[DoctorDoom]

I've seen people throwing around alarmingly large depletion rate numbers lately. For example Simmons, using 8%, predicts we'll be down to 25 mbd by 2020. Is this at all plausible?

When I first started crunching the numbers on depletion over a year ago, I concluded that in the long run, the reserve/production (R/P) ratio and the depletion rate must eventually be inverses of each other. Decline slower than the inverse R/P ratio, and the ratio gets ever smaller, decline faster and the ratio gets ever larger. Eventually, you must revert to the inverse ratio, either by experiencing an extremely rapid decent as the ratio gets too small, or by flattening out to a low decline rate as the ratio gets large. This is because the numerator, R, is dropping by an amount equal to the inverse of the R/P ratio, while P is dropping by whatever depletion rate you're using.

Some examples may help. I'll round off numbers from BP's world energy report: let's suppose R is 1200 Gb and P is 30 Gb/year (82 mbd). R/P is 40. Don't believe BP's estimate for R? Fine, use 900 Gb and R/P is 30, it doesn't change the argument. I am assuming zero reserve growth and zero new discoveries - the analysis assumes your reserves are all there is to produce, and the R/P ratio is the inverse of your "burn rate".

With an R/P of 40, you can hold steady at that R/P with a decline of 2.5% per year. Decline slower than that, and R/P will contract. For example, suppose we can prop up world production at 30 Gb for 10 years, a 0% decline rate. R/P will drop to 30 as R drops to 900. At some point, you will be forced to decline, in this example a decline of 3.33% could set in after 10 years of flat production. Hold flat for 20 years and R/P drops to 20, and you can then decline at 5%.

Exactly the opposite happens if you decline faster than inverse R/P. Suppose we take the 8% decline starting year 1. R drops by 30 Gb, to 1170, but P drops by 8%, to 27.6 Gb. R/P then increases to 42.4 years! Compounding it for 14 years as Simmons does will indeed drop P to 9.33 Gb / year (around 26 mbd). However, the cumulative P for that time period has been 259, leaving R at 941. The R/P ratio is now over 100 years, and still climbing!

That just doesn't seem reasonable to me. Experience with mature producers (such as the US) shows that R/P ratios drop as they deplete. Many mature producers have R/P ratios of 10 or lower. An 8% decline rate is consistent with an R/P ratio of 12. Given current world reserves, I could believe a short-term 8% decline due to infrastructure constraints etc., but it's hard to believe we're about to start down at 8% for a prolonged period unless the reserve estimates are inflated by a factor of 4. It also seems unlikely that there really will be zero increases in reserves for the next 14 years.

P.S. if the R/P does soar to 100 in response to a production crash, a 1% decline could set in from 2020 onward. At 8%, at some point absolute production must decline to the point where the trend reverts and the decline rate drops. Based on the experience with depleted producers such as the USA, we won't see R/P numbers like 100 for conventional oil. We might see them for tar sand production, though.

[MattSavinar]

So basically you're saying you think we're fucked.

Best,

Matt

[mekrob]

One thing that you seem to forget to use is the difference types of oil. It makes perfect sense to have an R/P of 100 if the oil that is left is extremely heavy, spaced far apart, it's source rock is not very porous, etc and simply just doesn't have a high production rate. By your calculations, you seem to give the impression that oil is completely homogenous in its occurrences around the world. It is not. Any complete analysis of oil depletion and its models needs to take this fact into account. Another main factor would be the net energy yielded as it becomes increasingly difficult to extract more energy (that is afterall what we want, not oil). Peace

[pup55]

Here is a little model for you:

$this->bbcode_second_pass_quote('', ' ')Growth Rate 0.08
decline ratio 0.08
Reserves Production r/p ratio
1 1200 30.00 40.00
2 1170 32.40 36.11
3 1138 34.99 32.51
4 1103 37.79 29.18
5 1065 40.81 26.09
6 1024 44.08 23.23
7 980 47.61 20.58
8 932 51.41 18.13
9 881 47.30 18.62
10 834 43.52 19.16
11 790 40.04 19.73
12 750 36.83 20.36
13 713 33.89 21.05
14 679 31.18 21.79
15 648 28.68 22.60

[mrobert]

Or you can print billions of dollars and open long term contracts to buy crude oil. The markets will react and will generate the oil supply.

Simple as that.

