Guest Post by Willis Eschenbach
In oil, as in other extractive industries, you have what is called the “R/P ratio”. In the R/P ratio, “R” is reserves of whatever it is you are extracting, and “P” is the production rate, the rate at which you are extracting and using up your reserves.
Figure 1. World annual oil production in billions of barrels (blue line), and years left at that production rate (R/P ratio, red line). Right scale shows the proven oil reserves for each year, in billions of barrels (dotted green line). DATA SOURCE: BP Statistical Review of World Energy 2011, a most fascinating Excel spreadsheet. PHOTO Spindletop Hill Gusher, 1901
When you divide the amount you have in reserves by the rate at which you are extracting the resource, you get the number of years the reserves will last at that rate of extraction. Accordingly, I include the R/P ratio in Figure 1 as “Years Left”
A couple of things to point out. First, the “Years Left”, the R/P ratio, is currently more than forty years … and has been for about a quarter century. Thirty years ago, we only had 30 years of proven oil reserves left. Estimates then said we would be running out of oil about now.
Twenty-five years ago, we had about forty years left. Ten years ago we had over forty years left. Now we have over forty-five years left. I’m sure you see the pattern here.
Second, this is only what are termed “proven reserves” (Wiki). It does not include “unproven reserves”, much of which is in the form of unconventional oils such as shale oil and oil sands. Even discounting the unproven reserves, while the rate of production has increased, the proven reserves have also increased at about the same rate. So the R/P ratio, the years left at the current rate of production, has stayed over forty years for almost a quarter century..
Now, at some point this party has to slow down, nothing goes on forever … but the data shows we certainly don’t need to hurry to replace oil with solar energy or rainbow energy or wind energy in the next few decades. We have plenty of time for the market to indicate the replacement.
Don’t get me wrong. I’d love to find a better energy source than oil. In fact, the huge new sources of shale gas will substitute in many areas for things like heating oil, and will burn cleaner in the bargain. And I do think we’ll find new sources of energy, humans are endlessly inventive.
I’m just registering my protest against the meme of “OMG we’re running out of oil we must change energy sources right now tomorrow!!”. It is simply not true. We have plenty of time. We have decades. We don’t have to blow billions of dollars of our money subsidizing solar and wind and biofuels. The world has enough oil to last for a long while, plenty long enough for the market to determine whatever the next energy source might be.
w.
NOTE: Oil figures, particularly reserves, are estimates. Oil companies are notoriously close-mouthed about their finds and the extent of their holdings. The advantage of the BP figures is that they are a single coherent time series. Other data gives somewhat different results. As far as I know the increase in proven reserves despite increasing production is common to all estimates.
SP Wells says:
December 14, 2011 at 8:52 am
“Seems to me there is a larger question than how much oil we have left. What about the damage being done to our environment by using fossil fuels and living in a plastic state of mind.”
A “plastic state of mind” ? As opposed to an elastic state of mind, supposedly? Oh, I see what you mean. Relax. You can make all the plastic you want from starch, or cellulosis.
https://shop.ultimaker.com/en/consumables.html
Imagine that. A “sustainable” world with plastic! A hippies nightmare! One can even make bags out of it!
Dave Springer says:
December 14, 2011 at 7:38 am
Typically naive of you to think “we’re talking 40 years” left, Dave. Read the article again. Note that the end of reserves has been forty years away for a quarter century now. Consider what that means for the current R/P ratio of forty years …
So whenever it is going to run out, we can say one thing for sure—only someone as blind as yourself could read that article and think that the data indicates we’ll run out in forty years.
Are you naturally that foolish and unobservant, Dave, or do you have to work at it? Because either way, it’s pretty impressive.
w.
Stephen Harris says:
December 14, 2011 at 9:20 am
– All major non-opec producers are in terminal decline;
—————————————————————————-
Ummm, actually, US oil production is climbing, gas production and gas liquids production soaring.
@Doug
U.S. oil production peaked at 9.1 mbd in 1971. It’s been in decline ever since, despite finds in Alaska and the Gulf. Current production is about 4.2 mbd.
