According to Matt Simmons, a retired Aramco executive said that Ghawar would never make more than 70 Gb (41% recovery).  Matt also said that the world record recovery factor for this type of reservoir was 45%.   I think that Ghawar is getting close to 60 Gb (35% of OOIP).  

Note that depletion starts when the first barrel is produced and it never stops until the last barrel is produced.  During this time period, a field can show rising production, stable production or falling production (some rate of decline), but regardless of whether production is increasing, flat or declining, depletion marches on.

Note that Shell was expanding their surface facilities at Yibal (same reservoir as Ghawar, also redeveloped with horizontal wells , just like Ghawar) to handle a projected increase in production, when the field started declining sharply, as the water hit the horizontal wells.   If memory serves, the final decline at Yibal hit when the field had produced about 35% of OOIP.

Stuart had a post about reserves a while back (http://www.theoildrum.com/story/2006/4/26/18109/8251).  Supposedly non-OPEC reserves have grown from ~240 GB in 1990 to ~300 GB in 2004.  This is despite the facts that a) over that period non-OPEC production was ~220 GB, and b)discovery rates are below production levels.

How can this be?  The usual explanations for reserve growth (besides new discoveries) are price and technology.  But the sense I get from TOD is that technology (like max. reservoir contact wells) tends to sustain higher production rates, but not to enhance overall recovery.  And from the early-90's to around 2001 or so, the price of oil stayed relatively low (~$20/barrel).  How is it possible that reserves didn't drop significantly, let alone increase?  Am I missing something?

Hadn't seen this posted...

http://www.americanenergysecurity.org/studyrelease.html

The Southern States Energy Board (SSEB), comprised of governors and state legislators from 16 southern states and two territories,  released a study (July 2006) advocating elimination of US oil imports by 2030.  

The plan? CTL, oil shale, biomass, enhanced oil recovery and transportation efficiency (which in 'merica only means cars - sorry Alan).

Quick take: dawning realization that there's a problem across the geopolitical spectrum. Still strong belief that the "American way of life is non-negotiable."

If URR is the amount economically extractible with today's technology, it seems logical that it should be possible to suck harder on the straw or accept higher water cuts when the price of oil doubles. I suppose this assumes that the industry actually incorporates the doubled price into its plans.

Is it the case, then, that the URR is limited more by today's technology than yesterday's price? Put another way, does the oil pumped diminish so quickly as URR is approached that rising price doesn't provide access to a meaningfully increased amount?  

I am in agreement with this statement. It matters much less to the world whether it is two trillion bbls or four which is ultimately recovered than it does whether the rate of production in ten years time is 105 mb/d or 65 mb/d. The former is of passing interest, the latter is of profound significance.

It is my opinion that our ability to extract oil from the earth at ever greater rates is geologically bound right now. The world is producing pretty much flat out. If things go wrong, which they have a tendency to do from time to time this will further impede production.

As producing oilfields become smaller and more remote the EROEI will become less and less. Many of the methods which are employed in depleted fields here in the US will not be viable in many areas. Thus the rate at which we are producing in the short-term could be negatively affected. This does not mean that at some point this oil will not be recovered, it merely means that production declines in the near term could be more substantial than is currently believed to be the case in some circles.

However today's sophisticated equipment allows a much better judgment of the potential size of the field before much drilling has occurred. Those initial estimates are often made before drilling has fully outlined the field, but can lead to overly optimistic predictions. These subsequently meet the reality of borehole data, and the initial well touted estimates have then, often less publicly, to be reduced.

Michael Lynch has one complaint about Colin Campbell that I have always thought was actually a fair criticism.  He says that Campbell complains about the lack of back dating when reserves growth occurs for an old oil discovery but doesn't recognize that today's discoveries will also experience reserve growth in the future.  In other words, even if we only find 6 billion barrels of oil in 2006, by 2026 we may be tabulating these same discoveries as 12 or 15 billion barrels. Still not enough to keep up with the oil we burn, but enough to delay the peak significantly.  I'm now wondering, however, if we'll see reserve growth of today's discoveries over the next few decades or is the reserve growth of yesterday's fields just an artifact of imperfect oil surveying methods in the past.  I thought it had to do with oil companies wanting to be able to spread out the reporting of discoveries to hide bad exploration years.

