Assorted links to updates on some of the stories we’ve been following at Econbrowser, including declining Saudi Arabian oil production, the role of mortgage-backed securities, and pressures on public pension funds to take on additional risks.
Jeremy Gilbert, retired Chief Petroleum Engineer of BP, weighed in last week on recent speculation at the Oil Drum about whether the decline in Saudi oil production signals that production from Ghawar, by far the world’s biggest and most important oil field, has peaked:
It is, of course, almost tragic that the Saudis won’t release more detailed performance data– and their own analyses– which would show the situation clearly and avoid the need for the painstaking work reported in Oil Drum….
It seems likely to me that the conclusions the authors have reached about Ghawar’s current status are broadly correct. However, it’s a big step to take from concluding Ghawar is currently at or close to maximum achievable production rate to saying that that rate cannot be maintained, or even increased, through the addition of additional production wells, through increased or more efficient water injection schemes or through surface facility modifications.
Heading Out, TOD’s resident petroleum specialist, also put in his two cents:
So far it seems that at both Ain Dar and Abqaiq Aramco have been able to keep this flood under good control for some years as the water has migrated through the field, and the oil has been recovered…. I still suspect that they will be producing from this part of Ghawar for around a decade yet.
Tanta at Calculated Risk is providing a tremendous service by producing a primer on how the alphabet soup of mortgage-backed securities operates. Parts one and two are up; can’t wait for part three. Businomics has a prequel.
Trustees of the $109 billion Teacher Retirement System of Texas have signed off on a seismic shift in investment strategy that will move tens of billions of dollars into hedge funds, real estate and other alternatives to stocks and bonds….
The teacher fund now has about $4.7 billion in alternative investments, less than 5 percent of the total. Under the plan that trustees approved Thursday, that would increase to 35 percent, or $38 billion based on the current value of the fund, over the next few years….
The fund did not begin investing in alternative assets until 2001. Over the past three years the investments have returned 20.4 percent a year, far outpacing U.S. stocks. But [new chief executive officer Britt] Harris said the fund has not invested enough money in them to significantly boost overall returns. “We’ve left a lot on the table” in terms of returns, he told trustees. “We want to be in the elite category.” The teacher fund’s returns have lagged behind those of other big public pensions with assets of more than $10 billion. Over the past three years, the fund has returned 11 percent annually, below the 11.6 percent median return of big funds.
Sorry folks, but you can’t judge an investment portfolio from 3 years of returns. You just can’t.