The Oil Drum

USGS World Petroleum Assessment

In 2000, the United States Geological Survey issued its World Petroleum Assessment, covering the thirty year period 1995-2025 (Table 1). The resource estimates from this study are widely quoted to support the argument that oil production can continue to expand. (Comments now open!)

There has been some discussion about how to apply the Hubbert Linearization (HL) to Saudi historical production in recent weeks at TOD. Trying not to fall into redundancy, let me have some loose thoughts on these models:

Three alternative Logistic models for Saudi production. Click for large version.

This is a guest post from Ugo Bardi and Marco Pagani. Ugo Bardi teaches chemistry at the University of Florence, Italy. He is the president of the Italian section of the Association for the Study of Peak Oil and Gas (ASPO) (www.aspoitalia.net). Marco Pagani is a physicist presently teaching and physics in secondary schools. He is a member of ASPO-Italy, a social and environmental activist, and the blogger of ecoalfabeta. (ecoalfabeta.blogosfere.it)

Abstract: We examined the world production of 57 minerals reported in the database of the United States Geological Survey (USGS). Of these, we found 11 cases where production has clearly peaked and is now declining. Several more may be peaking or be close to peaking. Fitting the production curve with a logistic function we see that, in most cases, the ultimate amount extrapolated from the fitting corresponds well to the amount obtained summing the cumulative production so far and the reserves estimated by the USGS. These results are a clear indication that the Hubbert model is valid for the worldwide production of minerals and not just for regional cases. It strongly supports the concept that “Peak oil” is just one of several cases of worldwide peaking and decline of a depletable resource. Many more mineral resources may peak worldwide and start their decline in the near future.

In his recent post, Ace assumes ultimate recoverable reserves (URR) in Saudi Arabia to be 175 Gb (billion barrels). With 112 Gb already produced, that leaves only 63 Gb remaining. Colin Campbell (the founder of ASPO) has estimated total reserves for Saudi Arabia of 275 Gb (news letter 66), believed to be C+C+NGL (crude oil + condensate + natural gas liquids). There is an enormous discrepancy between this and Ace's analysis that ought to be explained.

This post is a brief summary of my views on Saudi reserves and production. My conclusion is that Saudi Arabia likely has at least 120 Gbs of remaining reserves (C+C+NGL) for a URR in excess of 240 Gbs (C+C+NGL). The remaining reserves according to this analysis are almost double those reported by Ace.

Easy Come, Easy Go, or: The Incredible Disappearing 140 Tcf of Canadian Gas.

I posted an article "The Future of (Natural) Gas from the Western Canada Sedimentary Basin?" a few months ago, suggesting that the numbers suggested for Western Canadian gas in the NRCan report "Canadian Natural Gas Review of 2004 & Outlook to 2020" were exceedingly optimistic, basing that conclusion on both National Energy Board Scenarios and actual events.  I did not expect that the next NRCan report in the series would reflect this view, but it has since come out, and its contents prompted me to look further back in the series and then to look at how other official and unofficial assessments were changing.

As oil threatens to go through the roof over concerns that OPEC may not open the spigots, exploiting Canadian reserves is becoming far more expensive. The threat of labour disruption in the oil sands will only add to the problem.

An OPEC equivalent controlling future LNG trade is seen as a threat to US security, even as natural gas prices decline and the drilling sector consolidates in Canada.

Burnaby BC comes to terms with a long clean up after an oil spill, as the aftermath of a Japanese earthquake rattles the nuclear industry, and Ontario's nuclear troubles continue.

Risk aversion goes international as credit markets tighten around the world. Faced with threatened deals, banks are holding on to loans rather than hawking them to investors. The US sends another more senior figure to China to convince them to buy mortgage-backed securities. As bridge loans become pier loans in the developing credit crunch, Wall Street 'heads for the diaper aisle'.

