Hi Luis,

I am traveling, and only time for a quick reply. Based on your comments here, as well as those I got via e-mail over this article, I think people are misunderstanding my point. You wrote "for your argument to stand.."

I have two conclusions. One, is that if Saudi's reserves were accurately reported in 1982, and all one did was subtract out their production since that time, you get a (modestly) higher number than the HL indicates. That's one, and it's accurate as far as I can see. If I tried to argue for a higher number, then you could say that comparing the U.S. to Saudi may be inaccurate. But I am merely saying that unless we have reasons to suspect their reserves were overestimated in 1982, the remaining reserves should be at a minimum of what I calculated them to be.

However, my other point is that one can't really argue that their reserves are higher than that, because as shown when I applied it to the U.S., it gave me an answer that was grossly in error.

The final item was that it was surprising to me how much oil the U.S. has produced in the past 24 years from their reserves there. No implications toward Saudi there; I just thought the U.S. statistic was interesting.

NOTE: For readers who may wonder why there are comments prior to the publication of this essay, these comments took place while the article was still in the queue.

Robert:

Note the understatement of US reserves versus actual production.

Then consider that using only data from before the US peak that Khebab accurately predicted US production up to the present within 99%.

Who was wrong here? The reports of US reserves were wrong and the HL method predicted more production that we would have expected from the reserve reports. And the HL method was right.

Note again that Russia fits the plot for production early 1980s to present from data that terminates in the early 1980s. Yet that HL prediction is 95% on the mark.

The known HL plots against KSA do not suggest there are 150 billion barrels left. In fact those plots indicate 70 billion barrels. Your 95 billion barrel would be above the HL plot for KSA.

Now, you can try to construct some other view and you are certainly free to do so but you cannot ignore that HL plots of US and Russia were so accurate. You must explain why KSA is an exception to the rule and you haven't done that. Instead you suggest a similarity to the US so therefore we should expect something similar. Yet the HL plots don't suggest that at all. Stuart covered the HL plot for KSA here. This is why we argue there are 70 billion barrels left in KSA. Because the HL plot says so and the HL plot has been correct about US and Russian production post-peak to such an extraordinary degree that it is incumbent on anyone disputing this number to demonstrate why the HL plot is wrong.

"Instead you suggest a similarity to the US so therefore we should expect something similar."

Isn't that EXACTLY what WT has been stating all along?  That KSA will follow the same pattern that Texas, the Lower 48 etc have followed?  If we saw US reserves drop 6 Gb after pumping more then 60 Gb, shouldn't the same trend hold true for KSA?

If it doesn't then, you just debunked WTs own argument for RR.  Congratulations :)

I predict that once again WT will state that he wants to drill the Lower 48 of a QT.  Cuz that's where the oil is.

Surely we all heartily agree with him!

Well actually this post seems almost disinformation,taking a basic practice of the oil industry and acting as if it's shock and surprise.

The real numbers from 1982 to 2005 is that the US was pumping 8.6 million barrels a day in 82 and in 2005 is now pumping 5.1 million, that's a decline of 40%. It doesn't matter how much reserves the Sauds say they have, what matters is production numbers and even those are debatable right now.

So time will tell if they can ramp up, keep up, or start going down. But I think to explain to people how reserves numbers work or don't this post is somewhat irresponsible.

After doing some basic napkin calculations, for the 70 Gb reserves remaining in KSA to be true, they would have to have been in decline from their 9.1 million secondary maximum for at least the last 5-7 years.  Since the data indicates that this is not the case, we must then assume that the URR value must be higher, and the HL model is being skewed by the flat production rate from 1992 to 2002.
My friend, I've never argued here about the date of peak, whether it's today, five years, or 20 years, it doesn't matter. I do know we've already wasted 3 decades since we realized oil was a limited resource and have done nothing except use more of it. Now we're ankle deep in blood in the Middle East and about to be knee deep or deeper because of oil. So take your happy-happy over there and tell them how it's all good.
I never said it's all good.  I want us to move away from oil and reconnect our transportation system with electricity.  Burning oil for transportation is about the most moron thing we could have done.  Thanks to big oil though, it's all we've had for 100 years.
"I want us to move away from oil and reconnect our transportation system with electricity.  Burning oil for transportation is about the most moron thing we could have done."

So the intelligent thing to do is to shift transportation from oil to coal? Cool! Let the mountaintop removals accelerate!

Well actually this post seems almost disinformation,taking a basic practice of the oil industry and acting as if it's shock and surprise.

No, not the practice. The amount. That was the surprise.

What some of you are forgetting is that during my career I have been a Downstream guy and an R&D guy. I am learning some new things just like some of the people who e-mailed and told me that this was news to them. I am not an expert on Upstream operations, but this is the area I will be in when I go to Scotland. So, that is part of my motivation for getting involved in these upstream discussions. But don't expect me to be an expert in upstream. Others on this board know far more about upstream than I do. For now. :-)

Well don't play an "expert" when you're not and act as if you're discovering surprising new information, when its standard bs about reserves. Putting your discovery about how reserves work using the US against the Saud's numbers is to say the least garbage, I'm surprised the editors allow this.
Well don't play an "expert" when you're not and act as if you're discovering surprising new information, when its standard bs about reserves.

