[LUAU] Open Source Pizza - October 18, 2005

[Jim Thompson]

Hawaii Linux Institute wrote:

> R. Scott Belford wrote:
>
>> I don't think that you are making sense. This is the title that Jim 
>> has chosen for his presentation. Are you saying that this is *not* 
>> his title, [let's not get too personal]?
>>
>> --scott
>
> I don't think Jim would mind a little tease. But thanks for your concern.

Jim doesn't mind, really (read on).

> Jim's talk about "oil",

well, not exclusively.

> however, brought me nostalgia. I spent most of my career with Exxon 
> (now ExxonMobil). One of the projects I was assigned to was developing 
> reservoir simulation software (as part of a huge team) for Ghawar (the 
> largest oil field in the universe, with a daily oil production rate of 
> over 5 million barrels a day, translating into over 300 million US 
> dollars a day at today's price), which was a joint project between 
> Exxon and Saudi Aramco, more than 25 years ago. To service this 
> project, we bought one of the first Cray-1 "super computers". This 
> very expensive hardware became an antique and was eventually donated 
> to the Smithsonian.
>
> Essentially all the major oil companies have since switched to Linux 
> to do geological reservoir modeling and production simulation. Exxon 
> was the last holdout, but when Exxon went, so went the entire oil 
> industry. Daily oil production from Ghawar has decreased to just over 
> 4 million barrels, with (alarmingly) increased water cut (percent of 
> reservoir water produced along with oil). But it is true that oil 
> companies all over the world are increasingly relying on Linux to find 
> new oil fields, and to try to squeeze every possible drop of oil from 
> a known field. Indeed, AFAIK, no industry is as dominated by Linux as 
> the oil industry.
>
> Just a little personal bit for Jim to juicy up his long-anticipated talk.

Fantastic... and here I was anticipating a bad time at the hands of a 
heckling Wade even before he sent this message.

I was going to say this tomorrow (in-person), but I'm not a petroleum 
geologist. I had some friends at Shell and ARCO who were doing well 
field simulations "back in the day" (call it late 80s/early 90s), and I 
fixed some code for ARCO that they couldn't make work (what happens when 
you apply a O(n) or O(n^2) algorithm (in FORTRAN) to a very large 
oilfield? Asymptotically bad run times.)

Also, I helped out on a number of projects during my time at Convex that 
had links into "the patch".

Finally, I grew up across the kitchen table from a man (who, along with 
his father) ran a successful "water well" drilling business. (Recently 
sold.) Drilling water wells isn't a whole lot like drilling oil wells, 
but I did get exposed to my share of "patch trash" when I got a bit 
older and worked in the "family business" for a time.

"Water cut" increases the cost for both lifting the combined water and 
oil out of the hole (remind me tomorrow to explain that it takes *power* 
to move water (and oil), but building head can be done with a windmill 
or hand pump.) Additional increased costs with increased "water cut" are 
also borne by oil producers in some locales. In the US, this water is 
something of an ecological hazard, and needs specialized treatment prior 
to disposal. In Saudi, if what I am told is correct, they simply pump it 
all into the sand.

Of course, the primary source of this "water cut" these days is... the 
need for increased production. Producers inject water into the 
oil-producing regions of the formation in order to maintain pressure on 
the oil, forcing (more of) it from the aquifer. This is not uncommon, 
but in the Saudi case many injector wells are thought to be horizontal 
rather than vertical. This creates an even faster pressure rise, and 
subsequent fall-off when ever increasing amounts of water become 
required to maintain (ever-increasing production) levels.

And, as Wayne notes, water cut has increased exponentially at Saudi 
Aramaco’s monster Ghawar field. As we'll see tomorrow evening, 
"exponentials are deadly".

For the last four decades, 90% of Saudi Arabia’s 8-9 million barrels of 
oil per day has come from just five giant fields. 85% of the remaining 
10% comes from just 3 other fields. By contrast, America produces 5.5 
million barrels per day from 800,000 wells. America oil production 
discovery peaked in the early 1930s, and US production peaked in 1970 or 
1971
(Had production not peaked, the OPEC 'cartel' blockage of exports to the 
US in 1974 would have had a lot less effect.)
.
World-wide discovery peaked around 1962 or 1964 (depending on which data 
you view.) Every year since the mid 1980s we've used more oil than we've 
discovered, and the new "big" discoveries are now few and far between. 
At this point, Saudi Arabia's giant fields are almost the only 
"non-peaked" giant fields left. When they peak (if they haven't 
already), world production will peak, and we will be faced with how to 
turn away from our dependence on oil, sooner or later.

The result, if all goes "well" will be a steadily increasing cost of 
petrochemical based product, and the energy used to produce and 
transport them. This should be fundamentally sobering for those of us in 
Hawaii, where most of our food (grown with heavy inputs from the 
petrochemical industry (pesticides, fertilizers and the energy used to 
pump water and transport the resulting product) arrives by ship, the 
largest part of our economy arrives by airline (tourists), and 90% of 
the energy we use is petroleum based. Gas prices > $3.00/gallon (I paid 
$2.99 today.) are only the thin edge of the wedge.

What do we do (as a state) when tourism slows?

If things don't go "well" as energy costs rapidly increase, we face any 
number of "interesting events", some of which are far worse than others. 
I won't be covering many (if any at all of these), but here is one 
example since Wayne brought up Ghawar::

Let's say hypothetically for a period of several months to maybe half 
year or so Aramaco engineers and geologists notice some disturbing 
overall trends in their well logs and internal production records--each 
month has been producing less than the one before it. Meanwhile in 
Ghawar, the water cut has risen dramatically, but the outside world 
doesn't notice the decline as some of the oil demand is supplied by 
previously pumped oil from Saudi's massive storage farms. Everything 
appears normal, though the price per bbl of oil is slowly increasing.

As we learned with Enron, Worldcom and others, the books can only be 
cooked for so long.

One possible scenario: rather than fess up to the world, the Saudi 
government launches a covert attack on itself, blowing up enough 
infrastructure to dramatically cut back its production (to a level it 
can continue to produce for the next several years) and blames "Islamic 
Terrorists".

Aside from the oil market going ape sh*t ("you think the hurricanes were 
bad for gas prices? Watch this!"), the world economy swirling into the 
crapper, and the (well-anticipated?) call for an increased "presence" of 
US troops in Saudi, the real issue will be redirected, robbing society 
(again) of any chance to appreciate the state of things as early as 
possible. The "House of Saud" may find it easier to blame "religious 
fanatics" than own up to the fact that they (soon) will never again 
produce to the level to which we've all become accustomed. Saudi leaders 
are quite accustomed to leading OPEC.

There are many other scenarios that could make life in the short-term 
much more "interesting" than it is now.

Anyway, note that I'm not coming to "sell" something. I think its an 
interesting topic, with ... interesting implications for Hawaii (and the 
rest of the world).

As I learned recently, "Feedback is a gift", and I'm all about very 
interactive talks, so feel free to interrupt and interject at-will 
tomorrow (or any other time I'm speaking).

jim