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Peak oil overview - March 2008

Excerpt from the original posting at The Oil Drum.

Slide 15 from presentation:

OPEC’s true reserves are unknown

• Published reserves are unaudited

• Last Saudi reserve while US involved was 110 Gb in 1979 (perhaps 168 at “expected”)
---Production to date 81 Gb, implying 29 to 87 Gb remaining; Saudi claims 264 Gb remaining

• Kuwait published 96.5 Gb - Audit 24Gb

• GW Bush says regarding asking Saudi Arabia for more oil
---“It is hard to ask them to do something they may not be able to do.”

Comment: If one analyzes the reserves for OPEC countries, one very quickly comes to the conclusion that the published numbers are unreasonably high.

This is the story: In the early 1980s, OPEC oil countries were all vying for high quotas. To get those high quotas, they believed that publishing high reserves would be helpful. One by one, OPEC oil countries raised their reserve estimates, in an attempt to make it look like they had more oil, so deserved higher quotas. To further this illusion, they kept the reserve numbers at the new high level, even when oil had been pumped out, and no new oil had been found.

The practice has continued for years. OPEC leaders found that by overstating their reserves, they gained new respect, both within their own countries and abroad. They also found that the practice was very easy to do, since no one is auditing the reserve numbers they provide.

A graph of OPEC oil reserves over time is as follows:

There are many other ways this problem can be seen. For example, OPEC's oil production is unreasonably low in relationship to its reserves, unless the countries are inept at production or are misstating their reserve amounts. I discuss this issue further in my post The Disconnect Between Oil Reserves and Production. "Ace" has calculated some much lower reserve estimates, based on industry estimated recovery percentages.

Another insight can be gained by looking at Saudi oil reserves, when Americans were involved in setting reserves. According to Matt Simmons' "Twilight in the Desert", Saudi oil reserves were 110 Gigabarrels (Gb or billion barrels in US terminology) in 1979, back when Americans were still partial owners of Aramco. If we subtract the 81 Gb pumped out since then, this suggests remaining reserves of 29 Gb.

If is possible (even likely) that the 1979 American estimate was low. If, instead, we use the Saudi published estimate of 168 Gb in 1980, and subtract from it production of 81 Gb to date, we get an estimate of 87 Gb. This is less than a third of the 264.3 Gb that Saudi Arabia is currently reporting as reserves!

Kuwait is another country where we have an alternate estimate of the proven reserves available. An analysis by the Kuwait Oil Company as of December 31, 2001, showed proven reserves for the country of 24 Gb. Their published reserves were 96.5 as of December 31, 2001, moving up to 101.5 as of December 31, 2006!

President George W. Bush seems to be aware of Saudi Arabia's production/reserve problems. In an interview on ABC's Nightline, when asked why he didn't pressure the king for more oil, George Bush said

If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do.

Somehow, US textbooks and newspapers have not figured out the problem with OPEC reserves. They continue to quote huge "proven reserves" for most of the OPEC countries. The word proven adds credibility to the numbers, suggesting that somehow, the reserves have been proven to some authority, when nothing could be further from the truth.

The United States Geological Service (USGS) has added further to the confusion. It has taken the absurd reserves published by OPEC, and made calculations based on US development patterns suggesting that OPEC reserves may, in fact, be low. USGS publishes its even higher estimates, confusing the situation further.

Editorial Notes: Contributor Gail Tverberg writes: This presentation is aimed at a fairly introductory level, but with new data through December 2007. PDF and PowerPoint formats are provided, so that readers can use this to talk to their friends about peak oil, either on a one on one basis (with a PDF printout) or to a group with a PowerPoint.

What do you think? Leave a comment below.

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