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GoM Reserve Revisions for 2019

GoM Reserve Revisions for 2019 thumbnail

Overview

For 2019 BOEM showed a large increase in remaining reserves of 1.3Gboe,  91% of it oil, from newly discovered oil with Appomattox/Vicksburg and Vito the largest contributors at over 400mmboe each, followed by Buckskin and Kaikias, which are fairly large multi-well tie-backs, and smaller, one or two well  tie-backs of Blue Wing Olive, Constellation, Claibourne, Red Zinger and Stonefly. These discoveries were made with exploration wells between 2006 and 2016 but were only counted as reserves once firm development plans were put in place. Even given this the year in which BOEM includes the reserves is rather opaque and idiosyncratic, for example some of theses fields started production before 2018, and some developments, notably Kings Quay, are more advanced than Vito but are not included.

Other additions came from revisions to Thunder Horse, Atlantis, Mars-Ursa and Jack/St. Malo, which had major brownfield developments. The fields were not all added as discoveries or adjustments for 2019, but were spread over 2016 to 2019. Some other discoveries under development, such as Anchor, Whale and Ballymore, or in pre-FID studies, such as North Platte and Fort Sumter, will likewise be added against their discovery years as their estimates are finalised. Several of these projects are among the first to use new 20ksi wellhead equipment and it will be interesting to see what teething troubles are experienced.

It is noticeable how the adjustment numbers seem to be much higher than new discoveries – only Vito in 2018 shows up as a large new discovery. This is an artifact of the BOEM method that all discoveries in a lease are recorded against the first field to be found in that lease. Both Appomattox and Vicksberg and some smaller fields were discovered in leases where that had been earlier production from fields discovered several years earlier.

Two of the smaller new fields are probably underperforming with respect to BOEM expectations: Red Zinger produced only 0.8mmbbls of 7.3 estimated by BOEM and appears to have shutdown permanently an Stonefly has produced 2.3mmbbls (of 6.6 estimated) but has rapid decline rates and appears to need frequent work-overs or new drilling to maintain production, which may ultimately limit the economic reserves. Reports last year indicated that Appomattox performance and expected recovery were poorer originally expected so BOEM estimates may be reduced in 2020 and later estimates.

Reserve Replacement Ratios

The reserve replacement ratio for oil has been quite healthy, at least for deep and ultra-deep leases, except for a couple of periods following the oil price collapses of the mid 80s and 2008. The 2015 collapse doesn’t seem to have had much impact. For gas the replacement ratios show all the characteristics of a fading basin.

Reserve History

Many of the larger deep fields had overestimated original reserve estimated that had to be downgraded after the initial well production curves were analysed (e.g. Shenzi, Thunder Horse, Atlantis). Many of these have recovered much of the downgrade, but often this has been because of new field discoveries in the named field’s lease or extensive brownfield work rather than improved recovery. Shenzi has never recovered fully. Holstein carried anomalously high reserve estimates when viewed against the production figures for many years until being downgraded in 2017 (see below for other fields that may need similar re-estimates).

Mars-Ursa basin contains the largest reserves by far and is continuing to grow. It actually contains several fields and three production platforms.

Gulfstar is the total of the Gunflint and Tubular Bells fields that produce through the Gulfstar FPS.

The reserves here are against the year that BOEM reported them (i.e. not backdated). Deep and ultra-deep cumulative production will soon exceed that from shallow water. Production is cumulative from 1975, there was additional shallow production before this, back to 1940 but BOEM does not show reserves for earlier years.

This shows that shallow gas production has really been the most important aspect of GoM resources, and is now effectively finished. The production development for most of this gas was fairly simple with shallow and small wellhead platforms and pipelines feeding several onshore gas plants. Compare that to a monster like the Appomattox floater with its high upfront CAPEX, ongoing OPEX and DRILLEX, low EROI and exposure to various risks like poor reservoir performance (so far not doing so well), variable oil price (catching up this year after a poor start in the projects life) and environment (extensive shutdowns last year but this year it dodged the worst impacts that shutdown some other Shell facilities for months but likely to be increasingly exposed as the Gulf waters warm).

It’s a microcosm of the changes in the industry over the past thirty years and may illustrate why the risks appear now to be too great even for the largest companies like ExxonMobil and Chevron which are choosing to buy back shares rather than invest in new E&P projects.