[WebHubbleTelescope]

Look at this blog post by me and you can begin to understand the dyanamics of reserve:
http://mobjectivist.blogspot.com/2006/0 ... roven.html

It boils down to this relationship:
Reserve = Cumulative(Discoveries) - Cumulative(Production)

You can figure out where reserve peaks by taking the derivative and setting it to zero:
dReserve/dt = Discoveries - Production = 0

Then you get curves that look like the second graph from the first for Norway;





So reserves peaked around 1990, if not before, for Norway.

[DoctorDoom]

$this->bbcode_second_pass_quote('MattSavinar', 'S')o basically you're saying you think we're fucked.

Best,

Matt

[LadyRuby]

$this->bbcode_second_pass_quote('DoctorDoom', '[')Norway: 8.9
UK: 6.1
USA: 11.8
Venezuela: 72.6
Kazakhstan: 79.6
Iran: 93.0
UAR: 97.4
Libya: 63.0
Saudis: 65.6

So, a pop quiz: which of these countries are likely post-peak?

[DoctorDoom]

Here's another take on the same basic issue.

Suppose you have a decline rate R (e.g. R = 8%). This implies that production P asymtotically approaches 0 over an infinitely long time period. Cumulative production over the same infinite amount of time is then given by 1/R (derivation if requested, or you can just look it up in a math textbook).

In other words, 1.00 + 0.92 + 0.84 + ... = 1/.08 = 12.5. So, at 8%, you can expect to recover 12.5 x 30Gb = 375 Gb after an infinite amount of time. Thus the implication is that 1200 - 375 = 825 Gb will never be recovered. This is the problem with a decline rate that exceeds the R/P ratio - you end up asymtotically approaching 0 production but a non-zero "plateau" of reserves never get produced no matter how far out you run the graph.

The problem with a decline rate exceeding the R/P ratio is obvious, but for the sake of completeness, consider the Norwegian example. At some point Norway's production will have to crash. The R/P ratio is 8.9 now, so a decline of 11% (or higher) seems inevitable. If they somehow stave off further decline for another 4 years, the R/P ratio will drop to 5, and a 20% (or greater) decline is inevitable. At an extreme R/P of 1, a 100% decline might reasonably be forecast. Obviously a reversion of the decline rate to something like the inverse R/P is inevitable.

If you believe BP's numbers, current world R/P is 40, where, barring any new discoveries or reserve growth, it could remain forever at a 2.5% decline rate. If a greater decline (e.g. 8%) were to set in immediately, it would at some point be arrested by the ballooning R/P - to believe otherwise is effectively to disbelieve the reserve numbers. Conversely, each year that we go without a decline in P, we will inevitably have that much steeper a decent on the back end.

We could certainly see a prolonged 8% decline on the back-end - but only, in my view, after an initial period of flat or uptrending production. 15 years of 2% growth and you top out at around 110 mbd in 2020, at which point you have 660 Gb remaining and your R/P is down to 16.5, after which a 6% decline could in theory continue forever.

[EnergySpin]

$this->bbcode_second_pass_quote('DoctorDoom', '
')When I first started crunching the numbers on depletion over a year ago, I concluded that in the long run, the reserve/production (R/P) ratio and the depletion rate must eventually be inverses of each other.

[WebHubbleTelescope]

$this->bbcode_second_pass_quote('EnergySpin', '
')Eq(2) P(t) = - dR(t)/dt (Conservation of mass)

[EnergySpin]

$this->bbcode_second_pass_quote('WebHubbleTelescope', '')$this->bbcode_second_pass_quote('EnergySpin', '
')Eq(2) P(t) = - dR(t)/dt (Conservation of mass)

[DoctorDoom]

The actual text of Gould's speech (April, 2005):

http://newsroom.slb.com/press/inside/ar ... icleID=213

<i>
Secondly, the industry is dealing with a phenomenon that is exaggerated by the lack of investment over the past 18 years. This phenomenon is the decline rate for the older reservoirs that form the backbone of the world’s oil production, both in and out of OPEC. An accurate average decline rate is hard to estimate, but an overall figure of 8% is not an unreasonable assumption. The maintenance required to slow the rate of decline, and increase the overall recovery, is a key element of the supply picture going forward.
</i>

Text of more recent speech (June 2006):

http://newsroom.slb.com/press/inside/ar ... icleID=237

<i>
Five factors make the current situation somewhat complex. The first of these is the prevailing high price of oil caused by a combination of increased demand, a lack of renewal of the production base in the twenty years that prices were low, and the re-appearance of the peak oil theorists who amplify the factor of scarcity or fear. Geology and economics do not sit well together in academic arguments, but in my view the availability of new resources at current prices is not in doubt. The resources may not always be where people would like them, and not always of a quality we would like, but they are there.
</i>

[Shiraz]

The Simmons 8% comment is a hard one to work out. He knows the context in which it was delivered.

