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Page added on November 16, 2015
An “oil theologist” is needed to interpret the given resources and reserves in World Energy Outlook 2015
This year’s big news regarding the reporting of oil reserves in World Energy Outlook 2015 is that this annual report now discusses “resources that are technically possible to produce” and what proportion of these are proven reserves. When I was working on Chapter 17, The Peak of the Oil Age for my new book a few weeks ago I discussed the difference between technically producible resources and reserves. To support that discussion I made a figure explaining how different types of crude oil are classified.
All the oil formed millions of years ago is termed, “Total Petroleum Initially in Place (PIIP). We have now found most of the world’s producible oil but there are still some oilfields yet to be discovered. (Details on this will be found in the book.) Of all the oil that we have already found there is some that cannot technically be produced, i.e. is “unrecoverable”. The remaining oil is divided into two classes – non-commercially producible (Contingent Resources) and commercial oil. When describing oil reserves, 1P is that which will be produced with 90% certainty, 2P with 50% certainty and 3P with 10% certainty. In the image above, the yellow field and the “green” commercial oil are those termed, “resources that are technically possible to produce”. It is this volume that the IEA has now begun to promote as a shield against future declining oil production. Let’s now look at Table 3.4 from WEO2015.
First, we can note that there is no longer any detailed classification of different type of reserves. Only one reserve number is given – “Proven Reserves”. Therefore, we cannot see whether these reserves are conventional oil or unconventional oil (or both). Instead, we see a display of various classifications of resources. The IEA justifies this new system of describing oil yet to be produced by saying that one usually does not distinguish between conventional and unconventional oil reserves. This is correct if one studies the BP Review of World Energy or the Oil&Gas Journal, two sources that the IEA cites. However, the reserves these sources refer to are not 1P reserves. At the same time, the IEA states that Proven Reserves are those with 90% certainty to be produced (1P). The 1P, 2P, 3P reserve system is commonly used for crude oil.
The Latin Americas appear to have large reserves but one should realize that 290 billion barrels (Gb) of those exist in Venezuela’s Orinoco belt and are very heavy oil from oil sands. The rate of production of this oil is only 1 Mb/d and the production is expensive. In the American reserves Canada’s oil sands contribute 168 Gb. Table 3.4 also shows that there is 1,000 Gb of “Kerogen Oil” in the Americas and that is very much an example of raising false hopes. There is no commercial production of kerogen oil in the USA. The world’s foremost production of kerogen occurs in Estonia and the volume is not large. For the 1P reserves that the IEA report to be classified thusly requires that these reserves are in production. The IEA should at least have done like BP and stated the crude oil component of these reserves separately. Anyone wanting to use the numbers in Table 3.4 should have a deep knowledge on how oil reserves are reported. In conclusion the IEA states that the OECD nations of Europe have 12 Gb of proven reserves. BP states these as 6.5 Gb for Norway, 3 Gb for the UK, 0.6 Gb for Denmark, 0.6 Gb for Italy and a little more in other nations to give a total of 12 Gb. However, BP’s numbers are for 1P + 2P reserves that have a 50% certainty of being produced. They are not only 1P reserves.
WEO2015’s section on resources and reserves concludes with this text, “Proven reserves, as published by the Oil and Gas Journal or the BP Statistical Review (and mostly taken from government sources when available) are largely unchanged compared to last year, indicating that all production since the last review has been replaced by new reserves.” How reliable is this statement? The O&G Journal collects its reserve data by asking the governmental authorities of oil producing nations how large their reserves are. If they receive a response they give the numbers in their new data but if no response is forthcoming for one year then they use the previous year’s numbers. This numbers are then adopted by BP. The classic example of this is the OPEC nations. In 1986 the United Arab Emirates reported that their reserves had increased from 33 Gb to 97 Gb without having discovered any new oil fields. Now, 28 years later, the UAE’s reserves are still stated as being 97 Gb despite having produced 27 Gb of oil during that period. Meanwhile, in 2014 the IEA stated that we are discovering less than half the volume of oil that we consuming.
Previously, I mentioned that the WEO reports are presented as the energy industry’s “bible”. Now it seems as if every nation that desires to interpret the words of the IEA will need to acquire an “oil theologist”!
32 Comments on "An “oil theologist” is needed to interpret the given resources and reserves in World Energy Outlook 2015"
Cloud9 on Mon, 16th Nov 2015 7:00 am
Either by design or default the money manipulators have created a no interest environment. With free money to the central banks, all other organizations not receiving intravenous injections from the FED must seek some mechanism of earning yield. Pension funds, Insurance companies and anybody else with cash are desperate to find some haven in which to invest. If they fail in this, their assets will be completely consumed by inflation. It is in this matrix, that oil and gas companies must keep the narrative going that investments in companies holding proven reserves are worthy of your capital. By doing this, they remain viable for a few more quarters.
