statements that only 20% of the world’s oil has been used, and that higher prices will bring all the supply that we could ever need to market. The free market will solve any problem. They never mention that the other 80% will be so expensive and difficult to extract, that it might as well be on the Moon, when the ‘drill a hole’ wells run out enough to decrease total oil output. How well do you think that the economy will function on $200 oil, or $500 oil? Not too well, I would think.
My favorite economists (and other ‘experts’) are the ones that say that the stone age didn’t end due to a shortage of stones, and that the oil age won’t end due to a shortage of oil. They are absolutely right about the stone age, but not about the oil one. The stone age ended, and living standards have been rising ever since, because we have developed the necessary technology to continuously use fuels with greater and greater energy density. (And thus also probably lower and lower real energy cost, due to more energy obtained per fuel unit used. But I’m not smart enough to begin to prove that one!) We developed metal axes and saws to cut wood. Steam engines to use and mine coal. Internal combustion piston, and external combustion turbine engines, to burn oil products. And finally, extremely expensive nuclear reactors to use scarce uranium compounds which have to be carefully processed before use. I would just love to be able to ask one of those guys what will replace oil in transportation at a price that most people could afford, so as not to destroy demand for everything else.
I think that my favorite group of peak oil denyers is what I will call, the fantasy (No, not the Angelina JoLie guys) crowd. You may have met some of them. My fantasy list includes the proponents of algae, fuel cells(my favorite), batteries, biofuels, geothermal, solar, and wind. Fuel made from algae is so expensive that noone can yet come up with a reasonable cost estimate. Not a good sign. I have seen estimates of from $20 to $50 per gallon. Ouch! They will need to get that down a little. Fuel cells use platinum. In case they haven’t noticed, platinum isn’t exactly cheap and abundant on planet Earth. Try to get that ruler down in Bolivia, or the Chinese, to sell you all their lithium at a price that will enable you to make hundreds of millions of large car batteries. Better bring a few changes of clothes on that trip. Is there enough cheaply minable lithium on Earth to make that many batteries? You think mass production of batteries might cause a lithium price increase? Or that a lithium cartel might be formed? Biofuels might help, but not enough good, unused farmland exists for them to displace all but a small fraction of the huge amount of oil used today. Two and two-thirds cubic miles of oil used yearly equates to a lot of green stuff. With the current rate of population growth , we will soon need a lot more farmland for food production. Geothermal will always be tiny. Solar and wind produced electricity won’t help the transportation problem much, because hydrogen is far too costly and impractical for transportation use. Read “The Hydrogen Hoax” by Robert Zubrin. I really did lol.
Coal to liquids is no physical fantasy, but it may be a political or economic one. I hope that I am wrong, but trying to construct enough gigantic, expensive CTL plants, in time to make a significant dent in the peak oil shortage, will present insurmountable problems. The environmental impact statements alone will take years. Environmental groups will file lawsuits the day they are released. Since most people are in denial about peak oil, and since this is unlikely to change until the crisis hits, nothing at all will happen here (China might be different) until it is far too late. Very few people are aware of the enormous size of the oil industry that has taken 60 years to construct. You just can’t replace that overnight when you suddenly can’t get enough oil to keep the refineries running. Even if we could, the cost to do so will be beyound comprehension. Where will the money (tens of trillions?) come from to build CTL plants. By the time banks realize the profit potential of such lending, it will be far too late. The economy will probably already be collapsing from the effects of oil shortage and price explosion. Most big banks are already on taxpayer funded life support.
Unfortunately, a similar problem will occur with gas to liquid plants like Shell has pioneered. I’ve got to give Shell credit for at least trying to do something outside the lab in the real world. If I had to bet, I would say the greatest hope to avoid cataclysm (A very slim hope now, in my opinion) is to convert transportation to compressed natural gas and GTL fuel. Don’t waste natural gas on power generation no matter what burning coal does to the climate. Gas is too scarce, and the easy oil is running out too fast to worry about the climate now. We are about to enter a survival mode, folks. Without sufficient transportation our civilization will collapse because it was all designed and built around cheap liquid fuel. We can’t switch to high density cities overnight.
Don’t forget the global warming zealots. They are probably about to get laws passed which will limit carbon dioxide release into the atmosphere. (Plants hate them). This will greatly increase the cost of energy and further weaken the economy. Any CTL or GTL plants will become even more expensive and take even longer to construct. Remember that it will take a tremendous amount of fuel just to build such giant plants. We’re talking about plants that will cover square kilometers, if not miles. By the time such projects are started, oil will be extremely expensive and probably rationed everywhere outside the few countries still exporting it. I think that by then, the political system of the United States will have changed into some sort of totalitarian regime, and environmental laws will no longer be an impediment to CTL & GTL plant construction. Ever see the air in China? If they are lucky,’environmental terrorists trouble makers’ trying to ’sabotage energy progress and cause public disorder’ will only find themselves mining the huge coal deposit on the northern coast of Alaska. You think they realize that? Ask yourself how many people predicted that something as horrible as the Holocaust could ever happen in a literate, developed country like Germany. But it did.
