The little sheikdom that could
Jack Benny died on on December 26, 1974, in Beverly Hills, Calif. According to [one] of his famous jokes1, he had been 39 years old for some 40 years.
Middle East proved oil reserves numbers are suspect. Each country's estimates made questionable leaps in the past, and then remained constant, all the while disregarding all the oil produced over the years. Qatar provides the most recent example. Examining this small sheikdom's reserve numbers underscores some of the problems in assessing the world's proved oil stocks. Qatar could take a step toward resolving this uncertainty by allowing an independent audit of their reserves numbers. They seem to have little to hide.
Qatar's stated proved oil reserves2 are 15.207 billion barrels. Preliminary to assessing this number, it is necessary to talk about what the term "oil" means. Crude oil refers to liquid petroleum, which is a hydrocarbon-rich mixture of organic chemicals. Natural gas liquids, which include propane, butane, pentanes and other heavy hydrocarbons, can be added in. These are "components of natural gas that are liquid at surface in field facilities or in gas-processing plants. Natural gas liquids can be classified according to their vapor pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapor pressure." Some definitions of oil include only condensate produced in field separators along with petroleum, while others count all gas liquids (NGL) obtained during natural gas processing. The IEA and other data gathering organizations may add in other liquids, including synthetics made from coal or gas-to-liquids and biofuels.
The graphic (left, click to enlarge) shows the history of Qatar's stated proved oil reserves estimates since 1980 according to British Petroleum's (BP) oil production data. The 2006 number is from another source, but you will see soon enough that it doesn't matter. Qatar's proved oil reserves fluctuated in the range 3 to 4.5 billion barrels until the year 2000, when they jumped suddenly from 3.7 to 13.2 billion barrels. A further boost to 15.2 followed in the year 2001. They have remained constant at that level ever since, like comedian Jack Benny's age.
What does "oil" mean in determining Qatar's reserves numbers? BP's statistics measure the sum of crude oil, condensate, and natural gas liquids. The Oil & Gas Journal also lists 15.2 billion barrels of oil, which they define as crude oil and condensate only. OPEC also states Qatar's reserves as 15.2 billion barrels of crude oil only (see p. 136). Only one of these answers can be correct. H.E. Abdullah Bin Hamad Al-Attiyah, Qatar's Minister of Energy, explains part of the mystery —
One of the major benefits of my job as Minister of Energy is telling people what a great place Qatar is for investors. As you may know, Qatar has been blessed with huge hydrocarbon resources. We have about 4.5 billion barrels of crude oil reserves and about 900 trillion cubic feet of natural gas reserves in the North Field, the largest non-associated gas field in the world. As we develop the North Field gas reserves, we will produce at least 10 billion barrels of condensates. This means that our condensate reserves from the North Field are more than double our crude oil reserves.
It appears that Oil & Gas Journal wins the prize, but it is not clear whether Al-Attiyah used the word "condensates" in its narrow sense, or meant all natural gas liquids. Reconstructing events, it appears that Qatar made the decision in 2000 to include gas liquids that will be produced from the wet non-associated gas in it's huge North Field (shown in graphic top). Not satisfied with that estimate (13.2), Qatar added another 2 billion barrels the following year. 15.207 billion barrels — using five significant digits, no less! — became the official story. All the estimates seem to come from Qatar itself, and all the reporting organizations, including BP and OPEC, copy the sheikdom's number each year without performing any independent audit. If a review were requested, Qatar (or OPEC) would not allow it.
The official number has not changed in six years. As noted last week —
Country reserves estimates published by Oil & Gas Journal in December, 2005, 67 estimates were unchanged from previous year, 39 estimates were unchanged for 5 years, 27 estimates were unchanged for 10 years, and 17 estimates were unchanged for 15 years.
Qatar was one of 39 countries whose estimates stayed the same for five years. During the period end-2000 through 2006, Qatar produced 1.67 billion barrels of crude oil and condensates, according to the EIA data. If the official number were a precise measure of reserves, that would leave 13.53 billion barrels yet to be produced. As with production declines, however, Middle East countries are loathe to subtract. And Minister Al-Attiyah did say that Qatar had "at least 10 billion barrels of condensates." It is an incredible coincidence that Qatar's reserves additions from crude oil and condensates have precisely matched its yearly production of those liquids.