A significant amount of the world’s gold reserves can be found in sea water. Most of us understand that with current technology it is unprofitable to extract. Oil in this sense is similar to gold. Remember that the Monterey Shale Formation was going to make the U.S. the next Saudi Arabia. I think Short and his group are on top of this.
JuanP on Mon, 16th Nov 2015 7:36 am
I stopped reading the IEA’s WEO reports around 5 years ago. You read that crap at your own risk. These reports are as bad as Western MSM’s articles or USA DOS’ statements. If you seek the truth in life you should ignore and disregard anything and everything coming from these sources because they are nothing but liars, murderers, and thieves.
Consider yourself warned!
shortonoil on Mon, 16th Nov 2015 7:40 am
Both the IEA and the EIA have a propensity to defer to “technically recoverable oil”. Categorizing oil into “technically recoverable” quantities does nothing to clarify what will actually result in extractable quantities. Assuming that the world’s oil producers will extract a barrel just because they can in no way implies that they will. In fact, if they can’t make a profit on that barrel, it is going to stay exactly where it is; in the ground.
The IEA and the EIA have both ignored the simple question as to why anyone would want to extract a barrel of oil? Failing to answer that question is failing to determine if it will actually be extracted. Otherwise, because they have not asked that question they don’t have a clue as to what world’s reserves actually are. They have a number that might indicate what it could be if everything else that might affect it was ignored.
We take a different approach – we assume that if there is no reason for a producer to extract a barrel, they won’t!
http://www.thehillsgroup.org/
Boat on Mon, 16th Nov 2015 8:27 am
The EIA explains their methodology that goes into their information. They explain why it is difficult to be accurate and why they have revisions. It is not the EIA’s job to explain why anyone would want to extract a barrel of oil. They simply collect information from different sources and compile reports. These reports are not opinions, they just relay the information onto anyone interested. Idiots have other ideas of course.
Davy on Mon, 16th Nov 2015 8:47 am
Yea, Boat, and the tooth fairy leaves money under the pillow. Boat, are you being a dumb dumb or playing the same agenda game as others? Probably both. If you have watched and discussed these reports over the years as many have here you see clear unequivocal bias for the status quo narrative.
Boat on Mon, 16th Nov 2015 9:04 am
Davy,
If I were an oil investor and I needed the EIA reports for my primary information I would certainly take into account that revisions are mainly to the downward side. The most important thing is the consistency of the numbers and how far off the revisions were. See how easy that is? You are the one with bias and constantly look for trouble that isn’t there. PS Still waiting on that global crash.
shortonoil on Mon, 16th Nov 2015 10:02 am
“If I were an oil investor and I needed the EIA reports for my primary information I would certainly take into account that revisions are mainly to the downward side.”
The EIA is not reporting reserves, they are reporting resources. Reserves are the product of price and production cost (really an energy function). The EIA has no idea what either of those two will be in the future, so therefore they don’t know what the reserves really are going to be. The “I’m dense card” only plays so far, then it turns into the “I’m an idiot card”!
Davy on Mon, 16th Nov 2015 10:42 am
P.S. Boat, open your eyes and look around and you will see the collapse process. The problem with a hardcore cornucopian like you is they need an event because they are habituated to “either or”. This is not going to be an event it will be many events. By the time you understand what’s going on boat you will be up to your armpits with alligators. I do talk about time frames but they are relative ones. There are far too many variables involved with a vary big global system.
tahoe1780 on Mon, 16th Nov 2015 10:43 am
“If you want to corrupt a people, corrupt the language. Once it becomes impossible to say the truth with the language we have, it will ultimately be impossible for us to adapt and survive.” – Kurt Cobb
“When it becomes serious, you have to lie,” – Jean-Claude Juncker
Boat on Mon, 16th Nov 2015 10:52 am
Davy,
I do look around but a world economy growing in spite of any problem is still growth. When you read these reports, what goes through your mind. Being a cornucopia has nothing to do with global growth. Growth is just a fact. In fact growth is bad for climate change and hastens the day the climate will affect the world a lot more, a lot faster.
Doug T. on Mon, 16th Nov 2015 10:54 am
The German BGR does a better job of breaking out Reserves and Resources than most others, including EIA, BP, or IEA. Their report is more like a true ledger, also reporting cumulative production and EUR.
http://www.bgr.bund.de/EN/Home/homepage_node_en.html
GregT on Mon, 16th Nov 2015 10:58 am
@Boat,
“You are the one with bias and constantly look for trouble that isn’t there.”
