... In summary, proved reserves are political (or financial) data and should not be used for forecasting the future. The mean value (proven + probable) is needed and it is what is used by the oil companies -- but they do not publish it. The problem is that BP Review publishes the political data and most economists believe them....
Dana Visalli wrote: > Jean: > > What is your perspective on the degree of variability of reserves relative > to price? Colin shows 22 Gb of proved oil reserves for the US in 1997 (from > O&GJ). Is this a market-based estimate? Will reserve estimates go up with > price? Petroconsultant's estimates of ultimately recoverable reserves must > surely take price into account.I answered ... your previous mail [regarding] Spurious Reserve Reports ... I enclose it again.
Dana Visalli wrote: > Jean: > Thank you for responding so fully to Mike Lynch's views. > Can you tell us any more about the peculiar reserve reports from OPEC? by > way of review, here are the reserves listed for some Middle East countries, > 1990 reserves/1997 reserves: Saudi Arabia 257.5/259, Abu Dhabi 92.2/92.2, > Dubai 4/4, Iran 92.9/93, Iraq 100/112, Kuwait 91/94. > It looks like no one is minding the store; the numbers don't change, as you, > Colin and others have pointed out.
OPEC was in fact constituted of two groups; the first producing at full capacity and the second being the swing producers restraining their production to a certain quota. The swing producers are the Gulf producers: Saudi Arabia, Kuwait, Iran, Iraq and Abu Dhabi. It is why I prefer to look at the production of the world outside the Gulf producers rather than to the Non-OPEC. But within the Gulf producers, there were Saudi Arabia and the other four, as SA had in the past the power to increase or decrease its production by 2 Mb/d. (Compared to the nuclear powers, SA was the only one oil power.) The countershock of 1986 was triggered by Saudi Arabia alone as it was the only country to increase production, see the attached graph 1 from the USDOE monthly data at http://www.economagic.com/doeme.htm where in 1985 SA was the only producer to increase production as the rest of the Gulf [and] the Non-OPEC stayed flat.
The explanation is in the 1994 Peter Schweizer book "Victory" describing the barter deal between King Fahd and Reagan: cheap oil for US protection in the Gulf (cost for the US, 50 G$/a). The attached graph shows also the deal worked pretty well in 1991: Saudi Arabia quickly replaced Kuwait production in order to remove the oil price spike. The deal stayed until 1999 when Venezulea under Chavez (with the help of Mexico) decided to end the cheating within OPEC and convince Abdallah to increase price by respecting the quotas. Notice that the Non-OPEC [production] was peaking during this period [of] 1984-1992.
The problem within OPEC was to decide the quotas. The quotas depend on reserves and population. It is why when a reserves value is published, they prefer not to change in order to not upset the previous agreement on quotas. But the situtation has changed now as most of the Gulf producers have reached their capacity. I gave up guessing what the Gulf producers will decide, as what the oil price will do on the short term. In the past the variations of the demand were smoothed by the swing producers. Now I do not know how the supply will react to the demand as the Gulf producers are not "swingers" any more. The price will have to do its work, not in increasing the reserves but in decreasing the demand.
> Why, when the future of industrial society depends on those reserves, are > they so uncritically accepted by the mainstream?
During the 80s BP Review which was reporting mainly the Oil & Gas Journal data decided to change the OGJ [data] by putting their own values for Abu Dhabi as BP (as [with] Total) is partner in almost all the producing companies (staffed with BP people). When the review was published (at this time on paper), [the] BP Chairman was called by the Sheik who told him to destroy all the copies and to put [in] the values given by the national company. It was done very quickly and since then BP [has given] OGJ reserve data without questioning. An oil company which wants to stay in the Gulf cannot go against the will of the leader.
> And there is the question of many OPEC nations' reserves doubling in 1988. > You mentioned you were in Abu Dhabi in October; their reported reserves > tripled between '87 and '88 (from 31.0 Gb to 92.2 Gb). You didn't happen to > check their dipstick when you were there did you? ..... which is to say, has > any authority been able to confirm or deny the veracity of these reports? > Was there any critical discussion of these reserve jumps at the time they > occurred?
The United Arab Emirates reserves are given by the USGS report 98-468 as 61 Gb to compare with 97.8 Gb in BP Review. My paper in Abu Dhabi will be published soon by ECSSR as they have the copyright, but I will put it on the web after its publication. After my talk (see at the oilcrisis.com/laherrere the paper, Gulf News Oct 8), Dr. Ibrahim Ismail, advisor to the UAE Minister of Petroleum & Mineral Resources, said irrespective of the quality of the data and ambiguous definitions, there has been a continuous growth in oil and gas reserves in the last 50 years. In fact he was referring to the OGJ proven data which are the political values, [whereas] the technical data (backdated mean values from my personal file where I have homogenized all technical data) have been declining since 1980. (See attached graph 2.)
Happy New Year,
Jean Laherrere
OGJ Dec 18, 2000 |
1999 | 1999 | 1999 | |
---|---|---|---|---|
State |
first production year |
producing wells # |
production b/d |
per well b/d |
Alaska |
1905 | 1821 | 1049849 | 577 |
Florida |
1943 | 81 | 13411 | 166 |
Louisiana |
1902 | 31785 | 1513145 | 48 |
Alabama |
1944 | 801 | 30479 | 38 |
Mississipi |
1889 | 1475 | 49175 | 33 |
North Dakota |
1951 | 3304 | 90090 | 27 |
Nevada |
1954 | 78 | 1934 | 25 |
Utah |
1907 | 1929 | 44529 | 23 |
South Dakota |
1954 | 138 | 3014 | 22 |
California |
1861 | 40990 | 856773 | 21 |
Wyoming |
1894 | 10034 | 167471 | 17 |
Montana |
1916 | 3478 | 40929 | 12 |
New Mexico |
1911 | 20225 | 176375 | 9 |
Texas |
1889 | 166321 | 1400025 | 8 |
Arizona |
1958 | 26 | 181 | 7 |
Michigan |
1900 | 3500 | 21466 | 6 |
Nebraska |
1939 | 1206 | 7290 | 6 |
Colorado |
1887 | 9250 | 50597 | 5 |
Arkansas |
1921 | 7321 | 19600 | 3 |
Oklahoma |
1891 | 85837 | 193307 | 2 |
Kansas |
1889 | 43500 | 79578 | 2 |
Tennessee |
1860 | 700 | 945 | 1 |
Virginia |
1943 | 18 | 22 | 1 |
Illinois |
1889 | 29963 | 33055 | 1 |
Indiana |
1889 | 5121 | 5381 | 1 |
Missouri |
1889 | 303 | 252 | 1 |
Ohio |
1860 | 29166 | 16351 | 1 |
Kentucky |
1860 | 23344 | 7608 | 0.3 |
West Virginia |
1860 | 16025 | 4027 | 0.3 |
Pennsylvania |
1859 | 16250 | 4027 | 0.2 |
New York |
1865 | 3602 | 562 | 0.2 |
Total US |
557592 | 5881448 | 11 | |
Lower 48 |
555771 | 4831599 | 9 | |
Total US from BP Review (includes NGL, etc.) | 7760000 |
Graph 1
Graph 2