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Some additional comments about oil

Gregory Launay - Last uptat: January 20th, 2013


This article aims to clarify certain concepts useful in assessing issues around oil reserves. Relationship with transport and car is not always direct, but we're never really far away ...

In the introduction I would like to share with you a question that begins with this graph that I saw repeatedly used by speakers:

Evaluation of global oil reserves - Source: IEA, 2005

This diagram presents the estimated oil reserves (billion barrels) and their cost of production. The first square in the lower left represents the portion of reserves that we have consumed, the second represents the reserves reported by member countries of the Organization of Petroleum Exporting Countries (OPEC), and so on.

At first reading this graph shows us two things. The first is that we have used so far (well, 2005) fifth month of total reserves. The second is that all of the remaining oil is available at a price below $ 80 a barrel, which is in fact very moderate.

These conclusions seem quite so reassuring and rather far from alarmist that we can hear from some associations and other environmental activists.

This is also good in order to arrive at these conclusions I've seen this pattern used!

So who is telling the truth in the story? This graph it holds the truth in the face of eco fundamentalists? It is rather the result of a manipulation of global oil (and other manufacturers) to hide a disaster to mankind next? It is this existential question (not to say mystical!) That I suggest you answer by opening one by one up the drawers:

  • Why is there oil for 40 years ... from 40 years?
  • What is the Hubbert peak?
  • What are the estimates of fossil fuel reserves?
  • What is EROI?
  • Practice, what is the "right" way to read our chart?

Before going into detail on these points, it is useful to redefine the concepts of resource reserves and ultimate reserves (also called reserve base by the USGS)

  • The resource refers to the total amount of oil existing, which is extractable or not.

  • The proven reserve is the amount of oil that have known out of the ground for sure (that is to say with a probability greater than 90%) the technical and economic conditions of the moment. This reserve is usually called "1P" to Proven, it is actually a low estimate of reserves.

  • The reserve is the ultimate all oil that is extracted in absolute little. This reserve is not precisely known once the operation is complete. This concept may agree to deposit and given the global pool. The ultimate reserve is estimated statistically by the number of the subject called "2P" Proven + Probable for.

In other words 1P reserve is what is immediately profitable, the 2P reserves is what is likely to be tomorrow. In the long term, if we do not have too large errors, the number of 1P reserves should tend towards that of 2P reserves.


Why is there oil for 40 years ... from 40 years?

Concerns about excessive consumption of petroleum began in the early 1970s. They are first expressed in the famous report of the Club of Rome published in 1972 (the Meadows report to be precise). For the first time we are talking about "limits" growth model. The following year, 1973, will be the first oil shock.

So it's a little forty years we hear alarmist predictions about the end of our stay but oil always seems the same, between 30 and 40 years. Coming soon ... we are told soon. Returning to the facts.

This famous figure (30 to 40) is determined by an indicator: the ratio R / P. As the name suggest this leaves it by calculating the ratio of Proved Reserves on annual production. If the resulting number is 40 (which is still the case in 2011) then we can say that "at constant level of production, proven reserves are equivalent to 40 years of production. '

Generally summarizes rather "we still have oil for 40 years," quickly interpreted as "leave me alone the next 30 years, then we'll see." Insist first on the fact that this shortcut thought is misleading for two reasons:

The first is that oil production (or at least the willingness to consume) is not constant, it is increasing

the second is that the scarcity of a resource is determined by the supply / demand balance, which is the ability to produce each year is important and not the remaining stock

Returning to our basic question. The R / P ratio is therefore maintained at about 40 for quite some time.

Ratio Reserves / Production 1985 to 2009 - Source: BP Statisitcal Review, 2010

This apparent stability may be explained by two reasons. The first, which can be described as "technical" is increasing proven reserves that year after year tends towards the ultimate reserve. This increase reflects the fact that the oil industry is subject mastery well and that we will know how to exploit the already discovered oil. Ultimate reserves but they, how are they? Well they stagnate. Great discoveries are behind us and we can not find many people to challenge that today ...

