Solving the "Enigma" of Reserve Growth

This is a guest post from WebHubbleTelescope.
As a good rule of thumb, when you have a promising model describing some physical process, you might as well put it through its paces. Not only do you shake out some stubborn corner cases, but you often find something new and revealing. We did that in the last post, The Derivation of "Logistic-shaped" Discovery, grinding out the derivation of the classic Logistic/Sigmoid-shaped Hubbert curve based on the generalized Dispersive Discovery model. With this post, I use the same discovery model to derive the upward climb of the cumulative reserve growth curve which we empirically observe on many oil reservoirs and oil-bearing regions.

Update: WebHubbleTelescope has posted an updated version of this post here.

Many analysts have found this reserve growth behavior both curious and ultimately very important. I know that Khebab and Rembrandt have spent much time on TOD tracking this behavior as it plays an important role in how the peak will play out. Furthermore, I believe that the practice of "back-dating" discoveries based on reserve growth updates has muddied the waters and stalled progress in the basic understanding of the fundamental growth process. Unless we have a good model for the reserve growth dynamics we have to resort to using the heuristics supplied by USGS geologists, including the modified Arrington equation that Khebab has successfully used in the past. I find nothing wrong with using a heuristic and Khebab has really kick-started the "un-back-dating" approach with some excellent results. Still, a heuristic lacks some of the predictive power and room for insight that a fundamental model can provide.

The USGS crew have an interesting take on the reserve growth issue. In turns, the geologists working there have labeled fossil fuel (both oil and NG) reserve growth an "enigma" and a "puzzle".
For that reason the United States Geological Survey (USGS) considers [this] analysis "arguably the most significant research problem in the field of hydrocarbon resources assessment."

I have to admit that it has puzzled me for a while, but then again most of us here don't work at the USGS for 40-hours a week. This post runs though a stochastic analysis that essentially explains how reserve growth can happen.

One of the technical issues that the USGS have struggled with respect to their reserve growth analysis involves the use of "censored data". This essentially says that you should take special care of extrapolating data backwards considering you have only a truncated time-series data set of recent vintage. The "sweet spot" for good data basically doesn't exist, with very few values for old data and also very few values for the latest data. Working with such a limited data set, they massaged it the best they could and adequately normalized the fractional yearly growth, but they basically punted after this point and came up with only a heuristic to "explain" the trend. Pragmatically, I've decided to sweep the censoring problems under the rug, since in the long term, complaining about the possibility of statistical shortcomings still won't explain most of the trend, which rises steeply enough to make the cornucopians hopeful for great prospects ahead (listen to any right-wing radio program today for examples of this kind of unbridled optimism).
"We must accept finite disappointment, but we must never lose infinite hope." -- Martin Luther King Jr.

"Reserving judgments is a matter of infinite hope."
-- F. Scott Fitzgerald in The Great Gatsby
Yet we still have left a riddle wrapped in a mystery inside an enigma. The actual problem with the half-baked reserve growth analysis has become obscured by the trickiness with using censored data. Wrapped inside, it really stems from a lack of a good value for the initial discovery estimate. Stating it bluntly, pick this number incorrectly and you can get numbers all over the map, with the possibility for some hugely absurd values.

To provide a path forward in unwrapping the riddle, I used the generalized Dispersive Discovery Model. In terms of modeling reserve growth, the dispersion generates a tail for accumulating further discoveries after the initial estimate occurs. For constant average growth, the model looks like this:
DD(t) = 1 / (1/L + 1/kt)
For the purposes of this analysis, I convert it to a reserve growth value U(t) and set T=L/k to make the math easier to handle later on:
U(t) = tT / (t+T)
Note that at time t=0, the discovered amount starts at zero and then the accumulation reaches some value proportional to L -- what one should consider as the characteristic depth or volume of the reservoir. It takes time=T for most of the search to reach this point. The basic premise of reserve growth and what USGS geologists such as Attanasi & Root1 and Verma2 frame their arguments on, has to do with the reserve growth considered as a multiplicative factor of the initial estimate. They see numbers that reach a value of nearly 10x after 90 years and claim (perhaps implicitly) that this has some real physical significance, almost offering up hope for still-to-come huge reserve benefits. Figure 1 exaggerates the claim for effect, as I want to make you aware that a finite asymptote certainly exists, but it gets obscured by the data trends commonly reported.

Figure 1: Potential for huge reserve growth

The contrived swindle of the USGS explanation has to do with exactly when the original estimate becomes available. Conceivably you can make estimates that occur very early in the lifespan of a reservoir, and you will get very low estimates for estimated discovery size. To take it to one extreme, you might find the initial estimate to fill a sewing thimble. Now, if that estimate grows at all, you can get huge apparent reserve growth factors, some fraction approaching infinite in fact. In contrast, you can wait a couple of years and then report the data. The later years' growth factor will proportionately account for much less of an increase. Now if you consider that in other parts of the world, countries report reserves less conservatively then the USA, then the reserve growth factors can vary even more wildly. I used USA oil data from an Attanasi & Root paper1 which you can find a dump of here. Initially, I plotted the data as a fractional yearly growth curve, basically reproducing the trend that A&R report:

Figure 2: Trend duplicated from the A&R data. The blue '+' symbols represent the data and the red curve represents a small-window moving average. To generate the curve correctly, you must normalize the yearly growth per reservoir, as the reservoir sizes vary widely.

The key insight to understand the growth factor in terms of the DD model has to do with averaging the initial discovery point over a relatively small window of time starting from t=0. This effectively samples the infinite values of growth against other finite values. The use of the sampling/integration window brings down the potentially infinite (or at least very large) growth factor to something more realistic. The math on this derives easily into an analytic form, and we end up with this function, where A indicates the time integration window:
U_bar (t) = (A - T ln((t+A+T)/(t+T))) / (A - T ln((A+T)/T))
The term on the right of the main divisor assures that the average U_bar starts at 1 for time t=0. Alternatively we can set A to some arbitrary value and skip the integration, which assumes that all initial discovery estimates start at t=A/2. This results in the conceptually simpler:
U_delta (t) = 2*(t+A/2)*(A/2+T)/A/(t+A/2+T)
The latter equation obviously starts at 1 and reaches an asymptotic value of 1+2T/A. Both the values of A and T describe the ultimate asymptote, but the non-zero A serves to avoid generating a singularity at the origin. For T= 24.6 and A=6.6, the figure to the right shows the negligible differences between using an integration window versus assuming a delta shift in the first estimate. The two curves essentially sit very close to one another.

So what do these numbers mean? Essentially, A=6.6 means that the first discovery estimate on occurs on average 3.3 years after they first made the discovery. This makes intuitive sense because if we make the estimate too early, we end up with the equivalent of a thimble-full of oil. For T=24.6, this means that it takes about 25 years for the majority (i.e. the fast part) of the dispersive search to take place. The rest of the long tail results from the slower dispersion. The curve does eventually reach the asymptote for a cumulative growth factor of 8.5.

In terms of a spreadsheet, you can turn the CGF formula into a discrete generating function, with the yearly estimates based on the growth factor of the preceding year. I plotted the curve directly against the A&R data in Figure 3 and Figure 4. After the hairs on the back of my neck settled down, I realized that this simple formula has some nice understandable properties. It essentially generates growth factors based solely on the maximum entropy dispersion in the underlying model. In other words, the "enigmatic" reserve growth has turned from a puzzle into a mathematical result resulting solely from simple stochastic effects.

