THE END OF SUPERGIANTS: And What It Means

16 05 2019

GUEST POST: By Dr. Louis Arnoux

The meaning of this news snippet takes a bit of explaining.  What the specialised media did not emphasise is what follows:

When giant oil fields go into decline, they usually decline abruptly. Ghawar’s decline is ominous. It was discovered in 1948 and until recently represented about 50% of the oil crude production of the Kingdom of Saudi Arabia (KSA). Ghawar is representative of some 100 to 200 giant oil fields. Most of them are old.  The most recently discovered giants are of a diminutive size compared with those old giants.[2]

Giants represent about 1% of the total number of oil fields and yet produce over 60% of conventional oil crude.[3]Very few real giants have been discovered in recent years. The geology of the planet is now known well enough and prospects for new significant giant oil discoveries are known to be low.  In recent decades, discoveries of smaller oil fields have not been able to compensate for the eventual loss of the giants. Figure 1 illustrates the matter. It shows the net flux of addition to reserves per year (additional volumes less volumes used). Since 2010 the steep declining trend has worsened. The level of new discoveries per year is now only about 5% of yearly reserves depletion. That is, since the late 1970s the oil industry has been steadily depleting its stock-in-trade at a rather fast rate.

The fact that Ghawar is in terminal decline means that we must consider that most of the old giants are in a similar situation.  Some were already known to be in a terminal status, e.g. Cantarell in Mexico or the main North Sea fields.[4]  However, there is a paucity of recent public data on giants.  The matter of their depletion status is commercially sensitive.  Still, a number of public databases and studies from about 10 years ago provide a robust backdrop to the Ghawar news.[5]  This needs to be unpacked a bit more.  Older giants have been developed more slowly and as a result, tend to have lower depletion rates once they pass their peak of production.  More recent ones have been developed more aggressively with more recent technology and as a result, tend to have a much steeper depletion rate once past their production peak.  In short, we now must expect a “bunching”of abrupt declines of oil giants, old and more recent, between now and about 2030.

So, in fact, this little snippet of news about Ghawar tells us a lot.  It corroborates the assessment developed since 2010 with a number of colleagues, based on a thermodynamics analysis of the PPS and summarised in Figure 2.  In short, our world runs on net energy from oil.  Due to resource depletion, it takes more and more net energy from oil to get more oil. We estimate that in consequence, since the early 1980s, the absolute amount of net energy delivered by the oil industry to the non-oil part of the industrial world has been in steep decline.  The data summarised in Figure 3 corroborates Figure 2.

Almost no one noticed how dire the situation has become because most analysts reason in terms of barrels of crude or in financial terms. GDP growth data aggregates the growth of the oil industry world (oil industry plus everything and everyone that are necessary for the oil industry to operate) with that of the non-oil world.  This aggregation masks what is actually taking place. To keep operating the oil world progressively starves the non-oil world of the net energy that is vital for its continued existence.

It is in our view significant that it is precisely in the early 1980s that total global debt took off to high heaven (source Bank of America Meryl Lynch). This steep debt growth, evaluated in fiat currencies, masks the decline in net energy from oil; net energy that is at the source of all, actual tangible, real economic growth. Due to this decline, it is most unlikely that this global debt will ever be repaid.

The terminal decline of Ghawar also corroborates the more indirect analyses of the PPS summarised in Figure 3.  This means that the part-floating of Aramco that KSA wants to achieve in the near future is most likely so as to pre-empt having to go into a “fire sale” at a later stage when the decline of Ghawar and of the other Saudi large fields become rather obvious to even the most ignorant traders.

More importantly, the corroboration of our earlier analyses by the Ghawar news and the data summarised in Figure 3 tell us that we must expect abrupt turmoil from 2020 onwards not only re oil, but also concerning all other forms of energy supply, as well as socially and financially (consider the tail end of the orange curve onFigure 2). The present turmoil in Venezuela will probably appear as a forerunner of a nasty situation becoming global.

