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Tuesday, January 10, 2006

Creamed again

One of peak-oil denier Michael Lynch's favorite arguments to counter the oil depletion pessimists out there (Campbell and Laherrere, et al) has to do with questionable interpretation of the so-called "creaming curves" from mature fields. Since I did some real honest-to-goodness Monte Carlo simulations fairly recently, I think I have a handle on what Lynch has gone half-cocked over. Bottom-line: nothing to get excited about -- just Lynch practicing his highly refined art of attacking the model and not the reality of the situation.

Lynch essentially states that the creaming curves that get published have a tendency to creep up over time, implying that more oil exists than anyone currently realizes. I have thought about this for awhile, found his arguments somewhat intriguing myself, until the trickery finally popped into my head. Unfortunately, Lynch has mistaken the asymptotic properties of finite regions with the semi-infinite scope that some creaming curves occur under.

As an example, consider this Lynch curve:

Note that one curve gets plotted according to time progression. From the looks of it, it doesn't appear to have any asymptotic properties. On the other hand, when ordered by size (i.e. sorted), it shows a clear asymptote. Lynch likes to point out that people shouldn't look at the purple curve because the other one keeps climbing. What Lynch fails to point out, and many people have gotten taken by, constitutes a rather serious sin of omission on his part. He doesn't state his assumptions. If he did, then you would see the flaw in his argument rather quickly.
  1. Within a finite field area, the asymptote gets truncated artificially. The geologists or petroleum engineers declare the field "dry" when they stop finding strikes, go back and order the numbers, and figure out the creaming value. Ordering the values high to low and doing a cumulative sum gives the curve a filtered look that shows a horizontal asymptote. Graphically displaying the integration works out as a nice PowerPoint slide for management. The men in the suits agree, nodding their heads, and go on to the next field. And the engineers and scientists don't have to try to suck blood from a turnip.
  2. Within a quasi-infinite or continuously expanding field, the asymptote continues to creep upward. You can't make any assumptions on asymptotic behavior because the big discovery occasionally occurs, pushing the curves inexorably upward. In reality, only when you hit the limits of your quasi-infinite world can you make any serious interpretations on creaming.
The moral: Unless the field has hit the end of its lifetime, don't read too much into a creaming curve. If the discoveries do follow an ordering according to size, big to small, you might have an argument to stand on. (The unsorted curve should show show a noisy but quite straight linear upward trend if the sizes show independence with respect to time) However, in the quasi-infinite situations, the big discoveries will likely still occur where you haven't looked, thus invalidating any asymptotic trend that you may have counted on.

This exercise in Lynch de-debunking helped me see another interesting property of the creaming curve. When ordered according to size, a histogram of the individual slope values gives the probability density function. Which means you can easily check against a log-normal distribution. If I could find a creaming curve for the entire world, we should get a good distribution to work with.


Professor Anonymous Craig said...

I've been reading The Oil Drum off and on for about six months now and have popped over to your site a few times. I admit I'm still an amateur on this stuff but there's a couple of issues I've been wondering about.

How much of the data you're plotting is sweet light crude and how much is it a mixture of sweet light crude and other grades of oil? How much have the other grades of oil been used over the years? Has there been a tendency to bypass the heavier oil for light sweet crude?

Again, I'm an amateur and I may be confused but is it possible that light sweet crude has already peaked and that the extraction of the heavier oils hides that possibility?

1:40 AM  
Professor Blogger WHT said...

I guess I have been treating the varieties of crude as a second order effect as best. They don't call the stuff black gold for nothing; whatever you pull out of the ground you are going to process and make money on. At some point, the law of diminishing returns says that you will need to start going back and looking at the real tarry goo.

So with that said, yes, indeed, the possibility that light-sweet-crude has peaked is possibly true; there is an article on EnergyBulletin.com from a few months ago asserting that it has.

7:58 AM  
Professor Anonymous Anonymous said...

regarding the peak and decline of light, sweet crude, refer to the interviews with kurt wulff in barron's at the end of 2004 and 2005 (seemingly an annual thing), and look at some of wulff's "meter reader" advisories on his site (www.mcdep.com). wulff gets a lot less press in the peak oil community than he should, i think, even though he does not present himself as a member of the community.

in the 2004 interview (it might have been in the last issue of the year), he declared that during 2004, light, sweet crude oil had peaked worldwide. a year later, he said that that call seemed to have held up during 2005.

regarding michael lynch, could we please have some specific speculation on his motives? i haven't looked into the question, and the answers might be obvious, but i would like to hear from you (or other commenters). and why don't we throw in daniel yergin while we're at it? i can guess the first part of the answer, which is that they are paid to deny peak oil. i would like to know more about by whom and why.

thanks. great blog.

8:22 AM  
Professor Anonymous Craig said...

WHT, thanks for the reply.

I'll be back. You have a good site.

5:59 PM  

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