Figure 3: Fit to fractional yearly growth of the A&R data

Figure 4: Fit to cumulative reserve growth of the A&R data. This was calculated from the generating function in Figure 3. This correlates well with the direct use of the reserve growth equation.

Plotting the same data against an Attanasi & Root chart in Figure 5, it lays cleanly on top of it, showing discrepancies only on some very old outlier data. A&R went through the rationale of discounting the outliers, but I consider all the data valuable, if it gets used in the context of a decent model.

Figure 5: Fit on top of the original A&R chart duplicated from Reference 1. The blue line comes from the Dispersive Discovery reserve growth model.

Interestingly, with the limited data available, the reserve growth looks like it will continue on and eventually reach infinite values, but this becomes a mathematical impossibility if we integrate out the "thimble"-sized initial estimates. As a bottom-line, if we continue to make poor initial estimates for discoveries, we will continue to pay the price for acting surprised at the "huge" reserve growth we have. In other words, the USGS has pawned off a contrivance on us by making us believe that their trend lines went beyond mere empiricism. If you look back at the previous "model" that the USGS's Verma postulated2 based on the "modified Arrington" approach, you will realize that the trend line comes about purely from heuristic considerations. Their equation shows a fractional order power-law growth:
To top it off, this heuristic shows unlimited growth! Do you suppose that the USGS geologists figured out that by reserving judgment on the possibility of an asymptote, that they could pawn off a fast one on the public, and defer the reality for years to come?

You have to ask yourself how these professionals get away with publishing stuff based on hacking and punting, that really has such a simple statistical and mathematical underlying foundation. I really find nothing complicated about the mathematics (even though it has taken me some time to arrive at my current state of understanding). I call this combination of using simple models and using straightforward calculus and probabilities a form of pragmathematics -- just something you do to understand the physical foundation for the data we observe.

Referring again to the literature, you find hints that support the dispersive effects of accumulated reservoir estimates (note that they use the term dispersion).
A graphic illustration of the very broad URA data dispersion that occurs when grouping fields across geologic types and geographic areas was provided by the National Petroleum Council (NPC) and is reproduced with minor modification in Figure FE5.

I claim that this new dispersive discovery reserve growth model has the potential for filling in the back-dated discovery curves and providing better estimates of future production levels. I would recommend starting with the USA data and using Khebab's approach for regenerating a profile of un-back-dated discoveries and then applying the Oil Shock Model to estimate extrapolated production levels. It may take some time to sort out the mess, but we likely have all the pieces necessary to formulate a complete model-based projection.

The actual enigma of reserve growth I think has to do with the cluelessness of the USGS and the secrecy and inscrutability of the oil industry. You would think they would have figured out the reserve growth puzzle long ago. I guess they thought that deferring the reality would surely provide us with infinite hope.

The "How Did We Get Ourselves Into This Mess?" Epilogue

A fraction of the population thinks that oil production remains a simple matter of turning the spigot clockwise to get more oil, and reserve growth a non-issue. And that raising the current reserve inventory becomes a conservative decision made entirely under the control of humans.

Overestimating the size of a reservoir has significant financial advantages. You can attract huge initial investment capital if you exaggerate a claim. But this can also attract charlatans. So I agree with the SEC's decision to put the stops on that practice, with big fines for fraudulent claims. And thus the oil companies tried to make their reserve estimates as high as they could without overdoing it. But they still had no good ideas on how best to characterize their estimates (not smart? who knows?). Some people suggest that the industry just makes "conservative" decisions. Yet, I don't think that ambiguously-framed "conservative" decisions matches with well with what you can accomplish with a good reserve growth model. I would describe the industry's approach not "conservative" but "non-predictive" and "safe". I can point to lots of other engineering areas where through the routine process of characterization one can make equally conservative estimates, but they do an excellent job of predicting the asymptotic behavior with safety margins for any errors or noise that creeps in.

As an example Andy Grove was the first to characterize silicon dioxide growth by evaluating simple models and thus began Intel. Getting oxide thickness correct could follow a process where someone checks the thickness every two minutes like they were watching a loaf of bread rise, but the technology and modeling has gone way beyond that now in Silicon Valley and China. Not so with the oil industry however; to the untrained eye it looks like they use the primitive trick of plunging a thermometer into the turkey roasting in the oven. This is safe but, jeez, how primitive!

Bottom line, I believe the current industry estimates for reserve growth remain just as safe and non-predictive as a turkey thermometer, but that the underlying reality (having to do with the dispersion of searches through the volume of a reservoir) can vastly improve our educated guesses. This makes it potentially predictive if the industry had the balls to use a good validated model. The simple model I use for reserve growth is complementary to what Andy Grove did in the 60's. Unfortunately, I also don't think that petroleum engineers have any control over marketing decisions. It's possible that oil industry engineers knew about the characterization outlined here all along but were superceded by management's decisions. They used it in their own internal books and presented a "safe" facade for the outside world.

Unfortunately, we turned the clock to a new century, and some nobodies on TOD have finally figured out the obvious that had stared at them and the USGS in the face for years.

Journal References:
Attanasi, E.D., and Root, D.H., 1994, The enigma of oil and gas field growth: American Association of Petroleum Geologists Bulletin, v. 78, no. 3, p. 321-332.
Verma, M.K., 2003, Modified Arrington Method for Calculating Reserve Growth — A New Model for United States Oil and Gas Fields, U.S. Department of the Interior, U.S. Geological Survey

Web References:
  2. Finding Needles in a Haystack
  3. Application of the Dispersive Discovery Model
  4. The Shock Model (A Review) : Part I
  5. The Shock Model : Part II
  6. The Derivation of "Logistic-shaped" Discovery

A fraction of the population thinks that oil production remains a simple matter of turning the spigot clockwise to get more oil

Shome mishtake shurely? Clockwise?

No, no, not at all, the more you turn it clockwise the deeper you screw it into the hole and the closer you get to really good abiotic stuff. Plus this way you don't have to suffer from the post party hangover.

Good point, I guess it depends on whether you want cold or hot oil.


Would you care to venture out on a limb and take a guess as to how much reserves are (?)"over(?)estimated"? .... If this question is applicable, that is. I know that some OPEC reserve numbers have grown, but are there others?

(I think you're dealing with future projections. (Correct?) If so, have any future projections (made in the past) worked their way into current records?)

Or am I missing the point of your post?

Not Khebab's post but Khebab was the sponsor.

I was actually in the middle of making some final edits when Khebab posted a draft. No problem, but if you want to see the final draft, go here:

The main thing I added was a better description of the reserve growth asymptote. So for example, if we want to see where the cumulative growth levels off to, look to the following graph. The blue curve eventually levels off to a CGF of 8.5.

It's just like any computer model, if USGS, EIA, or others plug in crap data (or equations)... crap comes out.

Except, of course, for my model. "As one can clearly see..."

"To top it off, this heuristic shows unlimited growth!"

This is a very important insight. It's one thing to march out equations and models of reserve growth that, frankly, most people won't fully understand. But when you point out that the existing reserve growth methodology assumes the possibility of infinite growth in an obviously finite reservoir, anyone with half a brain should be able to realize that the existing methodology is deeply, deeply flawed.

