IEA's Resources To Reserves - Not to Worry!

[editor's note, by Stuart Staniford] This is a contributed post by Dave.

Readers of TOD were preoccupied with Hurricane Rita on September 22nd of this year and might have missed the release of the International Energy Agency's 130 page report Resources To Reserves, Oil And Gas Technologies for the Energy Markets of the Future. Two considerations make this report noteworthy. First, the study is firmly in the Cornucopian camp and so joins the CERA report in this respect but on a much larger scale. The second consideration should interest TOD readers the most: IEA appears to have released the report partly to counter claims of the worldwide Peak Oil community.

We learn from the IEA's Executive Summary (pdf) that the share of oil and gas in the world's fuel mix is expected to increase from about 57% in 2002 to 60% in 2030 if energy policies worldwide do not change. There will be a 70% demand increase over this period. Reading on, there's this interesting bit
In addition, as output from the world's existing production sources inevitably declines, probably at a rate around 5% per year, this decline will need to be compensated with new supplies.

The hydrocarbon resources in place around the world are sufficiently abundant to sustain likely growth in the global energy system for the foreseeable future. But keeping pace with today's demand growth projections will oblige the hydrocarbon industry to take on a new, diverse set of business and technological challenges.
The 5% figure is the same one Chris Skrebowski uses in his Megaprojects Update as discussed recently here at TOD. Nonetheless, no one needs to worry about undiscovered resources or proven reserves. According to the IEA these are ample.
Measured in units of oil equivalent, roughly 10 trillion barrels of conventional oil and gas are in place, and at least as much non-conventional oil and gas. Out of these 20 trillion barrels of oil equivalent (boe), 5 to 10 trillion can be considered technically, but not necessarily economically, recoverable, depending on recovery rates, technological progress and long-term price assumptions.

Proven reserves amount to about 2.2 trillion boe, which is not so far from the 1.5 trillion boe produced so far, over more than 100 years of exploitation. Indeed, 1.5 trillion boe is also a rough estimate of what needs to be produced over the next 25 years.
I might quibble and ask why there are not "roughly" 8 or even 12 trillion boe of conventional oil and gas in place waiting to be exploited -- but what's a trillion here or a trillion there? Nonetheless, IEA says there are 2.2 trillion boe of proven reserves but we only need 1.5 trillion of those barrels out to 2030.

It doesn't seem fair to talk in terms of barrels of oil equivalent for many reasons, chief among them being the necessity to convert gas to liquids (GTL) in some cases and the problem of transporting gas from place to place (LNG or pipelines). Nonetheless, I thought I would do some back of the envelope calculations to get a ballpark estimate of what we will be producing. Taking the CERA and Skrebowski numbers (now almost the same) that daily oil production will increase by about 16.5 mbd from 2004 to 2010, I did my rough calculations based on the projected increases from 2006 to 2010 (inclusive) to see how we'll be doing by then (given that 2005 is almost over now). Doing a simple cumulative addition of the mbd numbers for this period for oil and adding in an equal amount of gas, I found that we will produce an additional 31.46 billion barrels of oil equivalent (bboe) in that period. Using a baseline of 85/mbd with a 5% depletion rate, we will produce 133.35 billion barrels of oil (bbo) in this period. Using the BP 2005 Natural Gas Production Figures (given in billion cubic metres) and converting to bboe, the total figure I got was 90.83 (= 49.77/mbd in boe from natural gas production). No depletion factor was used for gas. Adding them up, we get 256 bboe of production in the period 2006 to 2010. This leaves an additional 1.244 trillion boe to produce in the period from 2011 until 2030. Clearly we're going to have to work hard and pick up the pace a bit to meet projected demand given continuing declines, decreasing (oil) discovery rates and extraction challenges.

To get that new production, the IEA cites the usual two challenges in the future, developing the technology we will need to extract these resources or reserves and providing sufficient investment to do so. In this graph, you will see that development of new resources and reserves is put in the categories Middle Eastern, other conventional, deepwater, Arctic, super deep, EOR, heavy oil and shale oil. These categories are presented solely as a function of economic price (2004 US dollars) with a total of about 4.5 trillion barrels of oil equivalent available and price rising to $80. Frankly, I'm not quite sure how to interpret this. Is EOR (enhanced oil recovery) a supply category apart from "other conventional" oil? Similar graphs can be found at the original IEA source cited at the top.

