[DoctorDoom]

Just for laughs, I tried running some computer simulations of the peak. What I found, I think, is that there is something a bit fishy with the baseline numbers people are using to forecast the peak year by 2010. The main problem is this: if the peak occurs too soon in relationship to the reserves, then declines at a 3% rate, the R/P ratio will bottom out too soon and then begin to rise again. This is because cumulative production, deducted from the reserves, is not keeping pace if you allow the drop to proceed at 3%. This seems counter-intuitive to me; most past-peak fields around the world see their R/P ratios drop to fairly low numbers, like 10-15 years. This implies that rather than computing production as X% of prior year, it might make more sense to compute it as X% of remaining reserves. If you do this you get a later peak followed by a steeper decline.

Using 2% demand growth, BP's current reserve estimates, and low numbers for all remaining yet-to-find/reserve-growth, it's very easy to put the peak out in 2020-2025 while not allowing the R/P ratio to drop below 15. The post-peak decline is breathtaking, of course.

The worst-case scenario peaks at 118 Mb/day, with an R/P ratio of 15 on the remaining 608 Gb of reserves. Production has to fall to half this by 2035 to stay at R/P = 15, a disastrous descent. Any earlier than that, say 2010 or 2015, and you can hold a plateau until 2025 while allowing the R/P to drop to no worse than around 20 years.

My point is this - if the peak is near, we can probably count on a long plateau; it's not reasonable to assume that we'd allow ourselves to starve while the R/P ratio bottoms at 30 and then heads back up. The only way to make the R/P ratio continue to slide is to reduce the rate of decline to 1-2%, or put a decade of flat production into the model. Either way, there's a good 15 years in which to get our act together. Perversely, peaking later is worse because of the steepness of the decline. Even then, you still have 15 years before the SHTF.

Here's the 2025 crash-and-burn:

$this->bbcode_second_pass_code('', '
Production USA Reserves Conv
Year Conv Hvy mbd w% ef% Conv Hvy R/P
2005 80 0 20 25 0 1126 100 38
2006 81 0 20 24 1 1107 100 37
2007 83 0 20 24 3 1086 100 35
2008 84 0 20 23 5 1066 100 34
2009 86 0 19 23 7 1044 100 33
2010 88 0 19 22 9 1022 100 31
2011 90 0 19 22 10 999 100 30
2012 91 0 19 21 12 976 100 29
2013 93 0 19 21 13 952 100 28
2014 95 0 19 20 14 928 100 26
2015 97 0 19 20 16 902 100 25
2016 98 0 19 19 17 876 99 24
2017 100 1 19 19 18 850 98 23
2018 101 2 19 19 19 823 97 22
2019 102 2 19 18 20 796 96 21
2020 104 3 19 18 21 768 94 20
2021 105 4 19 17 24 740 92 19
2022 108 4 19 17 26 710 90 18
2023 110 4 18 16 28 680 87 16
2024 112 4 18 16 30 649 85 15
2025 112 4 18 15 33 608 83 14
2026 111 4 18 15 35 568 81 14
2027 103 4 17 16 36 530 79 14
2028 96 4 17 17 38 495 77 14
2029 90 4 17 18 40 462 74 14
2030 84 4 16 18 42 432 72 14
2035 60 4 14 22 50 306 61 14
2040 42 4 14 31 49 218 50 14
2045 30 4 14 42 49 155 39 14
2050 21 4 14 57 49 110 28 14
2055 15 4 14 76 49 79 17 14
')

Here's the not-quite-right 2010 plateau that has us starving ourselves while the R/P climbs in the out years:

$this->bbcode_second_pass_code('', '
Production USA Reserves Conv
Year Conv Hvy mbd w% ef% Conv Hvy R/P
2005 80 0 20 25 0 1126 100 38
2006 81 0 20 24 1 1107 100 37
2007 83 0 20 24 3 1086 100 35
2008 84 0 20 23 5 1066 100 34
2009 86 0 19 23 7 1044 100 33
2010 86 0 19 23 9 1023 100 32
2011 86 0 19 23 10 1002 100 31
2012 86 0 19 23 12 980 100 31
2013 86 0 19 22 13 959 100 30
2014 86 0 19 22 14 937 100 29
2015 86 0 19 22 16 916 100 29
2016 83 0 19 23 17 896 99 29
2017 80 1 19 24 18 877 98 30
2018 78 2 19 24 19 858 97 30
2019 76 2 19 25 20 840 96 30
2020 73 3 19 25 21 824 94 30
2021 71 4 19 25 24 808 92 31
2022 69 4 19 26 26 793 90 31
2023 67 4 18 26 28 778 87 31
2024 65 4 18 26 30 764 85 32
2025 63 4 18 27 33 741 83 32
2026 61 4 18 27 35 719 81 32
2027 59 4 17 28 36 698 79 32
2028 57 4 17 28 38 677 77 32
2029 56 4 17 28 40 656 74 32
2030 54 4 16 28 42 637 72 32
2035 46 4 14 28 50 547 61 32
2040 40 4 14 32 49 470 50 32
2045 34 4 14 38 49 404 39 32
2050 29 4 14 43 49 347 28 32
2055 25 4 14 49 49 299 17 32
')