Additions to reserves
Needing to find almost 4% of its oil reserves each year seems a daunting prospect for the global oil industry, hence the pessimism of the casual observer of the oil scene. However, all is not what it seems — things are not as bad as they might appear at first sight. Relaxing the assumption that the world has to contend with an immutably fixed stock of crude oil makes all the difference; where there was gloom there is now the possibility of a happier outcome. A simple relationship says it all. The rate of change of proven oil reserves depends on the rate of gross additions to reserves less the rate of oil production (see below). Gross additions to reserves, in turn, comprise new discoveries, oilfield extensions and revisions.

Now that I've stopped laughing, I'm ready to make a serious comment. I agree that once one drops the assumption that oil is a finite resource, it does make all the difference... I'm feeling happier already, the gloom is lifting...

OK, that wasn't serious yet. Sorry. Someone

1. guesses the OOIP for field F
2. guesses the recovery rate R
3. guesses the URR for F  =  OOIP * R

Does EOR/IOR improve R and thus the URR? There is no general case. Sometimes yes, sometimes no. The day you are happiest, like the US lower-48 in 1970, may be your finest hour. You will never be that happy again. The declines may be steep. Against this psychological uncertainty, the mind has an array of defenses. As Hamlet said

To revise, or not to revise: that is the question:
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by revising end them?

Maybe all these games with recoverable reserves don't really matter too much here is the scenario.

First advanced recovery methods are touted for increasing the amount of recoverable oil and allowing recovery from fields that are not otherwise producible. The second case adds to the overall world supply for sure. The effect of the first condition increasing recovery is in my opinion not so important.  Consider in general your going to get 50% of the oil out of a field ( probably high ) if you put the increased recovery amount on two sides of the curve and more important add in the fact that these methods increase the depletion rate or basically enhance the production rate and what we have is this.

We can assume on the front side that at best 50% of the increase over the normal recovery rate will happen before the field declines. The rest will occur during the decline side of the field.

My position is its not proven in the least that more oil is actually extracted before the field starts into decline only the rate of extraction is enhanced. The 50% increase in URR is suspect at best for delaying the decline of the field.
Basically the increase in depletion swamps any increase in recovered oil before decline by a huge margin say 100:1.

Now I don't disagree that later or in a field that on its down slope these methods cannot increase the ultimate recovered reserves but the important point is that this final recovery will be at extraction rates far far below the peak and probably still have steep decline rates.

In a sense this is where I see a step function happening on the decline side. Drilling in fields past there peak causes a brief increase in production measured in years not decades then a steep decline followed by more aggressive methods that stabilize the field at a much lower level then down again.

Splitting out these effects is important since the Western Oil companies have become experts at wringing a field dry.
Sure they obtain more oil but whats important is its oil extracted at vastly lower production rates then when the field was pre-peak.  Now overall its debatable if they change the real extraction rate all that much since some fields will get boosted and some will crash as advanced methods such as co2 injection end and the field goes offline. Also these methods take a lot more infrastructure to implement causing significant cost/delays. My position is we will never attempt them for the vast majority of fields since overall the amount of oil will be falling and decline will fundamentally change the oil based economy.

So I'm comfortable with ignoring any of these reserve increases touted from advanced recovery methods and just assuming that what they do is bring the peak production earlier and more important cause a steep initial post peak decline before more aggressive methods are used to arrest the decline.

To finish off.

Advanced methods should cause the rate of production to increase and cause field to approach there peak production earlier in time. The downside is a initial significant drop in the production rate will almost always happen since when the wells water out you have extracted past 50% URR.

There is a delay before additional more aggressive methods can be used if economical to arrest the decline but the new production rates are always significantly less then the old.
In the chaos of a post peak world its not clear how much of this oil will ever be produced.

The shape of decline post peak is important because this is what we have to deal with during the transition from a world that's not peak oil aware to one that knows every year there will be less oil. My position is that we have a plateau then a big drop then some improvement. But what is important is the overall extraction or back side of the worlds production curve is not really all that relevant since at this point the whole society has changed in recognition that oil resources will decline every year.