I continue to be baffled by responses like this. First, I never "played" an expert. I am trying to learn about Saudi reserves, and tried to do a different calculation to verify the HL. It didn't work, but I found out the surprising information about U.S. production and reserves. Again, the "discovery" was not about how reserves work. It was that we had produced 10 times what we have drawn down over 24 years. That may not be news to you, but it was news to a lot of people, including me.

As far as the editors "allowing" this, one of the site owners specifically asked me to post this information here. Take into consideration that others may value the information more than you do, and your opinion is not particularly relevant to me when others got something from the information.

I never "played" an expert.

please

one of the site owners specifically asked me to post this information here

I am truly baffled.

please

Please indeed. Instead of the over the top personal attacks, why don't you build your case that I have presented myself as an upstream expert? Downstream? Sure, I know my stuff quite well there. I don't know everything, but I am quite knowledgeable. Ditto biofuels.

I am truly baffled.

Consider the fact that your opinion may simply be in error. It is not my intention, nor is it possible to please everyone all the time. In fact, the very fact that I work for an oil company means that it is impossible to ever please some people. Based on some of your historical comments and hostility toward me, I tend to think you belong in that latter category.

Relax Robert, I don't know you, I only argue your comments and you present yourself as an oil industry expert. I agreed with your numbers on ethanol and took, and still do vehement exception to how you say oil "markets," which you continually argued not with public facts, but saying you had inside information -- as our great president says "this ain't my first rodeo."

Now, you put up on a post information that anyone who has looked into a limited about how reserve numbers are kept knows it not to be any surprise at all. So why don't you try fessing up instead of people saying they're attacking you personally.

I've learned a lot of things on this site and its a very important issue, people deserve to be able get the best information possible and not "listen to me I'm oil company employee," and you do that all the time.

Relax Robert, I don't know you, I only argue your comments and you present yourself as an oil industry expert.

The oil industry has a lot of different areas. Most Upstream types won't know too much about refining, and vice-versa. I am a refining guy about to transition into an upstream job. So, part of what I am doing right now is trying to learn as much as I can about Upstream operations. The way I view this site, and the reason I started posting here in the first place, is that it is a place to share knowledge and to learn. However, you took the opportunity not to say "I disagree", but instead to belittle me personally. Why you felt the need to do that from your anonymous perch is something I simply can't know.

I agreed with your numbers on ethanol and took, and still do vehement exception to how you say oil "markets," which you continually argued not with public facts, but saying you had inside information

What I was doing was a favor to you. You would probably acknowledge that I do know some things that a layman would not know about the oil industry. Yet when I tried to help you answer a question - and I did have first hand information on some of this - you simply chose to disregard it and blow me off. That's your problem, but I won't ever try to answer another of your inquiries.

Now, you put up on a post information that anyone who has looked into a limited about how reserve numbers are kept knows it not to be any surprise at all. So why don't you try fessing up instead of people saying they're attacking you personally.

Why then, do you think some people even in this thread are saying "Those numbers can't be right." For me, the numbers were surprising. Just like an upstream guy might be surprised at how much energy it takes to refine a barrel of oil. However, if he did express surprise, I certainly would not feel the need to belittle him or suggest that this is common knowledge. The fact is, those numbers surprised quite a few people. You can see that someone expressed surprise in my blog. You can see surprise expressed in this thread. Surprise has been expressed in e-mails. So, your comments about this being pretty common knowledge ring pretty hollow with me. The thread has also generated a pretty good discussion, which sad to say you have not contributed substantively to.

I've learned a lot of things on this site and its a very important issue, people deserve to be able get the best information possible and not "listen to me I'm oil company employee," and you do that all the time.

I am starting to think you don't have an honest bone in your body. Show me a single example of where I have done that. Please link to the discussion, or admit that you are being dishonest. I went out of my way once to try to find out some information for you, and this is the thanks I get. But just know that you will never get even the most basic information from me ever again.

Robert,
Since I believe you understand math pretty well, let me present a thought experiment based on a fairly simple premise.

The premise is that, say starting from right now, i.e. Time=0, we will find a growth in reserves that goes like 1/(Time+k), where "k" is some small number to keep the starting number finite. Let's say that this reserve growth falls in the provable category to indicate that we can extract it.

Three interesting results spring from this premise.

  1. The amount of reserve left from now until eternity is infinite. This is a property of integrating a hyperbola (1/Time) over all time. Essentially we get a URR of infinity.

  2. If production is rate proportional to the current reserves (the classic "greed is good" assumption which explains man's and the free market's capitalistic instincts), the position of peak won't change too much. This has everything to do with rate considerations. The rate of reserve growth cannot match consumption rates, and new discoveries are clearly dwindling.

And most importantly, the one thing that explains your puzzlement.

3. The draw-down from reserves can become vanishingly small in this scenario.  Taking finite production from an infinite pool leads to the conundrum that we are extracting an infinitesimal fraction of that eventually available.