I forgot the technological fix people. They say that radical, new, undreamed of technology will come along to take care of the peak oil problem. Want to bet your life on it? Maby the UFO aliens will fix it.
By S R Bergquist on September 29th, 2009 at 10:00 am
Bill Simpson, you’ve taken on the world’s easiest job: critic. Instead of proposing solutions, you have simply mocked everyone; a bit of everything thrown into the soup, and not a single statistic or number to back up your comments.
Sadad al Husseini gives a refreshingly good report on the declining output situation. I am certain that the declines in total world output will be more prominent in the news, and counteract the recent “sunny” articles like the Scientific American article, showing a world map with vast area of sedimentary rock “unexplored”. And, as reality of $4-$6 per gallon of gasoline (without taxes) becomes an ongoing reality, more realistic vehicles will become prevalent in the USA and other auto-centric societies. See my blog: Http://www.maxattainablespeed.blogspot.com
If cars on the road could physically only attain 34 mph top speed, limited by a mechanical escapement (which could be retrofitted to ALL existing vehicles…no “magic bullet” needed) then vehicles would get lighter (NOT smaller) engines would get lighter, frames lighter, energy to build vehicles diminished, and MPG?? Certainly, easily 400 mpg. Aerodynamics: going faster requires considerably more power (to the third power). High speed requires more safety equipment (airbags) and heavier tires, more adept drivers.
When WWII began for the USA, we sacrificed ALL new vehicle production, then, RATIONED fuel. This crisis is ONLY about saving the entire world, yet no one seems to be willing to give up HIGH SPEED AUTO TRAVEL when it is the most simple, practical, OBVIOUS means to counteract the decline in worldwide petroleum production.
By Bill Simpson of Slidell LA. on September 29th, 2009 at 11:33 am
And peak oil isn’t the only problem. Read “The Coming Population Wars: a 12 bomb equation. Can Gates’s Billionaires Club stop these inevitable self-destruct triggers ?” It is on the MarketWatch website Sept. 29, 2009, 12:01 a.m. EDT by Paul B. Farrell. That was what the secret meeting a while back was all about.
By robert duerr on September 29th, 2009 at 6:21 pm
The whale hunt is over. As a young boy I happened to get an altar boy trip to Nantucket. I visited the whale museum twice. A vivid tale of when worlds collide. Whales and petrol. Petroleum will always be burned like whales will always be hunted. But the hunt for petroleum no longer thrusts industry’s progress. To produce a product that is increasingly difficult and expensive leaves little margin for growth in the economy. Oil must go. That 160 years is done. What will replace it? Telsa? Keeley? When the next world war begins and oil regions are incapacitated we will see the fruits of the maligned inventors.
By Chris Holtom on October 2nd, 2009 at 10:06 am
I agree that Bill Simpson’s observations are somewhat gloomy. Lets take his view as an extreme hypotheis. There is plenty of information in ASPO USA that offers statistics, projections and policies to mitigate the conditions that Bill describes. My own simple view is framed by the market and the human ability to adapt. I do not see peak oil as a single event, but as a series of shocks leading to a global realisation and comprehension of the consequences of peak oil over several years or even decades. Its the shocks that will stimulate the market to diversify followed lamely by political policies, none of which appear currently to have a clear vision of the rate of approach of the threat of peak oil nor the manifestation of its impact.
There are so many competing issues involved that rather than try to predict outcomes, perhaps our efforts should be on shaping certain conditions that appear beneficial in any circumstance.
The first is the gradual erosion of the nation state - its become a menace and a danger to itself and its neighbours. We should encourage movement towards global institutions and alliances like the EU. Much as I dislike the idea of bureaucrats tampering with my national laws and culture, I believe this process is a neccessity to reduce the risk of nationalistic responses during the shocks of peak oil realisation.
The second is a shorter term issue - fiscal encouragement of alternative energy research and consumption. There are such policies but they are too limited in effect and they are not changing habits at the rate that the impact of climate change or the approach of peak oil realisation appears to demand.
The third is probably the easiest and most immediate which is to generate a sustained and informed global debate to flush out the ‘truth’ about the issues that Bill Simpson refers to. He certainly caught my attention with the fuel cell issues of lithium and platinum supplies should fuel cells become a mass produced global reality. Statistics are necessary but so are well presented human impact arguments from both sides of the coin, presented by bodies that are perceived to take a truly independent view. It seems that ASPO USA is doing something of a job on those lines but I sense a slightly one-sided approach. That said, the interview with Sadad Al Husseini above was balanced and informative.
Thank you for the opportunity to enter this critical debate.