You may even want to re-caption the "enigma" vs. "reality" graph at top, saying something like: "Prevailing reserve growth claims imply that there are infinite reserves in obviously finite reservoirs. Faced with such an transparently incorrect model, the question remaining is not IF reserve growth models are wrong, but HOW LOW the asymptotic barrier of 'reality' lies."

Thank you for the comment. If you look at the A&R heuristic, it also shows an infinite first derivative at T=0, or essentially an infinite growth rate near zero. That supports that something is very fishy about how they came up with the heuristic.

" I don't think that ambiguously-framed "conservative" decisions matches with well with what you can accomplish with a good reserve growth model. "

while i dont disagree with that statement, the sec does not allow any assignment of "proven" reserves based on reserve growth modelling and imo, are not likely to.

some companies undoubtedly maintain more than one set of reserve estimates. one closely guarded set for making economic decisions, and one set for public consumption, 99.9+% of us will only see the latter.

You’ve hit the problem right between the eyes as with respect to recoverable reserve estimation. I’ve been a career development geologist for 33 years and have spent many thousands of man-days working on the same issues. I suspect you’re aware of many aspects of the process but I’ll expand for everyone’s benefit. There are two basic approaches to recoverable reserve estimation: volumetric and production decline. Volumetric analysis has always (and will continue to be) a rather inaccurate approach. Even when there seems to be enough geologic control to accurately map the volume of oil existing in the reservoir you’re still left with the uncertainly of recovery efficiency. Most large oil reservoir are produced by water-drive: the nature of oil to float on water. As oil is produced the water pushes the remaining oil upward. The problem with analyzing such a dynamic system is the inability to predict with any accuracy how effectively the water pushes the oil out. In reservoirs with very thick oil as little as 15% of the oil is recovered. In light oil reservoirs recoveries can be 60% or higher. But there are more variations possible. The character of the pore connections in one light oil reservoir may allow a 60% recovery while another reservoir with the same quality oil might recover only half that volume. The bottom line: while the in place volume may be fairly accurate, recoverable estimates are much more art then science. But before the reservoir produces this is all you have to work with.

By far the most accurate method to estimate ult rec in such reservoir is by production decline. After X number of years the wells will start producing water with the oil. In most cases, it then becomes relatively easy to estimate ult rec (this is why Saudi has a very good estimate of Ghawar's future production potential even though they won't share that info). There are certain natural power law functions that exert control over the process at this point. But this data isn’t available for years after the discovery is made. From analyzing hundreds of field studies the great majority of ult rec estimate errors were do to optimistic assumptions used in the volumetric analysis. Not fraudulent expectations but utilizing the high side of the different variables. Needless to say, pressure from the management of public companies on the staff to be realistic but estimate high has driven much of the process. Even when outside engineering auditors are used they can still be pushed with technical arguments to be more optimistic (to toot my own horn, I was pretty good at getting the numbers I wanted). And, to be honest, some of those “independent outside auditors” were nothing but “reserve whores” who would gladly skew the numbers if their invoices were high enough. (and, yes, we really would call them that behind their backs).

But I have some questions for Kebab et al. Where is the USGS coming up with their raw data? I have never seen the Survey or any other gov’t agency supplied with any data that would allow any measure of analysis. From a practical matter they couldn’t do such analysis if they did have access to the data. I recall back in the 70’s when the Feds required the Big Oils to supply them with all internal mapping and evaluations of fields in the OCS. The Feds wanted to see if Big Oil was hiding reserves. I knew one of the Survey geologists in charge of collecting the data. He told me that all he and his cohorts could do was log in the data. Analyzing the data with the current staff would take many decades so they didn’t even start the analysis process. I suspect those millions of bit of data are still sitting in a warehouse in New Orleans…if they weren’t destroyed by Katrina.

I’m guessing they are getting reserve estimates from the operators. Same question would go towards your source of data. You guys are very clever and your hard work is greatly appreciated so I hope this next point isn’t taken badly. Are you getting some of you reserve growth numbers from the public companies themselves? And if you are, are you able to distinguish reserve growth via the drill bit vs. growth through acquisitions? Acquisitions have been my focus for almost 20 years. I can only make a wild guess but at least 50% of the reserve growth of the companies I’ve dealt with has come from buying someone else’s field and not discovering new reserves. Thus it wasn’t so much reserve growth (although that’s how they market it to the public) but reserve transfer. I know that sounds so basic so please don’t take offense if you have taken this into account. But that question has been bugging me ever since I started reading about “reserve growth” here and elsewhere.

And, no, Elwood. In 33 years I’ve never seen a company keep two sets of books. I’ve always dealt with public companies and they always threw out the biggest reserve numbers they could w/o getting busted by the SEC (and some actually did get busted). They might secretly talk amongst themselves about how inflated their reserves might be. And don’t even ask me about the scum bag oil promoters I’ve dealt with and the outright lies of exaggerated reserves they would pitch to private investors. For a while I represented such screwed investors. But between the immorality on one side of the table and the ignorance on the other I couldn’t take any more and I no longer play expert witness.

Thank you Rockman, your post was extremely enlightening.

May I ask a personal opinion from you on this:

Do you think it might be possible that the executives in IOCs (or even NOCs) and might not fully be aware of these reserve game shenanigans and the ramifications they bring along to the numbers they themselves use in their decision making? How about the board level members? Those are usually way out of the loop already.

I'm asking because I know from experience that unless the people at executive positions are really hardcore numbers people (and I don't mean the way economists are, but the way physicists or engineers can be) and unless they possess strong hand on experience from the lower ranks in the company, then the higher level abstracted numbers can easily deceive them.

That is, they don't know how the numbers get cooked, why they get cooked, how much they are skewed and which way. They may not even suspect anything. They deal with high level decisions, so this kind of 'measurement stuff' is details to them and they expect the guys below them to 'get it right'.

Do you think this kind of 'reserve numbers folly' could be prevalent in the oil industry, barring the few smaller exceptions where there's been a real astrophysicist running the company with a fairly small amount of reserves.


When I began my career in 1975 most management came out of the engineering side. Many still do. And they all know exactly how the books can be cooked. In the last 20 years more financial guys have risen to the top management and some of them could be clueless. The typical motivation for cooking numbers is to make the board/shareholders happy (many of whom have no O&G background and are easily fooled). Happy board/shareholders make for good promotions and bonuses. But just like musical chairs, sooner or later someone's left holder the bag. A few years ago Shell Oil's cooked numbers got so far from reality they made a 20% or so downgrade in their booked reserves in one quarter. This was a huge number and an even bigger embarrassment. I suspect they had been warned by the SEC to come clean before they went after them with a meat clever.

With the public attention and shareholder scrutiny after the Enron fiasco I'm sure a lot of companies are playing straight. I'm currently consulting for a big independent and if they caught someone intentionally misrepresenting reserves (just on an internal basis) they would be fired on the spot. But you still need to be careful with the very small public companies. The payoff for misrepresenting assets is huge these days. And human nature is what it is.

Rockman, I second the thanks for your insights.

I'm sure you yourself don't necessarily have a need to rely on such expositions, but another set of insights into the global reserves situation that I have found useful were the commentaries by a self-described subsurface professional, based on the IHS database. These are available at InvestorVillage Clayton Williams Energy. I've asked about this once before on TOD, but I haven't yet been able to locate the writer's posts on Russia's oil reserves. Wonder if you or some other reader might perchance know.

