ASPO
STATISTICAL
REVIEW
OF
First Tentative
Edition, June 6, 2002
INTRODUCTION
The purpose of this paper is to correct the misleading impressions conveyed by a widely used source with a similar title that is put out by a major oil company.
The
information given by the latter work is not itself in dispute, but the selective
use of such information and the manner of its presentation have misled many
analysts.
The
depletion of oil is a vital issue given that it provides some 40 percent of
traded energy and 90 percent of transport fuel.
There
is accordingly an urgent need to correct the misleading impression that is
provided by vested interests, which are reluctant to admit to depletion.
·
No, the
resource is so large as to be infinite for practical purposes
Running
out is not the important issue.
A
better question is
·
When will
production reach a peak?
When
consumption rate exceeded discovery rate in 1981, we started eating our
inheritance from past discovery. No inheritance lasts for ever. The evidence
suggests that the peak of all liquid hydrocarbons comes around 2010.
After
peak comes decline. The World’s economic prosperity over the past Century has
been built on cheap and abundant oil-based energy, which has been important too
for agriculture, providing food for a growing population. After peak, the World
will have to use less, or find substitutes. They comprise gas, non-conventional
oil and gas, nuclear power, hydro-electricity, wind, tide, solar, geothermal,
and biomass. Hydrogen may be widely used as an energy carrier, but has to be
made from other sources of energy. Since none is as convenient and cheap as oil
has been, the World’s economy will have to make major adjustments. The
transition will likely be a time of great international tension as countries vie
with each other for access to oil. The world’s financial system will be
strained by the high price of its premier fuel, leading to consequential
economic recessions and excessive financial transfers especially to the Middle
East.
CONFUSING
DEFINITIONS
The use of ambiguous definitions is one of the primary causes of confusion and misunderstanding.
Production from all sources is normally reported whereas reserves are treated on a more restrictive basis. It is therefore difficult to determine the discovery trend, which is made up of reserves and the amounts produced to date. Discovery ultimately controls the rate of production.
It
is common practice to term those categories of oil and gas that have contributed
most to-date and will continue to dominate all supply for many years to come as Conventional,
but there is no agreement on where to draw the boundary.
As
herein defined, Conventional oil and
gas exclude the following categories
·
Oil from
coal and “shale”
·
Bitumen
·
Extra-Heavy
Oil
·
Heavy Oil
(<17.5o API)
·
Deepwater
oil and gas (>500 m water depth)
·
Polar oil
and gas
·
Liquids
extracted from gasfields
·
Coalbed
methane
·
Other
gases (from fractured source-rocks, hydrates, brines etc)
Production
from Non-Conventional sources will
become more important after the peak of Conventional,
but it is necessary to distinguish them because they are subject to different
extraction rates, costs, including environmental costs, operating conditions,
economics and geology. They are also generally less well known.
Although there are no particular challenges in estimating the size of an oilfield in technical terms, the reporting of reserves is subject to much uncertainty and manipulation. The industry typically under-reports the size of discovery, especially of large fields. Countries variously under-report, over-report or fail to update their estimates.
Simply stated in plain language, Reserves are estimates of future production from known fields. For financial purposes, such estimates are based on current wells and termed Proved – that is to say Proved So Far, which may or may not say much about the eventual size of the field.
All estimates are subject to uncertainty, or in other words probability, and reserves are sometimes quoted in terms of subjective probability, but whatever the scientific merits of such a system, it has led to great confusion, being in some cases exploited by vested interests.
The estimates quoted herein are best estimates, such that revisions are expected to be statistically neutral, namely Proved & Probable or having a Mean Probability.
It is furthermore convenient to apply a time limit to future production so as to avoid having to worry about low rates of tail-end production that may continue for a long time having a negligible impact on peak. Here, the estimates refer to what is likely to be produced before 2075.
Estimates
of future production from new yet-to-be discovered fields may also be made,
primarily by extrapolating the past discovery trends.
Reserve to Production Ratios, quoted in years, are widely reported and have misled many analysts and governments. It is utterly implausible that production could be held constant for a given number of years and then stop overnight, when all oilfields are observed to decline towards exhaustion. Depletion Rate, namely annual production as a percentage of the total future production is the right measure to use
It is equally misleading to plot reserves incorporating reserves attributed to the date when they are announced. The discovery of an oil field is attributable to the date of original wildcat (exploration borehole) that found it, even if its size was not then known precisely. Reserve revisions are widely attributed to technological progress, when they are mainly artifacts of reporting practices. Technology has indeed made great advances, but the principal impact has been to hold production higher for longer, which makes good economic sense, but does not significantly increase the size of the reserves, save in certain special cases. In fact, it accelerates depletion.
This
version is a first attempt to start putting the picture together. The Tables
refer to the main parameters. The present selection of graphs refers to The
Assessment and Importance of Oil Depletion as presented at the First
International Workshop on Oil Depletion in Uppsala 2002. Additional material
will be added in later editions.
It
is recognised that all the estimates are subject to error, given the unreliable
input data. The urgent challenge is to determine by how much, and to make
progressive corrections as new information and insight comes in.
ASPO Statistical Review of Oil and Gas, Proceedings of the 1:st International Workshop on Oil Depletion, Uppsala, Sweden, 23-25 May, 2002. Edited by K. Aleklett and C. Campbell, www.isv.uu.se/iwood2002.