In closing even though URR estimates are basically bogus
we are confident that given the known production we can estimate using Hubbert linearization. This approach does not match reality i.e it does not give us the date of the peak or the extraction rates correctly if advance methods are used. But all they do is increase production on the front side of the peak and cause a larger drop on the backside making the pre peak data more optimistic. Next its to optimistic since it assumes more oil can be produced pre peak then is the case from inflated URR's estimates. A lot of this oil will actually be produced from fattening of the tail of production and it won't be produced at any where near the rates that were possible pre-peak.

Once your a few years post peak all this is really not that important since external perception of oil has changed completely. Before the world peaks the oil gained from enhanced recovery certainly helps but post world peak its not relevant since the declines swamp the gains from depleted fields.

Now are there other scenarios that result in a plateau without a steep decline post peak ? The only answer here is that new fields are comming online and reworking of older fields is happening at such a rate that any significant deline is covered. If this is the case then we will indeed not see the cliff but a slow decline of say 1-3%.

But how do you prove this trend will continue say for a decade given that world wide there are two factors that will cause significant depleation events. The huge fields will eventually go into major decline most of these fields are already post peak so they will decline for the most part together or within a few years of each other.  Next a lot of the worlds smaller fields are declining or being extracted at high rates these fields will add significantly in total to the decline. Now take into account the state of our oil fields as far as pipelines equipment etc since we know that they were not maintained when oil was cheap. The fact that the state oil companies are generally inneficient and corrupt. Growing consumption in oil producing countries during the peak as oil prices skyrocket but production remains high and you have so many negatives. And on top of this the destabilization politically and the oil producing nations exert there political power near peak.

All these external and internal factors to me point to a world that won't experience a "soft landing" to use a meme circulating today. And again we don't really care what the last 2/3 of the production curve looks like its not that relevant since at this point the world has fundamentally changed.

The only way out of this mess that I can see is to use other methods to cause significant demand destruction after the peak. If the world's leaders are peak oil aware then really the best approach assuming there competing is to run there economies flat out to get as much wealth generated as possible pre-peak then instigate a recession post peak to hide the real fact that oil production is decreasing by lowering demand significantly. The other choice is hyper-inflation. Note this does not require some sort of evil plot just recognition of peak oil and recognizing the inflationary effect of increasing oil prices.

The problem the western nations have overall is there faced with unwinding the housing boom or going into hyper inflation caused by peak oil.

I think the latest stop in intrest rate hikes was really a smoke screen to give housing a chance to unwind a bit before more aggresive unwinding continues. Note that the oil prices magically stablized also. I'm pretty convinced the feds are now locking the intrest rate to oil prices either intentionally or simply from the effect on economic indicators. This means in the US and probably world wide we are already in powerdown.

If I'm right then the housing bubble will eventually be popped with a vengence the goverment has no choice or the rest of our economy will go into hyper-inflation.
I think in retrospect the only reason the US allowed this to happen was because of economic competition with China.
We got caught in a symbiotic relationship where to compete we had to consume there output since they were buying so much of our debt. I think in the end both countries are going to lose big time when this unwinds. Politically china can't handle a major recession that's why they played the game. On our side we had no choice but to allow hyper-inflation of the housing market to generate the wealth
to fund chinese expansion. The fact we acted as a sink for there production is really not that important. On the chinese side they wanted to avoid a recession at all costs on our side I think in general there was a lot of basic recognition that this was the last party and once the chinese and indian economies came onstream it would be a resource battle for growth from there on out.

Now we have too shakeout our overall economy to ensure it can function in the precense of increasing oil prices and lower returns or all hell will break loose the housig bubble is the least of our worries. This means the stock market will take a beating also.

So where do people invest ?
Intrest rates have to rise since the only place to invest will be to save at this point so the best return in a power-down economy will be to move most capitol into basically simple savings accounts and tie the money up.
The only growth will be in increasing efficieny and alternative energy sources. But the only way for wealthy people to make money in this sort of enviroment is to increase the value of the dollars they already hold. In general this means that the real wages for the rest of the people needs to decrease agianst the current production ratio so goods get more expensive. This of course has to be balanced agianst loosing consumers but in any case the standard of living for most will decrease steadily as wealth
concentrates.