The posts I have already read are as follows:

Investor Village CWEI. Message #56151 is a summary of OPEC field-by-field reserve data with his proposed corrections - and numbered references to thirteen other posts on single OPEC countries. Messages #71577 and #74013 review data for world's top 50 gas fields ranked by claimed reserve size. Message #74021 mentions that he had done a similar review of the Russian oil data.

Actually Steve I never deal with global aspects. Like most in the oil patch I'm consumed by my own tiny bit of the world. That's why I appreciate TOD and other similar sites. 99% of what I know about the rest of the world comes from folks like you and an occsional tech article I'll read in the john.

I made it somewhat clear that the data came form Attanasi & Root (A&R), who are a couple of USGS geologists that made the study in the 1990's. The reference is at the bottom of the post; I went to the university library, made a copy of the journal article, scanned the data tables with an OCR and went to work with the raw data. I posted the data to the message board (link in the post above), so you can take a look at it there if you want to. You will have to get the reference yourself and see how they collected their data.

As far as reserve transfer is concerned, yes A&R make reference to that issue. I agree that there is quite a bit of ambiguity as to what constitutes a "brand new" discovery and what is just an auxiliary discovery from the current reservoir. Or what gets generated by merging two or more reservoirs. A&R do talk about this type of growth but claim it isn't the whole story.

Look at it this way: If the merging of reserves is the complete story, then the entire back-dating concept is COMPLETELY HOSED. We should stop right now with doing back-dating because in your opinion, it will turn into a ZERO-SUM game. Whatever gets removed in one reservoir has to be moved into a different discovery year. Yet, all the backdated discovery curves I see show cumulative growth. I think Khebab and others can back that up.

I really don't care for probable, proven, etc. At best, those qualifiers only give you error bars on the estimates. I see all the time where people equate 50% confidence with being 50% off on the estimates. That's like claiming that a 50% chance of rain means that 50% of the ground will be covered by water.

I prefer to use the classical theories of probability using mean values and equating the variance to the square of the mean and letting the model figure out the most probable outcome. See, I used the word "probable" and it has nothing to do with the industry's definition.

A couple of comments.

25 years for the majority (i.e. the fast part) of the dispersive search to take place. The rest of the long tail results from the slower dispersion.

This fits fairly well with the historical record. Oil discovery historically was carried practically in two phases pre WWII and post WWII. The first 25 years before the war focused on basins near markets and the post WWII discovery period focused on the entire world. Taken together most of the worlds oil reserves had been discovered by 1970.

But what I'm interested in and whats not really shown with this model is the various types of reserve growth.

1.) New field + refined estimate generally 10 years post discovery.
2.) Technical reserve growth in existing fields based on financial changes or technical innovation.

The reason is fairly simple reserve growth in a existing field thats in production rarely results in a increase in production rate while new fields are additive in the sense that the production from a new field increases overall production rate.

I think its important to understand how much of the reserve growth should be attributed to each group.

My opinion is the reason we are at a plateau in production is most of the reserve growth in the latter part of the dispersive model is of the form of extensions to the reserve estimates for existing fields and does not contribute substantially to the peak production rate.

Reserve growth is a major factor that led me to believe that Saudi still had significant reserves. I documented this in A Different Approach to Calculating Saudi Arabia's Oil Reserves. To summarize:

In 1982, Saudi Arabia stopped allowing their oil and gas data to be scrutinized. Prior to that, outsiders had some access to information on their reserves. When that accessibility was shut down, Saudi proven oil reserves were estimated to be 164.60 billion barrels. I have yet to find a challenge to this number. It seems to be accepted that this number does represent their reserves in 1982. However, in 1990 they mysteriously raised their reserve estimate by 90 billion barrels. Since the data are now hidden from public view, there is obviously a great deal of skepticism regarding this new estimate.

So, I started with the assumption that the 1982 estimate of 164.60 billion barrels was correct, and then I just subtracted Saudi production since then. I calculated their total production since 1982 as 69 billion barrels, leaving 95 billion barrels of reserves. This approach would imply either that their 1982 reserves were overstated, or that the models showing Saudi Arabia at 70 billion barrels remaining are in error.

During that same time frame, here's what happened in the U.S.:

In 1982, U.S. reserves were 27.858 billion barrels. In 2005, U.S. reserves were 21.757 billion barrels. So the U.S. drew down reserves by 6 billion barrels. I then looked at cumulative production over that 24-year time period. What would you guess the cumulative production was, given that reserves were drawn down by 6 billion barrels? It may come as a surprise, but oil production from these reserves since 1982 totals 56.9 billion barrels. Thus, in the past 24 years the U.S. has produced 57 billion barrels of oil and pulled reserves down by only 6 billion barrels.

You have to assume that Saudi reserves - in sharp contrast to U.S. reserves - haven't grown at all if we are to accept the more pessimistic estimates.

Reserve growth from existing fields does not contribute significantly to overall increases in production.

Saudi Arabia is the perfect example of a region where reserve growth is mainly in existing fields.
The mistake is mixing in this form of reserve growth with reserve addition from new fields.

Once you get over that one I think a healthy does of skepticism is needed as far as the actual production rates that will be achieved from the reserve additions that have been made to mature fields.

We can look at the US although its purported reserves have not been drawn down all that much since 1982 the production rate has been steadily declining. Eyeballing one graph 1982 production was about 8mbpd and its about 5mbpd now. So although reserves only dropped by 6 billion barrels production rate has dropped by about 40%.

It should be fairly obvious that reserve growth in the US and by analogy in Saudi Arabia does not have a large impact on the rate of production when reserve growth is happening in a mature province.

Mixing in reserve growth from mature regions with reserve growth of new discoveries is in my opinion incorrect. Production rates seem to follow the initial realistic reserve estimates made when the field is brought into production.

And what we care about are production rates.

And what we care about are production rates.

True, but if the assumption is that Saudi is depleted to a very high percentage - as has been claimed here before - then the implication is that their production is about to fall off of a cliff.

Well hmm given that the reserve additions in mature provinces do not seem to have a significant impact on production rate. Is it not prudent to question what these reserve additions and how relevant they are to future production rates ?

Next its fairly easy to find that smaller reserve levels can be produced at pretty high production rates.

As far as reserves go the difference between the minimum amount of reserves needed to achieve a certain production rate and the maximum that would result in a higher rate is orders of magnitude.

What you really want to do is figure out maximum production rate from initial reserve estimates.

I use a rule of thumb that the reserves that can reasonably back a given production rate are about 10GB:1mbd

So 10GB of reserves can easily produce 1mbd at maximum production.

For example Ghawar has been estimated at 60GB or so and should have produced 6mbd and in fact this is not a bad number.

Given this its easy to reverse the world production. Assume that maximum production could have been 90mbd and you get 900GB of reserves that you can be very confident exists and more importantly can be produced at a high production rate. I'm not claiming this is all the reserves we have but I am saying that this is all thats needed to support our current production rates.

The effect of reserve estimates that exceed this amount on production rate need to be critically examined.

My approach to figuring out minimum reserves is dead simple I just took the peak production rates for a fair number of known fields that had already gone into significant decline and divided by the real URR.
Then adjusted to make it easy to calculate since its a rough estimate.

You can if you wish refine the procedure and figure out the real minimum reserve/ production ratio using existing data from known fields.

Once you have a good minimum reserve estimate from historical production then you have enough information to start at least taking a critical look at the fact that a lot of reserve increases have not resulted in slowing production declines.