In two articles (part 1 and part 2) published by out of Paris, Adam Porter reports
In the introductory paragraph Claude Mandil, the IEA's executive director, wasted no time in examining the subject.

He said, "soaring oil prices have again spotlighted the old question. Are we running out of oil? The doomsayers are again conveying grim messages through the front pages of major newspapers. `Peak oil' is now part of the general public's vocabulary, along with the notion that oil production may have peaked already, heralding a period of inevitable decline."....

What "peak oil" supporters might find even more strange, is the use of the Hubbert Curve within the report, which is the mountain-shaped curve, showing increasing then declining production. It was created by the former Shell geologist M.K. Hubbert, to illustrate the theory of "peak oil."

In a special section entitled just "Peak Oil" the IEA actually present the theory to its clients. They sum up by saying that "The striking success of Hubbert in predicting the peak of U.S. production suggests that such conditions were more or less met in the U.S. during that time period."

They then appear to question the current relevance of Hubbert in today's oil market. Because they move on to say that "the controversies surrounding peak oil in the literature revolve around four main points. Does the Hubbert model apply to oil production worldwide? If the Hubbert model does apply, when will the peak in worldwide oil production be? What happens after the peak? How fast will the decrease of production be? What role does technology play in such models?"
So, the IEA is definitely concerned about these unfounded Peak Oil rumors. As Porter points out,
The basic counter thrust of the IEA's argument is that new technologies and increased investment can overcome any production inflection. But the level of investment that requires is truly astronomical. Repeating a figure they first used in the IEA World Energy Outlook report they estimate that the total necessary investment cost "for worldwide upstream operations and transport [of oil]" by 2030 will amount to "$5 trillion."

That works out at roughly $564.5 million dollars a day, between now and 1 January 2030.
That's a lot of money! Colin Campbell wastes no time debunking this report.
"It is an absolute masterpiece," he stated. " A masterpiece of telling the truth in such a selective manner so as to get the juxtapositions quite right. All in order to mislead and confuse the situation. After all the best way to lie is to tell the truth, just in a manner that creates a wholly false impression of what is actually going on."

"The report is an absolute confession of `peak oil'," he said. "But at the same time the text goes out of its way to deny it. Really, it's a brilliant document. It takes immense skill and a marvellous command of language that allows [OECD] governments and oil companies to hide like this."
And that concludes this report from the Peak Oil War frontlines.
The Reports sub-title is thus:

"We Just Covered Our Asses"

 What magic, you stupid world did not come up with the needed capital, you failed to give the process $5 Trillion dollars!!  You failed!!  We told you what was needed Don't Blaim Us!!

They can't really be faulted for trying to save their cushy jobs, all they have to do every year is show alls well, and go to another great cocktail party and start writting next year's report.

That works out at roughly $564.5 million dollars a day, between now and 1 January 2030.

Ok but at today consumption rate it represents only an investment of about $5-6 dollars per barrel. Light sweet crude prices averaged $38.27 in 2004 against $29.61 in 2003. This 9$ increase generated around $700 millions of dollars per day in additional profits!
Dave that O(16mbpd) of new capacity is stuff that will have first oil by 2010 - lots of it will not have reached plateau by then.  You can probably roughly approximate it as a wedge from zero at the beginning of 05 to 16mbpd at about the end of 2012 - that won't be too far wrong.
I take your point.

For new production 2006 to 2010, out of convenience, I simply took Skrebowski' mbd numbers for each year from the Megaprojects document (e.g. 3.1/mbd in 2006), multiplied them out over the year and added each year together. Then I just doubled the total for new natural gas production boe. That's how I got the number and I'm sure it is a generous estimate.

Thanks for bringing this to our attention and digging the important pieces out.  The core group at TOD is really tireless in getting the numbers in front of the rest of us.

In my opinion the whole report can be boiled down to this quote from above -

"Out of these 20 trillion barrels of oil equivalent (boe), 5 to 10 trillion can be considered technically, but not necessarily economically, recoverable, depending on recovery rates, technological progress and long-term price assumptions."

They are basically saying in this report what all of us who believe in Peak Oil are saying.  We will never run out of oil, just oil that can be recovered fast and with positive EROEI.  Just reread the sentence ----"but not necessarily economically, recoverable---" and think about the implications.  Having a huge proven reserve of oil that is unrecoverable is useless as an energy source.

