The End of Exploration?
Posted by Dave Cohen on January 11, 2006 - 12:27am
There's been some discussion lately about reserve additions due to new discoveries and the trends there. This topic came up in some comments on Stuart's Predicting US Production with Gaussians--for example here). WebHubbleTelescope over at Mobjectivist has done a couple posts lately on this topic. In Monte Carlo Discoveries, he comes to a rather important conclusion.
The main thing to note relates to the essential noise characteristic in the system [discovery curves]. The fluctuation excursions fairly well match that of the real data (see the first diagram at the top of this post), with the occasional Ghawar super-giant showing up in the simulations, at about the rate expected for a log-normal distribution. But the truly significant observation relates to the disappearance of the noise on the downslope, in particular look at the noise after about 1980.I'll leave the heavy duty mathematics & modelling to Stuart, WHT, Khebab and others to argue over. This includes the mysterious assumption first used by M. King Hubbert that
Remember what I said initially about noise telling us something? The fact that the noise starts to disappear should make us worry. That noise-free downslope tells us that we have pretty effectively mined the giants and super-giants out there and that oil exploration has resorted to back-up strategies and a second pass over already explored territory or to more difficult regions that have a tighter distribution of field sizes.
The discovery curve mirrors approximately the production curve with a lag that varies from country to country. The US-48, for example, had a lag of 41 years whilst the UK North Sea production, with its urgency and technological basis had a lag of 25 years. The World's lag is estimated to be 36 years.noted at (among other places) Wolf At The Door. Here instead I will check in with the real world data over the last twenty years and particularly since 1994 using a favorite source, presentations from IHS Energy, to see what's been happening lately on the tail end of the discoveries curve. I feel it's always a good idea to remain a part of the reality-based community, so let's look at some data and look closely at what the recent trends are. Do they confirm the modelling?
We are all familiar with graphs like this one re-produced by Robert Hirsch in The Inevitable Peaking of
World Oil Production (pdf, October 2005).
Perhaps it will not surprise you too much that this IHS Energy presentation The Future of Global Hydrocarbon Exploration by Francis Harper, BP plc (APPEX, March 2005) asks the pertinent questions and shows the same thing as Hirsch, et. al. (slides 1 & 2)
Here's a quote from an abstract from IHS Energy data analyst Sandy Rushworth entitled The Challenging Role for Giant Fields: Can We Expect Giant Fields to Meet Increasing Oil Demand Trends? This is for an upcoming conference AAPG Annual Convention, April 9-12, 2006.
Click to enlarge
The important question comes up: Are the peak years of '99 and '00 [due to Kashagan and Azadegan] anomalous? By using the precise method of eyeballing this graph, we see that since 1994 there have been about 134 Gb discovered with the two megafields comprising about 41 Gb of reserves, 30% of the total. [Editor's Note: 1) this is all liquids including Natural Gas Liquids (NGLs) and Condensates and 2) all references to reserves should be considered with Bubba's post and comments about reserve estimates in mind.] Using IHS Energy's estimate of 144 Gb since 1994, that makes 2004 discoveries about 10 Gb.
So, what can we conclude from this data? I'll make some observations and include my own opinions.
On the other hand, you can always throw in those non-conventional sources (oil sands) or hope for some Gas-to-Liquids (GTL) or political stability with increased production from the Middle East and the rest. This all makes the numbers come out right as the ever-optimistic Sandy Rushworth of IHS Energy does (link above)
Perhaps it will not surprise you too much that this IHS Energy presentation The Future of Global Hydrocarbon Exploration by Francis Harper, BP plc (APPEX, March 2005) asks the pertinent questions and shows the same thing as Hirsch, et. al. (slides 1 & 2)
Here's a quote from an abstract from IHS Energy data analyst Sandy Rushworth entitled The Challenging Role for Giant Fields: Can We Expect Giant Fields to Meet Increasing Oil Demand Trends? This is for an upcoming conference AAPG Annual Convention, April 9-12, 2006.
For almost 20 years new oil discoveries have failed to replace production. Correspondingly, the number of large and giant (> 500 MMboe) discoveries have declined and average discovery size has decreased while demand has continued to increase. These contrary trends raise concerns about industry's ability to meet global energy needs. For the balance of this decade, nevertheless, projected liquids capacity growth is expected to exceed demand.It seems that IHS Energy, ASPO, TOD and many others are asking exactly the same questions. Only 61% of consumption was replaced over a 10 year period--assuming the figure includes 2004. Now, let's take a closer look at the circled area in the Oil Discovery Trend graphic above from the Harper presentation.