Given that I think you will find that the world is well past its minimum reasonable reserve level as is KSA future production rates using the total reserves estimates that are generally accepted are questionable.

Robert your own examples should at least cause you to pause and question what our reserve estimates mean as far as future production rates go. The US example you give is not cause for comfort but cause for alarm.

And finally the Saudi's certainly have the chance given the above to see production fall of a cliff.
Its not impossible and given the fact that they their reserve addition fit the profile of the ones least likely to result in high production rates its highly probable.

The concept of minimum reasonable reserve is robust and can be derived from existing hard data and it does open the possibility of steep drops in production in the near future. Its not improbable.

Robert your own examples should at least cause you to pause and question what our reserve estimates mean as far as future production rates go. The US example you give is not cause for comfort but cause for alarm.

It is cause for comfort insofar as I don't think Saudi is going to nosedive into the desert in the immediate future. That doesn't mean that I don't think that we have serious issues to deal with, just that I think the pessimistic views on decline rates over the next few years are wrong. And the slower the decline, the more time we have to make adjustments.

Time will tell.

My pessimistic assumptions have the US declining from 5mbd to 2-3 mbpd over a period of about two years.
This decline should start basically any day now and may have already started. I have two year window at best where if I'm right it should occur. Predicting a cliff is tough but the probability is heavily weighted towards the present. If we have not gone in steep decline within the year then next year the chances are a lot less.

Also I'm pretty confident the US will decline before KSA does. So all I can say is if we see the US do what I'm saying you should revisit your assumptions. If the US manages to keep production near 5mbd over the next few years with say less than a 5% decline rate them I'm probably wrong.

And although my methods are crude so I can't give a better than 2 year window I'm pretty confident we have already started down another steep decline phase. So I think although I can't prove it that we could discount the chances of steep decline in less than 12 months if we don't see declines in US production.

Time will tell.

"My pessimistic assumptions have the US declining from 5mbd to 2-3 mbpd over a period of about two years"

i sure dont see why you are soooooooo pesimistic about us production.

by your figures from a previous post, us production dropped from 8mmbpd to 5mmbpd over a period of 26 yrs. about 1.8% per yr ,de=(1-q/qo)^1/t. just wondering what assumptions you use to, pesimistically, predict a 30% annual decline for the next 2 yrs ?

I'll give you the short version.

Most of our current production is coming from two types of fields old watered out fields pumped using stripper field technology. This has a very low production rate and low decline rate. Its between 2-3mbd of our current production. 2mbd or so is from small fields and rework of old fields using horizontal wells or other advanced technology the depletion rate in these fields has been from 10-20%.

For this discussion this graph is as good as any.

A 20% depletion rate means you need to replace the field with new sources every 5 years.

As Robert notes the US has been fairly successful at replace depleted reserves with new fields.
If you look at the graph compared to to the HL approach this gives a constant 2mbd excess in production over the HL decline you still go through overall HL but the continuous drilling for small fields gives a 2mbd boost as long as they can effectively be replaced every 5 years. The number of fields that need to replaced basically doubles about every 8 years or so assuming a average lifetime of 8 years for small fields.

I don't see us getting another crop of small fields to replace the once we have exploited over the last 25 years we have pretty much hit the limit of this approach so once the current ones decline they will pretty much decline without replacement. Once they are gone this takes us down close to the 2-3 mbd of slow decline stripper well sources. So if I'm right and we are not bringing on enough small fields to replace our current production levels then as this last group of small fields decline production will simply go down.

You can find more complete data sets but since about 2000 or so replacement of reserves has dropped off dramatically. A lot of it is from purchasing reserves from independents. I'm not going to work through
all the variants and don't believe the reserve replacement numbers anyway.

The literature is full of reserve replacement issues esp in the US.

In any case once reserve replacement becomes a issue the clock starts ticking on these fast depleting fields and many will not be replaced. Some of our small field offshore production has depletion rates as high as 25%.

Big oil no longer replaces its depleting reserves with the drill bit. According to research by investment banking firm Bear Stearns, the oil majors’ reserve replacement ratio was only 91% in 2006 and 92% in 2005 and represents the third consecutive year in which the reserve replacement ratio for the industry fell below 100%. With global oil demand now exceeding 30 Bbbl annually and the high cost associated with finding and developing reserves, the challenge increases every year.

Understand I'm not using their reserve replacement claims as evidence just using the fact they are having trouble to assume that we can start the clock ticking on a lot of our fast depleting small fields and assume they won't be replaced. Next I actually put the start date back in 2000 thus my assertion of a steep drop soon.

Given the fact that reserves are replaced by purchasing fields etc etc. I'm conservative in my estimate of when the final decline set in.


It's a trend not isolated to Chevron. A study last year out of Rice University's James A. Baker III Institute for Public Policy found the Big Five oil companies – Chevron, BP, ExxonMobil, ConocoPhillips and Royal Dutch Shell – have been struggling to replenish their reserves for much of the past decade.

"The Big Five are gradually depleting their reserves with an average replacement ratio of only 82 per cent in the period since 1999," the study found.

Given that the independents are furiously depleting their reserves and that the majors can no longer buy or find enough oil to replace their reserves and I'm dubious about how real reserve replacement are since they tend to use boe and treat NG as a replacement for oil etc etc. I'm comfortable with my guess of when we will see steep decline as small fields deplete without replacement. Timing it is difficult without a in depth study but I think I'm close enough. Given that private independents represent a lot of US production and the majors can't buy enough of them to replace reserves.

Just a note:

I use depletion rates not decline rates depletion rate can only be known after a field has finished production.
So if a field is in production for ten years its depletion rate per year is 10%.
For five years the depletion rate is 20%. The production profile for small fields is basically a square wave going up to maximum and declining rapidly the last 10% of the fields life.

This is a pretty good write up on the life of a fairly large small field.


There may be another factor confusing the issue. If one estimates US reserve growth based upon y/y numbers of "reserve growth" as posted by public companies the results would be greatly overstated. During the last 15 years the bulk of my efforts (and many others) have been to assist public companies in buying producing reserves/oil companies. Just two weeks ago XTO bought Hunt oil for $4.5 billion. Those acquired reserves will show up on their books next year no different then if they had discovered new fields. This has been the oil patch response to PO for the last 20 years or so: we can't find enough reserves with the drill bit so we buy someone else's production to make up for our decline and thus show an increasing asset base: the lifeblood of every public oil company.

If someone throws out the number that the 50 largest US oil companies have a net increase in reserves of X% over the last 12 months I would bet you lunch that as much as half of that increase came from reserve transfer and not reserve discovery.

i have to admit, i dont really know where these aggregate reserve numbers come from. are they compiled from sec filings? where do privately held company's numbers fit in there ?

rockman cited a case where a private company was acquired by a public company. do these acquired reserves show up as reserve growth ?

anybody know the answer to these and other ponderances ?

will laura leave nick and run off with jerry ?

how will the world turn ?

Actually Hunt Oil was also a public company (I think). But elwood's question is still just as valid.

You won't see the words "reserve growth" peetin any public company's annual report. They simply report how much oil and gas in the ground they own and how that number has increased or decreased from last year. For a company's stock valuation it makes no different if they bought all the increase or the drilled it up. In the detailed section you could likely find those facts but they'll likely be in the fine print section.

Private companies have no requirement to make their reserve base known publicly.

hunt is, or was private. from their website:

Hunt Oil Company, a privately held exploration and production company,.....

