Dr. Sami Alnuaim: Global oil reserves

As a result to the comments/discussion I had received in relation to the article that I wrote and was published in this column two weeks ago under the title: ‘The Falsehood of Peak Oil Theory’, I would like to further clarify my opinion by defining the term “Hydrocarbon Reserves” as per the official definition of the Society of Petroleum Engineers (SPE), the international official nonprofit Petroleum Engineering Professional Society.  Hydrocarbon Reserves are defined as “those quantities of petroleum resources claimed to be commercially recoverable by application of development projects to known accumulations under defined conditions”. Reserves must satisfy four criteria to be claimed and used in what is called Petroleum Studies. They must be:

•  Discovered through one or more exploratory wells
• Recoverable using existing technology
• Commercially viable (can be produced economically)
• Remaining in the ground (not including what was produced already).
It is also important to admit that all reserve estimates involve uncertainty, depending on the amount of reliable geologic and engineering data available and the interpretation of those data. However, the relative degree of uncertainty can be expressed by dividing reserves into two principal classifications — “proven” (or “proved”) and “unproven” (or “unproved”). For example: The 260 billion stock tank barrel reserves estimate reported by Saudi Arabia is mainly “proven reserves” that was calculated based on minimum uncertainty using advanced reserves estimate and simulation tools.

Further to this definition, the current reserve estimates do not include the following:

• New hydrocarbon resources yet to be discovered; knowing that very small percentage of the global land and sea areas went through exploration activities; and not including advanced technologies that will be developed in the future that will help us discover more hydrocarbon resources in current and future exploration frontiers.

• The current remaining unrecovered oil. The current reserves estimates are calculated based on estimated recovery factor using existing technologies. Based on today’s technologies, the average global recovery factor from discovered fields is 35-40%. In Saudi Arabia, this is about 50%. This means that the current reserves estimates does not include 60-65% of the discovered oil that will be left in the ground due to limited technologies! This amount of remaining oil can be added later to the reserves once new technologies are developed to help us recover it from the ground. This is usually referred to as Secondary and Tertiary Oil Recovery.

• Non-commercial discovered hydrocarbon resources. However, with technology evolution, what is not economical today can be very attractive economically tomorrow and the Oil Sand, Shale Oil and Shale Gas boom that we witness nowadays is a good example of this. The US oil industry that claimed reaching the peak on 1970’ is talking today about reaching oil independence state by 2030 through the exploitation of Oil Sand and Shale Oil hydrocarbon resources in North America.

The above mentioned factors that made the concept of Peak Oil not acceptable were well supported by actual data. During the last few decades and despite of the high oil production, several major oil countries succeeded in maintaining its reserves estimates; others had indeed increased its reserves estimates.

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