Either Simmons is deliberately misrepresenting here, or he is alluding to the possibilty that a global peak oil downturn cause such instability so as to make infill drilling and new drilling impossible in the middle east.

My money is on the former. My impression is that Simmons is getting frustrated by the difficulties in getting a response on this topic. It must be tempting to exaggerate the meaning of genuinely scary numbers.

[WebHubbleTelescope]

$this->bbcode_second_pass_quote('EnergySpin', '')$this->bbcode_second_pass_quote('WebHubbleTelescope', '')$this->bbcode_second_pass_quote('EnergySpin', '
')Eq(2) P(t) = - dR(t)/dt (Conservation of mass)

[WebHubbleTelescope]

$this->bbcode_second_pass_quote('Shiraz', 'T')he Simmons 8% comment is a hard one to work out. He knows the context in which it was delivered.

Either Simmons is deliberately misrepresenting here, or he is alluding to the possibilty that a global peak oil downturn cause such instability so as to make infill drilling and new drilling impossible in the middle east.

My money is on the former. My impression is that Simmons is getting frustrated by the difficulties in getting a response on this topic. It must be tempting to exaggerate the meaning of genuinely scary numbers.

[mrobert]

I have done loads of advanced math ... but math is not our answer.

Peakoil should be as important of an issue, as the color of toilet paper, given our current technological knowledge.
Here I am, replying to this thread, using a laptop which is state-of-the art, and uses 35Wats.
I have a dim night-light that uses 5 wats.

I can go on with this energy usage, forever.
I have done a lot of science in my life, and I lectured these subjects about 10 years ago.

"They will sort it out", was always the answer.
There is NO "they" .. it's up to us.

[WebHubbleTelescope]

$this->bbcode_second_pass_quote('mrobert', 'I') have done loads of advanced math ... but math is not our answer.

[mrobert]

@WebHubbleTelescope : We are on the same side Sorry if you got me wrong. It wasn't my attention.

There is one very important factor that wasn't plugged into the ecuation. That's human nature, and we can't estimate it.

Do you think the graph of depletion/available resources will follow the rules of math, once people will realise what's ahead?

9 out of 10 people I mentioned PeakOil to, took me for a fool.
And I mentioned it to people with a high degree of education.
What we should calculate, is the moment when people will realize and things will get out of control.

I am not a doomer, but I know human nature very well.

It was 5 years ago, I have seen half the city I lived in, plugged of central heating, hot water, etc ... because the price went to high for them to pay. They spent the winter in houses with no heating, using cold water, etc.

PeakOil has already began. Maybe not in your country, but on a global view, it's here already.

Oil will last at least another hundred years. BUT. But not for everybody. The question is then :

When will the people that lack the precious fossil energy, get out of control?

In our capital, 800.000 people haven't paid for their heating, warm water, etc. Offcourse, the obvious solution is : pay it from tax payers money, and erase their debt (will happen in a few months).
That is why every day, more then half the economical news I read, is the invention of new taxes, to cover the mess.
But for how long will that work?

As someone mentioned in another thread, population will shift and form "colonies" for the skilled, smart and hardworking.

Our country "lost" 10% of it's population over the past years, ye the rate of mortality and the birthrate were pretty much unchanged. People got fed up and left the country. The interesting part is, that every person I personally know to have left the country, are smart and hard working.

Unfortunately, as nice as your math is ... it won't work following those calculations.

-----------

With more then 50% of the world population existing today, simply due to the fact that we were able to harvest cheap resources and keep everyone happy, do you think it will make a difference when they will vanish? It will, but a "good" one.
More then 50% of the world's population, it's useless.

Don't get me wrong ... but growing up, and in 20 years not beeing able to learn anything, and expecting the government to keep you live ... makes someone totally useless.

my 2 cents of the math of depletion

[WebHubbleTelescope]

mrober:
Granted on the human element in the equation. However, the parameter that remains constant to the first order is the driving force of greed. I don't think that we can ever moderate or throttle the effect of greed; modifications of greed likely exists as a second order effect, but statistically this would get swamped by other variations. If we try to legislate greed away, I have a feeling it will just move to other companies/countries.