These charts show who discoveries have affected the backdated reserves. Because of the issues mentioned above some new fields get attributed against older discoveries so the whole curve is skewed slightly to the left.

Major discoveries to be added in future BOEM estimates are Anchor, discovered in 2014 with about 300 mmboe reserves from early reports, North Platte (2012 and 280), Mormont/Khaleesi (2017 and 250), Shenandoah (2013 and 210), Whale (2017 and 336) and Ballymore (2017 and 440); so 2017 should have a high column added at some time. Note that typically around 80% of oil field reserves will be oil with the remainder as associated gas. Exploration drilling is now mostly limited to near field (i.e. infrastructure led exploration, ILX), therefore new discoveries are likely to be booked against existing fields and leases from earlier years (e.g. Shell has significant tie-back opportunities around Appomattox with Dover and Fort Sumter and near Perdido with Blacktip).

Reserve Adjustments

Initial reserve estimates have improved over time so lower revisions and adjustments have been needed for the recent deep and, more so, ultra-deep discoveries that have been developed with the latest seismic, drilling and reservoir modelling technologies. Even the low adjustments shown here are overestimates, as some should be shown as new discoveries in existing leases.

Early shallow and deep discovery reserve estimates were based on the best data available to geologists but often that data came principally from the wellbores that were being drilled in oil and gas E&P activities. Many more wells were drilled in shallow water, which is on the shelf and hence some of the geology extended onshore. The worst estimates therefore tended to be for the deep fields in the 70s and 80s when and where data tended to be sparsest during initial development activities.

Reserve to Production Ratios

The fields shown with solid bars have numbers calculated based on 2019 C&C reserves and total annual production for that year. Those with open bars are calculated from their design capacity and assuming 95% availability as they did not have a full production history for 2019 or 2020.

Several of the fields shown look as if they need a bit of revision to the numbers, some appear to low and some (all of them smaller fields already) too high.

These five fields all have recent production histories that would suggest much higher R/P numbers for the future, i.e. higher reserves, than shown above. If the BOEM reserves were true there would be decline rates above 30% evident. They all have had major recent brownfield projects so it may be BOEM has not yet caught up. Mad Dog in particular has a new platform (Argos – Odysseus’ faithful dog, a bit trite maybe) under construction that will open considerable new reserves, admittedly also adding production capacity as well but overall the R/P number should be around 12 to 15 based on the design producti

on rate.

Gunflint is virtually finished and I have not seen anything to say new drilling is planned. Troika is an intermittent producer at best and Neptune is just a minor producer. I have also shown small producers of Stonefly and Red Zinger mentioned above. All these are likely to have their reserve estimates downgraded in future estimates.

The next post will cover the overall GoM production figures.

Off Topic Finish: River Deltas

River deltas cover only 0.5% of the earth’s land area but include some of the most productive agricultural land and the most densely populated urban areas. Some are also highly bio-diverse with unique mangrove and wetland areas. They are home to almost 5% of the world’s population, mostly in developing countries, and about one tenth of these people are already exposed to severe flooding from tropical storms.

Without human intervention the deltas exist in dynamic equilibrium with silt continually being carried down from erosion in the river basin and deposited as the river stream slows at its mouth while previous deposits are prone to continual subsidence and vulnerable to erosion, either over the long term from normal wave and tidal action or from occasional storms, which can destroy beaches or change channel flows in a single day. Over only a few human generations deltas can move many miles as channel are silted up and new ones open. These dynamics are not compatible with high-density population and intense agriculture so they have to be prevented by building dams, drainage ditches, levees, seawalls etc. This infrastructure needs continual maintenance and upgrade as conditions change, and in many deltas is already ‘mature’ (e.g. most of the 94,000 dams in China were built in the 70s) and therefore not designed for the changes now being experienced, and may be prone to sudden failure (such as happened to the levees on the Mississippi during, or rather immediately after the passing of, Katrina).

By there nature deltas are low-lying and hence prone to flooding: pluvial (e.g. from direct monsoons), fluvial (from river flooding), tidal and cyclonic (i.e. storm surge combined with any or all of the other three causes). Individual delta areas may be at existential risk from a direct super-cyclone impact (or even tsunamis in some cases, though I have seen no analysis of this) especially if the areas become more reliant on artificial defences such as sea walls and pumping. However I think that as economic and environmental conditions deteriorate the opportunities to complete these type of engineering mega-projects will disappear, partly because society will not have the excess energy required to provide necessary funding and resources, but maybe principally because social conditions will not allow decades long projects to be completed and maintained – they become one step too far in complexity that the society can support (due to increasing corruption, lack of trained and experienced personnel, breakdown of global supply chains, continually changing project design assumptions, inter-group trust breakdown as precarity rises,  short-term, unstable and weak governing regimes etc.). New country wide electric grids with storage systems, large nuclear reactors, ultra-deep oil platforms, extensive carbon capture and storage infrastructure roll-out and green hydrogen systems all fall in the same category.

Given that the tripping point for Greenland ice cap melting has now probably been passed and that for the West Antarctic ice cap soon will be then a sea level rise of at least 10m (6-7 from Greenland, 3-4 from the West Antarctic) is virtually inevitable over some time frame beyond a hundred years. This would render most of the existing delta area uninhabitable and unproductive for agriculture or industry. The populations would have to move, and as the cities are so large it is difficult to see where they could be accommodated other than in massive refugee camps on the edge of the encroaching oceans. Farming would have to move from the rich deltic earth, and although the rich sediment will start to be deposited further inland, the move will mostly have to be to the already degraded river basins and harvests would decline from up to three a year to one (or none maybe). Rice could probably no longer be so dominant a crop in Asia (and at the moment it provides 20% of calories to half the world), even as heat, drought and parasite reduce yields on other staples. In the shorter term (e.g. by 2100) many deltas may see extensive out migration (which tends to favour the younger population, so leading to aging of the remaining population), reduced crop yields and urban and industrial areas that increasing look like island archipelagos.

There are known mechanisms that would allow rapid retreat of the Antarctic glaciers into the interior, which would allow a three-meter rise (ten feet, which somehow sounds worse) over only a few years. What is not known, and so far has defeated efforts at modelling, is when such an event might be triggered. A couple of mechanisms are known (ice wall collapse and ice shelf melt) but it is suspected that there are others, and accurately predicting the events is looking unlikely because of lack of data (e.g. the condition of the rock to ice interface is virtually unknown) and because the mechanisms involve fracture mechanics that are highly stochastic beyond current modelling capabilities. This talk has more details but it is a seminar so there is no attempt at concession to the layman and the speaker can be quite frustrating, as he doesn’t always finish one sentence before breathlessly starting the next. There is a non-zero but currently unquantifiable risk, which increases with sea temperatures level, that this melt will happen this century; it would be a catastrophe like nothing ever seen, not least for its effect on the world’s deltas

It may be possible for the world to absorb all the climate refugees from one megacity as it becomes submerged over several decades, but all these mega-deltas will be disappearing together, displacing the populations and removing the agricultural output as they go, with occasional major and rapid shocks thrown in to add further to global volatility.

There is a positive feedback associated with the deltas in that as the productive agricultural lands are flooded then important carbon sinks are removed (loss or gain of coastal vegetation as seas rise or fall is an identified feedback mechanism driving previous glaciation cycles). On the other hand as most deltas have extensive wetlands and many of them are rice-producing areas, they might be important sources of methane and the effect could be a negative feedback (who knows).

In addition to external sea level rise the deltas have local issues affecting their stability due to human activity. Silt transport and deposition is reduced by upstream dams and by increased extraction of water in the river basin or the delta itself. The river flow streams need to be maintained above a minimum level in each channel to ensure that salt water cannot inundate upstream. Increased water use upstream and increased variability of rainfall causing more prolonged droughts may make this more difficult. Salinization can extend further inland than high water marks because of intrusion through porous sub-strata. In some deltas the pliable and relatively thin silt deposits overly groundwater aquifers (or in a couple of case oil and gas deposits), which have been pumped out for human use, causing subsidence, usually as a bowl in the land that encourages further flooding.

The agricultural land can support multiple harvests but only one is supportable by monsoon rains, the others need irrigation by extraction directly from the river of from groundwater, where available. The silt that the river brings provides nutrients for rice and fish farms, which partly explains why three harvests are possible in many delta regions. However the practices used for intensive rice and fish farming themselves increase subsidence rates (as does the increased extraction of sand from deltas being seen).

