[Pops]

$this->bbcode_second_pass_quote('', 'N')ew finds of oil and gas are likely to have been about 16bn barrels of oil equivalent in 2014, IHS estimates, making it the fourth consecutive year of falling volumes. That is the longest sustained decline since 1950.

Because new oilfields generally take many years to develop, recent discoveries make no immediate difference to the crude market, but give an indication of supply potential in the 2020s.

Peter Jackson of IHS said: “The number of discoveries and the size of the discoveries has been declining at quite an alarming rate . . . you look at supply in 2020-25, it might make the outlook more challenging.”

So far there has not been a single new “giant” field — one with reserves of more than 500m barrels of oil equivalent — reported to have been found last year, although subsequent revisions may change that.

The figures for declining discoveries are particularly striking because exploration activity in 2014 showed little impact from the sharp fall in oil prices in the second half of the year. The last time oil and gas discoveries were around 2014’s level was in the mid-1990s, when exploration activity was hit by a period of weak prices.

Last year, the number of exploration and appraisal wells drilled worldwide was only 1 per cent lower than in 2013. This year, exploration budgets are being cut back across the industry and the number of wells drilled is likely to fall further.

Depending on later revisions, 2014 may turn out to have been the worst year for finding oil and gas since 1952.

[Pops]

[ROCKMAN]

My guess is he's desperately looking for new reserves to replace the reduction of billions of bbls of proved oil reserves that can no longer be classified as COMMERCIALLY producible thanks to the decrease in oil price. As they say: what the Oil Price God giveth the OPG can taketh away even faster. LOL.

[Pops]

Not sure, IHS says discoveries have fallen for 4 years in a row. Obviously those years didn't have a problem with price considering it was the highest ever.

[GoghGoner]

Quite shocking considering the source! Peter used the word "Alarming", OMG, we are definitely on the tail end now.

[ROCKMAN]

Pops – Just to be sure folks get the point I just made: according to the EIA the PROVED RESERVEs of the US increased from 20.6 billion bbls in 2009 to 36.5 billion bbls in 2014. They also peg the average oil price for 2009 at $62/bbl and $103/bbl by mid-2014. And down to $47/bbl by Jan 2015.

And the EIA definition of “proved reserves”: Proved energy reserves: Analysis of geologic and engineering data demonstrating with reasonable certainty such reserves are recoverable UNDER EXISTING economic and operating condition.

IOW the 20.6 billion bbls in 2009 was based upon $62/bbl oil and the 36.5 billion bbls in 2014 is based upon an average price of $88.20/bbl. We’ll have to wait to see what the EIA ends up with as an average 2015 oil price. But IF it’s anywhere close to $62/bbl as it was in 2009 we should expect a reduction in the EIA estimate of proven US oil reserves in the many billions of bbl. Note that the previous peak in US proved oil reserves was in 1981 at 31.3 billion bbls (they only chart that metric since 1980). So for 34 years they show a fairly consistent decrease in US proved oil reserves…until prices shot up after 2010.

Obviously the big increase has come from the shales. And none of those INPLACE reserves have decreased. But there are fewer INPLACE bbls in the shales today then there was in 2009 because we’ve produced a lot of it since then. So the amount of unproduced shale reserves is less than in 2009 and current prices are less than they were in 2009. Which means that if the EIA ultimately uses $62/bbl to estimate COMMERCIALLY recoverable US oil reserves it will likely be close to 21 billion bbls. IOW thanks to lower oil prices the current estimate of proven US oil reserves has decreased about 40%...or about 15 billion bbls.

Of course if prices again reach the $100/bbl level many of those lost bbls will reappear. But until that time they no longer exist. Not according to the Rockman…according to the EIA.

[Quinny]

And there's me thinking Copius Abundance would step in!

[Keith_McClary]

Not quite the same:
Wikipedia Oil megaprojects

[ROCKMAN]

Keith - Not the same at all. EIA will be forced to reduce the estimate of the amount of PROVED PRODUCING oil reserve with the lower oil price. the Mega project number is based upon the additon of new reserves, a much smaller number the estimate of all existing proved reserves. And based on reports of s number of new field developments due to lower oil prices I assume we'll see a delay in the start up of some new discoveries.