Annual and cumulative discoveries of oil reserves - Source: UK Energy Research Center, August 2009

Measurements of annual discoveries (red curve) clearly show that the bulk of the piece is known for thirty years. The last "great discovery" offshore Brazil, considered exceptional and the press has widely relayed in 2008, is estimated at 30 billion barrels ... the equivalent of one year of production. It is not that going to vary ultimate reserves (around 2500 billion barrels or 340 billion tonnes).

Estimate of ultimate reserves remaining in billion tonne Source: Jean-Marc Jancovici during ENSMP 2008

The apparent stability of the R / P ratio is related to the transfer of proven reserves but unproven in proven reserves.

This is one form of trompe l'oeil behind this first explanation.

The second explanation is political games being played behind the statements of reserves. Reserves are an important political weapon for the major producing countries.

The OPEC countries have increased their example reported reserves of over 300 billion barrels in the late 80s (when against oil shock) with no major breakthrough has been made. Similarly reserves of Kuwait have not been following the adjustment flaring wells drilled during the first Gulf War. This phenomenon is part of what we call war quotas among member countries of OPEC.

According to ASPO so there are very serious doubts about some of the reported reserves. The following graph shows the purple and 1P reserves declared by politicians and used in the calculation of the ratio R / P. The increase in reserve ratio explains the continuation of around 40.

Comparison of technical reserves and policies - Source: Association for the Study of Peak Oil and Gas (ASPO), May 2008

The green curve shows the evolution when her 2P reserves estimated by ASPO. According to this curve, the R / P ratio is expected to decline from almost 30 years now and argue a little less than 30 ...


What is the "Hubbert's peak"?

Beyond the debate on oil reserves (the stock), it is the capacity to produce annually (flow) determines the level of scarcity of a resource. If the level of production (supply) is less than the needs of the population (demand) while prices rise.

The concept of "peak oil," explains that the annual production level of a reservoir passes through a maximum during its period of operation, and for physical reasons. It is easy to understand for example that when a field is empty, the pressure drops inside it which makes it more difficult to extract the remaining oil.

Mario King Hubbert is famous for having published in 1956 a model of the evolution of the workflow described by a bell curve. He has made predictions on time or be achieved peak production in the United States in particular.

Prediction of peak oil production in the United States - Source: MK Hubbert, nuclear energy and fossil fuels the, pub. No. 95 Shell development company, june 1956

These therefore we must M.Hubbert notion of peak oil, otherwise known as "Hubbert's peak". And it is working reasonably well. Prediction of peak production in the United States has proved to be correct and such happened in the mid 1970s.

So we know that peak production occurs when half of the reserve has been used. This concept is valid for a given field but also for the world's reserves. Since the early 2000s, the issue is not so much whether such a peak will come but when he arrived. And recent developments of the world does not draw another pic, there already stands still a marked stagnation.

Annual oil production in millions of barrels per day - Source, BP statistical review 2011


What are the estimates of fossil fuel reserves?

Let us widen the scope a bit to watch the debate all fossil fuels. Here we focus on the different forms of oil (conventional and unconventional), coal and gas. Uranium, which is also a reserve fossil is not treated. Estimates of ultimate reserves can be summarized as follows:

Summary of fossil fuel reserves - Sources: synthesis of the author from various sources (IPCC, BP ​​Statististical Review, ASPO)

A few comments:

  • Note first that there is a fairly good convergence of views regarding the reserves of conventional oil. All persons having a legitimate opinion on the matter say nearly the same thing.

  • The upper estimate of gas reserves incorporates unconventional for more than half (firedamp gas shale gas or compact). Put into operation despite some recent unconventional, there is no guarantee that these resources are exploited.

  • Many disagreements exist around unconventional oil, there is no guarantee for the moment that what appears to be usable in low case!

The synthesis of the previous table for all fossil fuels can be represented as follows:

Summary of fossil fuel reserves - Sources: synthesis of the author from various sources (IPCC, BP ​​Statististical Review, ASPO)

The peak of world fossil is reached (roughly) when the "already used" will pretty nearly equivalent to the "remaining reserves". Given the level of reserves identified and always very important increase in the level of consumption, a fairly general consensus was formed to say that global peak for all fossil fuels will be reached before the end of the 21st century.

