I occasionally read commentaries which imply that there is no concern about global oil supply because the world has huge global oil reserves. We know that because huge, and growing, reserves figures are published in World Oil and Oil and Gas Journal, which then make their way into the mainstream media.

While those figures are published in respected oil industry journals, the figures are essentially worthless. No outside agency audits oil reserves for individual countries. Since there is no outside auditing, governments of many countries exaggerate their reserves figures. Also, multiple countries don’t update reserves figures for extended periods of time by subtracting off what they produce.

There is no one definition used for oil reserves so different countries use whatever definition suits their purposes. That leads to a confusing mishmash of data that has no coherent meaning.

A better way to assess what is going on in terms of global oil supply is to observe the decline curves of countries in which production is declining as well as the cumulative production and estimated ultimate recovery values for countries that haven’t yet gone into decline. There are many countries in which oil production (crude oil + condensate) is in long-term decline and that list is growing. Table 1 is a partial list of countries that have gone into long-term decline:

Since Indonesia is a member of OPEC, production was throttled back for many years prior to 1996. Indonesia’s highest production level was achieved in the early 1980s.

There are several interesting aspects of the Table 1 data. First, in spite of the introuction of substantial oil production from northern Alaska and the deepwater GOM since 1971, U.S. oil production has decline significantly since peak production. Alaskan oil production has declined significantly since its peak in 1988, from 2.02 mb/d to ~0.79 mb/d thus far in 2007. Alaska’s production decline has occurred in spite of numerous field additions and the addition of significant exploration/production areas in the National Petroleum Reserve-Alaska (NPR-A). When the Prudhoe Bay field started declining in the late 1980s, Alaskan production declined because the Prudhoe Bay field represents such a high percentage of Alaska’s total production.

Many people like to think that if only the Arctic National Wildlife Refuge (ANWR) and all offshore areas were opened to exploration/development, the decline of U.S. oil production would be reversed, but there isn’t enough oil in those areas to reverse the declining trend.

Another interesting aspect of the Table 1 data is associated with Mexico. As of 2006, Mexico’s oil production had only declined 120,000 b/d relative to 2004 but production from the Cantarell complex, which was producing about two-thirds of Mexico’s oil as of 2004, is starting to decline more rapidly. Mexico’s production for January/February 2007 was down ~0.24 mb/d compared to the 2004 average indicating an acceleration of Mexico’s decline. There is evidence to suggest that Cantarell’s production could decline ~1.7 mb/d between 2004 and 2015. Mexico will not be able to replace the lost production from Cantarell.

In the next 5 years it is likely that Russia, China and Brazil will peak and go into decline. That is significant because Russia, China and Brazil are among the few non-OPEC countries that had +300,000 b/d production increases over the last 5 years. For the period 2001-2004, the summed average annual production increase for the 3 countries was 694,000 b/d. The summed average annual production increase for the 3 countries dropped to 365,000 b/d for 2005-2006, or about half that of the 2001-2004 period. That suggests it is becoming increasingly difficult to increase production in those 3 countries. For the period 2003-2006, Russia’s oil production increase was greater than the non-OPEC production increase, meaning non-OPEC production excluding Russia actually declined during the period.

In recent years, the International Energy Agency has regularly forecast large non-OPEC production increases for the following year but actual production increases have been a small fraction of what they predicted. What they apparently fail to consider properly is the decline of an ever growing number of oil fields. It probably requires up to 3 mb/d of new production globally each year just to replace lost production from declining oil fields.

Much is made of non-conventional sources of oil, such as the Athabasca oil sands. Over the last 8 years, the oil production increase from the Athabasca oil sands was ~500,000 b/d. That’s not bad until you realize that North Sea oil production alone declined ~1,600,000 b/d over that same period of time.

There are also oil production problems within OPEC. The two largest fields in the world, in terms of oil volume–Ghawar (Saudi Arabia) and Burgan (Kuwait)–have significant problems such that it’s unlikely production from those fields can be increased in the future. Many of Saudi Arabia’s other large fields are also old and suffer problems like Ghawar.

Ultimately it’s necessary to discover new oil to replace that which has been extracted. The global discovery rate for conventional oil has been poor in recent years. For the January-June period of 2006, only ~3.6 Gb of oil was discovered . That follows the discovery of ~5 Gb in 2005 and ~7 Gb in 2004. Since global oil consumption is presently ~27 Gb a year, we’re using a lot more oil than we’re finding.

The U.S. media avoids the concept of peak oil production because of the economic implications. Whether the media are willing to admit it or not, there is considerable evidence to suggest that global oil production will reach a maximum in the next 5 years, due to geologic constraints, if it hasn’t already.

Roger Blanchard is Assistant Professor of Chemistry at Lake Superior State University, Sault Ste. Marie, Michigan. Blanchard is the author of The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region published by McFarland & Company (2005).

(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)

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