To emerge, develop and flourish, every civilisation requires a self-powered energy supply chain – i.e. it takes energy to get energy, so any civilisation lives on the energy surplus delivered to it by its self-powered energy supply chain(s). In the globalised industrial world’s case and until recently this was the oil industry (including the whole of the support systems required for the oil industry to operate).  Since oil overtook coal and biomass during the earlier part of the 20th century, the oil industry has been the sole self-powered supply chain of the industrial world. All other forms of energy depend on it, coal, natural gas, nuclear, all so-called “renewables”, and all the way to feed and food production. In our estimates, the oil industry entered terminal decline about 7 years ago and this decline will be over by about 2030 or before.  In our view, the decline of Ghawar corroborates that this end is most likely than not going to be abrupt.

The big problem is that presently we do not have a substitute energy supply chain that could be deployed in time. As summarised in Figure 4, what one calls “renewables” is not quite so and by a wide margin. Not only current “renewable” equipment requires net energy from oil for its manufacture, transport, maintenance, and eventual decommissioning but also its production results in substantial greenhouse gases emissions (GHGs).  Even more importantly, the current “renewable”technology mix cannot form the basis for a new, sustainable, self-powered energy supply chain able to substitute for the oil-based one within the time frame defined by the decline of net energy from oil and the imperatives to combat catastrophic global warming (at least 45% greenhouse gases emissions reduction by 2030).

We call the present situation the Energy Seneca (after the Roman philosopher who first identified patterns of progressive growth followed with a peak and then abrupt decline). Figure 5 explains why the industrial world is now in a very tight spot, just after it has passed through the Energy Seneca apex.  On the one hand, the oil industry world is trapped in the famous Red Queen effect (RQ).  It has to keep pumping at an ever-faster rate to keep delivering net energy while, per barrel extracted, this net energy is in steep decline.  Soon it will run out of breath…  On the other hand, alternatives face what I call the Inverse Red Queen effect (1/RQ).  If the alternatives grow too fast, their manufacture and deployment drain energy from the industrial world just when it desperately needs more. And if those alternatives do not grow fast enough, then the industrial world is bound to abruptly decline or even collapse.

The harsh reality that few have identified is that presently none of the solutions touted by “green”business interests, governmental bodies, and NGOs alike can extricate us in time from the combination of RQ and 1/RQ effects. Not only this combination precludes building a new self-powered energy supply chain in time but also it precludes augmenting the present oil industry with non-oil energy sources to extend its terminal operations.  In short, unbeknown to most, our world is in the process of losing access to all the energy forms it depends on.  This thermodynamic conundrum compounds global warming and all other ecological, social and financial global issues to form a lethal avalanche that has been in train since about 2008.  There is global cognitive failure on the part of world elites to recognise this situation and address it.

As shown in Figure 6, the abrupt end of the Oil Age converges with the surge in protests that have taken place in recent years and that keeps gathering momentum. While most do not understand the intricacies summarised here, thousands of scientists and millions of people now do realise that they no longer have a future.  There is a “demand-for-something-else” than what they presently have.  This now strident demand is for a way forward that breaks through prevailing cognitive failure and re-opens a future for the younger ones.

To conclude, in our view Ghawar’s decline heralds the abrupt end of the Oil Age, as we have known it so far, over the next ten years.  It does not mean that we are “running out of oil”; there is plenty left but most of it will stay underground.  If a resource cannot be used to generate economic activity it loses all value and ceases to be a resource.  Like it or not, we now have to face the harsh emerging reality on the downside of the Energy Seneca.


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13 responses

17 05 2019
rabiddoomsayer

More than a decade ago they were using multi lateral multi nipple drilling, just sucking the oily slime from on top of the injected salt water. Ghawar is a dome shaped structure that allows nearly complete recovery, further proof is is in satellite imagery showing production drills moving to the top of the dome.

Next bit of proof, try getting Ghawar’s production figures out of the general Saudi numbers. Despite well over sixty years of massive production we are supposed to believe Ghawar’s reserves are unchanged.

