from DRI/McGraw-Hill/French Petroleum Institute conference
"Oil markets over the next two decades: surplus or shortage?"
Rueil-Malmaison, France, 12-13 June 1997
|IEA||60.96||+ 6.33 = 67.29|
|World Oil (Feb. p103)||62.22|
|World Oil (Feb. p19)||69.89|
|BP Review:||oil sands included in production but excluded from reserves!|
US: 4400 fields listed both as oilfield and gasfield
SPE/WPC petroleum reserves definitions 1997:
|Proved= reasonable certainty||Proved = 90% probability|
|Probable=more likely than not||Proved+Probable = 50%,|
|Possible= less likely than probable||Proved+Probable+Possible = 10%|
There are currently almost as many definitions for reserves as there are evaluators, oil and gas companies, securities commissions, and government departments. Each one uses its own version of the definition for its own purposes.
" Classification of oil and gas reserves and resources in the Former Soviet Union " (he presented this classification at WPC Budapest 1979) .."the resource base appeared to be strongly exaggerated due to inclusion of reserves and resources that are neither reliable nor technologically and economically viable"
"an industry that prides itself on its use of science, technology, and frontier risk assessment, finds itself in the 1990s with a reserves definition more reminiscent of the 1890s"
"illegal addition of proved reserves"
" Why our reserves definitions dont work anymore "
" Virtual reserves- and other measures designed to confuse the investing public "
|USDOE annual reports 1994 & 1995 quote oil proven reserves of UK:|
|Oil & Gas Journal||4.52||4.29|
|when it is reported for UKCS by DTI|
|UKOOA for UKCS production forecast 1996-2030:|
|Annex B (developed) fields:||7 Gb|
|New (waiting development)fields:||10 Gb|
|All fields:||17 Gb|
|End of 1995 in Mb||O&GJ||World Oil|
|Norway||8 422||24 175|
|UAE||98 100||63 484|
|Iran||88 200||57 700|
|FSU||57 000||189 681|
|World||1 007 475||1 107 111|
|Published (political) value versus technical value:|
|Example of Troll oil|
|political (optimistist)||technical (conservative)|
|Carmalt 1984:||1400 Mb||Gray (Shell)1985:||210 Mb|
|Knapp 1996 :||958 Mb||Horstad (Saga) 1996:||312+250=562 Mb|
fig 7:US and FSU production profile
all petroleum activity depends on oil price:
fiscal incentives increase production as in UK
New tools (3D, horizontal wells, subsea completions) improve the development, save money, but accelerate depletion rather than add significant reserves.
Technological improvement hardly catches up with the increase in complexity of the new difficult discoveries (creaming curve) or of the enhanced oil recovery of remaining reserves
As easy fields are developed, operators turn to difficult fields: W.Shetlands, deepwaters with the help of technology; Brazil did it 10 years ago
Technology is often credited for improvement when Nature is generous, as better water flooding in some good North Sea fields, or when increase of volume in-place increases the reserves, but bad luck is claimed (or silence) when technology fails!
As reserves (R) = oil in-place (OIP) multiplied by recovery factor (RF), R increases if OIP or RF increases, but OIP revision needs new wells or new seismic, when reserve revision is mainly from production data.
There is no substantial field growth if the probabilistic approach is properly done by using expected value (mean).
Large range of recovery factor, depending on the quality and complexity of the reservoir, from 5 to 80%, little hope to improve every field, but only a few susceptible with EOR and consequent investments.
Mostly reported reserves data anticipate on enhanced oil recovery: Ghawar 65%.
Many people rely on R/P ratio quoted in years (remaining reserves end of 1995 versus annual production for 1995) saying: if the world has 45 years of reserves vs production: there is no worry for the next 45 years: this statement is wrong!
R/P in years is a meaningless ratio: the good ratio is depletion =P/R in % = 100/ nb years:
it means that the reserves are produced each year at such percentage. The depletion of the world from Petroconsultants data is: 2.6% for the world, 1.7% for OPEC and 4% for NOPEC (Non-OPEC)
The best method is to combine several approaches
when exploratory drilling data not available: extrapolation of historical pattern: close to a logistic curve
Any production profile of a country can be analyzed as the sum of several symmetrical Hubbert curves (as with Fourier analysis).
Until last year, there was a unanimous agreement from official agencies: no problem for supply foreseen for the next twenty years despite the worlds strong increase in demand, without price increase. Forecasting no oil shock is safer, whereas if one happens, it will be declared a natural unpredictable catastrophe. Question marks appear only this year (WEC March 1997 for Europe).
Present low oil price since 1986 has to be explained by the origin of the 1986 countershock = Saudi Arabia: as described in the book VICTORY by Peter Schweizer, 1994. There is an unwritten barter agreement between Saudi Arabia and the US: cheap oil in exchange for US protection at an annual cost of 50 G$, taken under the US defense budget instead of being paid by US gasoline consumers, doubling the real cost of imported oil! Saudi Arabia is an explosive country, and any political change can trigger a new oil crisis. When the percentage of supply by the swing producers exceeds 30% as it was during the period 1971-1979, no one could oppose a drastic rise, if Saudi Arabia and the other swing producers (Kuwait, Iran, Iraq, UAE) want it. (Can they be in agreement?) This event could be triggered before 2000 by the non-swing decline (North Sea in particular):
The lower the price, the more expensive the oil is to produce in order to pay for the fixed costs: example: North Sea: Statfjord decline 15%/a
Assessment of published ultimate oil reserves:
|but adding NGL and non-conventional gives the total liquids:|
Reporting reserves is a political act. Information on the size of petroleum assets is poor, because of confidentiality and lack of consensus.
Cheap oil is disappearing: 80% of the oil produced in 1995 was found before 1973; that is why oil is sold so cheap!
Most official agencies, relying on unreliable published data, forecast that there is no problem of supplying the future demand for the next 20 years without a major petroleum price increase.
An erroneous methodology is used in the USA for reporting proven reserves because of SEC rules. Reserves are constantly revised, as neglected probable becomes proven. Some believe wrongly that the increase is due to "technology." Using the expected values method removes the illusion of field growth.
Only the State Companies which own 90% of the world oil reserves can resolve the issue by opening their files more, in order to permit a more reliable inventory of humanity's asset.
Today we consume three times more than we discover. No technological breakthrough is foreseen! Technology helps to produce quicker and cheaper, but hardly increases the reported reserves which anticipate the technology.
The Middle East has most of the yet-to-produce reserves, but needs a great deal of money to meet the future increase in demand, as the production of the rest of the world will decline soon. Bankers are reluctant to invest in M.E. fearing instability, lack of demand of M.E. supply and future low price.
As far as petroleum is concerned, the World is moving in the wrong direction because of very poor data and erroneous interpretation. An oil crisis could be coming and nobody is prepared.
Surplus or shortage?: the answer is surplus of oil resources (conventional and non-conventional), but shortage of oil reserves before 2010 In fact, as oil price will increase substantially, the demand will be less than anticipated. There are many fields for energy savings.
Thanks to Petroconsultants for the data used to draw these graphs.
J. Laherrère & G.Rutman DRI/Mcgraw-Hill/IFO June 12 1997