USGS estimate of oil supply

From: Glenn Morton (
Date: Thu Sep 27 2001 - 00:48:48 EDT

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    As I am no longer subscribed to the list, Joel Cannon asked me to respond to
    this (I think this is it).

    Kenneth Pier wrote:
    The Sept 17 US News and World Report has an article (p.82 or on the scarcity (or
    non-scarcity) of oil - a topic that Glenn Morton has brought to our
    This article refers to a book that is soon to be published by Princeton U
    (" Hubbert's Peak-The Impending World Oil Shortage" by Princeton geologist
    Kenneth Duffeyes) that suggests that world oil production will peak this
    and then begin to decline with disastrous economic consequences. This
    is based largely on the work of Hubbert. Glenn has referred to this
    in his messages.
    But now the same US News article mentions that the US Geological Survey has
    much rosier outlook. Just last year the USGS doubled its estimate of
    world oil from 1.1 trillion barrels ( the world currently uses about 28
    barrels/day) to 2.3 trillion barrels. This is an estimate they call
    "conservative". The USGS numbers are roughly arrived at as follows: 0.9
    barrels of "proven" reserves; 0.7 trillion barrels of new oil discoveries
    (mostly in the middle east but also along in the Atlantic coastal areas of
    Africa and South America); 0.7 trillion barrels of additional recovery from
    established oil fields due to improved technologies of extraction. According
    USGS prediction world oil production can continue to increase for another
    years reaching a maximum of about 50 billion barrels/year and then declining
    rapidly to less than 20 billion barrels/year by 2050. This would give the
    approximately 40 "oil aplenty" years to find alternative energy sources, vs
    less than 10 years predicted by Hubbert's curve. I am interested if anyone,
    especially Glenn, has a response to these very different scenarios.


    I looked up the USGS estimate which can be found at

    First off, I hope the USGS is correct. Secondly, almost no one in the
    industry believes they are. Their prediction is the most optimistic
    prediction of all! The entire game with the Hubbert curve depends upon what
    the estimated ultimate recovery is. When half of the oil is produced, the
    Hubbert production curve reaches its maximum and then begins to decline.
    So those who believe that there is more oil have a later Hubbert curve peak
    than those who believe that there is less. Colin Campbell, a well known
    researcher in this area is the most pesimistic. He believed that the world
    only had 350 billion barrels of future production. He published in 1998 that
    we would peak production in 2000---he was wrong. Robertson's research
    believes that there is 864 billion more barrels of recoverable oil which
    would place the peak of oil production around 2008. Masters et al in 1994
    said that there was around 1550 billion barrels of future recovery and in
    2000 the USGS said that there was only 1600 billion more barrels

    One can look at what is already produced (about 900 billion barrels), what
    our production rate is today adding say 2% growth per annum, and how much
    undiscovered oil is believed to be out there for each model and calculate
    when the peak in production will be by when 1/2 of the production is
    recovered. For Robertson it calculates out to be 2008.

    The first thing I see wrong with the USGS estimate is that they create a
    widow's peak production curve. (see p. 82 of the US News and World Report).
    No resource has ever produced that type of curve. I know of no mature oil
    producin basin in the world that has that type of production curve. They are
    always somewhat Gaussian in shape--not the skewed asymmetric form the USGS

    The second poor assumption is that the same reserve growth seen in the US
    will apply elsewhere. With the exception of the former Soviet Union and
    China, this would be a silly thing to believe. Most of the Western World's
    oil fields in Africa, South America, SE Asia, etc, are found and managed
    using the latest technologies. To expect the same kind of reserve growth
    where these technologies have already been applied is an odd assumption.

    The article mentions horizontal wells. It says, "The USGS looked at the US
    experience, where technologies such as horzontal drilling and digital
    seismic imaging retrieve 50 percent or more of a field's oil. In the rest of
    the world the average is about 30 percent. Exporting U.S. technology and
    know-how should raise the yields in other countries by about 700 billion
    barrels, says Thomas Ahlbrandt, the head of the USGS study."