The existence of reserves does not imply that it is remotely without cost to extract them, or that the extraction will not carry consequences, like oil spills offshore or the contamination of water, air and soil. The role of coal in Britain until the horrific pollution of the 1950s is an example of “we still have plenty of something, but we have to make a switch.”
In addition, there is no reference to the price of oil and oil products. What would I care if there is 40 years of oil left if a fill-up of a 100 mpg vehicle costs $1,000? It becomes as problematic as telling me there is only 40 years’ supply of platinum left in the Earth’s crust: not my immediate concern.
The establishment of a oil-based economy is not merely a matter of access to supply, but the cost of bringing that supply in a refined form to market, and its price that fluctuates in response to its role as a benchmark commodity. See “gold” as a reference, even though gold’s rise since 1970 is not due to its utility, but to the debasement of currencies.
So in sum, the existence of oil reserves is no guarantee that they are easily extractable, or worth (yet) the effort. A move of civilization to a fusion and hydrogen economy, or even an as yet more challenging source, is best done while we still have the leisure of (historically) a cheap energy source as fossil fuels.
Stephen Harris says:
December 14, 2011 at 9:20 am
If you think reserves are exaggerated, you’ll have to explain why thirty years ago they said we had thirty years of proven reserves. Sounds to me like the “proven reserves” has consistently underestimated the actual reserves, not overestimated them as you claim.
w.
Proven oil reserves is the same as saying recoverable oil reserves, and known oil reserves is oil not yet recoverable with current technology. There is also undiscovered which is anybodies guess. The numbers are always changing. The Alberta oil sands for instance are known to contain at least two trillion barrels of oil, with about 280 billion barrels recoverable with current technology.
Don K earlier mentioned Thomas Gold.
Gold wrote a very interesting essay in 1989 entitled New Ideas in Science.
It’s also about old ideas & progress in science.
While likely instigated by Gold’s oil & gas experience, it covers a few other examples of what he calls “the ‘herd’ instinct”.
While climate change isn’t mentioned, I think everyone will see how Gold’s article applies to the current climate change controversy.
http://www.scientificexploration.org/journal/jse_03_2_gold.pdf
Without wishing to enter into arguments of proven vs unproven, recoverable, abiotic etc., Norway recently announced two new finds in the North Sea which are the third largest ever discovered – from a region heavily explored for the last 40 years and considered “prospected out” for many years.
Over the last three years, Norway has discovered more new all than any country except Brazil and the US – and only from the North Sea.
When 40 year-old fields can still provide such finds, I think we are along way from worrying about the oil running out.
A note about “RESERVES”: This is an economic-based number, meaning the amount of measured volume/tonnages that are known to a high confidence level that can be produced at a profit. The methods of determination of these numbers are prescribed in detail by industry technical associations and must be done by properly qualified engineers. They are even subject to audit. Theoretically, this number goes up and down with the price of the commodity but practically, it is the measure as of a given date. Measured resources are those resources which have been measured to a lesser confidence level for which there is a reasonable expectation that they could become economic either through increased price levels or improved technology. A lot of the resources of sub-economic commodities were already known decades ago (like the oil sands, deep deposits, offshore deposits, oil shales and coal deposit methane) but didn’t meet the standards of intensity of measurement and/or the technologies available were not economic. Recently discovered methyl hydrates in the sea floor muds are probably not far off in this chain. This is why the numbers are able to keep pace and this is why a little bit of knowledge is a dangerous thing to groups like the The Club of Rome and the green jihadists. Another factor in very large trends where there is a high degree of confidence that there are abundant resources is that it costs money to drill and develop reserves and so it doesn’t make economic sense to prove up more reserves than you are planning to produce within a certain planning time frame – say 10 years or so. For this reason, companies treat reserves like active inventories and only add to them as required. In another post I used the example of INCO’s nickel reserves in the Sudbury basin of Ontario having only 15 to 20 years reserves of nickel continuously since 1905. In addition, newer deposits found since The Club of Rome linear mob think, have kept reserves rising as demand increased.