You, Boat, are the one with bias that is constantly ignoring the trouble that is there. Using dollar cost averaging to justify losing money in the market casino is a sign of addiction Boat. Addiction and denial. Gambling seldom ends well.
Davy on Mon, 16th Nov 2015 11:09 am
Boat, this is not about the “either or” of growth. This is about what is a minimum operating level of growth that supports the current global system. It takes more than just a little growth. It takes time for this inadequate growth to decay the system. There is clear indications of dangerous decay. Like I keep saying this is a process and a process going in the wrong direction.
JuanP on Mon, 16th Nov 2015 11:09 am
Boat, You are not worth the air you breathe. You are an arrogant, ignorant fool!
GregT on Mon, 16th Nov 2015 11:12 am
Boat,
“I do look around but a world economy growing in spite of any problem is still growth.”
If you aren’t willing to take the time to understand what most others here do, you are doing nothing more than wasting your time, and insulting other peoples’ intelligence. There is plenty of information available to you if you care to learn. If you choose not to, you are living in extreme denial, and making yourself look foolish.
Boat on Mon, 16th Nov 2015 11:15 am
short,
Speaking of idiot why is supply still growing, oil consumption growing and prices down. When does depletion and its consequences kick in? All other commodities have dropping prices when there are surpluses. Oh wait….gasoline just hit $1.76 in Houston.
GregT on Mon, 16th Nov 2015 11:38 am
Boat,
You are arguing with someone who is lightyears ahead of you, and it is crystal clear that you don’t have the slightest clue what you are arguing about. You continue to make yourself look like a complete idiot.
Truth Has A Liberal Bias on Mon, 16th Nov 2015 11:41 am
Is Boat fucking retarded?
Boat on Mon, 16th Nov 2015 11:42 am
GregT,
Time marches on and who looks foolish? See a crash? I don’t even see a global slow down. See the effects of oil depletion? Heck there is a surplus and Iran oil has still yet to hit the market. I am not in denial. I can read and comprehend.
I just read an article of two oil companies that are adding drilling rigs and are producing oil at $10-$15 in Oklahoma.
apneaman on Mon, 16th Nov 2015 11:48 am
boat says “the day the climate will affect the world a lot more, a lot faster”
a lot more than what boat? do you need to see people’s heads exploding before you consider it an immediate and costly issue? Like many others who are ignorant and scared you are pushing it out to a date past your life expectancy. It’s painfully obvious that you know even less about AGW and the host of other environmental predicaments than you do about economy and energy.
These victims of a AGW jack hurricane remnant have already discovered the immediate consequences of fucking up the planetary energy balance. Go tell them it’s not a problem yet you fucking imbecile.
Floods Devastated South Carolina Farms
http://www.rfdtv.com/story/30502171/floods-devastated-south-carolina-farms
Damage Estimates Rising From South Carolina’s ‘Record-Breaking’ Storm
“The potential exposure home insurers in South Carolina face from the early October storm that flooded the state is estimated to be over $18 billion, according to catastrophe modeling firm CoreLogic.”
http://www.insurancejournal.com/magazines/features/2015/11/02/386418.htm
Davy on Mon, 16th Nov 2015 1:14 pm
Boat, do you really think gas at $1.76 Houston is a good thing? Don’t you think we are into economic extremism with commodities tanking, excessive debt, and huge unfounded liabilities. These extremes are at every level Boat.
I would respect you more if you were more balanced. I think you really are more balanced you just like pulling chains and getting attention. Contribute Boat don’t stir shit like a kid.
rockman on Mon, 16th Nov 2015 1:18 pm
It occurs to me there’s an important factor that typically isn’t mentioned even when the price of oil is factored into the “proven economically recover reserve” number is tossed out. Such as who’s driiling those reserves anc how fast are they being produced. Consider the Eagle Ford Shale. Of course the proved reserves has fallen considerably since so many of millions of bbls are no longer recoverable at ghe current price. But the remaining proved reserves are bding developed as fast.
And at the end of day the vast majority of the planet doesn’t card about that number: they care about the price of refinded products and secondarially the price of oil. Neither of which depends directly on the volume of proved commercially recoverable oil reserves.