[westexas]

Not much of a surprise, given the probability that actual global crude oil production (45 and lower API gravity) has been flat to down since 2005, as annual Brent crude oil prices doubled from $55 in 2005 to the $110 range for 2011 to 2013. Of course, as other noted, it's surprising that the Yerginistas would admit it.

Copy of previous post:

Peak (Crude Oil) in Rear View Mirror?

OPEC dry gas production increased from 41 BCF/day in 2005 to 62 BCF/day in 2012 (EIA, complete 2013 data not yet available), an increase of 21 BCF/day.

Comparing OPEC (crude only) and EIA data bases (C+C) implies that OPEC condensate production increased from 1.2 mbpd in 2005 to 2.3 mbpd in 2012, an increase of 1.1 mbpd.

This was be an observed increase of 52,000 barrels of condensate (BC) per BCF/day increase in gas production, for OPEC.

The EIA shows that global dry gas production increased from 270 BCF/day in 2005 to 325 BCF/day in 2012, an increase of 55 BCF/day.

If we use the OPEC condensate to gas ratio as a guide, this implies that global condensate production rose by about 3 mbpd from 2005 to 2012. The EIA shows that global C+C rose by 2 mbpd from 2005 to 2012, which of course would imply a decline in actual global crude oil production (45 and lower API gravity crude oil).

Note that the high volume of US condensate would fall in the non-OPEC data set, so in reality the non-OPEC BC to BCF/day ratio is probably higher than the OPEC data set.

In any case, the foregoing analysis is additional support for the premise that actual global crude oil production (45 and lower API gravity crude oil) probably peaked in 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase.

[Pops]

$this->bbcode_second_pass_quote('ROCKMAN', 'K')eith - Not the same at all. EIA will be forced to reduce the estimate of the amount of PROVED PRODUCING oil reserve with the lower oil price. the Mega project number is based upon the additon of new reserves, a much smaller number the estimate of all existing proved reserves. And based on reports of s number of new field developments due to lower oil prices I assume we'll see a delay in the start up of some new discoveries.

[Keith_McClary]

$this->bbcode_second_pass_quote('Pops', '[')url=http://inside.mines.edu/fullcalendar/fullcalendar/popajax.php?EVID=7854&url=http%3A%2F%2Finside.mines.edu%2FVan-Tuyl-Lecture-Dr-Philip-H-Pete-Stark-IHS-Denver-BE-241&id=25306]And here is another[/url]from the CO school of mines about the same report (the http is messed up)

[Pops]

Some discussion on this at POB with Jean Laherrere



Laherrere:
$this->bbcode_second_pass_quote('', 'T')he main problem is that economists rely on the published political 1P oil reserves always on the rise and ignore the confidential technical reserves declining since 1980; since 1980 the oil production (light green) is over the the oil discovery (dark green): same for oil and gas (in blue) since 1990.
Economists argue that technology will save the world but ignore the technical data
Economists do not think wrong, they think on wrong data.

[ROCKMAN]

Pops – “We found about 13 billion barrels of oil equivalent that year”. And here’s the tricky part about interpreting such statements: is that 13 billion bbls of oil they found in the ground or is that 13 billion bbls of oil that will be recovered from new reservoirs? New reservoirs that may contain 30 billion or so bbls of oil in place?

So let’s give them the benefit of the doubt and assume they aren’t being deceitful bastards and aren’t including unrecoverable oil in those 13 billion bbls. But here’s the problem with that assumption: they had to assume it will require a certain oil price to recover those 13 billion bbls. So maybe they assumed a price of $90/bbl. But what if they were to assume $50/bbl? One thing for sure: they wouldn’t be calculation 13 billion bbls because many of those bbls might not be justified to develop if oil was $50/bbl. Every project I’ve drilled over the last 4 decades required a price assumption to calculate the potential ROR. A well I might have risked $3 million to drill to find some oil when it was $100/bbl might be dropped if prices fell to $50/bbl.

And guess what: to some degree that’s happening right now with some Eagle Ford Shales wells. I don’t have a sense of the number of wells yet but there are operators that have already drilled and cased EFS wells but are unwilling to spend the tens’ of $millions to frac them now due to the low oil price. The $millions in sunk costs at that point are no longer a deterministic factor. But apparently their incremental cost to just frac those wells is insufficient to justify investing in just the frac alone. BTW with the very high number of stages being used these days some frac jobs are costiing more than it did to drill and case the hole.