In 2003, Al-Attiyah stated that Qatar's oil reserves, outside of gas liquids from North Field, were about 4.5 billion barrels (quote above), but raised the number to 5 billion in April, 2004. The minister's 2004 assessment may be a reasonable ballpark estimate. A more in-depth analysis shows that proved reserve gains may have offset or surpassed losses, even when produced oil is counted against the total.
The onshore Dukhan field, which started production in 1949, is operated by Qatar Petroleum (QP), and has been their mainstay producer for all that time. According to the EIA, production will increase there from 335 thousand barrels per day (b/d) to 350 thousand. This is remarkable, in light of the field's age. Qatar stated Dukhan's reserves as 2.156 billion barrels in January, 1999. At the maximum rate of 335 thousand b/d, Dukhan has produced 0.978 billion barrels since the beginning of 1999, leaving 1.178 billion barrels. Qatar still lists reserves of 2.2 billion barrels at Dukhan, but this is most likely another unchanging reserves number. Could it be a case of reserves growth? The point is that we don't know.
In 2004, Qatar put their offshore reserves at 1.842 billion barrels. This may be underestimate, because the Al-Shaheen field, operated by the Danish company Maersk, is expected to see a gradual increase in production from "240,000 barrels/day ( b/d ) in first quarter 2006 to a plateau level of 525,000 b/d from late 2009." Al-Shaheen must be a very large field, perhaps in excess of 3 billion barrels of proved recoverable oil, for it to support production at such a high level. Maersk has significantly upgraded Al-Shaheen's reserves, but to an unknown extent. Qatar also has seven other offshore fields producing oil, including Bul Hanine (100 thousand b/d capacity). A total of 400 million barrels had been produced at Al-Shaheen as of February, 2005. Assuming production of 200 thousand b/d since then, Al-Shaheen has already produced approximately 0.54 billion barrels since production started in 1994.
Qatar is a success story so far. Their production of crude oil and highly valued condensate is slated to increase, despite their misleading reserves calculations. Qatar did not make a suspicious boost in their proved reserves in the 1980's/early 90's as Iran, the UAE, Iraq, Kuwait and Saudi Arabia did. When Qatar did finally boost their proved reserves, where defined oil includes gas liquids, they had a good reason for doing so. Other Middle East OPEC countries (graphic, left) have no such excuse. None of these oil producers ever revise their reserves numbers from year to year to reflect produced oil. When their proved reserves numbers do change, they only increase.
Peak oil is a liquid fuels problem. Data transparency, both for produced oil and proved reserves, is a matter of the utmost importance to the world's economies. According to the Oil & Gas Journal (OGJ), the Middle East contains 56% of the world's proved reserves, but all estimates are unreliable. In Taking a Peek into Real Peak Oil Issues, Matt Simmons states that "those resisting data transparency have something to hide" (slide 12). Qatar seems to have far less to hide than other countries, including Saudi Arabia, but has adopted the Kingdom's secretiveness by stating unchanging yearly reserve numbers that do not reflect discoveries or produced oil. Let's call on Qatar's honorable Energy Minister Abdullah Bin Hamad Al-Attiyah to allow Qatar to be the first Middle Eastern OPEC country to allow an independent audit of its proved reserves.
1 — Jack: Marilyn [Monroe], Marilyn, I know this is sudden, but will you marry me?
Marilyn: Marry? But look at the difference in our ages.
Jack: Well, there isn't much difference, Marilyn. You're 25 and I'm 39.
Marilyn: Yes, but what about 25 years from now, when I'm 50 and you're 39?
2 — Proved reserves are defined as the estimated quantities that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions.
Contact the author at dave_DOT_aspo_AT_gmail_DOT_com
ASPO-USA is a nonpartisan, proactive effort to encourage prudent energy management, constructive community transformation, and cooperative initiatives during an era of depleting petroleum resources.
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