Representation of peak oil production, coal and gas - Source: International Energy Agency 2004


What is EROI?

This acronym stands for "Energy Return On Investement," we also find in the literature the term EREOI (Energy Return on Energy Invested). It is simply an image of performance provision of energy.

ERIO is calculated by the ratio of Energy Produced on Energy Invested. This concept can be applied to both hunting (how many calories expenditure for the hunter to capture those of the animal), as well as in agriculture and the extraction of fossil fuels.

This is often associated with the total production of a particular resource (the surplus). Eg agriculture has a lower EROI than hunting / gathering but a greater surplus per m2 per person.

There is currently no comprehensive measures specific ERIO for the extraction of fossil resources and even less statistical series but some scientists have even tried to draw an overview. Among them we can cite two American professors Charles Hall and Cutler J.Cleveland.

For example, here a summary of the situation in the United States representing the EROI based on the annual quantity produced.

EROI based on annual quantities produced for all energy used in the United States - Sources: Charles Hall, Provisional Results from EROI Assessments 2006

The red bubbles represent 2005 figures for all energy resources (coal, oil, nuclear, etc.), the bubble rightmost being the total energy consumption of the United States in 2005 (the sum of all the others on the horizontal axis). The other three bubbles correspond to different years for oil produced on American soil and imported oil. Bubble size is the image of the data uncertainty.

The unit used on the horizontal axis (the quad) is equal to 10 18 joules power is still 24 Million tonnes of oil equivalent (Mtoe). Total U.S. consumption in 2005 (~ 100 quads) corresponds to 24 Gtoe or 17.5 billion barrels.

This graph shows that the EROI of oil produced on American soil is increased from 100 in 1930 (I put one, I get 100) to 15 today. The figures for imported oil showed the same trend.

The EROI is a picture of the quality of the exploited resource. It is understood that the man started to exploit the resource better, the easier (and therefore cheaper) to extract. Then came the time to oilfield deeper, with a crude oil of lower quality and therefore a lower EROI.

The decline in EROI has a first impact on the price (this is what shows the first graph in this article) but not exclusively. For mineral resources (like gold or diamond) is the supply / demand balance that determines the price at which we can extract. If the resource is indispensable prices adjust to make it usable (not to mention profitable) it is, whatever the quality (and therefore the price of extraction).

For energy resources is a little different. Beyond cetimpact price must retain a sense that the operation in relation to the energy balance. Nobody exploit a resource that EROI is 1 (I put one, I get one ... it's for Shadok!) And that any matter the cost ....

This is the question posed Chrales Hall on the previous graph is asking a minimum limit of EROI around 3 or 4. For comparison the oil sands require to invest between 25-40% of the energy extracted from the ASPO is a ... EROI between 2.5 and 4.

According to the theory, practice how to read this graph?

After this overview back to our original question about the correct reading of the graph below:

Evaluation of global oil reserves - Source: IEA 2005

This type of presentation, without being false, can strongly induce error. For an accurate reading, we must clarify the following points:

  • There is debate today on the quantities actually available, the debate focuses primarily on policy statements (conventional oil) but also the capabilities of exploitation of unconventional resources. The graph on the support of more high estimates of reserves.

  • Then there is a debate on the quality and therefore the efficiency of the extraction of different resources (plus it goes to the right of the graph, the better ... drop a bit like politics).

  • There finally debate on the amount that we think we can produce annually (this is somewhat a result of the first two points), and therefore the date of peak oil or global Hubbert peak.

This graph therefore mixed a little of everything (including assisted technique called Recovery "EOR" also hotly contested) and ignores important given LA: the stream.

We could just as well have draw such a graph for solar energy. Quantities are far superior to the needs of humanity and the production costs are now a reasonable order of magnitude. Representation as a "quantity / price" would lead us to believe that just go all solar. Of course this is not as simple, solar energy is very diffuse and successfully produce in large quantities poses many problems. We could still hold the same reasoning for the hydrogen found in large quantities on the planet and can be used as fuel.

The interpretation of this graph to the oil reserves is exactly the same ... the information presented does not prove in any way that we have the capacity to produce oil in quantities sufficient for annual long time.