I'm in the process of working up a new model, starting with oil reserves and depletion. I've run into a problem that I'm hoping someone can clear up for me.
I am using as a source the BP World Energy Report (2004), which states here that they used "proved reserves" (P90):
http://www.bp.com/genericarticle.do?cat ... Id=2004232
However, Campbell's work, which has very similar-looking reserve numbers (modulo some adjustments he makes because he thinks the ME countries are lying), says he's using P50 reserves. If you recall my previous model, I wondered about possible reserve expansion due to the difference between P90 and P50 reserves. Campbell deals with this issue very cleanly by using P50 numbers and assuming that because the population of wells is so large, the numbers will average out to being correct (the definition of P50).
So who's right? At least one other source I found (quoted third hand on another board) seems to indicate the numbers are P50s. But I can't believe BP would make a fundamental error of this sort (the worst I'd accuse them of is being too trusting of numbers from the ME).
Here are the baseline numbers for 2003, sources are BP (for the reserve numbers) and this source for actual 2003 production numbers:
http://www.photius.com/rankings/oil_production_0.html
$this->bbcode_second_pass_code('', '
Producer Mb/day Gb R/P
UK 2.541 4.7 5.1
Norway 3.408 10.0 8.0
Indonesia 1.451 4.7 8.9
USA 8.054 30.7 10.4
Middle East 1.900 8.8 12.7
Mexico 3.590 17.2 13.1
Africa 2.100 11.2 14.6
Asia 3.300 19.1 15.9
South America 2.200 13.5 16.8
Canada 2.738 17.6 17.6
Brazil 1.561 9.8 17.2
Algeria 1.520 11.3 20.4
China 3.300 23.7 19.7
Europe 2.600 22.8 24.0
Russia 7.286 67.0 25.2
Angola 0.742 8.9 32.9
Quatar 0.864 15.2 48.2
Nigeria 2.256 34.3 41.7
Libya 1.429 36.0 69.0
Venezuela 3.080 77.2 68.7
Kuwait 2.117 96.5 124.9
UAE 2.566 97.8 104.4
Iran 3.804 130.7 94.1
Iraq 2.452 115.0 128.5
Saudi Arabia 8.711 262.8 82.7
')
PeakOil is You
P90 versus P50 numbers
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R/P ratios
by Doctor Doom » Tue 29 Jun 2004, 16:49:25
Now referring to the numbers in the previous post, I want to make some observations based on R/P ratios. Recall in the earlier discussion that in the limit, the R/P ratio must be 1/depletion rate.
So, looking at the pask-peak producers, it seems clear that we can expect their production to fall very fast. Let's take the UK. With an R/P of 5, they can pump for 5 more years and then fall to 0, or they can decline at 20% / year and hold the R/P constant. Or they can decline at more than 20% / year until the R/P comes back up to something like 10. You can pretty much go down the list and figure how much the production needs to drop to avoid further decline in the R/P ratio, the US by 10% / year, China by 5%, etc. Of course this is before taking into account any reserve expansion or new discoveries. But any way you slice it, if these countries decline by less than the inverse of the R/P ratio, their reserves will go to 0 fast.
Now looking near the bottom of the list, here is the second observation. Let's take the UAE as an example. With an R/P ratio of 104, any decline in production greater than 1% means that the R/P will climb. So, for example, if their production declines by 3%, the R/P ratio will actually go up. This is true for all of the producers with high R/P ratios. It just doesn't make sense that this would happen; it makes more sense that they would at worst sit on a plateau util their R/P ratios started to come down. In fact, I think a strong argument could be made for expanding their production. The Saudis, for example, would have an R/P ratio of 60 if they expanded production to 12 Mb/day.
I am still fiddling with the new model, and in particular I can't seem to make it work nicely for the next few years. The model suggests that production in the mature countries should fall very fast, at rates much greater than 3%, and that we should see that right now (2004). ME production could be ramped up, but this takes time, and so we should be seeing a huge shortfall right now (the model thinks we can't produce more than 75.5 Mb / day for 2004).
I have checked several sources and the only slack is that the Saudis can pump an additional 1 Mb/day over the 2003 number - they actually did that in May 2002 so it's not BS. So I allow the Saudis to raise production by 1 Mb/day for 2004. After this, anything other than a not-very-believable pace of expansion in the ME countries will not be enough to prevent an overall decline in production. In fact, according to the model, it should be happening right now. Eventually, the ME expansion comes on-line and production begins to rise again. The actual peak isn't reached until 2020, by which time Saudi output is 18 Mb / day and their R/P ratio is below 30.
Anyway, still tuning it, but here are the numbers for what I'll call the "twin peaks" scenaro:
$this->bbcode_second_pass_code('', '
World Saudis
Year Mb/day Gb R/P Heavy R/P Mb/day ME5%
2004 75.570 1127.9 40.9 0.000 82.7 10.234 28.9% pre-peak
2005 74.886 1109.1 40.6 0.000 69.8 10.848 30.9%
2006 73.848 1090.3 40.4 0.000 65.1 11.499 33.2%
2007 73.401 1071.2 40.0 0.000 60.7 12.188 35.4%
2008 73.502 1051.7 39.2 0.000 56.5 12.920 37.5%
2009 73.862 1031.7 38.3 0.000 52.5 13.695 39.5%
2010 74.358 1011.2 37.3 1.000 48.8 14.243 41.3%
2011 75.608 990.3 35.9 1.200 46.1 14.812 42.7%
2012 76.301 968.8 34.8 1.440 43.5 15.405 44.4%
2013 77.132 946.9 33.6 1.728 41.0 16.021 46.2%
2014 78.033 924.4 32.5 1.901 38.5 16.342 47.4%
2015 78.403 901.6 31.5 2.091 36.9 16.668 48.8%
2016 78.846 878.4 30.5 2.300 35.3 17.002 50.3%
2017 79.427 854.9 29.5 2.530 33.7 17.342 51.8% begin plateu
2018 79.949 831.0 28.5 2.783 32.1 17.689 53.0%
2019 80.382 806.9 27.5 3.061 30.6 18.042 54.0%
2020 80.622 782.5 26.6 3.367 29.1 18.042 54.8%
2021 80.575 758.1 25.8 3.704 28.2 18.042 55.8%
2022 80.630 733.6 24.9 4.075 27.2 18.042 56.5%
2023 80.691 709.1 24.1 4.319 26.3 18.042 57.2%
2024 80.448 684.5 23.3 4.578 25.3 18.042 57.8%
2025 80.107 660.0 22.6 4.853 24.4 18.042 58.4%
2026 79.666 635.6 21.9 5.144 23.5 18.042 59.1% end plateau
2027 79.278 611.3 21.1 5.453 22.5 18.042 59.7%
2028 78.965 587.1 20.4 5.780 21.6 18.042 60.1%
2029 78.598 563.0 19.6 6.127 20.6 18.042 60.4%
2030 78.145 539.1 18.9 6.494 19.6 17.501 60.1%
2031 76.974 515.6 18.4 6.884 19.3 16.976 60.3%
2032 75.889 492.6 17.8 7.297 18.9 16.467 60.5%
2033 74.856 470.0 17.2 7.338 18.5 15.973 60.7%
2034 73.512 447.7 16.7 7.265 18.0 15.494 61.1%
2035 72.111 425.9 16.2 7.192 17.6 15.029 61.3%
2036 70.437 404.6 15.7 7.120 17.1 14.578 61.5%
2037 68.637 383.8 15.3 7.049 16.7 14.141 61.8%
2038 66.905 363.5 14.9 6.978 16.2 13.716 61.8%
2039 65.051 343.8 14.5 6.909 15.7 13.305 62.1%
2040 63.265 324.6 14.1 6.840 15.2 12.906 61.9%
2041 61.312 306.1 13.7 6.771 14.7 12.054 61.2%
2042 58.774 288.4 13.4 6.703 14.7 11.259 61.2%
2043 56.366 271.5 13.2 6.636 14.7 10.517 61.2%
2044 54.080 255.3 12.9 6.570 14.7 9.824 61.1%
2045 51.909 239.9 12.7 6.504 14.7 9.177 61.1%
2046 49.774 225.1 12.4 6.439 14.7 8.573 60.4%
2047 47.355 211.2 12.2 6.375 14.7 8.009 60.1%
2048 45.076 198.0 12.0 6.311 14.7 7.483 59.9%
2049 42.928 185.5 11.8 6.248 14.7 6.991 59.2%
2050 40.740 173.8 11.7 6.186 14.7 6.532 58.8%
')
The model assumes that producers with R/Ps under 10 have to cut production to maintain the R/P, plus take an additional 10% cut to slowly bring the R/P back to 10. Producers between 10 and 15 are cut by 1/(R/P) to keep R/P constant. Producers between 15-20 are cut a nominal 3%. Producers between 20-30 are held constant. Producers above 30 are allowed to expand production, with expansion allowed at a rate related to the R/P; producers over 50 can expand at 6%, producers over 40 at 4%, producers over 30 at just 2%. The effect is to slowly drive everyone to the same place, the 10-15 R/P range.