In the recent past deltas benefited as poor farming practices lead to increased erosion and some deltas grew rapidly. Climate change is expected to increase the amount of silt to be transported on average (this is not necessarily a good thing overall as it implies increased soil erosion is occurring in the river basins), but it is likely to become more variable.

The large Asian rivers that are partly fed from Himalayan glaciers may initially experience increased flow as melting rates rise, and hence increased silt transport, but will then start to dry up as the glaciers disappear. The increased variability in monsoons with more floods and droughts will also effect how silt is transported and deposited, as will population density changes and infrastructure construction (e.g. sea walls, jetties, dams, bridges), all in difficult to predict ways.

It would be interesting to see a summary of how many landfills, sewerage plants, refineries, chemical stores and other potentially polluting sites there are in the deltas and at what elevations. I don’t think there are any nuclear reactors although there re a couple just outside (e.g. the recently leaking one near Hong Kong and the one under construction in Bangladesh).

Here are most of the largest deltas, in no particular order.

Nile

The Nile delta contains over 40% of the population and 61% of Egypt’s agricultural land. 18% of the total area is below sea level, protected by coastal walls and sand dunes, with a further 12.7% below 1 meter and 13.1% between 1 and 2 meters, and a maximum elevation of 18 m in Cairo, at the delta’s apex. The biggest immediate threats are not from sea level rise but from loss of sediment (as dams are built or upstream water extraction increases, subsidence and erosion of coastal dunes.

Pearl River (Guangdong and Hong Kong)

The Pearl River is the third largest in China. The population in the delta is 22 million and urbanization has been displacing some fertile agricultural land while newly reclaimed land is less fertile. The whole delta lies below 10 m.

Red River (northern Vietnam, including Hanoi)

The Red River, like the Yellow, is named for the colour of silt it carries. It contains 30% of the population, is the industrial heartland and an important agricultural area. Almost all of it is below 3m and most below 1.5m.

Yellow River

The Yellow River has the highest silt density anywhere and is consequently growing into the ocean at over two kilometers per year. It has a population of over five million and is undergoing significant urbanization and industrialization (some built around the second largest oil field in China). The river used to change course frequently but is now constrained by dykes, levees and seawalls for flood defence. Upstream water extraction is such that the river occasionally dries up before reaching the sea and erosion and salinization have been increasing steadily, and the pattern of sedimentation in low flow periods and the constant upgrading of the levees means that the riverbed can be higher than the surrounding plain, which is therefore highly exposed to flooding. A one-meter sea level rise and two to three meter storm surge would mean inundation of 40% of the delta.

Yangtse River (Shanghai etc.)

The Yangtze delta is the most significant delta economically; it contains many large cities that are almost beginning to encroach and overlap each other. The population is over 120m, and still rapidly growing, it creates 20% of China’s GDP and is a rich agricultural area for rice, wheat, soybean etc. The Three Rivers Dam sits on the Yangtze upstream but there are 50000 other dams affecting the river flow. Over the past fifty years sediment transport has reduced by 80% due to the dams and soil conservation strategies and coastal erosion has accelerated markedly. Shanghai alone has 23m people and its average elevation is four meters; it is protected by an extensive system of rigid sea walls. Sea walls tend to simply deflect wave energy so often just move areas of erosion rather than preventing it. There is evidence of increasing salinization and land subsidence due to pumping of groundwater, which will eventually threaten the delta’s status as China’s breadbasket if they continue. The delta is in he bulls eye for typhoons and, increasingly, super-typhoons that come across the Philippine Sea and East China Sea (where sea surface temperatures are warming twice as fast as average).

Mekong (southern Vietnam)

The Mekong delta population is 18m, but its mean elevation at only 0.8m means that 12m may either need to move or have artificial protection provided over the next five decades.

The delta is shrinking and sinking because it is being starved of sediment by extensive and continuing hydroelectric dam development upstream (over 70 dams and counting in Cambodia, Laos and China). A continuing drought has meant that recent levels of the river have been the lowest in a century.

There has been a net out migration of over one million from the delta this century with at least half attributed to climate change, in particular a severe drought in 2015/16 allowed salt water intrusion up to 80 km inland, proportionally this has particularly impacted sugar cane production. Of the farmers remaining there has had to be a significant switch from rice to shrimp farming.