This economic scenario requires no conspiracy except that the goverment will continue to increase intrest rates to destroy the debt economy and transition economic control to the wealthy who can only lend real money and away from the fractional banking system. Economically this is how I believe we will unwind the fractional banking system eventually since it does not function in a economy that is always shrinking. Eventually we will end up with a fixed or decreasing money supply decreasing since the wealthy will simply not invest when the markets are not favorable.
Eventually once the economy shrinks enough we will probably move back to something like a gold standard or proabably a energy standard for backing the money.

Finally back to the chinese its time to drop the bomb on there growth and break the global economy but tanking not only the US economy but all the western nations. Not sure how we will do it but best guess is we will actually play a double game. Initally we will allow inflation to go uncontrolled to erase the debt and just maybe to save some of the housing market but next we will become draconion with intrest rates to turn off the debt based economy. Or we may even default but massively increase intrest rates tough to say. But there seems to be no doubt that once we are past peak oil intrest rates will be aggresivly increased regardless of the cost till its cheaper to borrow from individuals that have real wealth.

Can we predict the shape of the peak ?
Can someone debunk my cliff prediction ?
Am I right about how we will unwind fractional banking ?
What's the best approach the US can take while it has power to tank the Chinese economy ?

More important can someone show me that the world will respond rationally once everyone knows were post peak regardless of the shape ?

Our agreement on this point is complete. Talk of reserves revisions only sows confusion. It is another manifestation of the Cornucopian fallacy that refuses to acknowledge limits to growth and replaces skeptical reason with unquestioning faith in technology & markets. Reserves must grow; if they do not, consumption is bounded. This is the essence of the CGES report.

CERA's latest report does this by fantasizing about productive capacity instead of discussing reasonable expectations for actual production.

By their bullshit ye shall know them.

The debate on the distinction between (a) the increase in recoverable oil due to the discovery of new oil reservoirs and (b) the increase due to technological progress in extracting oil from already-discovered reservoirs is almost beside the point.

From the `peak oil' perspective it is irrelevant whether oil is `discovered' in the physical sense or whether a new technology is `discovered' for extracting more of the oil whose physical presence has already been ascertained   --  the impact on the shape of the Hubbert curve is exactly the same because the impact on extraction and effective demand is exactly the same.  

In fact, albeit inadvertently, Planet Earth has at least up to now been in compliance with its own `globalised' version of  ASPO's Oil Depletion Protocol:

"No planet shall produce oil at above its current Depletion Rate, such being defined as annual production as a percentage of the estimated amount left to produce."

[I've changed one word - the original version runs : "No country shall produce oil ...]

The crux of the matter is not how additions are made to URR estimates but whether such additions can continue to be made in the future and how rapidly the decline in such additions will set in.

Super Nafta.

With all my posts sorry one more thing and its way way off the topic of depletion but it helps me close out one last issue I had with the overall aspects of depletion and the US's response.

Now I finally understand this SuperNafta thing I never could grasp the reason behind it. But if you assume all the concepts that I presented in my other posts basically that the US was planning withdrawing its currency as the world standard and revert back to a local economy then it makes tons of sense.

Canada is obvious but Mexico was a question. Now I understand.
The US gets two things from Mexico oil even with the collapse of Cantrell there are still significant deap water deposits and others that can be exploited. And if the Mexican economy tanks there is probably more for export.

Next it provides the US with a group of willing cheap labor that will allow it to drop real wages to maximize profit margins in the new shrunken economy.

It creates a pretty large block of economic control for the new closed dollar.

And last but not leas even easier land access to Venzuela for the oil there plus almost certianly a larger body of willing men to enter our army. We are going to need a pretty large army going forward.

During the American Civil war this was accomplished in the North via the open immigration policy and litterly drafting men as the left the boats.

http://www.spartacus.schoolnet.co.uk/USAcivilwarE.htm

A simple policy would be to grant any Mexican US citizenship if they serve in our armed forces.

It has happened

http://66.102.7.104/search?q=cache:PLYYBJ8WQ5AJ:lmri.ucsb.edu/pipermail/naccs-midwest/2003-May/00025 6.html+Mexican+citizen+US+army&hl=en&gl=us&ct=clnk&cd=8

Crazy yes for sure.

Does it make sense ?
To me it does now.

Tomorrow the Australian version of 60 Minutes has a show on 'peak oil'(http://sixtyminutes.ninemsn.com.au/sixtyminutes/stories/2006_08_27/story_1751.asp).