The proposed sale of Saudi Aramco is telling, as is the dollar mining out of the Saudi princes.

18 05 2019
george bellarious

So that IEA chart in Figure 3 shows them predicting peak right about now? That means net energy will be going down both due to increased energy input and decreased production. Greeaaat….

One thing about peak oil, and in particular, net energy analysis, is that it seems to explain a lot in the world around us – “pointless” western-led wars in the middle east, declining economic health, growing debt, stalled progress, lack of flying cars.

Though I’d supect most of us following this issue since the early 2000’s wouldn’t have thought we’d be here in 2019 with cheap air travel, and reasonable petrol prices.

Anybody aware of reasonable counter-arguments to that damning chart of declining net energy?

19 05 2019
RGR

The IEA called peak oil for 2006. Recycling that particular idea would not be out of bounds for a group run by an economist in the least. It has taken a decade for them just to try and gain back some credibility in that regard.
The counter-arguments to declining net energy is the obvious fact that net energy has been declining since shortly after oil and gas production began.
And all that declining net energy, across nearly a century or more now, hasn’t seemed to bother anyone. Not when US Presidents were declaring not just peak oils but complete running outs as far back as the 1980’s or when net energy was the mechanism to predict the complete cessation of oil drilling in the US before the turn of the century.

20 05 2019
mikestasse

Sure, declining net energy has been an issue since the very start, but it doesn’t become ‘a problem’ until the ERoEI reaches 20:1, it becomes serious at 10:1, and catastrophic at 5:1, or less……..

It’s called the energy cliff. Rather well explained here if you haven’t yet watched it… https://damnthematrix.wordpress.com/2019/05/13/enjoy-the-end-of-the-world/

16 06 2019
austrianpeter

This book, George, explains it all very well and confirms that there is no alternative (TINA).

My own book, ‘The Financial Jigsaw’ further explains the coming GFC2. A free pdf is avaliable on request to: peter@underco.co.uk

4 06 2019
Delfina

I read someone recently noting that we *do* have flying cars. They’re called helicopters.

19 05 2019
Di Tod

I would love to know that too, George. It’s inconceivable that we are the only people to see what the IEA report is saying. Perhaps this explains Trump’s military flexing towards Iran – another Iraqi oil-grab war in the making?
I lost faith in PO a couple of years ago and sold my sustainable farmlet of ten years. Reading this today, coupled with the election result, I think I’ll buy again in Tasmania – running shoes on. Many thanks for posting Mike, much appreciated.

20 05 2019
mikestasse

Wow Di, didn’t even know you’d sold…….. get in touch.

20 05 2019
gbell12

We’ve been on our farmlet 10 years as of this month! So you’re saying, don’t sell, even though I’m sick of it? 🙂

23 05 2019
Yif

I’m 57 years old. Didn’t I have a good run & isn’t it all over for me anyway ?
I don’t have the money or the enthusiasm to start farming …

24 05 2019
gbell12

Totally. But there are lots of examples of people your age finding ways to give back for another 30 years. That’s my challenge too.

28 05 2019
Lloyd Morcom

Hi Mike. I’m writing a post collapse novel set mainly in Australia and as part of my research I took an Excel spreadsheet from this site https://profile.id.com.au/australia/occupations and fooled around with it, trying out some assumptions as to the resilience of people in various occupational sectors to see what the population numbers would be like after a major crash.
I’m mainly working off info that Dmitri Orlov has put out there regarding post-collapse Russia and all my assumptions are easily visible in the spreadsheet so if anyone wants to download it and fiddle around with the figures and assumptions it’s easy to do. I’ve removed one category of 160K unclassified workers as it simplifies the chart.
My assumptions are for a severe crash and for the number of people possible for one worker to support doubling, though obviously not in high style!
I don’t know how to upload the document to this comment so could I email it to you?

Cheers Lloyd

8 06 2019
mikestasse

sure…. send it to mstasse at yahoo dot com

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