Replies to post #1911 on The Rising Influence of Rising Affluence

[DewDiligence]

Your point regarding the self-inflicted damages in the Third World is well taken; however, it’s unlikely that all of these countries will be political basket cases at the same time, and hence at least some of them can be expected to achieve a modicum of success at developing their hydrocarbon resources that have yet to be developed.

Happy New Year!
Dew

[DewDiligence]

Iraq Oil Production Reaches 2.7M boe/d

http://online.wsj.com/article/SB10001424052748704030704576069601478986800.html

›JANUARY 8, 2011
By HASSAN HAFIDH

Iraq has raised crude-oil output by some 300,000 barrels a day, to about 2.7 million barrels a day, since a handful of foreign oil firms began redeveloping some of the country's biggest fields, according to a senior Iraqi oil official.

The gains represent some of the first, early fruit from two rounds of oil-licensing deals between Baghdad and big, international oil firms. Abdul Mahdy al-Ameedi, head of Iraq's Petroleum Contracts and Licensing Directorate, said in an interview on Saturday that the gains were sustainable, and that Iraq now expected to hit three million barrels a day by the end of this year.

"We are hoping to reach a total of three million barrels a day by the end of 2011," Mr. Ameedi said. The upbeat assessment is the latest from Iraqi oil officials, who started to predict an uptick in oil output late last year, as international firms that won development deals in 2009 started drilling, mostly in Iraq's oil-rich south.

Iraq has set an ambitious target of increasing daily output to some 12 million barrels a day in less than a decade. Iraqi oil output has been stuck at 2.5 million barrels a day or less since it recovered after the U.S.-led invasion in 2003.

Many experts, including international oil executives and even some Iraqi oil officials, say the 12-million-barrel target is unlikely to be met. Already firms have complained about the difficulty in getting supplies into Iraq amid big bottlenecks. Tricky engineering problems, including how to finance and build a massive water-injection system needed to boost output in future development, are still unresolved.

But even a much more modest increase in output would be welcome news for Iraq and the world. Iraq relies on oil sales for roughly 95% of its revenue. At the same time, global oil prices are climbing again, hovering recently around $90 a barrel for U.S. benchmark crude.

Iraq's ability to quickly ramp up production could meet some of the rising demand from China and other developing economies, which has contributed to the recent price rise. That could cool prices.

Mr. Ameedi said production at the supergiant Rumaila oil field, Iraq's largest, in the southern Basra governorate, has reached 1.275 million barrels a day—a 20% increase. Production at Rumaila, which is being developed by a consortium led by BP PLC and China National Petroleum Corp., is expected to hit a total of 1.5 million barrels a day by the end of this year, he said.

Output at Zubair, developed by a partnership led by Italy's Eni SpA, has increased to 265,000 barrels a day, a 45% increase, Mr. Ameedi said.

A consortium led by Exxon Mobil Corp. has increased production by 11,000 barrels a day from Iraq's West Qurna Phase 1 oil field in southern Iraq, Mr. Ameedi said.

Baghdad's 20-year service contracts oblige investors in producing oil fields to boost output by 10% above an agreed baseline rate within three years in order to start getting paid costs back. Rumaila reached the 10% increase in early December. Zubair hit the required increase in November, Mr. Ameedi said.‹

[DewDiligence]

Brazil’s Oilfields Hold Double PBR’s Estimate, Say Researchers

http://www.bloomberg.com/news/2011-01-19/brazil-oil-fields-may-hold-more-than-twice-estimated-reserves.html

›By Peter Millard - Jan 19, 2011 11:43 AM ET

Brazilian oil deposits below a layer of salt in the Atlantic Ocean hold at least 123 billion barrels of reserves, more than double government estimates, according to a university study by a former Petroleo Brasileiro SA geologist.

The research, which set out to show government figures were too optimistic, found they underestimated the area’s potential, said Hernani Chaves, a professor at the Rio de Janeiro State University who worked at Petrobras for 35 years. The forecast, which the study puts at a 90 percent probability, compares with the Brazilian oil regulator’s 50 billion-barrel estimate.

“We started with a skeptical view and finished with bigger numbers,” Chaves said in an interview at the university in the city of Rio. “When we got the first results I said: ‘Something is wrong, it’s too big.’”

Petrobras, which currently has 16 billion barrels of proven reserves, is investing more than $200 billion in five years as it taps the so-called pre-salt fields lying two miles below the ocean surface and another two to four miles beneath the seabed. The deposits include the Americas’ two largest oil discoveries since Mexico’s Cantarell in 1976. Royal Dutch Shell Plc, Repsol YPF SA and Exxon Mobil Corp. also operate blocks in the area. BG Group Plc and Galp Energia SGPS SA hold minority stakes.

Oil Bill

Brazilian lawmakers passed a bill last year making Petrobras the operator of all new exploration licenses in the pre-salt and other areas deemed strategic. Rights to explore more than half of the region are yet to be auctioned. The oil producer controls or has stakes in 85 percent of all the existing licenses. The area likely holds 60 new fields with an average size of 2.2 billion barrels, according to the study.

Petrobras received the right to 5 billion barrels of pre- salt oil from the government as payment for stock in its $70 billion share sale last year, the world’s biggest ever.

Chaves and Cleveland Jones, a professor at the same university and co-author of the study, found there’s a 10 percent chance the region holds 206 billion barrels of oil and natural gas, which would surpass the estimate of 172 billion barrels for Venezuela at the end of 2009 in BP Plc.’s Statistical Review of World Energy. Venezuela currently has Latin America’s biggest proven reserves.

Libra

The researchers are less optimistic than the oil regulator on the size of the government’s Libra field, the country’s largest. They estimate Libra holds about 5 billion barrels, compared with as much as 15 billion estimated by the ANP, as the regulator is known.

The two geologists used software from Oslo-based GeoKnowledge, an oil consulting firm, and the Monte Carlo statistical model the U.S. Geologic Survey uses to calculate undiscovered oil and natural gas resources around the world. Monte Carlo predicts potential discoveries based on the history of exploration successes and failures in an area.

Petrobras estimates reserves of as much as 16.8 billion barrels at four pre-salt fields where it has drilled and tested wells including Lula, its biggest prospect, the company said in an e-mailed response to questions. The company didn’t provide an estimate for the entire area and declined to comment on the study.

Recovery Rate

The study assumes fields in the pre-salt region, an area bigger than Florida, will have a recovery rate of 25 percent to 30 percent, Chaves said. The rate measures the percentage of oil that can be extracted from a reservoir and that counts as reserves.

Brazilian President Dilma Rousseff said the pre-salt may hold 100 billion barrels in 2009, when she was cabinet chief for her predecessor, Luiz Inacio Lula da Silva.

Magda Chambriard, a director at ANP, said last year the pre-salt may hold more than the 50 billion-barrel estimate the agency uses in presentations.

The costs and technical challenges involved in pumping oil from ultra-deep fields will likely slow development of the reserves, Chaves said. It will cost trillions of dollars to develop the entire area, he said.

Petrobras expects to boost recoverable reserves to up to 35 billion barrels by 2014. The company’s proven reserves, or oil that can be extracted with existing infrastructure, rose 7.5 percent in 2010 to 16 billion barrels, the company said Friday.‹