"Running on Empty- You're about to hear two of the scariest words in the English language -- "peak oil". Effectively, they mean the end of the world as we know it. The point where oil production reaches its absolute peak; the point when supplies start running out. And the doomsayers are convinced we're almost there. So, if you think paying $100 to fill your tank is painful, I hate to tell you, this is as good as it gets. It'll get worse, much worse. Two dollars plus per litre by Christmas for a start. Naturally, the oil companies say stay calm. We'll be right for a 100 years at least. But then they would, wouldn't they?"

Maybe they will sell it to the US and European shows?

Finally, our main public TV station follows up its peak oil show with one on Monday on coal fired power stations and global warming (What Price Global Warming?http://www.abc.net.au/4corners/content/2006/s1722956.htm).

I dont know why all of this focus in one week- must be a conspiracy? :)

Lakes of hydrocarbons found on Titan

The Cassini spacecraft, using its radar system, has discovered very strong evidence for hydrocarbon lakes on Titan. Dark patches, which resemble terrestrial lakes, seem to be sprinkled all over the high latitudes surrounding Titan's north pole.
[...]
The abundant methane in Titan's atmosphere is stable as a liquid under Titan conditions, as is its abundant chemical product, ethane, but liquid water is not. For all these reasons, scientists interpret the dark areas as lakes of liquid methane or ethane, making Titan the only body in the solar system besides Earth known to possess lakes.

The really neat thing is, this will give the Space Shuttle and the International Space Station something useful to do. They can start building interplanetary LPG supertankers.

This has certainly been an interesting thread, and not full of sound bites, but with some long meaty posts that get into some real detail, not sound bite stuff!  Good deal!  :-)

It has however, been vexing in places.  Let me tackle one or two things that could cause confusion, especially since they have been discussion we have had here in the last few days:

1.  It has been with interest that I have noticed many "thinkers" on the Peak Oil subject in this string of posts have distanced themselves from any concern about OOIP (Original Oil In Place), URR (Ultimate Recoverable Reserves), and in fact, seem to have dismissed the issue of Recovery Factor (as a percent of the original oil in place) altogether.

This comes as a bit of a shock, in that my original understanding of Hubbert Linearization was that the stats were based very directly on URR and what Westexas and others often state as the fundamental importance of 1/2 Qt  or one half total quantity.  This would mean that OOIP and URR would be absolutely crucial if one uses any version close to Hubbert Linearization (HL)  This is very clear in such charting and graphing as is found for example at such TOD strings as
 "A Different Way to Perform the Hubbert Linearization"
http://www.theoildrum.com/story/2006/8/16/102942/337#more

Note the key importance of URR.  Without this, I have trouble finding a statistical scientific leg for "peak oil" dating and estimation to stand on.

Are some folks at TOD distancing from the mathematical underpinnings of HL?  If so, this reduces the value of the charts and graphs.  I am one of the worst algebra students you can imagine, but the one equation I can easily solve is  "solve for X, where X is unknown.....   X+X+X=(guess what?)...X

If I assume the original amount of oil did not matter, and the amount that can be extracted from that original amount does not matter, (since in so many cases, both numbers have been and are moving targets, and were unknown to begin with), then the only thing I have left to work with is daily production  (which by the way, in many cases is not actually known).  The issue  with daily production is that it can be turned up and down by human/political/economic  based decisions, and has very little to do with geology, unless you are at peak, in which case it cannot be turned up, butt only down...daily production, until peak time, is a function of much, much more above ground than below ground, and can rise and fall on a whim.  It is useless as a predicting tool, this was the mistake made in the 1970's.

No discussion of fields found but for some reason not developed (our recent long discussion of Khurais in Saudi Arabia comes to mind, now being billed as possible 1.2 million barrel per day field of light sweet crude, to be developed for production before 2010 (some say by 2007.  See the depletion of Abqaiq string
http://www.theoildrum.com/story/2006/8/20/235224/373

Khurais may never deliver a thousand barrels a day.  But it points out that the linkage between "discovery" and "production" is very tenous indeed.  This is even more true in places where oil is easier to find than to produce such as the arctic or deep offshore, or production has been impacted by legislation ( such as OCS Outer Continental Shelf).