I stand corrected...thanks

Which is different than in the UK, where you can find a treasure trove of data because of the government's requirements for producing publicly available info.

Rockman I have no idea. I quite using reserve estimates a long time ago. See my response to Robert. I might add that HL also give a pretty good estimate of reserves based on some assumptions about the production profile.

HL can give a high estimate. Given my simple concept of minimum reserves producible at a high production rate and HL. I estimate we are in our last 100-250GB of oil that can be recovered at a production rate close to todays. And we are producing it at about 30GB a year. This result is consistent with basically all the models.

The difference is that by ignoring reserve estimates and using production and known final URR's you get no indication that production rates will remain close to todays effectively right now.

Nothing rules out a steep drop in production its as valid an outcome as any other.

Using the US as a metric intense extraction of marginally producing wells while resulting in a fairly steady reserve addition profile has seen production rates drop by 40%.

The expectation that the rest of the world will allow individuals and small companies to extract remaining oil thats barely profitable and pay a low tax to the state is absurd. Anyway you look at it the US comes out as a best case scenario.

I freely admit that my approach is rough but its reasonable and it is sufficient to indicate we should be concerned about near term production rates. The fact that we probably will be producing 30-40mbpd in 2020 or so regardless of the model you use is really not that important. Whats important is the production profile over the next ten years or so and focusing on assessing how much oil we have that we can produce at a high rate. Its obvious that using reserve additions to assume future production rates is probably incorrect.

I don't have the numbers in front of me but its pretty easy to figure out for example that 14% of the worlds current production is coming from about 3% of its reserves if I remember the calculation correctly.

The bulk of remaining reserve claims are in mature regions that are declining in production. They will not contribute to future production increases but at best depending on how real they are will slow decline.

We have about 25mbd of production in the world backed by a small reserve base that susceptible to steep declines. Even a simple review shows this situation and this is using what are probably high reserve estimates.

Simple treatment of reserve growth in mature regions as equal to reserve growth from new discoveries is wrong. Its mixing cream with moldy cheese.


I think your approach is as good as any other and a lot better than most. And you make an excellent point about decline rates of new fields vs. older ones. Mixing the two in any effort to construct a model can't work well. I know a small field that will still be producing long after the big Deep Water fields are a distant memory. It's only doing 250 bopd but if you multiply that by thousands of similar fields it will add up. Just like the point that our current 5 mmbopd is coming out from wells at an average of less then 10 bopd per well.

Exactly. That is what makes my models (the Oil Shock model for production and Dispersive Discovery) work so well. I actually use probability arguments which essentially accommodate a mix of production rates and search rates.

AKAIK, no one has taken this stochastic approach before. I suppose that people are out there using pure rhetoric to "model" the effects, but at some point someone has to show the mathematics. That is why Khebab and Stuart and I have kept up the pressure on this front.


Where can I find your model? Sounds very interesting.

At the bottom of this post, see the links in the Web References section.

"In 1982, U.S. reserves were 27.858 billion barrels. In 2005, U.S. reserves were 21.757 billion barrels."

i'm wondering exactly where these reserve figures came from ? are they compiled from sec reports, from eia estimates, the usgs, or where ? i'm not questioning the numbers, i just would like to know where the numbers come from.

Just to make sure everyone understands, reserves can take one of 2 forms. The one I discussed in the post is cumulative reserves, which basically trends upward. The other kind of reserves is defined by how much you have "on hand".

Big difference between the two. RR referred to the latter, which will eventually go to zero when we "use up" all of our oil. The first definition will go to some maximum asymptotically.

So the diff between the two is like night and day. (and I am pretty sure that elwoodelmore understands this, just clarifying for other readers)


Congratulations on your brilliant posting – at last, I think I’ve got it. But it wasn’t the math that made me get it. It was the ‘sewing thimble’ analogy.

So I have a suggestion. Would it not be possible to draft a ‘penny catechism’ version of your text, i.e. a version which the mathematically challenged would understand without too much effort? What may seem pretty much like Math 101 to somebody of your intellectual ability sounds quite formidable to many readers – after all, not everybody who peruses TOD belongs to the top centile of the cognitive bell curve.

For example, when you write:

The term on the right of the main divisor assures that the average U_bar starts at 1 for time t=0. Alternatively we can set A to some arbitrary value and skip the integration, which assumes that all initial discovery estimates start at t=A/2. This results in the conceptually simpler ..

I guess what most of us will read is this:

The term on the right of the main oh Jesus Christ wot’s that gobbledygook gobbledygook gobbledygook average U_bar gobbledygook gobbledygook. Alternatively we can set gobbledygook to some arbitrary value and skip the gobbledygook gobbledygook, which assumes that all initial discovery estimates start at gobbledygook gobbledygook. This results in the conceptually simpler ..

But that said, I’m gobsmacked by the simplicity of it all!

Thanks, The history of this post is that I figured out the math last Saturday, and have been spending all my time trying to substantiate the thesis and trying to shoot holes in the arguments. That always has to come first, well before the "reserve growth for dummies" phase takes place. I actually kept on refining the post, not aware that Khebab had posted it. That's OK as I am used to that at work. Final draft is here:

I guess its a combination of getting something out on the blogs quickly and trying to establish some credibility with a detailed analysis. I'm sure we will come up with some more simple analogies over time.

The Hubbert math can be quite easy. I cleaned it up and posted it at Wikipedia under the entry "Hubbert math". As Deffeyes says in his book if you buy into the idea that your scattergram in the space of (P/Q, Q) fits a straight line, then you are buying into the Hubbert math in all its forms.

Incidentally, it's fairly easy to enter math on the web at Wikipedia. If you don't know LaTeX, just look how others have done equations like the ones you want.

I'll try try to make a link here to
Hubbert math.

Enjoy! --Jon Claerbout

thanks, I new about the Latex on Wikipedia, but nothing on most blogs AFAIK. I started using math markup with a WYSIWYG interface and never picked up Latex, but will categorically state that I will never ever pronounce Latex the "correct" way.

BTW, I notice that the Wiki entry does not actually derive the Hubbert curve. Would you mind if I put a link to the following post on the Hubbert_math entry?

Following are 2 excerpts from my 2002 petition to the USGS to withdraw their 2000 analysis on the basis that it did not meet federal criteria for clarity, accuracy, reproducibility and robustness.
You may have a model that fits global USA experiemce, but I am confident that it will not model either non USA reserve growth or future reserve growth of recently discovered fields.
I am not even close to being a mathematician, so don't understand your dispersive model, but I feel that your apparently excellent result is more serenipity than inevitability.

4.10 Reserve Growth (Chapter RG) General Failings

4.10.1 Reserve Growth Causes

The un-stated assumptions of the RG projection are that RG is purely a function of geology and is uniformly time dependent. Neither assumption is valid. What are the real conditions?

- Reporting practices A)
In the USA, regulations require companies to report proven reserves. Proven reserves are defined as 90% probability10. If a company is quite capable of making an accurate 50% probability (most likely) initial estimate, but is constrained to report only the 90% probability estimate, (certainly the case in the USA for the last 30 years), their reported reserves will grow over time as more drilling is done and more reserves are proven, converging finally on the original 50% estimate. (Reserve growth being growth of “proved” reserves is clearly recognized on page RG-2).
In the rest of the world the tendency is to report proven plus probable – defined as 50% probability10. If the uncertainty of such estimates is similar over a large number of fields there will be a rough balance with shrinkage of some fields balancing growth of others, and near zero net growth as a result of development. Laherrere has illustrated such an actuality.11

- Reporting practices B)
Historically, especially in the years of corporate ownership and booming discovery, it was in the interest of the petroleum corporations to under-report reserves, even when not constrained to by regulations. Low discovery years could then be compensated by reporting some of the pocketed reserves, thus keeping shareholders happy. In the late 1960s under-reported reserves were probably very large. Subsequent nationalization and declining discovery rates, in all probability, have largely emptied the corporate reserve pockets. They can’t be emptied twice.

