Will 730 billion barrels be added to the reserve pool from reserve growth between 1996 and 2025 as estimated by the United States Geological Survey?
This post is the third part in a three piece series about the phenomenon of reserve growth in found oil fields. Insight in future reserve growth, often attributed to technological advancement, is crucial in determining the peak of conventional oil production. Parts 1 and 2 can be found here and here.
What we learned in part 2 of this series is that the data with respect to reserve growth is utterly confusing. Nonetheless, we need an answer to the question what the future perspectives are for reserve growth in order to; 1) improve forecasting the peak in conventional oil production; 2) Increase the understanding of the future role of technology in the oil industry.
The United States Geological Survey has so far been the only institute which has published an estimate for future reserve growth.
In their World Petroleum Assessment from the year 2000 they estimated that reserves would grow with 730 billion barrels between 1996 and 2025.(612 billion barrels for conventional oil, 118 billion barrels for Natural Gas Liquids). By estimating past reserve growth in the US lower 48 a reserve growth algorithm was established. This algorithm of which the curve is shown below was then applied to the entire world. Delivering an estimate of 730 billion barrels.
The problem with this method is the way how crude oil reserves are reported in the US which has been described in detail in part 2. Because of the practice of reporting only proven reserves, the amount of reserve growth is very high in the US when compared to other regions. In addition several heavy/extra heavy oil fields such as the kern river oil field are included in the assessment, which showed huge reserve growth due to the advancement in steam technology necessary to dilute the oil to produce it in the middle of the 20th century. It is erroneous to apply reserve growth in such heavy/extra heavy oil fields with medium and light crude oil fields.
Thirdly applying onshore reserve growth to offshore and deepsea fields is certainly not an approach that gives a correct estimate. Based on these three issues, the figures presented by the USGS do not seem to have much value. The method used likely provides figures too inacurrate to be relied upon.
However, the USGS authors (Albrandt et al) have acknowledge a part of the problems outlined:
"There are several reasons why a reserve-growth function that is based on historical trends for oil and gas fields in the Lower 48 states could Overestimate world potential reserve growth:To see if these critical remarks on their study held any value the authors of the USGS study attempted to apply their function for reserve growth, as shown in graph 1, to other oil producing regions in the world. Several latter publications were published with respect to reserve growth in Volga-Ural (Verma et al., 2000), West Siberian Basin (Verma and Ulmishek 2003), the North Sea (Klett and Guatier 2003, 2005), the Middle East (Verma et al., 2004) and Canada (Beliveau, 2003; Verma and Henry, 2004). Their conclusion was that the reserve growth curve is indeed applicable to the entire world, given reserve growth patterns observed in these other regions. The one about Russia has been described in detail in part 2. These publications do not shed much light on the issue however as shown in part 2. Reserve growth varies in every region in the world. Applying a strict curve from one region towards others does not make much sense to me in the light of the highly chaotic variance in data. I therefore disagree that such a conclusion can be made, the USGS authors could be right, but they could also very well be wrong.
Engineering criteria for reporting reserves of world oil and gas fields might, in general, be less restrictive than those for the United States, tending to increase known reserves and decrease the potential for reserve growth.
Reported reserves might be deliberatly overstated in some countries, reducing the potential for future reserve growth.
Large world oil and gas fields might tend to have more substantial development than U.S. fields prior to release of initial field-size estimates, leading to more accurate initial reserves estimates and reducing the potential for future reserve growth.(USGS WPA 2000, chapter AR)"
The International Energy Agency seems to disagree with this cautious vision on estimating reserve growth. In their recent resources to reserves report they noted the following about the USGS method and the criticism it received from ASPO:
"It should be noted that some authors (ASPO) argue that the "reserve growth" phenomenon is an artefact of very conservative United States reporting on proven reserves, which should not be applied worldwide, particularly in OPEC countries where some observers claim that published proven reserves numbers are suspicious (Simmons 2005). However, further studies by USGS geologists have pointed to reserve growth observed also in large fields outside the United States, at a rate consistent with the assumption of the 2000 Assessment (Klett 2003)." (IEA Resources to Reserves, 2006)There is only one way to give a reasonable answer to what future path there is for reserve growth. The USGS takes the estimates from the IHS energy database (formerly petroconsultants) as a starting point. The updates in the IHS energy database therefore give excellent means for reviewing the forecast from the USGS. By looking at every change in the past decades in the IHS Energy database (formerly Petroconsultants) in meticulous detail an accurate answer can be found. Only then we will know what exactly bas happened in the past decades with oil reserves (proven and probable). There is only one problem, access to the database costs approximately 1 million dollars a year, a bit too expensive for a voluntary weblog. So the best we can do at the moment is by looking at the bigger trends that are available in public domain data.
In a publication from August 2005 in AAPG Bulletin (An evaluation of the USGS WPA 2000) the authors (Albrandt et al) conclude that approximately 28% percent or 171 billion barrels of the forecasted 612 billion barrels for conventional oil had been added to the reserve pool between 1996 and 2003.
In a presentation from 2004 one of the UGSS study authors (Klett) showed a graph depicting reserve growth in giant oil fields between 1981 and 1996 and 1996 and 2003: