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.

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: http://docs.google.com/Doc?id=dctrrzxh_28cts3c5gn

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.

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

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.

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.

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.

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.

"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.

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: http://docs.google.com/View?docid=dctrrzxh_28cts3c5gn

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.

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?
http://www.theoildrum.com/node/4171

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?

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.

Interdisciplinary...

Interdisciplinarianism!

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.