Oil firms find reserves elusive

For investors looking for the cheapest reserve replacement costs, don't turn to Canada. Not only is the country's oil and gas basin particularly well-developed, making new reserves hard to find, but also Alberta's oil sands boom has driven up service costs above and beyond the increase seen globally. Canada's senior producers' reserve replacement costs went up 40 per cent from 2005 to 2006, while the country's energy trusts and juniors saw costs increase year over year by 62 per cent and 37 per cent, respectively, according to the report.

"The unrelenting rise in reserve replacement costs, coupled with cost pressures elsewhere, has significantly eroded the profitability of crude oil and natural gas developments, especially in high-cost regions such as Western Canada," Mr. Ollenberger said.

I have written recently about some of the reasons that coal reserves, as currently understood, might not be quite as large, at present, as they are assumed to be. However, while I could continue on that tack for some additional time, it is perhaps time to give a gentle cough and suggest that there is perhaps a little terminologically inexact thinking in some of the discussions on the actual size of reserves, relative to the overall resource and that there is another viewpoint that should be considered in this debate. Particularly this relates to how much is left and how long it will last.

Firstly it should be recognized that a number of studies of coal reserves have put caveats on their numbers along the lines of “under current operating and economic conditions.” And so let me first put back up the table I posted in my last post , relating to the coal reserves of the UK back in 1952.

Note that this is coal that has largely been proved to be in place. However, in the time frame between 1952 and today it has not been mined or gone away, but it has become, at present, uneconomic to mine. And thus under current conditions it is no longer a reserve. And the one thing that those who write here should know better about assuming is the “current conditions.” Jeepers! We have spent over two years here accumulating convincing evidence that current conditions are not sustainable, and yet that argument is accepted, with little discussion, when it is proposed.

The National Research Council, as Leanan reported earlier, has just issued a report Coal: Research and Development to Support National Energy Policy dealing with both current reserves and needed research. While I haven’t had a chance to read it in detail yet, there was one paragraph I thought worth mentioning before I write a longer review, and it is this one.

Despite significant uncertainties in existing reserve estimates, it is clear that there is sufficient coal at current levels of production to meet anticipated needs through 2030. Looking further into the future, there is probably sufficient coal to meet the nation’s needs for more than 100 years at current rates of consumption. However it is not possible to confirm the often-quoted assertion that there is a sufficient supply of coal for the next 250 years.

I had written in the non-too-distant past about why coal reserves can be smaller than those anticipated. There is, however, a current part of the in-situ deposits that are not considered, and to illustrate what I mean, I thought I would use the example of the Prairie State Energy Campus that is being developed in Southern Illinois. This is a 1,600 megawatt power plant that will serve customers in Illinois, Missouri, Indiana and Kentucky. It will be served by a dedicated adjacent underground coal mine. It is one aspect of this mine that I thought I would address here.

In this revisions post I want to update my views on Ghawar reserves incorporating 4 main changes:

1. A model base assumption error in the way initial reserves in Uthmaniyah were calculated is corrected.

2. The data vintage for the Linux oil saturation map has been revised to 2002 (from 2004).

3. 2002 based figures are re-based to 2006 by adjusting for 4 years production at 5 million barrles per day.

4. The production prognosis for Hawiyah has been revised down.

These adjustments result in the initial whole field reserves figure rising to 173 billion barrels and show the field in a more severly depleted state in 2006 than previously shown.

Two volumetric simulations (2D) of the initial and remaining reserves in Ghawar, the world’s largest producing oil field, have been determined. The High Case scenario uses somewhat more optimistic assumptions than the Base Case scenario. Background and methodology are described in detail here.

Estimate of initial oil in place = 162 billion barrels (same for High and Base cases)

High Case
Produced oil = 63 billion barrels
2004 reserves = 43 billion barrels
60% depleted

Base Case
Produced oil = 55 billion barrels
2004 reserves = 34 billion barrels
62% depleted

The Base Case production model shows Ghawar on the edge of irreversible production decline that may start around 2010 or it may already have started. The High Case production model is more robust and shows plateau production maintained until around 2013.