Half of all the oil they list probably can't be recovered economically but they still tell everyone we have lots of oil in the ground.  And because of this we can't be near peak production.  

It's fun with numbers on a spreadsheet.  But like the previous post said, they haven't technically lied, and have left an escape route if that oil is never brought to market - we didn't develop the technology.

And since we have to develop this new technology for hard to get oil, why don't we work just as hard on other sources of energy that are less harsh to our own biosphere.  Lets at least TALK about doing both simultaneously.  Not try and bury or denigrate any alternative to oil and NG.
At some point in the future, there will be a move to count coal as a hydrocarbon reserve, simply noting that it is "hydrogen challenged oil."

At some point, these knuckle heads will figure out that reserves are not equal to production, that OOIP is not equal to production, and gee, flow rates really do matter.  You can claim 2 trillion barrels of Canadian oil sands, but that will not get you 5 million barrels a day before 2015.  Of course, that will be about the time that they extend US storage to include the asphalt in roads...

This should be the Executive Summary

Billy: Daddy, they say we are running out of sweets and
       soon there will be no dessert after dinner.

Dad: No worry son, they have discovered that the center of
     the planet is made of CHOCOLATE!

Billy: REALLY daddy?

Dad: Yes son, you will never have to worry about going
     without desert EVER!

...with both iea and skrebowski reporting %5 depletion, it could be an interesting this number real???...does anyone have any data to support a depletion rate that high??
No one knows the overall depletion rate from existing oil production worldwide. I thought it was interesting that IEA and Skrebowski cited the same percentage. I think we are most confident about so-called "Type 3" depletion in which an entire country's total output starts to decline (eg. Mexico 2005).
Unfortunately as we head to more technically advanced methods of recovery 5% becomes extremely optimistic - see the North Sea for example.  I think, more than anything, this has me most concerned.
This is the crux of the matter. You think that EOR will accelerate declines and IEA, CERA, et. al. think that recovery rates will increase as a result of applying new technologies. For deepwater, steep declines at the end of the life cycle of the fields are apparently the norm. Will that continue? For other fields, do we know? You have mentioned that you'll post on this, HO, and it's a good idea. This is a big issue and central to the Peak Oil situation and debate. I'd like to know more about it.
I'm working on doing better at this by exhaustive tabulation of past projects (allowing me to calibrate against past production numbers), and better modeling of the production profile of the fields. However, since it's a big job it will take me a while (weeks). Especially if I get as distracted by economics as this last week.
And the big unasnwered question: according to the EIA, we're fine until 2030 - but what happens then? They're basically saying that there will be no oil afterwards. Is that really an upbeat message? Or is this just for our current crop of politicians, most of which expect to be dead by that date?

I find it endlessly fascinating that the supposed peak oil deniers usually expect much steeper declines than the peak oilers - only just late enough that people alive today shouldn't really care.

Articles such as this confuse those of us who study peak oil from outside the oil production world and illustrate why sites like Oil Drum are so critical to our understanding.
Dave, thanx for the reference to Resources to Reserves.  I am always receptive to new figures for post 2010 projectiona and URR that folks notice in the Media.  And thus, we've updated the IEA Scenario graph at with these comments:

"Last month we had chastised IEA for presenting a URR in its 2004 World Energy Outlook which did not support its extraction projections.  In lieu de a realistic URR, we arbitrarily used our Scenarios Average in its stead.  Above, we have enhanced the IEA Scenario by inserting a plateau rather than a 2030 peak based on a dramatic 75% increase in their published URR this month.   As this new IEA URR exceeds our Scenario Average, a plateau now presents itself and moves IEA up to the 5th highest scenario in terms of optimism.

The increase in the IEA URR had the effect of increasing our Scenarios Average for URR and that slightly changed plateaus and exhaustion in some other scenarios that share the AVG: namely BP, OPEC & Total.

The Exhaustion Exit is demarked by each model's failure to produce 7-mbd (was 6-mbd).

See our Comments on Peak Oil, the ASPO Record & other recent Scenario draft updates at the Economics link."

If someone was feeding me $500,000 a day I certainly wouldn't invest it in oil wells.  That would buy more than enough renewables to make petroleum essentially worthless.
dunno if anyone is still reading...but..are there ways to model depletion of not yet depleting countries i.e. S.A. based on depletion of known similar geologic situations..or is there a better way??