<Site migration this weekend; make sure your email address is up-to-date The Oil Drum DrumBeat: December 23, 2006>
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60 comments on A Primer on Reserve Growth - part 1 of 3

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Freddy Hutter on December 18, 2006 - 8:29pm Permalink | Subthread | Comments top
Excellent summation, Rembrandt; and i look forward to the other two segments.  I may have some comments in Part 3 based on my own study of the Global perspective.  Our first draft of a graphic is at http://trendlines.ca/economic.htm#Scenarios where we show that Resource Growth (total of Discoveries + Reserve Growth) has averaged 3.3% (thick blue line) since 1957 and 7% since Y2K.

The recent Growth rate is unprecedented and is a reflection of another component of Reserve Growth ... those fields and resources made feasible by higher pricing.

The infamous ASPO graph showing Discoveries dwindling sine the mid 80's seems ominous.  But when global discoveries are viewe in the context of total Resource Growth (incl Reserve Growth), they pale in comparison and the calculation errors of the past are put in perspective.

The main databased of discoveries have been backdated.  While my graph shows presently available data (eg BP, Petroconsultants, OGJ, API & WorldOil, all these annual data filings from the 50's, 60's & 70's were later doubled or tripled by backdating the corrections.  In other words, Reserve Growth as u define it Part One is actually magnificent if u could use those original numbers in our 100-yr database.


please click on the above link to view the Legend
   

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Rembrandt on December 18, 2006 - 8:42pm Permalink | Subthread | Parent | Comments top
Thanks Freddy, You are referring to unconventional reserve growth which is not what I am addressing in my posts. "those fields and resources made feasible by higher pricing" For conventional oil this is not really the case, since nearly all fields are producible within the range of 25 dollars a barrel, including most EOR techniques. Again I would stress to keep the division between conventional + unconventional in mind when spreading information, otherwise it leads to false views on how reserve growth works :). (Sorry if i keep nagging you with this point..)
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Freddy Hutter on December 18, 2006 - 10:40pm Permalink | Subthread | Parent | Comments top
Non-conventional oil is a recent phenomenom; and u are correct, mainly 'cuz of price barriers.  And surely the Resource Growth since 1997 reflects that (eg - OGJ adding Canadian tar sands back in 2002).

But look at Resource Growth previous to that and compare to Discoveries on the ASPO graph for the same period:

1960's - 278-Gb Resource Growth
1970's - 254-Gb   "
1980's - 325-Gb   "
1990's - 431-Gb   "

1288-Gb of Resource Growth in 40 years.  Incredible numbers!  In 1960, there was 660-Gb of Resoureces remaining.  Add 1288 in Discoveries and Reserve Growth and the total is 1948-Gb.  832-Gb has been consumed in that 40 year period.  That means we should have 1116-Gb left in Y2K.  I don't recollect the total of Discoveries from 1960 to Y2k, but when one deducts that figure from 1288-Gb, that gives us the Reserve Growth of conv oil.  Anyone?

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Freddy Hutter on December 18, 2006 - 11:21pm Permalink | Subthread | Parent | Comments top
Ok, Jean Laherrere's figures show approx just under 1000-Gb were discovered in that 40yr period.  That leaves a net of 300-Gb or 7.5-Gb/yr in Reserve Growth!  To give this some scale, the globe consumes 31-gb/yr & discoveries in the same 40 year period averaged 25-Gb/Yr.
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Rembrandt on December 19, 2006 - 2:49am Permalink | Subthread | Parent | Comments top
I don't know were you got that figures from before 1995, because I take Jean laherrere's study he did with the french geologists perrodon and another fellow (don't recall the name) in 1994 for petroconsultants as a starting point. At this time they estimated a range between around 1600 to 2250 billion barrels for URR of conventional oil. Not long after independent estimates by Jean laherrere led him to believe in an URR of 2150, now this has been revised downwards to 2000 billion barrels. So please cite the reference to these figures,
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Freddy Hutter on December 19, 2006 - 3:45pm Permalink | Subthread | Parent | Comments top
We are not in disagreement, Rembrandt.  You seem to have forgotten to deduct the pre-1960 URR (723-Gb) from the 1750-Gb tally in that Laherrere/Perrodon/Demaison study.  
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Euan Mearns on December 19, 2006 - 1:53pm Permalink | Subthread | Parent | Comments top
Peak Hysteria

Freddy, a nice chart.  One of the features that catches my eye is how the AV URR less past gets close to the Past Consumption curve around 1998 - the year of $10 oil - but since then there has been a rapid divergence.

So this is a bit curious, back in 1998 when "the world was awash with oil" your chart shows conceptualy that future resources were running out.  Today, when there is wide spread concern that the "the world is not awash with oil" and the price is close to all time highs your chart shows there is no problem with future supplies.

OK, so the argument is that reserves are linked to price but this is uncharted territory isn't it, because the oil price has never been driven high before because of market supply - demand forces - and as demand has been growing at a steady rate of 1.1mmbpdpy for 25 years, its really supply problems that lie at the heart of the current bull run.

Can you name us some countries that currently belong to the past peak crowd that will have fooled us and by growing production rapidly in the next 6 years,  attain new peaks based on this price related inflation of their reserves?

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Freddy Hutter on December 21, 2006 - 11:36pm Permalink | Subthread | Parent | Comments top
Euan, the world was hardly at threat of "running out".  This line is "accumulated consumption (1043-Gb) ... not annual (31-Gb).  Altho it doesn't appear on the graph, your concerns are best addressed by watching the FutureResouces/AnnualProduction ratio over time.  It is commonly known as 40 year plateau in the BP graph and has been the rationalization for little discovery over the past two decades.

In my study, this ratio has a historic low of 35 years in 1978, a recent low of 40 years in Y2K and has since increased to 62 years.  While the metric has no bearing on supply rates in the future, it does bode well for a lengthy duration of supply at whatever flow rate.

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obdacher on December 23, 2006 - 10:35am Permalink | Subthread | Parent | Comments top
Freddy,  why is the oil extraction rate decreasing in the US ? Is all this state of the art high tech oil field technology a waste of money ? Is the quality of the reserve barrel decreasing ? Are the reporting standards nowadays less strict ?

 According to EIA the US had in 1984 28.446 million proven reserves and produced that year 3,249,696,000 barrels i.e 11,4% of the total. In 2004, before the hurricans struck, the US had 21.371 million reserves and produced 1.983.302.000 barrels which works out as 9,3% of the total.

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Hothgor on December 23, 2006 - 11:33am Permalink | Subthread | Parent | Comments top
I don't think Freddy is suggesting that we should not experience declining production rates, simply that we will have an extremely long plateau with a very minor decline set over decades.
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obdacher on December 23, 2006 - 11:47am Permalink | Subthread | Parent | Comments top
Hotgor you didn´t understand my question. I am not talking about  absolute production levels, I want to know why the efficiency of the oil production from a given amount of reserves is decreasing
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chemE on December 23, 2006 - 12:30pm Permalink | Subthread | Parent | Comments top
Freddy has also stated that PEMEX will produce 4.0 MBPD in Q1-2007.

Inquiring minds want to know:

(1) How does Freddy have that information
(2) Why has not PEMEX said so publicly
(3) Is Freddy predicting this to be a 1Q affair or will it be longer (2Q, 3Q, 1Y, 2Yrs, 5Yrs, ... infinity years)

(4) If Freddy is predicting this information based on field by field analysis is he willing to share that information? Or state that he will not share it? - for xxx reasons!

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60 comments on A Primer on Reserve Growth - part 1 of 3

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