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Campbell replies to USGS: Global Petroleum Reserves - A View to the Future
by iNet News Manager
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•• Dec. 1, 2002 •• SolarQuest® iNet News Service •• A Reply by C.J.Campbell to “Global Petroleum Reserves - A View to the Future” by Thomas S. Ahlbrandt and J.McCabe, United States Geological Survey, Published in Geotimes, November 2002

Ahlbrandt and McCabe have written an elegant article choosing their words with extreme care to present what seems to be an authoritative account of the world’s oil and gas situation, based on a study made by the United States Geological Survey in 2000. But a closer look shows it to be a thoroughly flawed study that has done incalculable damage by misleading international agencies and governments.

The study was in fact a marked departure from earlier sound evaluations made by the USGS over a thirty years period under its previous project director, the late C.H.Masters. He showed that he understood the situation well, using great skill to deliver the message, albeit at times between the lines, as he recognised its sensitive nature.

Neither of the authors claim practical oil experience. That is betrayed by their mindset, which is more appropriate to the mining geologist for whom resource concentration is as important as occurrence. They say they speak to a Mr Green of Exxon, but we do not know what he tells them or with what motive: another spokesman in the same company reportedly made the succinct comment: “you get what you pay for, and that came free”.

It is an old trick for the politician to answer a question that is not asked. No one need be seriously concerned about when the last drop of oil will be produced. What matters - and matters greatly - is the date when the growth of past production gives way to decline from resource constraints. This is the transcendental issue, given the world’s dependence on abundant oil-based energy, furnishing 40% of all traded energy and 90% of transport fuel, essential to trade. The USA itself experienced the discontinuity in 1971, and the same pattern of growth to decline has been repeated from one country to another around the world. A recent example is the United Kingdom, with production peaking in 1999, twenty-seven years after peak discovery. Production inevitably has to mirror earlier discovery after a time lag. The world peak of discovery was in 1964, so it should surprise no one that a corresponding peak in production is now imminent. It is so self-evident, even if our eyes are too blinkered to see it.

The authors present the comforting notion of a resource pyramid implying that the World can seamlessly move to more difficult and expensive sources of oil and gas when the need arises. But there is a polarity about oil that they fail to grasp: it is either present in profitable abundance or not there at all, due ultimately to the fact that it is a liquid concentrated by Nature in a few places having the right geology. They speak of “crustal abundance” when a glance at the oil map shows clusters of oilfields separated wide barren tracts.

They give emphasis to “reserve growth” as a new element, dismissed by their predecessor, yet fail to point out that the text of the study itself expresses grave reservations. “Growth” is in fact more an artefact of reporting practices than a technological or economic dynamic. In short, reserves described as Proved for financial purposes refer to what has been confirmed so far by drilling, saying little about the full size of the field concerned. Clearly, it was absurd to apply, as the study did, the experience of the old onshore fields of the USA, with their special commercial, legal and reporting environment, to the offshore or international spheres, where very different conditions obtain.

The authors speak of their impressive probabilistic methods, which in the study allowed them to quote estimates to three decimal places. In, for example, the famous case of little known NE Greenland, the study states with a straight face that there is a 95% subjective probability of more than zero, namely at least one barrel, and a 5% probability of more than 111.815 Gb (billion barrels). A Mean value of 47.148 Gb is then computed from this range, being incorporated in the global assessment. Can we really give much credence to the suggestion that this remote place, that has so far failed to attract the interest of the industry, holds almost as much, or more, than the North Sea, the largest new province to be found since the Second World War? Could this be pseudo-science at its best?

Turning to the actual estimates, the authors state that the sum of past production, reserves, reserve growth and undiscovered comes to about three trillion barrels, but then claim that the peak of production will not arise before the mid-Century. Experience shows that the onset of decline comes at, or before, the midpoint of depletion, due largely to the immutable physics of the reservoir that impose a gradual decline on production towards exhaustion. Depletion Midpoint on their estimates will come when 1500 Gb have been produced, which will be around 2020 at present production rates, or sooner if demand should rise. A mid-Century peak implies precipitate fall thereafter, which is implausible. But even this line of reasoning does not paint the full picture, because it fails to distinguish the different categories of oil. There is clearly a huge difference between a Middle East free flowing well and digging up a tar-sand in Canada with a shovel. As the authors themselves state, there will be an increasing reliance on heavy oils, low on their resource pyramid, which are slow to produce and will not contribute significantly until after global peak for obvious commercial and environmental reasons. The USGS study did not forecast production itself, but simply indicated the amounts to be found over the 30-year study period. But the internal evidence, flawed as it is, indicates a peak long before the mid-Century. If that were not enough, we can now compare the actual results with forecast over the first seven yours of the study period. The indicated average annual discovery is 24 Gb, whereas the actual has been less than half that amount. This is doubly damning because it would be normal to expect the larger fields to be found first as the past record amply confirms.

What the USGS failed to do was to extrapolate past discovery trends in the world’s mature basins, containing most of its oil and gas, having properly backdated reserve revisions to the discovery of the respective fields. It is axiomatic that a field is found by the first successful borehole drilled into it, even if its size is not exactly known at the outset. Had the USGS done that, it would have had the benefit of the considerable experience of the oil industry working in the real world, which is likely to give a better view of the future than abstract geological assessment couched in subjective probability ranking.

The authors accuse those who draw attention to the manifest failure of the study as having hidden agendas, introducing the colourful but unhelpful designations of Cornucopian and Malthusian, when all we seek is a realistic assessment of this critical issue.

The article reviews two specific areas: the Caspian and Iraq. Is it a coincidence that the United States earlier this year attacked Afghanistan, which borders the Caspian, and now turns its guns on Iraq? Let us hope that its foreign policy is not being influenced by this thoroughly flawed work. We can forgive its authors for having got it wrong as it is a difficult subject, calling for long years of experience, as marshalled by their predecessor, but to perpetuate the error with persuasive language and specious argument verges on the culpable.

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