Oh yeah, I put in the heavy crude; even Campbell estimates (skeptically) that 700 Gb can be produced from that over 60 years. That's over 3 Mb / day, so it's a significant amount of oil. The model assumes this is developed in 2010 and it ramps up on the same curve as everyone else. I only gave them 300 Gb of reserves, though, because O&G reports I've read state that 15-25% of the 1200 Gb are "economically recoverable". The model also caps production at R/P = 100 to allow for the difficulty of extraction.
The summary: unless we want to see steep declines right away, ME production needs to be ramped up in the next 5 years. Eventually the 5 ME countries at the bottom of the list (with R/Ps in the 100+ range) must account for 60% of world production. The Saudis need to reach 18 Mb / day and their R/P ratio must fall to 30 by 2020 and then continue down.
So, looking at the pask-peak producers, it seems clear that we can expect their production to fall very fast. Let's take the UK. With an R/P of 5, they can pump for 5 more years and then fall to 0, or they can decline at 20% / year and hold the R/P constant. Or they can decline at more than 20% / year until the R/P comes back up to something like 10. You can pretty much go down the list and figure how much the production needs to drop to avoid further decline in the R/P ratio, the US by 10% / year, China by 5%, etc. Of course this is before taking into account any reserve expansion or new discoveries. But any way you slice it, if these countries decline by less than the inverse of the R/P ratio, their reserves will go to 0 fast.
Now looking near the bottom of the list, here is the second observation. Let's take the UAE as an example. With an R/P ratio of 104, any decline in production greater than 1% means that the R/P will climb. So, for example, if their production declines by 3%, the R/P ratio will actually go up. This is true for all of the producers with high R/P ratios. It just doesn't make sense that this would happen; it makes more sense that they would at worst sit on a plateau util their R/P ratios started to come down. In fact, I think a strong argument could be made for expanding their production. The Saudis, for example, would have an R/P ratio of 60 if they expanded production to 12 Mb/day.
I am still fiddling with the new model, and in particular I can't seem to make it work nicely for the next few years. The model suggests that production in the mature countries should fall very fast, at rates much greater than 3%, and that we should see that right now (2004). ME production could be ramped up, but this takes time, and so we should be seeing a huge shortfall right now (the model thinks we can't produce more than 75.5 Mb / day for 2004).
I have checked several sources and the only slack is that the Saudis can pump an additional 1 Mb/day over the 2003 number - they actually did that in May 2002 so it's not BS. So I allow the Saudis to raise production by 1 Mb/day for 2004. After this, anything other than a not-very-believable pace of expansion in the ME countries will not be enough to prevent an overall decline in production. In fact, according to the model, it should be happening right now. Eventually, the ME expansion comes on-line and production begins to rise again. The actual peak isn't reached until 2020, by which time Saudi output is 18 Mb / day and their R/P ratio is below 30.
Anyway, still tuning it, but here are the numbers for what I'll call the "twin peaks" scenaro:
$this->bbcode_second_pass_code('', '
World Saudis
Year Mb/day Gb R/P Heavy R/P Mb/day ME5%
2004 75.570 1127.9 40.9 0.000 82.7 10.234 28.9% pre-peak
2005 74.886 1109.1 40.6 0.000 69.8 10.848 30.9%
2006 73.848 1090.3 40.4 0.000 65.1 11.499 33.2%
2007 73.401 1071.2 40.0 0.000 60.7 12.188 35.4%
2008 73.502 1051.7 39.2 0.000 56.5 12.920 37.5%
2009 73.862 1031.7 38.3 0.000 52.5 13.695 39.5%
2010 74.358 1011.2 37.3 1.000 48.8 14.243 41.3%
2011 75.608 990.3 35.9 1.200 46.1 14.812 42.7%
2012 76.301 968.8 34.8 1.440 43.5 15.405 44.4%
2013 77.132 946.9 33.6 1.728 41.0 16.021 46.2%
2014 78.033 924.4 32.5 1.901 38.5 16.342 47.4%
2015 78.403 901.6 31.5 2.091 36.9 16.668 48.8%
2016 78.846 878.4 30.5 2.300 35.3 17.002 50.3%