2.  Once again, much of the discussion indicates that many see "peak" as running out".  There are discussions of war, murder,  and so little oil in the world that even heavy freighter ships will not be functional ("the end of long distance heavy shipping")  This is almost unbelievable that anyone could conjecture such a scenario based on "peak oil" as the real issue exists.  

First, I will quote someone with, I assume, the strongest possible "Peak Oil" credentials, Matt Simmons:
"At peak, the world will not be "running out." Indeed, more than half the world's conventional oil and a larger share of its unconventional oil will remain to be extracted. . What the world is running out of is cheap oil, the $20 oil we built our civilization around. Suggesting that there are no insurmountable problems for the oil industry above or below ground and that a return to inexpensive oil and orderly oil markets is in the cards is a fool's forecast"

The worst case scenario, Hubbert's Peak,
http://www.energybulletin.net/image/uploads/14337/newswire_2004Scenario_1.jpg
Peak by 2010 (although the newest charts have pushed the peak further into the future a bit and broadened the top, this one was made in 2004 and has been corrected by ASPO and Campbell), shows as much oil being produced in 2025 as was being produced in 1985, and as much being produced in 2050 as in 1970.  This is even without biofuels, RR's bio-butanol, solar, wind, LPG and natural gas conversion for liquid or as transport fuel, etc.

 (short factoid, long known:  The issue of "Peak Oil" is MUCH more an issue of waste and consumption than lack of production.  The amount produced, EVEN in the worst case scenarios throughout the rest of the centurly still is mind boggling.  The problem is, the amount we want to consume is COMPLETELY INSANE!!

Now this will be a very serious issue, so much so that along with environmental issues, these are the "big issues" for the better half of the upcoming century, if not all of it.  It will be nation threatening, and bring down powers that be, and force a HUGE SHIFT in thinking about energy, production, and consumption.  BUT, please think for a moment:
Heavy long distance cargo ships are the SINGLE most efficient way to move material, and for that matter people if they have to ride them.  They use less oil per ton mile of transport than any other form of transport. Only possibly wind powered ships are more sustainable, and these cannot carry nearly as much dependably.  Of all the fossil fuel devices of mankind, the first to succeed was cargo ships, and it will certainly be the absolute last to die.  They can be powered by the absolute shiitiest of oil, heavy dirty oil....they could come closest to digesting raw tar sand oil, or heavy tars, or the HEAVIEST of crude oils, even used and waste oil.

To believe that any remnent of modern fossil fuel culture would outlast heavy oil powered cheap cargo shipping displays a complete misunderstanding of how oil is used in the world, and how much will still be around for the rest of the century, peak oil or not.

great southern uses the words "the point when supplies start running out.", as the way the discussion of peak oil is being billed in Australia's press.

:-(  sigh....the primitivist fantasy has surely taken over....a world soon to be filled with fairy tale castles, and pretty maidens riding white stallions, with happy spinners of beautiful clothe being the heaviest of industry, working peacably spinning gold from straw in the tower of the castle...and of course there will be fairies in this "Midsummer Night's Dream".....all remnents of science, that devil's tool, will soon fade away.....

Roger Conner known to you as ThatsItImout

Peak Oil and Bakhtiari's 4 Phases of Transition

by Byron W. King
Pittsburgh, U.S.A
August 25, 2006.

IN A RECENT ARTICLE entitled "Nothing Like Business as Usual," published Aug. 11, 2006, in Whiskey & Gunpowder, I outlined the views on Peak Oil of a man named Ali Morteza Samsam Bakhtiari. Dr. Bakhtiari is a former senior energy expert who spent his long career, which started in 1971, employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran. During the course of his employment with NIOC, he held many important positions of trust and responsibility.

http://www.howestreet.com/articles/index.php?article_id=2953

Oil's depletion rate

In a recent piece (25/8/06) the author behind `Heading Out' sought enlightenment on the matter of oil depletion by reading a `report' by the CGES on this subject.  Since, by his own admission, the author has remained unenlightened, may we suggest a few reasons why this was so.  The CGES piece was not a report but a short proprietary article in our Market Watch series (part of our Global Oil Report), which looks at various topical issues concerning the oil industry.  Heading Out contends that the CGES piece `conceals some of the assumptions that it makes, by hiding them within the overbounding simplification of its argument.'  The CGES article did not deliberately try to simplify, but attempted instead to make a simple point based on a simple argument.  For the benefit of those who have not read the CGES paper, the simple argument we made is as follows.

