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Monday, January 16, 2006

Reserve Growth

A commenter at PeakOil.com referenced a paper on the "enigma" of reserve growth. I assume they call this an enigmatic phenomena in that no one really understands reserve growth and why it occurs. I have a few ideas, but first note a couple of things from the article. The authors work as consultants and hail from Canada. Does this color their outlook? Let's look at the charts. The first one shows a growth that appears fairly significant, perhaps an order-of-magnitude effect on reserve growth for oil and gas. However the second and third chart shows much more moderate growth.

But the first chart has a time scale that dates back 100 years. I don't have any idea of how they came up with this chart, but you have to ask: how effectively did the wildcatters estimate things 100 years ago? Is this the enigma -- that reserve growth doesn't appear as strong today as 100 years ago?

They also show another chart that has a big order-of-magnitude increase for heavy oil. What does heavy oil constitute in the USA and Canada? Can you say oil shale and tar sands?

A very muddled paper IMO. The authors haven't stated their results clearly, instead relying on innuendo and inferences. Fortunately they do show their data so that we can muddle our way through it as well.

A couple of apparently experienced oil people have contributed to the PeakOil.com thread mentioned above, ReserveGrowthRulz (a petroleum engineer) and RockDoc (a PhD geologist). I find it frustrating because they keep things close to the vest, alternately promising data and rationalizing things away with a sunny optimism. Take a look at this quote, which I highlighted:
ReserveGrowthRulz wrote:
Oh...I never said that ALL civilizations made the transition down through the ages from one energy form to another, just that us, as the human race, has done better in general, and succeeded in general, as we progressed through time and technologies.
In comparison to what? The orangutan race? The Martian race?

Face it, many of the petroleum engineers and geologists display hypocritical tendencies and thus can easily slide into a catch-22 situation. On the one hand, they can make these reserve predictions that err on the conservative side so that they can "grow" over time to make up for job insecurity. Fair enough, nobody ever got fired for underestimating a certain cash cow. But then they turn around and blame Colin Campbell and other oil depletion analysts for using the original and non-reserve growth numbers as proposed and continue to accuse them of "doomstering" because they keep missing the peak date. Of course you can perhaps fairly accuse Campbell of naivete in his estimates, but some deep-seated intellectual dishonesty prevents most everyone else in the oil industry from alerting us just why Campbell has made his own mistake of conservatism -- exactly the thing that the petroleum engineers practice and condone within their own profession.

So, 'fess up to where these "bad" numbers come from and we can take you geologists and petroleum engineers seriously. Right now I believe Campbell more than your brethren because at least he does not fly the flag of hypocricy.

I submit a suggestion on your road to redemption. Get rid of the euphemisms that call attention to the sunny optimism, and practice some honesty. As a first step I suggest that you don't call it "reserve growth", but instead refer to the issue as "bad estimate corrections". If you don't like that idea, I will give you a shovel and you can keep on digging a deeper hole.


Professor Anonymous Anonymous said...

Could it be that the great fields of the ME like Ghawar will extend their reserves similar to the Attanasi and Root growth functions?
If so, I expect to find you and Stuart Staniford of The Oil Drum crying in your beer at the old blogger's rest home one day ;.)

It seems to me that the long tail of the U.S. Hubbert curve is related to this reserve growth phenomena. Perhaps you could use a factor of, say 5 to multiply the reserves of any new fields coming on stream, and for fields discovered in the past 10 years, when plotting the path of oil depletion. How would your projections look under this assumption?

7:07 PM  
Professor Blogger @whut said...

That's why we do the math modeling, to get the insight. My model has a natural tail built into it, caused by the Markovian assumption that the rate of extraction is proportional to the amount left in the reservoir. The law of diminishing returns leads to long tails. I use this in the USA model and it sure does show up. Why do you think the thousands of stripper wells exist, each drawing in a few barrels per day? Remnants from once much larger supplies.

What you also forget is that the reserves are included in the model as backdated predictions.

The Saudis have the reverse problem. They may overstimate their reserves. Allah never fired anyone for exaggerating the power of their religious beliefs.

4:31 PM  

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