2017 79.427 854.9 29.5 2.530 33.7 17.342 51.8% begin plateu
2018 79.949 831.0 28.5 2.783 32.1 17.689 53.0%
2019 80.382 806.9 27.5 3.061 30.6 18.042 54.0%
2020 80.622 782.5 26.6 3.367 29.1 18.042 54.8%
2021 80.575 758.1 25.8 3.704 28.2 18.042 55.8%
2022 80.630 733.6 24.9 4.075 27.2 18.042 56.5%
2023 80.691 709.1 24.1 4.319 26.3 18.042 57.2%
2024 80.448 684.5 23.3 4.578 25.3 18.042 57.8%
2025 80.107 660.0 22.6 4.853 24.4 18.042 58.4%
2026 79.666 635.6 21.9 5.144 23.5 18.042 59.1% end plateau
2027 79.278 611.3 21.1 5.453 22.5 18.042 59.7%
2028 78.965 587.1 20.4 5.780 21.6 18.042 60.1%
2029 78.598 563.0 19.6 6.127 20.6 18.042 60.4%
2030 78.145 539.1 18.9 6.494 19.6 17.501 60.1%
2031 76.974 515.6 18.4 6.884 19.3 16.976 60.3%
2032 75.889 492.6 17.8 7.297 18.9 16.467 60.5%
2033 74.856 470.0 17.2 7.338 18.5 15.973 60.7%
2034 73.512 447.7 16.7 7.265 18.0 15.494 61.1%
2035 72.111 425.9 16.2 7.192 17.6 15.029 61.3%
2036 70.437 404.6 15.7 7.120 17.1 14.578 61.5%
2037 68.637 383.8 15.3 7.049 16.7 14.141 61.8%
2038 66.905 363.5 14.9 6.978 16.2 13.716 61.8%
2039 65.051 343.8 14.5 6.909 15.7 13.305 62.1%
2040 63.265 324.6 14.1 6.840 15.2 12.906 61.9%
2041 61.312 306.1 13.7 6.771 14.7 12.054 61.2%
2042 58.774 288.4 13.4 6.703 14.7 11.259 61.2%
2043 56.366 271.5 13.2 6.636 14.7 10.517 61.2%
2044 54.080 255.3 12.9 6.570 14.7 9.824 61.1%
2045 51.909 239.9 12.7 6.504 14.7 9.177 61.1%
2046 49.774 225.1 12.4 6.439 14.7 8.573 60.4%
2047 47.355 211.2 12.2 6.375 14.7 8.009 60.1%
2048 45.076 198.0 12.0 6.311 14.7 7.483 59.9%
2049 42.928 185.5 11.8 6.248 14.7 6.991 59.2%
2050 40.740 173.8 11.7 6.186 14.7 6.532 58.8%
')
The model assumes that producers with R/Ps under 10 have to cut production to maintain the R/P, plus take an additional 10% cut to slowly bring the R/P back to 10. Producers between 10 and 15 are cut by 1/(R/P) to keep R/P constant. Producers between 15-20 are cut a nominal 3%. Producers between 20-30 are held constant. Producers above 30 are allowed to expand production, with expansion allowed at a rate related to the R/P; producers over 50 can expand at 6%, producers over 40 at 4%, producers over 30 at just 2%. The effect is to slowly drive everyone to the same place, the 10-15 R/P range.
Oh yeah, I put in the heavy crude; even Campbell estimates (skeptically) that 700 Gb can be produced from that over 60 years. That's over 3 Mb / day, so it's a significant amount of oil. The model assumes this is developed in 2010 and it ramps up on the same curve as everyone else. I only gave them 300 Gb of reserves, though, because O&G reports I've read state that 15-25% of the 1200 Gb are "economically recoverable". The model also caps production at R/P = 100 to allow for the difficulty of extraction.
The summary: unless we want to see steep declines right away, ME production needs to be ramped up in the next 5 years. Eventually the 5 ME countries at the bottom of the list (with R/Ps in the 100+ range) must account for 60% of world production. The Saudis need to reach 18 Mb / day and their R/P ratio must fall to 30 by 2020 and then continue down.
- Doctor Doom
P90 numbers
by Soft_Landing » Tue 29 Jun 2004, 19:24:08
Are they P90 or P50?
$this->bbcode_second_pass_quote('', 'S')o who's right? At least one other source I found (quoted third hand on another board) seems to indicate the numbers are P50s. But I can't believe BP would make a fundamental error of this sort (the worst I'd accuse them of is being too trusting of numbers from the ME).
$this->bbcode_second_pass_quote('', 'S')o who's right? At least one other source I found (quoted third hand on another board) seems to indicate the numbers are P50s. But I can't believe BP would make a fundamental error of this sort (the worst I'd accuse them of is being too trusting of numbers from the ME).
I think you can reasonably assume the numbers are P50, because you can't add P90 numbers. Obviously, in the report, the estimates for each country are added together to estimate a total. This would be a completely inane calculation if performed on P90 numbers. The result would be so ridiculously conservative as to make the data useless for any kind of analysis. We certainly wouldn't need to worry about peak oil for a long time to come.