In any single year the world's oil production rate forms one of the key elements of its depletion rate.  Last year, 26.38 billion barrels of crude oil were produced globally (according to the Oil and Gas Journal) yielding a depletion rate of 2.38% on the basis of an average level of proven global crude oil reserves of 1,109 billion barrels in 2005 (again according to the OGJ, but excluding Canada's tar sands reserves).  If -- a big `if', by the way -- there are no further additions whatsoever to the world's proven reserves of crude oil, then the world's depletion rate will obviously rise over time from the 2.38% rate of 2006.  With no further reserves additions and assuming the same rate of oil production, it is a mere matter of arithmetic to calculate the depletion rate ten years hence (3.1% a year), twenty years hence (4.5% p.a.) and thirty years hence (8.3% a year).  However, the world's crude reserves do change over time because companies strive to change them; after all, reserves are the future lifeblood of the industry.

The rate of change of oil reserves is tautologically equal to the rate of gross additions to reserves less the rate of oil production.  Gross additions, in turn, comprise new discoveries, oilfield extensions and revisions.  It is highly unlikely that during any particular year there will be no gross additions to reserves whatsoever.  Discoveries -- small or large -- are being made continuously and with the passage of time and the aid of technology companies get to know more about their oilfields.  Growing knowledge tends to result in more oil reserves through oilfield extensions and revisions of reserves -- what is commonly known in the industry as `reserves growth' -- as well as through discoveries of new oilfields.

A case in point is the United States, the world's most mature oil province.  At the end of 1973, during the first oil crisis, the US had proven oil reserves of 35 billion barrels, giving it an R/P ratio of 10 years and a depletion rate of 10% a year, provided no new oilfields were discovered thenceforth and no oilfield extensions and revisions were made either.  At the end of 2005 the US had proven reserves of 21 billion barrels with an R/P ratio of 11 years, yet had produced in the meantime no less than 86 billion barrels of crude oil!  It would be extremely difficult to determine precisely what proportion of the 86 billion barrels actually produced between 1973 and 2005 was due to new discoveries, oilfield extensions or revisions, and in a fundamental sense it is irrelevant because the US enjoyed the benefits of this oil, whatever its source.  What really counts is the oil producers' ongoing struggle to replace the oil being produced: whether this is achieved via wildcat wells, or oilfield extensions or reappraisals of existing fields hardly concerns the average consumer filling up his shiny SUV in Los Angeles or his beaten-up truck in Mumbai.

Having made the theoretical point presented above, the CGES article proceeded to look at the global picture and see whether the world's gross additions to oil reserves since 1954 exceeded or fell short of global production.  We did not discuss in our short article individual oilfields, or countries for that matter, for there was only enough space to concern ourselves with the aggregate picture; incidentally, for those interested in individual countries do feel free to contact the CGES.  As a matter of historical fact, then, one can assuredly say that since 1954 the world's cumulative gross additions to reserves have exceeded its cumulative oil production.  If this had not been the case, the world's proven reserves would not have grown at all -- and surely no one is purporting that!  This is not to say that we `don't need to worry', as Heading Out contends we are urging our readers, for the future might be very different from the historical record.  There are indeed a number of reasons why we should be fearful, the most important being the lack of opportunities afforded to the international oil companies to `grow' their oil reserves, because they are kept out of the most prospective areas in the world.

To sum up, the author of Heading Out was not enlightened by our article simply because he did not read it carefully enough.  The CGES set out to find what is the world's oil depletion rate and to see whether it has changed over time.  If there are no gross additions to reserves the depletion rate is equal to the world's rate of oil production as a percentage of global proven reserves (2.38% in 2005).  However, gross additions have not been zero; indeed, since 1954 they have exceeded the world's production of oil.  As a result, proven global oil reserves have grown since then and expansion rather than depletion has been the norm.  Oil reserves may shrink in the future and cause depletion to become a serious worry, but they have not done so both in the more remote and the recent past, and that is as much as we dare say on this subject at present.

Dr. Leo P. Drollas
Deputy Director and Chief Economist
Centre for Global Energy Studies
17 Knightsbridge
London SW1X 7LY
United Kingdom