Here's an in-between case with the plateau in the 2015-2020 range; we still starve in the out years but it's not for lack of trying as the R/P falls to 15:

$this->bbcode_second_pass_code('', '
Production USA Reserves Conv
Year Conv Hvy mbd w% ef% Conv Hvy R/P
2005 80 0 20 25 0 1126 100 38
2006 81 0 20 24 1 1107 100 37
2007 83 0 20 24 3 1086 100 35
2008 84 0 20 23 5 1066 100 34
2009 86 0 19 23 7 1044 100 33
2010 88 0 19 22 9 1022 100 31
2011 90 0 19 22 10 999 100 30
2012 91 0 19 21 12 976 100 29
2013 93 0 19 21 13 952 100 28
2014 95 0 19 20 14 928 100 26
2015 95 0 19 20 16 903 100 26
2016 95 0 19 20 17 878 99 25
2017 95 1 19 20 18 854 98 24
2018 95 2 19 20 19 829 97 23
2019 95 2 19 20 20 804 96 23
2020 95 3 19 20 21 780 94 22
2021 92 4 19 20 24 756 92 22
2022 89 4 19 20 26 733 90 22
2023 86 4 18 20 28 712 87 22
2024 84 4 18 21 30 691 85 22
2025 81 4 18 21 33 662 83 22
2026 79 4 18 21 35 633 81 21
2027 76 4 17 22 36 605 79 21
2028 74 4 17 22 38 578 77 21
2029 72 4 17 22 40 552 74 21
2030 70 4 16 22 42 526 72 20
2035 60 4 14 22 50 411 61 18
2040 51 4 14 26 49 311 50 16
2045 44 4 14 30 49 226 39 14
2050 31 4 14 41 49 161 28 14
2055 22 4 14 55 49 114 17 14
')

[Aaron]

could you graph that for us?

[DoctorDoom]

Assumptions:

Reserves = 1146 Gb (from BP)
Yet-to-find = 100 Gb at 5 Gb / year for 20 years, 0 afterwards
Reserve growth = 100 Gb at 5 Gb / year for 20 years, 0 afterwards
Venezuela heavy crude: 100 Gb (conservative, based on quoted numbers that 15% of their over 1000 Gb of reserves is produceable at $15/barrel; assumes energy profit ratio is 3:1, meaning each of these barrels is effectively 2/3 of a conventional barrel.
Baseline 2005 = 80 Mb/day.
Growth = 2% / year until peak
Decline = 3% / year post-peak until R/P limit reached
R/P minimum = 15 years (production max = 7% of remaining reserves)
Heavy crude cannot be produced at greater than 6 Mb/day (4 net of energy costs).

Legend for charts:
Production numbers are in Mb / day
Reserves are in Gb
R/P is in years and doesn't include the "heavy" numbers

USA numbers can be ignored. They represent an attempt to see what effect a change in US policy might have. US demand starts at 20 Mb/day and grows at 1.5% per year before policy effects. The policy modelled is to increase mpg requirements from current average of 20 to an average of 40, this is done over 15 years as the US fleet of autos is turned over. After this, efficiency of everything including autos must improve at 3% per year until the US is using energy at the same rate as Germany (50% of current US per-capita consumption). The numbers printed are the US demand in Mb/day, % of world production that represents, and the % energy efficiency the US has achieved (maximum of 50%).

[DoctorDoom]

$this->bbcode_second_pass_quote('Aaron', 'c')ould you graph that for us?

[Pops]

I'm a real visual guy too Doc.

Go to: www.zippimages.com there is free hosting and no registration, although there is a limit to the time it will appear.

Then click {Img} in the post reply window and point it at the host.

[rowante]

DoctorDoom's work needs to be in the submit to the experts forum. Aaron?

[Cool Hand Linc]

I have trouble with it too. What does it all mean?

[Onyered]

In the last paragraph you said, “unless growth increases”. So are you factoring in the world demand increase? Maybe that would account for the difference in the dates.

[Aaron]

$this->bbcode_second_pass_quote('', 'A')ssuming I could, how would I post an image to your server?

[smiley]

I’ve been thinking about that myself since I noticed that R/P ratios in S&C America where increasing despite falling production. I came to the conclusion that R/P ratios can run higher despite falling production.

I was first seeing the R/P ratio as the amount of production left. Therefore you will intuitively think that R/P ratios are going to decline with production.

