This is a guest contribution by Dr Walter Youngquist, best known for GeoDestinies, his classic text on global resources and their depletion that was first published in 1997. I had the good fortune to meet Dr Youngquist at the ASPO conference in Houston two years ago and since then we have shared regular correspondence. Dr Youngquist (now aged 88) is updating GeoDestinies and last week he sent me this piece, seeking opinion. I always find his prose to be eloquent, simple, often understated and as a result very powerful.

I asked if we could publish this short piece on The Oil Drum and he kindly agreed. Many readers of The Oil Drum might feel that they already know much of what is written here, but you need to stop and ask how it is that we know what we know? When the new edition of GeoDestinies is published I'd warmly recommend this to Oil Drum readers as a well referenced, well written source spanning energy, soils, water, metals and population.

The Tragedy of 21 Darts [PDF]

This is a long article on the subject of oil & gas reserves and due diligence.

My purpose is to alert you to revision of SEC Regulation S-K and Regulation S-X effective January 1, 2010. Concealed in a handful of benign new regs is a financial truck bomb that's going to blow away "proved reserves" as a meaningful metric of oil company assets.

Old definition: Proved Reserves are those quantities which can be estimated with reasonable certainty to be commercially recoverable from known reservoirs under defined economic conditions. Proved quantities are limited by the lowest known hydrocarbon as seen in a well penetration unless otherwise indicated by definitive geoscience, engineering, or performance data. Seismic data alone is not sufficient to define fluid contacts. Undeveloped locations may be classified as Proved in undrilled areas of a reservoir that can be judged with reasonable certainty to be commercially productive.

New definition: Industry is no longer constrained by the criterion of certainty. An operator can book incremental proved reserves from planned enhanced recovery projects (gas injection, acid fracturing) based on a pilot project. Coal seam gas, bitumen, oil shale and other unconventional resources can be booked as Proved Reserves. Estimated reservoir properties in the aggregate is a departure from the old rules. The new SEC definition does not require that an analogous reservoir has to be in the immediate area or in pressure communication. Seismic analysis and reservoir models are sufficient to book Proved Reserves.

Hold on to your shorts, it gets worse.

Last Sunday George Will wrote about the abundance of fossil fuels in his column for the Washington Post. He began by surmising that Titusville, PA might have a claim to being most responsible for the modern world through the contribution of oil to world wealth. He then went on to list some of the many folk that have predicted (falsely) the arrival of a peak in oil production and the amount of reserves that are available.

In 1977 . . . Jimmy Carter predicted that mankind "could use up all the proven reserves of oil in the entire world by the end of the next decade." Since then the world has consumed three times more oil than was then in the world's proven reserves.

He does not see that America, or the world for that matter, can wean themselves from a dependence on hydrocarbons, and quotes Keith Rattie, the chief executive of Questar, from a commencement speech as well as Edward Morse, from a story in Foreign Affairs in which Morse states that there is plenty of natural gas available – perhaps a hundred years at the present rate of consumption, and that the deep water fields just beginning to be exploited are significantly larger than thought. And he includes Daniel Yergin as stating that" the resource base of the planet is sufficient to keep up with demand for decades to come.”

Europe’s Busiest Port Expands for Oil Speculators, Idling Ships

(Bloomberg) -- The Port of Rotterdam, Europe’s busiest, expanded its anchorage area to accommodate increasing demand from oil traders storing fuel at sea and more idling ships awaiting cargoes.

Rijkswaterstaat, the Dutch waterways authority, designated an area 15 kilometers (9 miles) northwest off the North Sea resort of Scheveningen as a new anchoring zone, the port authority said in a statement on its Web site today.

“Many tankers are lying at anchor here to wait for orders or for speculative considerations,” the port said in the statement. “The popularity of North Sea anchoring spots has increased considerably.”

This is a guest post by Jean Laherrère on gold. Although of little relevance to our economies in the present day, this precious metal has been used as money for many thousands of years, and still retains its importance and value. In a two part article, Jean analyses how gold mining is subject to depletion.

In this first installment, an assessment of reserves and a production model is presented for each of major gold-producing countries in the world.

Note: This post contains close to 50 images amounting to 2 Mbytes of data.

The Case Against An Energy Comeback: Demand needs more than recovery to surge

The accelerating rise in commodities prices may leave energy behind. Even if the economy recovers next year as expected, energy consumption in the industrialized world fell so far, so fast, that it will struggle just to meet 2007 levels.

Barclays Capital estimates that oil demand in the Organization of Economic Cooperation and Development nations will actually be down 8,000 barrels a day in 2010 compared with 2007, while U.S. demand will be down by 754,000 barrels a day. The sudden price rise last year to $140 a barrel followed by economic collapse had a dramatic effect on energy consumption, from automotive fuel to electricity.

"That is a lot of demand that has been lost, that definitely will not come back in 2010," said Barclays analyst Constanza Jacazio. "Even assuming a global economic growth forecast of 4.2%."

The Press and Journal (regional newspaper covering north Scotland and Aberdeen) had a headline story on carbon capture and storage (CCS) last week that inspired me to send a letter to the editor that was published today.

Striving to enhance oil recovery factors and prolong the life of the North Sea has significant merit. Using electricity to simply bury CO2 does not.

Full letter plus some additional information below the fold:

Home Green Home: Reality Check

It’s easy to get caught up in the excitement surrounding renewable energy technology. After all, what homeowner wouldn’t want to reduce — or even eliminate — his or her electric bill with a backyard wind turbine, or a rooftop solar array?

As readers might imagine, however, becoming a small-scale power producer is easier said than done — even in this age of incentives and subsidies.

My saga began with a call to GreenLogic, a residential renewable energy consulting firm and contractor in Long Island where I live.

I’d heard that, with the help of tax credits and refunds from the government and my utility, Long Island Power Authority, a cool set of solar panels could pay for themselves in short order. So I told Wendy Smith, my GreenLogic consultant, that this was my first hope.

She immediately began bursting my green bubble.

World oil production peaked in July 2008 at 74.74 million barrels/day (mbd) and now has fallen to about 72 mbd. It is expected that oil production will decline at about 2.2 mbd per year as shown below in the chart. The forecasts from the IEA WEO 2008 and 2009 are shown for comparison. The IEA 2009 forecast has dropped significantly lower than the 2008 forecast. The IEA 2009 forecast also shows a slight decline from 2009 to 2012 implying that the IEA possibly agrees that world oil peaked in July 2008.

The US Energy Information Administration (EIA) and the International Energy Agency (IEA) should make official statements about declining world oil production now to urgently increase the focus on oil conservation and alternative renewable energy sources.