For those more interested see:
http://spe.org/industry/docs/Reserves_Audit_Standards_2007.pdf
Just a brief comment on the Hubbert curve. It is treated with respect because it did predict US “Oil Production” fairly accurately. The HC is actually quite rigorous. It depends on a function called the logistic curve P(t) = 1 / (1 +e^-t) which yields a sort of S-shaped curve which looks like exponential growth initially, then flops over and approaches a limit. Plot the rate of change of the logistic curve and you get the Hubbert curve. Those of you who are good at math can investigate the logistic function and Hubbert curve. Don’t ask me for more details as I am horrible at math.
But the logistic curve/Hubbert curve are critically dependent on knowing the amount of exploitable resource. Get the amount of resource wrong, the prediction will be wrong. In the case of US natural gas, the amount of resource was not well known, and Hubbert failed to predict US production peak (twice actually). In the case of world oil, it is very difficult to predict the peak because the data on resource is poor and obsfucated. That’s why guesses are all over the place. However, no sane person thinks the resource is unlimited. We are arguing about when the peak will occur, not whether it will occur.
Also keep in mind that only about 15% or the planet’s population lives in situations where demand for oil is stable or declining. Most folks live in developing countries and their demand for petroleum is surely going to soar in future years. Why can’t they use other energy sources? They can (so can we) but liquid hydrocarbons are portable, energy dense, easy to store. easy to use, and relatively safe. “Oil” is the fuel of choice for many situations — especially transportation.
I’m not sure why this confuses people. There is no crystal ball. Nobody can possibly know exactly how much oil is left. But what the R/P factor shows is we have at least 40 years. That’s a timespan from 1903 with the Wright brothers fooling around with kites to 1943 where planes could fly at 30,000 feet. A lot can happen in 40 years. Think of life in 1970 compared to 2011. We are in the age of exponential technical advancement. What will the world look like in 2051? Come on everyone, pull out your crystal balls.
jrwakefield: December 14, 2011 at 8:21 am
Not one oil field can be shown to be of abiotic.
EVERY oil field has a biological source rock.
We evidently read different books…
Or have drawn differing conclusions…
No problem with that.
You are perfectly entitled to think oil has a biological origin.
You are perfectly entitled to assay EVERY oil field [if you can].
However, I am still not convinced by your BOLD claims.
SP Wells says:
December 14, 2011 at 8:52 am
Sustainability is not just about the United States, although it seems impossible to glimpse our own narcissism.
Btw, one form of narcissism is “do gooder”, “save the worlder”, “we only want to help everyone” narcissism, as a cloak for personal control needs existing in the presence of truly having nothing better to do, like successfully dealing with your own self and immediate situation first. Writ large via Communistic theology and its pseudo-physics and now the “sustainability/equality for your own good, or else!” ethic , it always leads to regressive scarcities which mirror the original scarcity of self or at least the absence of a creative human mind. Or, just take a look at Obama and his regressive policies. He’d make toilet paper impossible.
Several people have brought up the point that reserve estimates are what’s economically recoverable at some price point per barrel. It appears the graph is adjusted for that to some extent.
The inflation adjusted price of oil was between $13 and $18/bbl from 1947 to 1971. US market control ended in 1971. Price doubled to $30/bbl almost overnight and stayed there for 13 years reaching $60/bbl for several years when it 1986 it fell below $30 again and stayed between $20 and $30 for next 16 years until 2004. Who knows where it’s headed now. Even $60/bbl seems like a fond memory at this point. One wonders if $100/bbl is economically sustainable. It isn’t looking good so far.
As far as I’m concerned the price of oil is the #1 issue for the next president of the United States to do something about.
Who here can look me straight in the eye and tell me the US economy wouldn’t rise like a rocket if oil fell back to being stable at around $15/bbl and transportation fuel $0.50 gallon? That’s what we had from 1986 to 2004. This is all political. On 9/11/01 oil was still relatively stable at $25. It started rising on the next day and essentially never looked back. This is the root cause of the ongoing deep recession.