[Pops]

I understand your point ROCK.

The problem with the story is it does not specify what "kind" of discoveries these are, you assume they are "Proved Reserves" by EIA standards: "under existing economic and operating conditions" and I'm thinking since they are not EIA estimates, and that they specifically include the trend with the previous 3 years of falling "discoveries" (which had prices high enought to make oil from a turnip economical) that they are discoveries of the "technically recoverable" sort - resources recoverable technically using existing technology even if not currently profitable.

See what I mean?

[Pops]

I found this story from forbes last year:
$this->bbcode_second_pass_quote('', '2')013 was a decidedly lackluster year for oil exploration. Worldwide, there were no discoveries as big as 1 billion barrels.

[ROCKMAN]

Pops - And in the oil patch we don't completely dismiss "proved reserves" regardless of uncertainties over how they are defined. But the number we hang onto the vast majority of time is "PDP"...Proved Developed Producing. While a company might have X million bbls of "PUD" (Proved Undeveloped) reserves what eventually gets developed and producing depends not only on the future price of oil but also if those in ground reserves are really there in the first place. I've drilled many wells with PUD reserves only to discover what someone decided was “proved" actually wasn't. Remember I'm the geologist right of school that drilled the first 5 wells off a platform in the GOM when I started at Mobil oil that turned out to be non-commercial. Those 5 wells turn 25 million bbls of oil and 120 bcf of NG “Proved Undeveloped" reserves (based upon the exploration geologist’s mapping) into 1 million bbls oil and 25 bcf of PDP reserves (based upon the development geologist’s…the Rockman…map). Which goes a long way to explain the general pissey attitude I have towards some exploration geologists when they start using the word "proved" too casually. LOL.

Also understand that PDP reserves don’t always end being “proved” either. About 3 years ago I drilled a nice NG well that we felt very good about the 6 bcf PDP reserves we assigned to it. And the 31 days after it went on production it depleted. We still don’t have a clear understating of what happened. But that well turned 6 bcf of PDP reserves into 0.1 bcf total cumulative production.

[Nubs]

Fear not, Oilfinder, help is on the way!!

Remember Georesonance, the company that located the wreck of MH370? (https://au.news.yahoo.com/sa/a/23036893/exploration-company-believes-it-may-have-found-mh370/)

Their proprietary "multi-spectral satellite imagery" can find all the oil and gas you could ever need. Up to 5000 meters underground. From space. http://www.georesonance.com/

[rockdoc123]

as a counter to Rockmans post I can say that there are a few fields I've been exposed to where the reserves just kept growing. Simply because we didn't understand the plumbing system as well as we thought.
There is one field I can think of in Egypt that was 25 MMB when discovered and ended up eventually being 450 MMB. I remember a couple of similar fields in Indonesia.

My point here is it works both ways. If you want to be Mr Doom and Gloom you can point only to those that are always smaller than originally thought and if you want to be Mr Sunshine you can only point to those that got larger. The truth is somewhere in between.

Also I am not sure but suspect Rockmans experience with PDP not showing up to the dinner table happened back before Sarbanes Oxley which required sign off on reserves by independent auditors. Having lived through that transition it was interesting to see how the auditors went from doing pretty much what you wanted them to over to being as belligerent as possible, which meant the law was working.

There was a point in time in the industry where oil company booked reserves were pretty much meaningless. One of my jobs back in the eighties at one of the smaller majors was to do a full audit of all the booked 3P reserves. The result was a massive write down as the previous senior management were being rewarded for reserve adds. After that there were a lot of checks and balances put in place including reserves teams who reported directly to the COO and performed independent audits on their colleagues discoveries.

My point here is that bad things were done back then....it was largely fixed and there are a lot of controls in place now to avoid the "reserve fixing issue". There are mistakes made...good Lord we are basing our estimates on huge areas that we are sampling with wireline logs and production tests by generally less than 5% of the area. This is why most of us moved from deterministic estimates to probabilistic estimates quite awhile ago.