The objective of this paper is to frame the critical role of giant fields in meeting the global oil future. Since 1994 giant fields represent only 2% of the [total # of ] discoveries but almost half of the resources added. But 144 Bbo [Gb] of liquids discoveries since 1994 replaced only about 61% of the consumption.
Click to enlarge
The important question comes up: Are the peak years of '99 and '00 [due to Kashagan and Azadegan] anomalous? By using the precise method of eyeballing this graph, we see that since 1994 there have been about 134 Gb discovered with the two megafields comprising about 41 Gb of reserves, 30% of the total. [Editor's Note: 1) this is all liquids including Natural Gas Liquids (NGLs) and Condensates and 2) all references to reserves should be considered with Bubba's post and comments about reserve estimates in mind.] Using IHS Energy's estimate of 144 Gb since 1994, that makes 2004 discoveries about 10 Gb.
So, what can we conclude from this data? I'll make some observations and include my own opinions.
- Excluding Kashagan and Azadegan, discoveries since 1990 never exceed 15 Gb with steady but flat volumes found due to deepwater reservoirs.
- The two big fields are actually noise in the data trend and are anomalous.
- IHS Energy estimates are for all liquids (boe), not crude oil of whatever grade. If you look around at some of the other presentations there, you will see that NGLs and condensates represent the large majority of new discoveries.
- If you don't think any big mega or giant discoveries are right around the corner--as I don't--then the rate of consumption replaced by discoveries--61% in the last 10 years--can only down year-on-year.
- The idea that the discovery process is stochastic at this point in time is almost certainly wrong and disregards history. The world is well-explored and the bigger fields are found first because petroleum geology is an empirical science with many years of experience behind it. These experts have known for some time now where to look. On occasion, mostly due to lack of political access or effective technology, prospective areas have been left unexplored. Now, new plays are running out. This point (link from WHT)
“Pearson’s r” [statistical validity] test found no correlation between oil discoveries from one year to the next, i.e. discoveries appear to be random. But there is > 99% confidence that annual oil production is not a random process. (It looks like a bell-curve, not very noisy.)
is correct. Even if some new megafields are found, they will be few and far between. - Modelling by Stuart, WHT, Khebab and others is essentially capturing the trends accurately and predicting the future with some confidence.
On the other hand, you can always throw in those non-conventional sources (oil sands) or hope for some Gas-to-Liquids (GTL) or political stability with increased production from the Middle East and the rest. This all makes the numbers come out right as the ever-optimistic Sandy Rushworth of IHS Energy does (link above)
Field growth, mostly in giant historic fields and increased recoveries in Canadian and Venezuelan oil sands, though, added about 190 Bbo of additional resource - more than replacing consumption. The combination of recent giant discoveries and reserve growth from historic giants will drive the projected liquids production growth through this decade. Other factors are critical to sustain future production growth. One is access to enormous Middle East resources with potential for more than 250 Bbo in giant fields. Another is technology. A five percent increase in recovery factor could add about 220 Bbo from western hemisphere oil sands. Proposed GTL technologies, mostly targeting fallow giant gas resources in the Middle East and Asia, could add 1.5 MMb/d of liquids production by 2020. Giant hydrocarbon accumulations will continue to dominate future liquids supplies.Is it The End of Exploration? Not quite yet but we may be closer than you think. We shall see.
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Did anyone watch the EIA 06 forecast on C-SPAN2 last night. It really gives you confidence in government. It reminded me of my son's 9th grade science presentation to the parents. They mentioned PO once and that it was not yet a problem, but were keeping their eye on it. Any way if you are on any blood pressure or heart medicine don't watch it, I am sure it will be re-broadcast.
At least let me thank all you guys, for all your hard work and keep it up.
http://www.realclimate.org/
I AM MRS ELIZABETH ALBERT MILTON FROM BO FREETOWN SIERRA LEONE WE ARE WRITTING TO SEEK YOUR HIGHLY ESTEMMED HELP/ CONSENT IN A LASTING BUSINESS RELATIONSHIP OF MUTUAL BENEFIT INVOLVING ($21 MILLION USD) TWEENTY ONE MILLION USD FOR INVESTMENT IN YOUR COMPANY/COUNTRY UNDER A JOINT VENTURE PARTNERSHIP.I AGREED TO OFFER YOU 15% OF THE TOTAL AMOUT OF $21 MILLION AND 30% FROM THE PROFIT GENERATED IN THE INVESTMENT.
