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OPEC reserves revisited

For the ASPO-USA conference 2009, this interview was done with Sadad-al-Husseini, ex-Saudi Aramco geologist and executive vice president (excerpt)

Question: Assume for the moment that declines in demand have flattened and that we resume modest growth in demand in a year or so. Are there adequate new oil projects in the pipeline to meet rising demand for a few more years?

Sadad: I’ve been tracking the number of projects, globally, for a long time both in the Middle East and elsewhere—Russia, Brazil, west coast of Africa, and others. A lot of this information is in the public domain, so there is no mystery there. The International Energy Agency recently reported on the same numbers. The bottom line is that there are not enough projects. There is not enough new capacity coming on line, within say the next five to six years, to make up for global declines. And that’s assuming a very moderate level of declines—6% to 6.5% for non-OPEC, perhaps a 3.5% to 4% decline rate for OPEC.

http://www.aspousa.org/index.php/2009/09/interview-with-sadad-al-husseini/

So let us have a look at those decline rates. These are from the International Energy Agency (IEA) World Energy Outlook (WEO 2008):

iea_weo2008_analysis_declineexistingfields_reserves

This is my analysis based on the decline rate chapter 10. Please note (as at 2007):

(1) 79% of existing reserves are under production (980 Gb), but yield only annual oil flows declining at around 4% pa. The total amount of oil which can be produced up to 2030 is around 380 Gb

(2) a whopping 55 mb/d of 70 mb/d of crude oil are from post peak fields (dark blue) with a natural decline rate of  9% pa. Additional upgrades are necessary to lift this natural decline rate to the observed decline rate (dotted area)

(3) 15 mb/d are from fields at plateau or still growing, but not by much

(4) In total, in relation to 2007, 27 mb/d of additional capacity have to come on stream, just to keep crude production flat

(5) Most of the remaining 21% of reserves, which still have to be developed, come from the Middle East, the former Soviet Union or from expensive offshore

The ratio of 980 Gb of producing reserves to a 23 year production of ‘only’ 380 Gb  suggests something is wrong with the reserves. So let’s go back to Sadad-al-Husseini’s warning. It comes 2 years after his slide show at an Oil & Money conference in London in 2007

http://www.energyintel.com/om/program.asp?year=2007

in which he crossed out at least 300 Gb of proved reserves and reclassified them as resources.

I quoted his graph in my submission #103 to the Australian Senate Inquiry on Fuel and Energy on page 16
http://www.crudeoilpeak.com/?p=34

sadadalhusseini300gbreservesinflated

Here is a more detailed reserve table from ASPO newsletter 46 (October 2004)   http://www.energybulletin.net/node/2390

opec_reserves_2004_aspo_newsletter46_energy_bulletin

Col 3 = PFC Energy depletion levels as assessed in September 2004

Col 4 = Original reserves calculated as column 2 divided by column 3

Col 5 = Remaining reserves calculated as column 4 minus column 2

Column 9 shows that OPEC reserves reported in the BP statistical review (here the 2004 version)

http://www.oilcrisis.com/bp/statistical_review_of_world_energy_full_report_workbook_2004.xls

are mostly total discoveries, not remaining reserves. In other words these reserves contain oil already produced and consumed.

The International Energy Agency (IEA) writes in its World Energy Outlook 2004 (page 92)

This hike in OPEC countries’ estimates of their reserves was driven by negotiations at that time over production quotas, and had little to do with the actual discovery of new reserves. In fact, very little exploration activity was carried out in those countries at that time. Total reserves have hardly changed since the end of the 1980s.

http://www.iea.org/weo/2004.asp 

This graph shows how reserves were increased (data from the BP Statistical Review)
In its latest WEO 2008 the IEA repeats on page 202:

According to BP, which compiles published official figures, proven reserves worldwide have almost doubled since 1980 (Figure 9.3). Most of the changes result from increases in official figures from OPEC countries, mainly in the Middle East, as a result of large upward revisions in 1986-1987. They were driven by negotiations at the time over production quotas and have little to do with the discovery of new reserves or physical appraisal work on discovered fields. The official reserves of OPEC countries have hardly chnaged since then, despite ongoing production

 http://www.iea.org/weo/2008.asp 

This  problem will explode in the next years, by 2015 at the latest when – according to the late Dr. Ali Bakhtiari – Iran enters a period of zero exports. The following graph shows actual production and consumption data (EIA) superimposed on Ali’s projections  http://www.peakoil.net/iwood2003/paper/BakhtiariPaper.doc 

iran_production2008_consumption_dr_bakhtiari

Dr. Bakhtiari’s warnings are well documented in the Hansard of the Australian Senate hearings on oil supplies, in July 2006 http://www.aph.gov.au/hansard/senate/commttee/S9515.pdf 

Iran introduced petrol rationing in 2007 http://news.bbc.co.uk/2/hi/6244574.stm

Oct 8 2009 (Reuters)  Iran plans to nearly halve the amount of gasoline that motorists can buy at a heavily subsidised price, state television reported on Thursday, in what could be a politically controversial proposal.

It quoted Oil Minister Massoud Mirkazemi as saying that under the plan, to be considered by parliament next week, the quota of subsidised gasoline would be reduced to 55 litres per month from 100 litres now.

http://www.reuters.com/article/GCA-Iran/idUSTRE5973AT20091008

See also my submission 75 to the Productivity Commission on energy efficiency (February 2005)

Next intelligence failure: 300 Gb OPEC oil missing
http://www.crudeoilpeak.com/?p=372

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