The Oil Drum: Australia/New Zealand

This is the post where I try and draw my own conclusions from the Conference. And not recognizing many of the papers in this does not mean that they weren’t important, but rather that from my own perspective that this is what I got most from.

The recurrent word that cropped up, again and again, was Scale. It was an attempt by the speakers to try and convey to their audience the size of the problem that is coming at us, increasingly rapidly. That one word encapsulates the difference between those who talk of the world energy problem in Quads (quadrillion Btu’s), as opposed to those that talk of the solution in terms of kilowatts and Megawatts. (The handy Dashboard on my Mac tells me that a Megawatt is 56,869 Btus/min. A Quad is 1,000,000,000,000,000 Btu.) The current shortages of gasoline are largely brought about by a transient closure of refineries that affects around 1 mbd of oil supply. The time is not far distant when such shortages will become more regular as we compete for supply in a more competitive global market.

The tipping point that seemed still a comfortable distance away three years ago when the American ASPO meetings began in Denver, is now just about here. And the solutions that have been discussed do not approach, as yet, the millions of barrels a day (mbd) of fuel replacement that we may need before long. At the same time, to return to the theme of my own paper, we do not have the educated human resource that we need. Data from my Dean of Enrollment shows that ACT report national high school student interest in engineering was at 14% in 1982. By 1992 it had dropped to 9%. By 2005 it was down to 5%, and has fallen below that since.

We have been writing for almost 3 years on this site about the privatization of energy data by IHS Energy and the negative impact the lack of accuracy that CERA's historically optimistic claims are having on energy policy. The rebuttals and counteranalysis at TOD to CERAs assertions are too numerous to list. Today at the IHS Energy Conference in Houston, the CEO of IHS Energy, parent of CERA and other energy information agencies, asserted that Peak Oilers don't have the data to support their claims. This post is a brief rebuttal to this 'news' coming out of Houston, and a plea to refocus the questions to what is relevant and probable, not on what is irrelevant and unlikely.

Source - various - detailed here by G. Morton(Click to enlarge)

The story made it to the front page of the Financial Times (Europe's main English-language business paper) this week, so you'd think it is big news - and the headlines is nicely attention grabbing, but what's behind it?

Iraq may hold twice as much oil

Iraq could hold almost twice as much oil in its reserves as had been thought, according to the most comprehensive independent study of its resources since the US-led invasion in 2003.

The potential presence of a further 100bn barrels in the western desert highlights the opportunity for Iraq to be one of the world’s biggest oil suppliers, and its attractions for international oil companies – *if* the conflict in the country can be resolved.

Obviously, that's a pretty big "if", but it's still big news... or is it?

Will 730 billion barrels be added to the reserve pool from reserve growth between 1996 and 2025 as estimated by the United States Geological Survey?

This post is the third part in a three piece series about the phenomenon of reserve growth in found oil fields. Insight in future reserve growth, often attributed to technological advancement, is crucial in determining the peak of conventional oil production. For those not familiar with reserve growth, it would be best to read part 1 first:

1. General introduction to reserve growth, what can we learn from the worldwide recovery factor in conventional oil fields?

At the Oil Depletion conference (hosted by the Energy Institute) held in London on 7th November, Dr Kenneth Chew, a Vice President of IHS Energy reported proved and probable reserves (2P) for Kuwait of around 52 billion barrels (read from chart). This is approximately 51% of the proved reserves reported in the BP statistical review that stand at 101.5 billion barrels. This tends to support recent reports of Kuwaiti reserves being substantially overstated.

Ken Chew also presented data indicating global remaining discovered proved plus probable (2P) liquid resources of some 1,250 billion barrels. This implies global proved liquid reserves (1P) of around 950 billion barrels (based on an assumption that 1P is approximately 75% of 2P). This is substantially lower than estimates provided by BP, Oil & Gas Journal and World Oil.

[editor's note, by Dave Cohen] This is the 2nd and final installment of my miniseries on CERA and Daniel Yergin. The first was Perception Management -- CERA and IHS Energy.

This Washington Post It's Not the End Of the Oil Age (July 2005) is vintage Daniel Yergin.

We're not running out of oil. Not yet...

But it is oil that gets most of the attention. Prices around $60 a barrel, driven by high demand growth, are fueling the fear of imminent shortage -- that the world is going to begin running out of oil in five or 10 years. This shortage, it is argued, will be amplified by the substantial and growing demand from two giants: China and India.

Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

The social function of such text, aside from questions about the accuracy of the message, is to reassure the public that the tightness in global spare capacity and high oil prices do reflect market fundamentals. However, the market and production capacity—potential supply—are currently out of balance. These are temporary conditions due to factors explained below. Everything will work out fine if we are patient and wait a few years.

[Update by Dave Cohen on 08/28/06 at 4:04 PM EDT] Ken Chew of IHS Energy contacted me and told me in part the origin of the 175 Gb number cited below with regard to Esser's testimony. It is not the tar sands. When I know more details, I will revise the text of this article.

[editor's note, by Dave Cohen] This is Part 1 of what I hope will be a 2 part series. The second installment is tentatively titled Getting to Know Daniel Yergin. Enjoy and remember what's at stake.

Yet another recent CERA press release World Oil & Liquids Production Capacity to Grow Significantly through At Least 2015 denies that peak oil is a concern.

Based on the report's extensive field-by-field analysis, [Peter] Jackson and [Robert] Esser conclude that the data reinforce CERA's view that the specter of "peak oil" is not imminent, nor is the start of an "undulating plateau" pattern of supply capacity.

This latest cornucopian summary has been commented upon here at TOD and criticized directly by Kjell Aleklett, President of ASPO in CERA's report is over-optimistic courtesy of the Energy Bulletin.

This story's aim is to investigate the CERA method, provide background for these latest statements and round out Aleklett's critique. The view here is that CERA, which is wholly owned by IHS Energy, is misleading the public and our elected representatives. These two organizations are managing perceptions as they cast aspersions on the peak oil view of reality and present misleading or incomplete analysis to the media.

These half-truths have gone on long enough. A bit more in-depth analysis is required to reveal this charade for what it is. Our future energy need is put in ever greater jeopardy the longer the world waits to mitigate the crisis. One step toward changing perceptions to create a call to action is to refute deceptions, whether they are intentional or not.

There's been some discussion lately about reserve additions due to new discoveries and the trends there. This topic came up in some comments on Stuart's Predicting US Production with Gaussians--for example here). WebHubbleTelescope over at Mobjectivist has done a couple posts lately on this topic. In Monte Carlo Discoveries, he comes to a rather important conclusion.

The main thing to note relates to the essential noise characteristic in the system [discovery curves]. The fluctuation excursions fairly well match that of the real data (see the first diagram at the top of this post), with the occasional Ghawar super-giant showing up in the simulations, at about the rate expected for a log-normal distribution. But the truly significant observation relates to the disappearance of the noise on the downslope, in particular look at the noise after about 1980.

Remember what I said initially about noise telling us something? The fact that the noise starts to disappear should make us worry. That noise-free downslope tells us that we have pretty effectively mined the giants and super-giants out there and that oil exploration has resorted to back-up strategies and a second pass over already explored territory or to more difficult regions that have a tighter distribution of field sizes.

I'll leave the heavy duty mathematics & modelling to Stuart, WHT, Khebab and others to argue over. This includes the mysterious assumption first used by M. King Hubbert that

The discovery curve mirrors approximately the production curve with a lag that varies from country to country. The US-48, for example, had a lag of 41 years whilst the UK North Sea production, with its urgency and technological basis had a lag of 25 years. The World's lag is estimated to be 36 years.

noted at (among other places) Wolf At The Door. Here instead I will check in with the real world data over the last twenty years and particularly since 1994 using a favorite source, presentations from IHS Energy, to see what's been happening lately on the tail end of the discoveries curve. I feel it's always a good idea to remain a part of the reality-based community, so let's look at some data and look closely at what the recent trends are. Do they confirm the modelling?

Recently, Robert Esser of CERA testified before congress World Oil Production capacity to increase up to 25% by 2015; No peak seen for decades, US Congressional Committee told.

"A detailed new audit of our own analysis and the enormous scale of reserve upgrades in existing fields, confirmed by the most extensive and complete databases on field production - the proprietary databases of IHS, of which CERA is now part - contradicts those who believe that peak oil is imminent," Esser testified.

CERA was acquired by IHS Energy in September, 2004, so of course this amounts to CERA auditing itself. It seemed that the IHS Energy website might be a good source on the IHS/CERA point of view and this turns out to be a bit of a gold mine. Indeed, there are a number of presentations there that give us some insight into their thinking. There is a lot of material there to sort through. In order to narrow this story somewhat, a presentation entitled Global Oil Supply Issues: Recent Trends and Future Possibilities (pdf) seemed a good place to start--not least because it contains some slides on IHS Energy's position on peak oil. The presentation is by Ken Chew, IHS Energy VP for Industry Performance and Strategy. Let's see what Chew had to say about the peak oil issue.