Irrawaddy (Myanmar)

The population is 3.5m and much of the terrain is below three meters. In 2008 it received a direct hit from a cyclone leaving 2.5m homeless and over 100,000 dead or missing. Population and human activity is rising fast but while upstream dams have reduced coarse sediment increased deforestation and mining has allowed for increased soil erosion and fine sediment load, carried mostly in the monsoon season. It seems unlikely that the current regime in Myanmar will have environmental protection as a major consideration compared to economic growth.

Ganges-Bramaputra (Bangladesh and eastern India)

Sometimes called the Bengal Delta this is the most densely populated region in the world with 130m inhabitants. It is the largest delta and over 10% of the land is below one-meter elevation. It has seen the deadliest storm induced flooding events and is considered the delta most at risk from sea level rise (locally 3mm/year recently), which is exacerbated by subsidence, due to compaction and isostatic effects, that on average is equal in rate of sea level rise but in places can be over twice that and up to 18mm/year has been observed around the main city of Dhaka. The infrastructure is in a poor state, salinization is increasing and agricultural yields are falling. Climate change is causing increased variability in the monsoons and may expose the region to more intense heat waves. India has built a strongly guarded wall to prevent migration from Bangladesh.

Indus (Pakistan and western India)

The Indus is possibly the delta that is most advanced in degradation from human activity. Originally it was rich swampland and mangrove but upstream dam development and over extraction of water has starved it of sediment and allowed salinization so that now nearly 60% is barren and 30% submerged for prolonged periods. Over the last two centuries it is estimated to have lost 92% (sic!) of its area. 1.2m people (over half) have moved, mainly to Karachi, and many remaining would leave if they could.

Mississippi

The delta is subsiding because of oil and gas production from underlying reservoirs and compaction of sediment that is no longer being compensated by silt deposition. Nitrogen and phosphate eutrophication are major issues in developing dead zones in the Gulf of Mexico, though I have found nothing that links this to geography changes in the delta but loss of vegetation would seem likely to be destablising. Coastal erosion mainly occurs during storms and therefore may be growing, as tropical storms seem to be getting more frequent and larger in the Gulf, related to the rising sea temperatures.

Rhine–Meuse–Scheldt (Rotterdam, Hook-of-Holland, Utrecht, Gouda, Delft)

This is an important trading, industrial, agricultural and residential area. It is not at high risk from upstream effects on water and sediment flows (though future drought and flood patterns may change). High tides and storm surges are the main risk and the area is protected by the Dutch dyke system and moveable barriers ate the main river outlet. The Dutch government calls its country is the “safest delta in the world”. The Royal Dutch Meteorological Institute recently raised its estimation for sea level rise to 2100 to two-meters, which will presumably be the design point for upgrading these defences over time.

Ciliwung (and twelve other connecting rivers: Jakarta, Indonesia)

Jakarta with population approaching 11m is the fastest sinking city in the world, mostly due to groundwater extraction from under the delta through thousands of individual wells. The average elevation is eight meters but falling at a rate that would put 95% of the city underwater by 2050. The government has cited a plan to move the capital (i.e. the administration institutions and associated service companies) to a new build city cut out of the jungle on Borneo, but have also promised $40billion to protect Jakarta – mainly to halt subsidence, so leaving the city still exposed to sea level rise.

Chao Phraya (Bangkok)

Bangkok has an average elevation of 1.5m and a population of 10m. It sits on reclaimed swampland, is subsiding because of groundwater extraction and prone to flooding that can last two months or more.

South East Asia Impacts

The two maps below are from Climate Central and  show the effects of 2 and 7.5 meter sea level rises on South East Asia, which has five mega deltas with the red colouring showing the affected areas. Most damage, relatively, is done by the initial 2 meter rise, which some recent research suggests is now the minimum commitment within this century, with much of the deltas’ areas and most of the populations at risk of inundation. The main effect of the additional rise to 7.5 meters would be to push the refugee camps further back. The maps are based on current land topography; subsidence and erosion will make things worse, any increased sedimentation would improve things and sea defences may temporarily ameliorate the impacts. Salinization would move upstream beyond the flooded areas.

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