Boat on Mon, 16th Nov 2015 1:34 pm
apeman,
When homes and business can’t get insurance on a part of the coast that has been hit repeatedly, that is a sign. When they are forced inland and tornadoes force insurance companies to drop coverage, that’s a sign. When we quit putting wind and solar because they cant stand up to the weather, that’s a sign. When the defense dept quit building ships because the weather makes passage unsafe, thats a sign. Kinda get where I’m headed here?
shortonoil on Mon, 16th Nov 2015 2:39 pm
“short,
Speaking of idiot why is supply still growing, oil consumption growing and prices down.”
That has been explained so…..so many times that the letters on the keyboard are starting to wear off!
http://peakoil.com/forums/we-are-in-a-global-recession-t71905-80.html
IEA says 3-fold or greater increase in biofuels possible by 2040
“As explained above, to maintain the present system it is now necessary to cannibalize the existing structure. This is requiring the formation of a huge amount of debt. Considering the fragility of the present system it doesn’t seem likely that both continuous of a consumable supply, and the build out of large new infrastructure processes is likely. In the frantic attempt to maintain the status quo we appear to have boxed ourselves into a corner.”
http://www.thehillsgroup.org/
etc, etc, etc,
Ever consider taking a speed reading course. Your apparent rate is about 2 words a minute!!!
marmico on Mon, 16th Nov 2015 2:49 pm
Aleklett, another peak oil disciple of Campbell, in 2005 testimony to the U.S. House of Representatives, produced this little gem of a chart* which projected that “all liquids” production would be 27 Gb/a in 2015. By contrast, the 2005 IEA World Energy Outlook projected 36 Gb/a.
*www2.energybulletin.net/image/articles/11621/fig4.png
The reality, not the theology, is that actual 2015 production is ~34 Gb/a. 10 years later, the IEA “bible” was considerably more accurate in both direction and magnitude than Aleklett.
Davy on Mon, 16th Nov 2015 3:06 pm
Yes sir Marmi, but in the process of funding the shale bubble we indirectly ruined the financial system. This shale bubble along with several other bubbles and macro economic distortion has sealed our fate sooner rather than latter. That was focking smart. That is unless you are a cornucopian who consider all that excessive debt and rates stuck at zero range as just a little froth from the new normal extravaganza. Got any charts today?
Boat on Mon, 16th Nov 2015 5:06 pm
Davy,
In this bubble your talking about have you figured in the savings for the consumer for heating? Nat gas fracking accounts for most new production and 25% of nat gas consumed. What about home grown jobs instead of buying energy from overseas. BTW because of fracked oil and nat gas energy is now 25% of imports instead of over 50%. Just adding a little balance to your post. I wonder about the taxes states and the gov have received. Gonna get us a chart?
marmico on Mon, 16th Nov 2015 5:24 pm
U.S. nonfinancial corporate business liability is $16.2 trillion.
It seems unlikely that (say 30%)defaults on $0.30 trillion of shale oil/gas credit is systemic or contagious.
Davy on Mon, 16th Nov 2015 6:12 pm
Nothing wrong with balance boat but how do you expect those benefits you mentioned to be sustainable with a debt burdened economy? As far as charts you got fingers try Google.
shortonoil on Mon, 16th Nov 2015 6:13 pm
[i]”U.S. nonfinancial corporate business liability is $16.2 trillion.
It seems unlikely that (say 30%)defaults on $0.30 trillion of shale oil/gas credit is systemic or contagious.”[/i]
Since Marco can’t dazzle with brilliance, he likes to try baffling with bullshit. HY credit now held by shale is $300 billion. The shale industry has had well over $1 trillion invested into it to create an industry with $360 billion in gross sales. Simply put, those investors are never going to see their money again. Many of those investors were pension funds that got conned into putting their money into the Miracle of Shale. When those funds have to start cutting redemptions by 10 to 15% you have contagion!
Davy on Mon, 16th Nov 2015 6:18 pm
You are deceiving yourself Marmi if you think those kind of defaults in today’s economic climate are not dangerously destabilizing. You can diminish the immediate dangers but longer term there are no fixes with growth slowing and a deflationary environment taking over.
marmico on Mon, 16th Nov 2015 7:02 pm
The shale industry has had well over $1 trillion invested
Do you have a citation or is that an itchy hemorrhoid?
Stockholders gain or lose money every day. Who gives a shit that some mid-tier E&P firm in Williston, ND is liquidated and recapitalized wiping out stockholders equity. It’s systemic credit risk that matters.
When those funds have to start cutting redemptions by 10 to 15% you have contagion!
What a retard. In aggregate pension funds hold the market basket in stocks. After all, the managers charge an exorbitant fee to be closet indexers.
An individual pension fund could be neutral, overweight or underweight in shale energy.
Pension funds will not be cutting distributions any time soon because MSCI Energy Index is down 30% from its July 2014 peak.