This argument is subtle, but if interpreted incorrectly, it gives ammunition to the cornucopians, who can assert that huge reserves lay in wait.  However, in reality, since rate extraction is proportional to current reserves, all we see is the classic effect of "diminishing returns".   Of course this has real ramifications for a continuously growing energy-based global GDP economy, but the cornucupians will not spin it that way.  They instead point to a continuously finite reserve that doesn't get drawn down by as much as one's expectations can intuit.

Having to face and account for this argument, a cornucopian would have to propose a reserve growth rate that will keep pushing the peak into the future. Unfortunately, this would have to be a growth even more aggresive that the 1/Time variant, which already has an infinite URR !  Fortunately, anyone actually proposing such a growth rate puts themselves in a situation that they can be endlessly mocked.

We have to continue to do question the numbers because otherwise we fall into the logical conundrum B.S. traps that politicians and corporations and scam artists have historically used to try to separate us from our money.  Simple thought experiments like I have shown here remain one of the few options that we have to eliminate the rhetorical arguments from the public discourse.

As a recent and complementary example of where people have gotten hoodwinked in this fashion, google the "infinite horizon" argument to escalating Social Security costs.  Bush's people have actually suggested huge future costs of S.S. based solely on a hidden assumption of an "infinite horizon". It takes time for the economists to dig this stuff out of the rhetorical arguments, but by that time the damage is done and people get a completely misleading impression.   I remember hearing Al Franken debunk this argument quite effectively by saying that, "yes we may have a huge SS deficit, but will have infinite time to pay it off, so it looks like our current funding is no problem".  Touche.  

WebHubbleTelescope,

This was a first rate response, encompassing much of the peak oil debate.  It also neatly points a spotlight on the Global warming and finite resources debates intertwinned with Peak oil.

If you don't mind I think I will "borrow" this example the next time I have a discussion with people who are overly optomistic about resource availability.

I have the feeling of beeing the spectator of an absurd theater play. Hogwash will find something to attack Westexas with, people will come to Westexas defence, Hogwash will attack again then move on to the next tread. Rinse and repeat ad infinitum.

But lets get it on.

Isn't that EXACTLY what WT has been stating all along?  That KSA will follow the same pattern that Texas, the Lower 48 etc have followed?  If we saw US reserves drop 6 Gb after pumping more then 60 Gb, shouldn't the same trend hold true for KSA?

Westexas has been saying that based on the HL method the KSA should peak at the same point as the lower 48. In the lower 48 you had the Texas Railroad commission, in KSA you have OPEC.

The argument being debated here is that Rapier says that the reserve growth in the US might be mirrored in the KSA. Other counter the argument by saying that in the US reserves were intentionally underestimated, but that the opposite holds true for OPEC.

The argument being debated here is that Rapier says that the reserve growth in the US might be mirrored in the KSA.

That misunderstanding has led to a lot of the comments in this thread. That was not my argument. I just checked US reserves growth to see how applicable such a method might be. As I said, it wasn't very accurate. However, it is possible that Saudi has had some reserves growth. We just can't know, and as I said we can't afford to risk that.

And current reserve estimates for KSA are based on the assumption that there has been zero reserve growth in the KSA, AND they have had no new discoveries since 1982.  Two ridiculous assumptions at best.

Why not ?

The region is well explored they have large reserves no real reason to assume any reserve growth came from fresh discoveries instead of better estimates for current fields.
Or probably more realistic different estimates of URR for current fields.

KSA has not announced large new discoveries.

And URR growth in existing developed fields has to my knowledge never lead to increased production rates ever.

The US, even in 1982 was perhaps the best explored region on the planet, yet we experienced the reserve growth' phenomenon and continued to discover new fields.

Your argument holds no water, and WTs own arguments are undermining your position.

Westexas is making the argument from the HL perspective not from RR's surprised perspective!!! Have you failed to read WT's argument at all in all these months????

His argument is not RR's argument at all. WT's argument is that because KSA resembles the lower 48 IN THE HL PLOT that KSA is now set for irreversible declines.

Your ignorance is either astounding or deliberate. Which is it, Hothgor? Are you ignorant beyond belief or a deliberate troll? No other option fits after all these months of telling you the same thing over and over and over again.

One more time, Hothgor...

  1. The HL method correctly predicted US production from 1970 to 2006 using only data up to 1970!!!!

  2. Applying the same HL method to KSA says they are on the verge of irreversible declines.

Do you understand this yet? This is the heart of WT's argument. This is what I just explained to RR.
Well, the decline has allready set in in the KSA, with drilling ramped up to historical high levels, while keeping production voluntary flat:

http://www.econbrowser.com/archives/2006/07/saudi_prod_rigs.jpg

Unfortunatly, production in KSA now starts to decline, alltough being presented as production cuts, cause "the market is over-supplied"

Right.., hense the low prices these days.

Relax.
Red Ferret says we have 29 years:
Personaly, I think that blackleatherhosed cats land their UFO's every night and then start to refill our oil fields..
So nothing to worry about!  </sarcasm off>