Major advances in biofuel are inevitable. The key is synthetic biology. Evolution just didn’t produce the perfect organism for production of fuel oil or ethanol. Direct production of fuel oil from water, sun, and air is something that has no survival value in nature. Evolution never selected for it so where it exists it’s generally an undesireable byproduct of metabolism that evolution tends to minimize rather than maximize.
Synthetic biology changes all that. There are already patented cyano-bacteria (blue-green algae) that can produce 20,000 gallons/acre per year of fuel at a price equivalent to $30/bbl oil. These algae grow great in municipal wastewater with high nutrient loads, brackish water, and saltwater. Just 10% of the Texas panhandle, a few million acres, could provide all the diesel, ethanol, and avgas for entire US current annual consumption.
How many applecarts would that upset? Imagine if oil exporters like OPEC couldn’t compete at $30/bbl. Imagine if domestic oil producers couldn’t compete at $30/bbl. You see, $30/bbl equivalent is just the opening price for advanced biofuels. Sort of like transisters cost a dollar each in 1960. Demonstrably, once you can design living things like you can design a car or a computer, advanced biofuel plants won’t be constructed but they’ll rather be grown.
I think everyone who’s really aware of the scope of engineering opportunities to be exploited by access to synthetic biology knows that energy is a political problem not a technical problem. Too many vested interests in the status quo would be utterly destroyed by virtually free energy. Nonetheless progress in the infant field of synthetic biology is rapid. It’s mostly a matter of miniaturization, automation, and cost reduction in the synthetic biology lab. This where all the great strides are happening. In the past 10 years for instance the cost of sequencing a human genome fell from $1 billion to under $10,000 and from several years to less than a week. Think of it like being able to read and write. The cost of reading nature’s books (genomes) has dropped precipitously. We’re also interested in writing our own books. We can do that. The first artificial, working genome was written in the past 24 months. It took many months and many millions of dollars. But the cost of doing that is plummetting. This means that experimentation to produce that perfect biofuel-producing organism gets faster and cheaper and eventually it gets to the point where artificial life designed on computer workstation is as routine as writing apps for iPhones.
This is our next technological revolution. It’s coming soon and it’s a biggie as far as revolutions go. I’d say it’s the biggest thing since writing was invented.
@Michael Irwin.E.
Please see:
http://www.enopetroleum.com/opecoilreservers.html
Notice how OPEC estimates were almost doubled in the same, short time frame in order to take advantage of new production quotas. The new estimates were not based on new discoveries. I hope you don’t think they all just made honest mistakes, and corrected them all at the same time. Oil geology is well understood and reserve estimates of long existing fields is not guess work. A sudden doubling of reserves by OPEC members doesn’t pass the smell test.
It is very much in a producers political and economic interest to fudge reserve estimates. Oil is money. Money is power and influence. When it comes to actual reserves estimates I trust retired industry insiders like Colin Campbell as well as whistleblowers and leaked cables more than the official party line.
But where the rubber meets the road is in production numbers. Those can’t be fudged that much. And the truth is that production has hit a bumpy plateau, despite growing demand. Heroic efforts to drill six miles below the ocean surface or to frack oil precursors in shale formations isn’t going to turn the game around. And why is anyone drilling in such difficult places? Because that’s where the rest of the oil is located. The low hanging, and cheap to produce, fruit has been picked. At best these efforts will give us a little bit of breathing room to come up with a different way to run our industrial civilization.
Doug says:
December 14, 2011 at 9:08 am
jrwakefield says:
December 14, 2011 at 8:31 am
Then you misunderstand a Hubbert curve. It’s not about what’s in the ground, it’s about flow rates.
————–
Actually I understand Hubbert’s work just fine. He is now off 10 fold on gas FLOW RATES in the US.
And please, stop setting up absurd premises such as “we need to find seven Ghawars a year”. All we need to do is keep getting a percent or two more recovery factor from all the existing fields every so often, find some giant deepwater fields, prove up a few billion in old fields like Wattenberg through new technology, apply horizontal drilling to liquid prone shales etc. That is exactly what we are doing, at economical costs and realistic energy inputs.