CONTACT MY SON IMMEDIATELY FOR DETAILS OF THE TRANSACTION AND SOURCE OF FUND,FOR MY HEALTH IS NOT GOOD FOR NOW.
WAITING FOR YOUR EARLIEST RESPONSE.
MRS ELIZABETH MILTON
INVESTMENT IN YOUR COUNTRY
although 36 years ago is 1970, and from the graph above it looks like the peak could even of been before then.
Does anyone have an idea of what Regular Oil discovery has been these last years?
For instance before fertilizers corn was grown primarily in river/stream bottoms because flooding provided the intensive nutrients needed. As well all farmland needs humus- the cellulosic ethanol needs this as well. I see this area -biofuels as a hazardous "exploration" arena. The world pop. is such that large expansions of fuels from croplands already marginal, will cut carrying capacity.See the pop. thread, Jason Bradford's comments.
An EROEI of 1.34 essentially means that 3 units of energy goes into one end of the 'black box' and 4 units of energy comes out the other end. Thus, in a sense, you have 3 units of energy just going around in a circle doing nothing. However, the greater the size of this wheel spinning, the more capital investment is required, so the whole thing is still rather unattractive from an energy (as opposed to financial) standpoint.
And as creg rightly indicated in his post above, soil depletion is an issue which is vitally important but which doesn't get much attention. Our factory farms are already stressing our soil resources badly enough without making it worse by increasing corn production to make ethanol.
Even if the ethanol-from-corn route managed to increase its EROEI to 2, I couldn't get enthused about it. It is just fundamentally a bad idea and poor use of precious resources.
As we all know, tar sands are capital and energy intensive and are low rate of production sources. (I continue to be intrigued by the fact that total Canadian oil production is flat to lower year over year. Canadian tar sands production is having trouble just matching the falloff in conventional Canadian production).
Daniel Yergin is hanging his hat on the "small fields will save us" model. I think that he is dead wrong, and our experience here in Texas certainly refutes Yergin's position. I do think that smaller companies can make some money looking for smaller overlooked fields, but the production resulting from these efforts will be just rounding errors on the global energy scene.
In my local Peak Oil presentations, I suggest that people start trying to live on 50% or less of their current income and I assert that most Americans have two choices: (1) cut spending now or (2) you will be forced to cut spending later. I also strongly encourage people to try to reduce their commute between home and work to as close to zero as possible.
Getting out of debt where possible is also important, even if it means moving to a much smaller property or renting rather than owning a house. It's better to own a tiny property outright than to live in a large one essentially owned by the bank. Your energy dependency would be lower as well. Renting can be even better as it means that someone else is holding the bag as the real estate bubble bursts.
I was thinking about this exploration topic this morning watching CNBC. Kerr-McGee today announced a one billion dollar stock buyback program. It would seem watching where oil companies put thier money is a good indication of thier attitudes toward oil exploration. They would prefer to buyback thier own stock instead of finding more oil? hmmm....
João Carlos
sorry my bad english, my native language is portuguese.
PS
I strongly believe that we will see PO at mainstream media saying that "PO maybe happen soon" only AFTER the PO happened. So, when you see PO as main article at the NYTimes is a signal that PO happened some time ago.
Also, I love the following comment:
I might start presenting it this way: You can either buckle on your parachute and jump off the cliff now, or wait to be pushed off before you're ready.
Published on Thursday, January 12, 2006 by CBC News
Alberta oil sands to star now we're post-peak: CIBC World Markets
By Staff
Summary:
Alberta's oil sands will become the most important source of new oil in the world by 2010 as conventional crude dries up, CIBC World Markets says in its latest monthly report.
Alberta will sit on one of the most valuable energy sources in the world by that time, and one of the few still open to private investment, said Jeff Rubin, chief economist at CIBC World Markets, the bank's wholesale banking arm.
He added that conventional oil production around the world apparently peaked in 2004.
http://www.cibc.com/ca/pdf/mutual-funds/disclosures/can-resources-fund.pdf
As noted here, E&P just hasn't been paying unless one get luckier than average.
The cause AND consequence is that reserves fail to equal extraction.
That's why the CNOC play for Unocal was interesting - rather than pay for exploration, they decided to buy reserves - they gladly offered to spin off US distribution assets. Now, CNOC is buying into a TOTAL project as a development partner. Still not risking money on exploration.
As a note, "super deep water" stops at the edge of the continental shelf as theory strongly suggests that ocean basins contain no hydrocarbon resources.