On the other hand you can also see the R/P ratio as a measure of efficiency. It indicates how efficient you produce your reserves.

If you have a field of size R you can produce P with standard production methods.

If you introduce technology, which facilitates production but not increases reserves (like water lifting), your production (P) will increase and the R/P ratio will fall.

If you decide to cap some of your production to save your reserves for later (like OPEC did) your production (P) will fall and the R/P ratio will rise.

If your oil is harder to produce (complex reservoirs), production will be relatively low and the R/P ratio relatively high.

This appears to be the case in South and Central America.

For instance in Venezuela the extra heavy oil reserves are very large. However the production of these fields is very complex and slow. Therefore such a field will have an extremely high R/P ratio.

If you use this definition you can understand why a R/P ratio can rise despite falling production. The decreasing R/P ratios from the ordinary fields are counteracted by the addition of new fields with very high R/P ratios.

[Ender]

$this->bbcode_second_pass_quote('smiley', 'I')’ve been thinking about that myself since I noticed that R/P ratios in S&C America where increasing despite falling production. I came to the conclusion that R/P ratios can run higher despite falling production.

If you use this definition you can understand why a R/P ratio can rise despite falling production. The decreasing R/P ratios from the ordinary fields are counteracted by the addition of new fields with very high R/P ratios.

[pup55]

Do us a favor and re-run your model using "zero" reserves growth, and re-figure the peak.

Seems to me like "reserves growth" is related to somebody's estimate of the ability of new technology to find new oil in existing holes, therefore the number is "soft", that is, it might be overly optimistic and/or pessimistic. It would be interesting to know the sensitivity of the peak to this number.

[Aaron]

I think that these reserve revisions are based on past experience with technology increasing ultimate recoverable. While certainly true for the past, the assumption that new technology will continue this trend is suspect.

It's similar to estimating new discoveries based on past trends... these historic estimates fail to account for the impact of these historic finds on possible future finds.

[DoctorDoom]

$this->bbcode_second_pass_quote('Onyered', 'I')n the last paragraph you said, “unless growth increases”. So are you factoring in the world demand increase? Maybe that would account for the difference in the dates.

[notacornucopian]

Great work DD !

Regarding the Alberta tars sands number, the EUB report says 174 billion barrels remaining established recoverable, if that helps. The initial endowment is over a trillion barrels but the ultimate recoverable is noted as just over 300 billion barrels. Check this link if you want to look at it further www.eub.gov.ab.ca/bbs/products/STs/st98-2004.pdf
( the numbers above are found in the first few pages )

I wouldn't place a lot of value in the USGS numbers for yet to discover, either. If you have ever seen their yet to discover number plotted from where historical discovery leaves off, the " median " number they use for estimating future finds is completely implausible. I don't think I would use anything beyond their P90 number for future discovery in a model of this kind.

[smiley]

Doctordoom

I've been thinking some more on your model. A while back I tried to derive a simple model using two gaussians for exploration and production. Using gausians means that you only have to worry about two parameters and the area under the peak will be allways equal.

It works fine and if you fit it to production data you get a peak around 2000. It is essentially the same that Hubbert did. Only the oil crisis in the 70's is messing things up.

But it gives you a basic idea how the different parameters should behave. From that you can calculate the R/P ratios (Integral of exploration minus production) divided by production).

However if you start using the BP data you get a total mess and the peak shifts to 2060-2080. That is because the exploration data provided by Campbell and Laherre peak in the 60's. The reserve growth in the BP-data has not yet peaked.

In fact according to them the world R/P ratio has hovered around 40 for 20 years, which means that each year we find 40 times as much oil as we produce.

Perhaps if you cut the reserves by 20% (the Shell factor) you'll find that the need for a plateau disappears.

[DoctorDoom]

$this->bbcode_second_pass_quote('notacornucopian', 'R')egarding the Alberta tars sands number, the EUB report says 174 billion barrels remaining established recoverable, if that helps.

[Aaron]

DD.

Sent you an email...

received?

[pup55]

So the two changes you made, namely the reserves growth and the estimate of discoverable only really changed the "plateau" by a year or so, if I am seeing it correctly.

So the next question is, what magnitude of change in reserves growth/discoveries would give you a plateau at some comfortable time out into the future, say for example, 2050 or so? How much new oil would we need to find and/or obtain by improved technology to get us out that far, given the current consumption rate?

[smiley]

Aaron wrote

$this->bbcode_second_pass_quote('', 'N')o - you only have to find as much as you use, + 40 times the amount of the year-over-year growth. So, if you used 24 Gb during a particular year, and the next year it's 25 Gb, you don't need to find 1000 Gb to hold the R/P at 40, you just need to find 25 + 40 = 65.