—————
I didn’t come up with the seven Ghawars, the IEA did.
If you understand flow rates how come you keep on about what’s in the ground? None of those you noted will have enough flow to keep up with depletion from aging fields. That is fact, not conjecture. Example, Cantarell has dropped more in flow rate than the Alberta Oil Sands can ever hope to produce.
“a few billion” is tiny in a world that consumes 33bb/year.
Stephen Harris says:
“U.S. oil production peaked at 9.1 mbd in 1971. It’s been in decline ever since, despite finds in Alaska and the Gulf. Current production is about 4.2 mbd.”
Plenty of the blame for that decline can be laid at the feet of the enviro-lobby, which has been fighting the extraction of more than ten billion barrels of easily recoverable oil from a three square mile section of ANWR [the tiny red square]. There is certainly more oil to be found on the North Slope, but oil companies are not even allowed to explore for it. [Yet there sems to be unlimited money for failed social experiments.]
And the price of oil seems to be related much more closely to international crises than to actual supply and demand.
The current Administration refuses to allow exploration or drilling around almost all of the U.S., including Alaska. However, the Administration has no objection to China’s drilling in the Gulf of Mexico in partnership with Cuba, only 30 miles off the U.S. coastline.
IfWhen there is a Chinese/Cuban oil spill, the fault will be due to the enviros’ obstructionism. But expect them to turn a blind eye toward the Chinese, the Cubans, and the Administration.There is plenty of oil for our needs. Enviro politics is the only reason it is not being produced. The eco-lobby is directly responsible for the high cost of gasoline, and of all widely used petroleum-based products.
malagaview says:
December 14, 2011 at 10:01 am
jrwakefield: December 14, 2011 at 8:21 am
Not one oil field can be shown to be of abiotic.
EVERY oil field has a biological source rock.
We evidently read different books…
Or have drawn differing conclusions…
No problem with that.
You are perfectly entitled to think oil has a biological origin.
You are perfectly entitled to assay EVERY oil field [if you can].
However, I am still not convinced by your BOLD claims.
——-
Pick any field you want, how about Tupi off Brazil? Google its geology.
The fact is the oil industry uses biological markers as a tool to look for deposits.
With the amount of oil that is released every year through natural oil seeps around the world, it’s got to be coming from somewhere. Just in the gulf of Mexico alone, the equivalent of two EXXON Valdez sized spills are released every year by natural seeps.
An introduction to the modern petroleum science, and to the Russian-Ukrainian theory of deep, abiotic petroleum origins.
http://www.gasresources.net/Introduction.htm
Spot on as always. An example of new technology, gas rather than oil, bringing previously untapped reserves into production is the long awaited FLNG. Shell’s video illustrating this feat of engineering is interesting. Sadly they didn’t pay me to post it here :o(
jrwakefield said:
“Except for the Arctic, the entire planet has been searched. The big easy fields have all be found and exploited.”
Sorry, don’t buy that the *entire* planet has been searched. It may have been searched for the “big easy fields” as you say but I included shale in my question as well. Looking at the patchwork of shale deposits just within the US which are only recently being tapped, I believe there are other shale deposits in other countries which were ignored in the past or remain undiscovered.
“There wont be oil beyond the continental shelfs, wrong geology. Oil deposits are mostly from shallow marine ecosystems. Explained in the book Oil 101.”
But there *is* oil beyond the continental shelves…they have been progressing into deeper & deeper water depths (away from the shelf) as technology improves. The BP disaster in the Gulf was in over 5000ft of water & many thousands of feet below the ocean floor. Also, that new Brazilian find in the South Atlantic is in very deep water (away from the shelf) as well.
Tell me, what does Oil 101 say is the deepest water depth oil will be found and how deep below the ocean floor is the limit to find oil…eh?