It is mathematically possible that BP could be reporting numbers that are P90 relative to world endowment. To do this, however, BP would first need to add P50 numbers from all countries to obtain the unbiased estimate, calculate P90 for world using an estimate for error, then divide 'world P90' between countries, weighted for their P50 endowment. However, P90 numbers obtained in this way would not be P90 relative to each individual country (they might be P55, P60, P70, P80 - you just can't know. They would certainly be between P90 and P50 however) . In other words - and I know I'm having a little difficulty making this clear - the P90 numbers reported for each country (using this method) would NOT be the amount of oil to be recovered with 90% certainty.
For that reason, I think we can probably write off the possibility that BP are actually reporting P90 numbers, even though they clearly make that claim in the report.
-
Soft_Landing - Lignite
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Re: P90 numbers
by Doctor Doom » Tue 29 Jun 2004, 20:21:59
$this->bbcode_second_pass_quote('Soft_Landing', 'T')hey would certainly be between P90 and P50 however).
It would still be worth knowing. Let X = sum(all P50 numbers). Let Y = sum(all P90 numbers). Suppose that BP has computed Y. Even though meaningless, there is one thing for sure that we know: X > Y. So an estimte of X would be very useful.
- Doctor Doom
by smiley » Wed 30 Jun 2004, 10:42:26
Only P100 is certain, and you don't know that number untill you squeezed the last drop from the oilfield.
SEC rules give some standards for calculating the P90 and P50 numbers, but most countries don't obey the standards.
But even oil companies which do use the SEC convention have their own interpretation. Shell, BP and Norsk Hydro have reported the reserves for the Oman Lange field, according to the SEC regulations.
However their estimates differ by a factor 4. So P50 for Shell is perhaps the same as P90 for BP.
http://www.reuters.co.uk/newsPackageArt ... yID=537923§ion=finance)
I think that this is the basic problem of every model, lack of coherent data. Especially the countries which are the most important for the location of the peak (Russia, SA, Kuwait, UAE) provide the least trustworthy data.
The best model would be one which just bypasses the whole reserve issue and predicts future production from present and past production trends, rig counts and that kind of stuff.
SEC rules give some standards for calculating the P90 and P50 numbers, but most countries don't obey the standards.
But even oil companies which do use the SEC convention have their own interpretation. Shell, BP and Norsk Hydro have reported the reserves for the Oman Lange field, according to the SEC regulations.
However their estimates differ by a factor 4. So P50 for Shell is perhaps the same as P90 for BP.
http://www.reuters.co.uk/newsPackageArt ... yID=537923§ion=finance)
I think that this is the basic problem of every model, lack of coherent data. Especially the countries which are the most important for the location of the peak (Russia, SA, Kuwait, UAE) provide the least trustworthy data.
The best model would be one which just bypasses the whole reserve issue and predicts future production from present and past production trends, rig counts and that kind of stuff.
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Production trends
by DoctorDoom » Wed 30 Jun 2004, 11:32:07
$this->bbcode_second_pass_quote('smiley', 'T')he best model would be one which just bypasses the whole reserve issue and predicts future production from present and past production trends, rig counts and that kind of stuff.
That seems unsatisfying - what if you're about to fall off a cliff? And what do you do about anomolies (situations where production is being jacked up and down based on demand, instead of being capacity-constrained.
- DoctorDoom
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by Soft_Landing » Wed 30 Jun 2004, 13:09:44
$this->bbcode_second_pass_quote('', 'I')t would still be worth knowing. Let X = sum(all P50 numbers). Let Y = sum(all P90 numbers). Suppose that BP has computed Y. Even though meaningless, there is one thing for sure that we know: X > Y. So an estimte of X would be very useful.
Oh yes. An estimate of X is certainly desirable. The point I was trying to make is that if BP calculated Y (= sum of P90), Y is so conservative as to be completely useless in our goal of estimating X.
I was reading in "Future of natural gas supply", Jean Laherrere, available here:
http://peakoil.net/JL/JeanL.html
Go to page 54 and he has a plot of historical outcomes of supposed P90 estimates. Although SEC requires P90's, the mean likelihood of surpassing P90 numbers has been about 55% for both oil and natural gas lately. This result has been higher in the past for oil (P90 in 1980 worked about 70%).
This is particularly interesting because it is one more way to artificially increase reserves over time - appear business as usual. You can gradually reduce your internal criteria for booking reserves (toward P50%) whilst continuing to claim the numbers are actually P90. I guess Shell just got a little too obvious with it.
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