Good article. One small comment:
I would say that the discovery process is very stochastic--it's very much like drawing without replacement. That is, imagine that one is drawing balls from a (very large) urn, one at a time. There are black balls of various size (size distributed according to some power law), representing oil discoveries of various sizes, and a larger number of white balls representing "not oil" (looked but didn't find any). The chance of drawing any particular ball is proportional to its volume.
Given this, oil exploration will remain useful as long as a reasonable proportion of black volume is being drawn. (How much depends on economics.)
The key point is that there are only so many bowling balls in the urn, and they will mostly be drawn first. The process is stochastic, and you can never really say (short of exhausting the urn) that there's not still a bowling ball in there somewhere, but over time the discovery rate will continue to drop. After a while, only will see only BBs. How many years will a typical oil company explore at a loss in the hope that they might find just one more big field?
It has to do with the discovery of hazardous waste sites. During the late 1970s and the early 1980s the EPA could hardly stick a shovel in the ground without discovering a large hazardous waste site, Love Canal being perhaps the most notorious example.
Based on what had been found, people at the time were making all sorts of wild estimates of all the millions of tons of highly toxic waste that must surely be scattered all over the countryside. Well, people did find many other large hazardous waste sites, but then the size of the sites that were subsequently being discovered started to get much smaller than the earlier ones. While I'm sure there are still many small hazardous waste sites yet undiscovered, it is pretty clear to any informed observer that the chances of finding another Love Canal are just about zero.
I don't know whether this example is also 'stochastic', but it seems to very closely mirror what's been happening with the discovery of new oil fields.
On the other hand, what is discovered year-on-year may be viewed as stochastic.
From Laherrere Oil companies are not out there drilling random wildcats (or flipping coins or drawing balls of various sizes from an urn). So, I think what I wrote was not entirely clear as to my intended meaning.
Now, the thing to do is generate a composite creaming curve for every known discovery globally (an semi-infinite field) and plot it unsorted, that is, don't order it big to small, but keep it in order of occurence. You might be surprised to find that the slope is largely linear, but noisy, and not showing this "asymptotic bend" indicative of "big fields first". This would prove, or at least suggest, that discoveries are indeed stochastic and we could simplify much of the modeling.
But then again, we would have to deal with the eternal optimists who would pointedly say "see, we just have to wait for the next big one". Which is a gambler's paradox.
I have two questions about the first graph from Robert Hirsch.
- Is the discovery amount (that is being compared to production) the amount of oil that will be recovered from these fields or is it the total estimate of what is in the field?
- Do the reserve additions mentioned in the graph include the mysterious OPEC reserve additions of the 80s?
The reason I ask these questions is because the total area of the positive bars (the ones above the zero line) is much greater than the total area of the negative bars. So at first glance you wouldn't think we have much to worry about.Is there any way that we can somehow workout how much of the original discoveries we have actually used up by comparing the area under the production graph with the area under the original discoveries graph?
Anyway, keep it coming guys. This stuff is fascinating!
Re #2 -- Not sure, the mysterious (and likely spurious) OPEC additions may or may not be in there.
I can say that IHS Energy includes these OPEC additions.
I fully support and second your post here. It backs up what I see every day in the real world. You may have seen this post here where I discuss how Deepwater Exploration has been "creamed" already.
The biggest unquantified and uncataloged source of hydrocarbon liquids that I still see out there relate to natural gas liquids (NGL's). Most depletion models forecast this wedge growing considerably in the future, but from a qualitative standpoint, there is A LOT of gas worldwide that is currently stranded. From my own work I see many, many gas discoveries by IOC's in Nigeria that are considered failures as there is no way to monetize the resource (both the gas, the associated condensate and the NGL's.)
Anybody have a good current reference on how much liquid hydrocarbons are estimated stranded in undeveloped gas reservoirs worldwide and where they are?
I think of these mysterious lags as a composite of 4 essential time constants in a rate equation model.
Each one of these time constants is Markovian in the first-order. The rate is proportional to the amount remaining. This makes it a linear set of equations and allows a natural spread in possible rates where the standard deviation of each rate is the mean. Which makes it a maximum entropy estimate as well. In other words you are applying the minimum amount of knowledge in estimating how the curve will evolve.
What I usually use is about 0.1/year for each of these lag rates. This works remarkably well on first cut, if you have a good set of discovery curves. I typically have to increase the rates for offshore and decrease them for global and USA data.
Bottom line is that if you apply these 4 rates to the discovery curves, you can get the Hubbert shift. On top of that, the fluctuating noise on the discoveries filters out due to the maximum entropy property of the Markov model.