By Don Hirschberg on October 2nd, 2009 at 3:03 pm
Mr. Bergquist, let’s do a little arithmetic with the numbers in your comment. Let’s use the minimum mpg value you mentioned, 400 mpg, and the maximum speed you stipulated, 34 mph.
A representative gallon of gasoline has a HHV of 125,000 BTU. 125,000 BTU/H x 778 ft#/BTU / 3600 sec/H / 550 Ft# per HP = 49.1 HP hours per gallon at 100% brake thermal efficiency. At 34 mph and 400 mpg, fuel is used at 34/400 = 0.85 Gal/hour. If an engine of 50% thermal efficiency were developed (doubtful, far better than anything so far) then 0.85 x .50 x 49.1 = 2.09 HP, the required output of your engine to attain your maximum speed. (No hills allowed?)
As to aerodynamics, benefits at 34 mph and under would be minuscule.
Given a population of almost 7 billion and still growing I say there is no combination of “solutions” that can sustain our present civilization. It is amazing to me how many people are hard wired to think all problems have solutions. One of the beauties of Thermodynamics is that it tells us limits beyond which we cannot go. For example the “hydrogen fuel” people can’t seem to understand that hydrogen is not a source of energy on this planet and never will be.
By Bill Simpson of Slidell LA. on October 2nd, 2009 at 5:26 pm
Hi, S.R.B. Actually, I think that I wrote a while back that a crash program to convert transportation to compressed natural gas might still be able to avoid catastrophe, but that may have been on another website. I was lucky to have been educated by Catholic nuns and brothers, so I just feel that is my moral duty to warn people about something (peak oil) that I think is only a few years away(economic collapse caused by peak oil prices), and that will cause untold human suffering, if not addressed very soon. Since I saw that James Kunstler did a piece on peak oil on his very popular web site, and that he referenced this site, I just thought that I would outline the magnitude of the problems to any folks unfamiliar with the subject, who might drift over this way. We peak oilers are a tiny minority you know. Lay out Armageddon, and you might get something done. The right person might read it and begin to think. And for me, writing thousands of words isn’t easy, especially for free.
I worked in government for 25 years, and have learned that politicians don’t worry much about the distant (past the next election) future. Most think that capitalism, left alone, will take care of all problems. I myself believe that when critical resources, like oil, begin to run out, that will no longer be the case, especially with the current business emphasis on immediate profit. We need massive, immediate, government intervention in this coming liquid fuel shortage mess now. I don’t mean government ownership, just the right policies and laws. If Washington waits until oil production actually begins to decline, and people finally quit thinking that there is ‘plenty of oil’ left, I believe that many people on this planet will then find themselves in a life-threating situation. If anyone thinks that the current economic situation is a mess, try $12 a gallon rationed gasoline.
Dummy that I am, I actually thought that Obama would do like Carter, and address the Nation on the need for a crash program to switch to compressed natural gas powered vehicles. Gas to liquids might also help. Shell is already producing the diesel-like fuel from natural gas, which is now a lot easier to find than oil. Please remember that any technological fix, even IF found, will take many years to implement. I had also hoped for a crash program of wind and solar electric generation from Obama, so as to quit wasting finite fossil fuels on that.
As far as sacrifice, there is no hope of that until the need is demonstrably expressed to the American public. Until Pearl Harbor, the American people wanted nothing to do with WW II. Only a Presidential address to the Nation can educate the public about the danger of business as usual. It will be the only hope of raising enough public awareness of the problem to force Congress to act before it is too late. But I appreciate your criticism. And for those who can think of anything that can rapidly replace the 38% of the energy used by mankind that currently comes from cheap oil, at an affordable price, please tell me so that I can invest in it. After I get rich and buy a new telescope, I’ll give it all away.
And finally, I’ve read 5 books on peak oil, but since they got destroyed by Hurricane Katrina flooding caused by Corps of Engineers defective levee construction (They couldn’t get levees built in 40 years, and people think peak oil won’t be a problem!), along with just about everything else I owned, I couldn’t cite them in the footnotes so often found on these websites.
By Don Hirschberg on October 3rd, 2009 at 11:06 pm
There is a typo in my October 2 comment. The fuel rate should read .085 gal/hour, not 0.85. I used the correct number on the calculator so the final result is OK, that is, Bergquist’s car would only need to put out 2 horse power. My aplogies to anyone who wasted time due to my error.
By Matt Mushalik on October 13th, 2009 at 4:18 am
Sadad’s warning comes 2 years after his slide show at an Oil & Money conference in London in 2007
http://www.energyintel.com/om/program.asp?year=2007
in which he crossed out 300 Gb of proved reserves and reclassified them as resources.
I quoted his graph in my submission #103 to the Australian Senate Inquiry on Fuel and Energy on page 16
http://www.crudeoilpeak.com/?p=34
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