Jeff
I think that it is a terrible waste of oil to burn it for heat when it can be a raw material for so many useful products. That said, I feel confident that it will eventually become so valuable as a feedstock that other, cheaper sources will become available for heat. It appears that natural gas will largely replace oil for heating well within the projected time for running out of oil. When natural gas, which can also be used as a feedstock, exceeds the cost of producing power from uranium and thorium, we can stop burning it for power generation. Get the price of electric power low enough and gas will be phased out of home and business heating. If oil and natural gas were only used for feedstock and transportation purposes, the supplies start looking a lot larger. There is also the consideration that, given cheap enough electric power, conversion of coal to methane looks more practical and we have huge quantities of coal.
I do believe that the primary problems of our (USA) energy problems are political. I have very high hopes that the RICO suit filed by Chevron will cause a thorough reevaluation of some of the environmental efforts by various groups including some agencies of the US government.
One immediate need is a requirement that any document presented to (or referenced by our federal government) or produced by our federal government must have all of the original data as well as the analysis procedures available to the general public on servers which are administered by an independent agency. It should also be possible for anyone to post a paper which has been submitted for publication and rejected as long as the reasons for rejection are also posted. There should be significant penalties for presenting fraudulent or incomplete data. I think that this would also significantly reduce the contention that we have in the discussion of global warming.
I do not trust the EPA to present an honest, much less a balanced, picture of anything having to do with their regulations. Until they have to include an analysis of costs versus benefits for any existing or proposed regulation (including, of course, posting the assumptions and methods of calculation). Demonstration of significant error in the cost benefit ratio at any time in the life of the regulation should be cause for cancelling that regulation as well as reconsidering the desirability of continuing to use the input from the individuals who made the erroneous assumptions.
One formative occasion in my disgust regarding our regulatory agencies was the attempt of a local power company to put in the Black Fox nuclear power plant. The attacks on it fell into three primary categories.
1 Physical Safety: While it would withstand a crash by one 747, what if two hit it at the same time?
2 Process Safety: Would it be safer if the peak steam temperature were only 400 degrees Fahrenheit? How about 300 degrees?
3 Cost Effectiveness: Now that we have greatly increased the cost of the physical plant and the cost of all of the permitting as well as significantly decreased its efficiency, how can it still generate electricity at a price lower than a coal fired plant?
4: Environmental Impact: It is my understanding that Black Fox finally failed for the impact on the Verdigris river that it would provide its cooling water. There was no assertion that any pollutants would be added to the river. Instead, by evaporating some of the water, it would increase the concentration of allegedly preexisting pollutants. Would it be petty of me to mention that the name of river, which was given to it by an early French explorer, can be interpreted to mean green grey and that I consider that descriptive?
The current theory on the biotic origin of oil, is that it is formed from silt-buried plankton in shallow seas. Not from dinosaurs. Which means that Earth has been generating oil for around three billion years. And that’s not to say that all oil is biotic in origin, the theories are not mutually exclusive.
Rob Potter says:
December 14, 2011 at 9:55 am
Without wishing to enter into arguments of proven vs unproven, recoverable, abiotic etc., Norway recently announced two new finds in the North Sea which are the third largest ever discovered – from a region heavily explored for the last 40 years and considered “prospected out” for many years.
Over the last three years, Norway has discovered more new all than any country except Brazil and the US – and only from the North Sea.
When 40 year-old fields can still provide such finds, I think we are along way from worrying about the oil running out.
————–
http://www.bloomberg.com/news/2011-08-16/norway-sees-longer-oil-era-as-north-sea-find-offers-hidden-giant.html
“The Aldous and Avaldsnes oil discoveries located on the Utsira High may hold 500 million to 1.2 billion barrels of recoverable oil, according to the Stavanger-based company. The company is scheduled to drill a well next week at the Aldous Major North prospect, which has a 50 percent chance of striking oil and may add as much as 300 million barrels of recoverable oil, Dodson said. ”
Puny. The world consumes 33 BILLION BARRELS PER YEAR. That represents a mere 13 days of world consumption. It will last the Norwgians only 2 years. If that is a “giant” field we are indeed in trouble.