- Technology
Before about 1930 oil discovery was largely random and estimating reserves was a matter of guess work. Technology has progressed through gravimetrics, seismology, digital analysis, 2D and 3D imaging, data base development, computer correlation of well logs and seismology, enhanced well-logging and widespread computerization with PCs and supercomputers and sophisticated imaging software. Estimating reserves was associated with pretty high confidence levels by the 1970s and had become something approaching an exact science by the early 1990s.
In the early days it was logical to estimate conservatively and err on the side of caution.21 Technology has allowed updating of prior conservative estimates, providing reserve growth that will not be repeated.
Since 1980 or earlier, initial P50 non-USA reserve estimates would have been sufficiently accurate to allow for relatively little growth due to technology.

- Politics/Quotas
OPEC quotas are decided, to no small degree, relative to reserves. OPEC members who want to increase their quota are motivated to announce higher reserves. Whether OPEC reserve growth, which was very high in the 1980s, was a case of emptying pockets of unstated reserves left over from nationalization, of applying new technology to old estimates or to quota wars is unclear. However, there is real risk that present reported reserves are overstated, especially as they have grown moderately for a decade regardless of production. Future shrinkage is more likely than future growth.
Flash – The O&GJ just lowered their Middle-east reserves growth base estimate by 180 Gb.22

4.10.2 General Conclusions

- Reserve growth is much more an artifact of reporting than a function of geology.
-Due to technological progress and changing reporting motivation, reserve growth is not uniformly time dependent.21
-USA reserve growth history cannot be used to estimate reserve growth for the rest of the world.
-30 year reserve growth history (eg 1940-1970) of a group of fields discovered long ago (eg 1935-1940)cannot be applied to a group of fields discovered recently, (1980-1985). (If reserve growth really was valid, this factor alone causes the USGS to overestimate the growth by 200-300 Gb for all discoveries since 1980!)
-Most historic non-USA reserve growth will not be repeated.

These conclusions completely invalidate Chapter RG and the bulk of the 670 Gb of estimated reserve growth.

4.11.3 Robustness/Reproducibility

It would be appropriate to test the applicability of the growth factors. Consider that large fields discovered long ago, under conditions of high uncertainty and high motivation to understate, show substantially higher growth than small fields discovered recently under conditions of initial estimation accuracy, motivation to overstate and requiring few wells to be proven.21 A good test would be to divide the total population of oil fields into large field, medium and small field groups. The large field group will have most of the oil, and the small field group most of the fields. Now divide each group into young, middle-aged and old subgroups. In the young group include fields less than 30 years old but for which known growth is now zero.

Without having done this exercise, but inferring from Morehouse21, one can confidently predict that the zeroth year large-old growth factor will be not less than 6x the corresponding small-young growth factor. If the resulting 9 growth factors are then applied to the subject population by size and age the USGS results will not be reproduced. Using a single growth for all fields overstates potential growth substantially.

Example: Prudhoe Bay had “proven” P90 reserves of 9 Gb and P50 reserves of 12.5 Gb in 197712. Production peaked in 1988 and by 1997 “known” oil could be confidently projected as 12- 12.5 Gb. Secondary recovery (infill drilling and re-pressurization) had been extensively applied13 so expected growth was already zero. If 1977 is taken as the zeroth year the USGS factor would have estimated growth of 45 Gb vs an actual of less than 3.5 Gb or more than 12 times too high. (If the initial P50 reserves estimate had been used, real growth would probably be slightly negative). Prudhoe Bay is a large young field. Imagine the error multiple on a small young field outside the USA reporting an initial P50 estimate.

The reserve growth estimation fails the test of robust reproducibility.

Murray I agree with your thoughts 100%.

The only addition is that small fields deplete rapidly generally with lifetimes of 5-10 years and depletion rates of 10-20% without constant replacement once the discovery cycle ends the contribution of these fields to production declines rapidly within about 8 years after the discovery rate drops close to zero.

Reworking of older fields using advanced methods such as horizontal drilling to get high production rates from a thin layer of oil behave the same way. And obviously the number of older fields that can be reworked declines with each passing year.

Another group is offshore oil fields both large and small these are produced rapidly with depletion rates often in the 10-20% range.

Both groups represent unsustainable production sources that can decline quickly once discovery is done.

In particular at least with my rough analysis I outlined above for the US about 2mbd of production is from these high risk sources and although its hard to figure some time between 2000-2006 significant replacement was no longer possible. At least in the data I've read almost all reserve replacement is reported as BOE or barrel of oil equivalent I've got no idea how the reserve growth figure presented in this paper where able to split out real oil from boe which is anything from tar to NG. Figuring out when the US became unable to replace oil with real oil even by exploiting smaller fields is difficult and may well be impossible.
But the event seems to be in the past and once these fast depleting oil sources are gone they won't be replaced.

"Reserve growth is much more an artifact of reporting than a function of geology."

I agree and that was the reason for my post. It has nothing to do with geology, just plain probability and statistics applied to a simple search problem.

The Prudhoe case likely takes into the account the shifting of the initial discovery estimate. It took a while to get the production going that far north so I imagine that they had pretty good initial estimates. Part of the reason for using probability arguments is to account for the large spread in initial values. That is the reason for the "A" value I use above. Like I said in the post, there are several problems with using censored data as you describe. That is the reason for trying to show the math, basically trying to accomodate bad assumptions that others have made. I'm curious if you have any detailed analysis in your petition or is it mainly examples like Prudhoe?

The impetus for the petition was:


This petition is submitted under the provisions of Public Law 106-554; H.R. 5658 Section 515 and consistent with the guidelines issued by the Office of Management and Budget as required by that law and section; entitled “Guidelines for Ensuring and Maximizing the Quality, Objectivity, Utility and Integrity of Information Disseminated by Federal Agencies, and the guidelines issued by the USGS entitled “Guidelines for Ensuring the Quality of Information Disseminated to the Public”.

The petition concerns the USGS report entitled “US Geological Survey World Petroleum Assessment 2000 – Description and Results” and found at This report fails to meet the guidelines referenced above in its entirety, with major issues to be addressed primarily in Chapter ES, IN, AM, OP, RG and AR. snip

As such it is more descriptive than analytic. Also, while I am quite numerate, I am not an analytic number cruncher, and have no (zero that is) statistical analysis capability, although I can generally understand the results of such analyses. That said I did include a lot of available hard data to make various points.

I agree with your assessment especially when people like Michael Lynch try to use the reserve growth model as some sort of endless supply.

