July ASPO Newsletter  

This month's ASPO newsletter is out. The depletion model hasn't been updated, but Colin Campbell does make the following point about an update to add a category for "Enhanced Oil Recovery" that he thinks will have a negligible impact on the overall depletion curve.

The estimates of Ultimate Recovery, used in the ASPO model, are based on realistic assumptions about the percentage of oil being recovered from the reservoir during the greater part of a field’s life, as might be determined by competent reservoir engineers. This percentage is primarily influenced by the gravity of the oil, with heavy oils yielding less than light oils, but there are also many other detailed reservoir conditions that have an effect. This recovery factor will influence the level of production over much of the life of the field, including its peak.

Waterflood and gas injection have become more or less standard procedures, commonly being implemented early in the life of the field when they have the greatest impact. The proceeds may therefore be treated with Regular Conventional Oil. But in addition, we may assume that every effort will be made to extend the life of a field after it has gone into decline, especially onshore where the project is not constrained by the costs of maintaining costly platforms. Additional infill wells may be drilled, and other more sophisticated methods of stimulation, such as CO2 injection, may be applied, which will add tail-end production to the Ultimate Recovery.

It might make sense therefore to add a category for Enhanced Oil Recovery to the Production Forecast, as given at the front of the Newsletter, to cover these tail end additions, being somewhat similar in behaviour to the projected gradual increase of Heavy Oil production. More study is needed to divine what sort of percentage would be appropriate in the various countries. It is not a critical issue, having a negligible impact on Peak Production, but deserves further consideration.

There is also a discussion about the likelihood of countries nationalising their energy reserves in future and keeping them for their own use.

As oil depletion bites in the years ahead, countries will likely wake up to the idea of preserving their resources for their own future needs rather than virtually giving them away. The Bolivian Government currently faces popular unrest as the people call for the nationalisation of that country’s substantial gas reserves. The foreign companies operating the Bolivian fields naturally prefer more profitable exports, as provided under their concession terms.

It is curious that Britain, which faces the exhaustion of its own oil within 20 years, is still willing to permit the export of what it has left at a small fraction of the cost of its growing imports. Its people may in due time follow the Bolivian lead as they appreciate the situation better.

The European Union has recently endeavoured to win support for a common constitution, but countries holding referenda found that the people themselves were far from convinced that they wanted to surrender more sovereignty. The national governments are evidently still victims of outdated economic principles, whereas the people at large have a better intuitive grasp of their own long term best interests. It is certainly an odd situation, but perhaps it is the vision of what follows Peak Oil that begins to bring these uncomfortable new mindsets to the fore.

“Put your Trust in the People” said Winston Churchill.

There is also a note about BP's Statistical Review of world energy - which reports world oil reserves of 1188.6 Gb vs the ASPO's estimate of 777 Gb. A point is made about the anomalous upward estimation of reserves estimates by Iran, Kuwait, Iraq, Aub Dhabi and Saudi Arabia. I've discussed the Iraq estimate at some length before, so I have some sympathy for the idea that BP may at least be partially be right - significant additional reserves in the middle east is entirely possible if you consider the history of oil discoveries in the region (and I can't tell if the ASPO has ever considered this idea or not). Does this make a huge difference to the peak ? Not really - it probably just delays it for a few more years (and, given the problems in Iraqi oil production, it may not delay the peak at all, just flatten out the back end of the curve somewhat).

BP has published the 2005 Edition of its Statistical Review of World Energy. It reports World oil reserves at 1188.6 Gb. A footnote states that the information is compiled from a combination of official sources and does not represent BP’s own knowledge. It is noteworthy that the estimates for 36 of the 48 listed countries are unchanged. Production eats into reserves, so it is implausible that new discovery or upward revision should exactly match the 20 Gb produced in these countries last year. The report does note however that the estimate for Canada includes Non-Conventional oil.

BP itself must have an intimate knowledge of the real reserves of Kuwait, Iran, Iraq and Abu Dhabi having been intimately involved in the discovery of most of the major fields in the region. If it were to reveal its knowledge, we might be able decipher the anomalous increases reported by these countries in the 1980s. Kuwait increased its reported reserves from 64 to 90 Gb in 1985 and again to 93 Gb in 1988, although nothing particular had changed in the oilfields. Abu Dhabi and Iran then matched this number (up respectively from 31 and 49 Gb), while Iraq, not to be outdone, claimed a rounded 100 Gb (up from 47 Gb).

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