It's interesting after reading all these post how it ens up reminding me of Tainter's, The Collapse of Complex Societies. Tainter pointed out that, when a society increases in complexity that the members of that society have to specialize to accommodate that complexity. Murray's post shows some big holes with current discovery models and seems to have an expert background in the reporting of reserves and such, yet he doesn't have the statistical training that webhubble does to graph what he knows. Also earlier, the growing disconnect from those make the big decisions in energy companies from those who crunch numbers and run them. Peak Oil being a global phenomena is so interdisciplinary in nature that it may be impossible to tackle efficiently and effectively. If you look on the news, most of the Finance/Business category of people look to the falling dollar/speculation for rising oil prices, because that is what they know. The Peak Oil crowd is focused on supply, and lacks the proper business background and imo has done a poor job, to explain away these as being however significant a factors. Also many PO people are so focused on total supply they often forget that prices depend on the amount of total available net exports, which thankfully Westexas has had enough economic sense to start looking at internal consumption in exporting countries. The so called "solutions" to peak oil are equally jumbled often focused on a particular area but ignore other huge factors that people in different fields end to point out. It is my opinion that as we are seeing now, society has become so complex that its responses to such issues have become irratic and ineffective just like a 3 headed Siamese triplet with 6 legs trying to frogger its way through an 8 lane freeway. Thank god for the oildrum so at least we can get a decent holistic approach and collaborate. I wonder if even the seemingly obvious idea to reduce societies complexity has any merit, due to all the stuff I've read from Jeff Vail. After 2 and a half years on theoildrum (i have another account) and researching peak oil I have little hope for BAU, but at the same time, maybe letting the tower of cards fall is the best way to fix the problem.

This was a bit of a rant, just thought I'd point out Tainter has a good point

Good luck,

Good point, tooting my horn just a bit, I have worked deep physics, chemistry, MatSci, CompSci, mechanical, and am author of an applied math book, with my degree in EE. But absolutely zero geology experience. I currently work full time in interactive simulations so I basically draw on everything I have learned and had experience with when I come up with a model. I would definitely say I specialize, because I haven't even touched on the idea of working out a simulation of how a complex society would collapse. That would require something more than the equivalent of the bean-counting exercise (yes, that's what I would call it) that I described in the above post. I know enough that it wouldn't be worth the effort.

Indeed, I very much respect your contributions and deeply admire your work and effort, I hope to become an IE myself one day and work on decentralized methods of energy and logistics. I was mainly just trying to point out what a huge and difficult problem resource depletion is because I'm sure you will admit that its incredibly hard to get the whole picture of peak oil by yourself, despite your excellent resume.

Thanks for everything you contribute here, because of your work I can sit down at night and not feel blind folded about the future,


A very good analysis of the current state of affairs IMO. Your post brought back all the readings I’ve done on complex adaptive systems (Chaos for short). A petroleum geologist for 33 years I reflect on my math shortcomings as WHT does about his earth science voids. And my similar deficits in global macroeconomics. Even though my field is much more narrow than the focus of TOD I see the negative effects of specialization, as you described, on an almost daily basis. Engineers that don’t appreciated depositional variations of sands and geologist that don’t fully appreciate the nature of viscosity. (I’m actually an engineer/geologist so I get to throw rocks at both sides of the table.)

But the diversity here is what drew me in a couple of months ago. Even evaluating the occasional goofy ideas has benefit. Though the most important aspects of PO don’t hang too much on the geology I’m satisfied to add an occasional minor course correction to the discussion. It may surprise you but very, very few in the oil patch concern themselves with the big PO picture. We are consumed by our own tiny little pieces of the petroleum world. I like to think that those who are on the frontlines of the debate gain something useful from our collective ramblings. But at a minimum, as you say, we gain an awareness of the potential futures out there.

"viscosity", etc

I've written some papers on diffusion in terms of semiconductor physics so I am very conversant in the math that this involves on a small scale. I have also reported on some very strange behavior, what I would call enigmatic as well, until we figured it out and the enigma disappeared.

So I too enjoy going from the microscopic to the global.



I think that is the key word. It's 9 syllables, jeez it must be important!

I was thinking along these same lines last night when I was reading a transcript of Al Gore. I was thinking, my god, the man doesn't know the simplest thing about energy. And he's a nobel prize winner! He doesnt understand that energy is the real currency of the world, and that it costs energy to build turbines and solar panels. How can we possibly burn all that extra energy to produce these items, while lowering our consumption of fossil fuels? (And without killing off a whole bunch of people or collapsing entire economies?)

Here's another example of how a lack of interdisciplinarianism can cause problems: most of the Ron Paul movement is somewhat on the right track talking about how deficits lead to currency devaluation. But it is really the interruption in the trendline of energy supply growth that initiated the currency devaluation we're all seeing today. After all, we've had a policy of deficit spending for the last 30 years, and the problems have just started to get really serious recently. Surely it is not fiscal irresponsibility that caused this? I mean, 25 years ago you could say that fiscal irresponsibility is going to lead to an energy and economic crisis. (And Ron Paul did say it 25 years ago.) But to say it now is kind of late. So that has rendered the Ron Paul movement effectively ineffective. And that's just one political group. The McCain group and the Obama group are even more clueless. They dont know anything at all about energy or basic economics. It seems they do not even possess high school educations. But that is a separate issue from interdisciplinarianism. Basically, they're just plain dumb. This is very unfortunate, to say the least.

What we need is a way to synthesize information like this "Enigma" of Reserve Growth, so as to move it into the mainstream. The process of synthesis is what will bring the greatest understanding for everyone, including the experts. Take Al Gore's film, and also the film Day After Tomorrow as examplea. Those films helped to popularize some of the scarier possibilities of climate change. I don't care much for the idea of overdramatizing something to the point of discrediting a field of science. But I think it is harmless to help people to imagine scenarios where rapid climate shifts can occur. After all, that possibility is not fiction. The climate can and has undergone rapid shifts in the past. (I dont know about days or weeks, but definately in timescales of just a few years.)

Unfortunately, at this point in time people are 10 times more concerned about catastrophic climate change than they are about the types of catastrophies that can and will occur if we allow ourselves to drive right off the energy cliff. Humanity has been asked a simple question: are we smarter than yeast? We are on the threshold of checking the NO box.

What is oddly frightening to me is the fact that I have not seen even one pop culturalization of an energy crisis. At least, nothing that I can remember. Nothing that really fits what seems most likely to happen. Considering all the incredible scenarios that have been played out in movies, that strikes me as incredibly extraordinarily odd, to the nth degree of oddness. From earthquakes, volcanos, asteroids, plagues, world wars, alien invasions, even killer bees! Why is there no box office hit movie involving a peak energy scenarios? To be honest, the Matrix is the closest thing I can think of.

But the Matrix's main premise was fatally flawed, since the human body will never be a net producer of energy. And the very idea that people actually think the human body can "produce" energy is rather scary. This is basic physics. But that doesnt really matter because that film was not really about enslaving humans to be used as AA bateries.

That was just the sugar coating, to acclimate us to the much darker reality that may be coming. 30, 20, or even 15 years from now, reality may be so harsh that many people may willingly choose to be plugged into a matrix. But in reality they will simply be exterminated. How lovely. In my limited study of the occult neofuedal darklords, I have learned 2 key points. One, they always openly state their plans. Two, the public must willingly accept whatever form of enslavement the dark lords offer. The Matrix reality fits right into that.

Couple of movies about peak oil: "Oil Storm", which I have on disk and I haven't watched yet (kind of a low-budget cable type movie). "The Deal" with Christian Slater, a bigger budget movie. "Syriana", obliquely references peak oil, but very good.

Thanks for the headup on the pics. Need to find them on netflix now.