    I find it incredible that someone could say this today. Three dimensional
    digital seismic is the standard practice throughout the world. My company
    like others has acquired 3D data in all areas around the world in which we
    operate. Horizontal wells are used throughout the world today. In the UK we
    are already doing that having drilled wells with reaches of 11000 or more

    As to the recovery factor, the 50% in the US and 30% elsewhere, one can't
    always blindly apply to the world what the US has found. In the Gulf Coast
    basin, which is the major producing region for the US today, we generally
    have a crude that flows easily. This is not the case with much of the
    tertiary oils in the UK. They are what we call low gravity and thus they
    don't flow very well. Recovery factors will be lower in this basin NOT
    because of a lack of technical expertise on the part of the Scots but
    because of the laws of physics.

    One other fact which needs to be taken into account. One cannot, simply
    cannot, produce oil that has not been discovered. This means that the volume
    of oil that has been discovered and that which will be discovered will have
    to equal that which will ultimately be produced. In order for the USGS
    estimate to be correct, it means that only 2/3 of all the world's oil has
    been discovered to date. The world has produced nearly a trillion barrels
    and it has a trillion barrels of reserves. (see )

    The USGS says that there is another trillion barrels out there to be found.
    Let's look at discovery rates and how long it will take to 'discover' those
    missing barrels. Here is the discovery rate data
    1955-1960 41 billion barrels per year
    1960-1965 42 billion barrels per year
    1965-1970 38 billion barrels per year
    1970-1975 30 billion barrels per year
    1975-1980 32 billion barrels per year
    1980-1985 19 billion barrels per year
    1985-1990 18 billion barrels per year
    1990-1995 8 billion barrels per year
    1995-2000 6 billion barrels per year (not all the data is in)

    So, the USGS says that we have another trillion barrels to find. Great.
    1000/6= 166 years to find that oil. Given that we pump out of the ground
    today 28 billion barrels per year one can clearly see that the discovery
    rate is no where near enough to maintain that rate of production. Like water
    entering a bowl at 6 liters per minute and leaving at 28 liters per minute,
    one can clearly see that eventually the rate of water leaving the bowl must
    decline to match the inflow (unless a miracle occurs and water which didn't
    enter the bowl is conjured up in the bowl!) Or like a checking account in
    which one writes checks at a faster rate than one makes deposits eventually
    the checking account will be overdrawn. Even if the USGS is correct, the
    rate of oil production CANNOT do what they say it will do in their estimate.
    They have the production continue to increase until 2037 where it will peak
    out at 53 billion barrels per year or approximately 140 million per day.
    Most of us in the oil industry don't believe that we will ever be able to
    produce 100 million barrels per day (today it is around 78 million per day).

    Just today I went to some horse races with some Shell Oil employees. The
    subject of oil decline came up and I learned that in 5 years, Shell will be
    producing only half of the oil that they produce today out of the North Sea.
    The North Sea is down 25% in production in just the past 2 years. Australia
    will decline by 33% in the next 3 years. (see T. G. Powell, "Understanding
    Australia's Petroleum Resources, Future Production Trends and the Role of
    the Frontiers," First Break 19(2001):7:397-409)

    This was published in First Break last month:

    Top 15 non-OPEC producers in 2000 liquid reserves replacement from new field
    discoveries 1991-2000
                          replacement %
                              1996-2000 1991-2000
    1. Russia 18 14
    2. Mexico 15 22
    3. Norway 37 45
    4. China 49 57
    5. UK 17 26
    6. Brazil 202 164
    7. Oman 39 42
    8. Egypt 37 34
    9. Kazakhstan 623 350
    10.Argentina 35 36
    11.Angola 19 46
    12. Malaysia 19 46
    13. India 8 20
    14. Colombia 30 121
    15. Australia 107 80

    Top 15 66 54
    World excl. US Canada 37 42
    OPEC 35 47
    Non OPEC 41 36

    "Exploration Successes fail to meet World's Appetite for Oil, but Gas is a
    Different Story, Says Petroleum Trends Report," First Break 19(2001):8:447

    Given the current discovery rates, I wish the USGS would explain how in the
    world we are going to produce more oil than we find. It seems that they
    believe in miracles.

    I would end this note with a quote from a great oil finder, Michael

            “Halbouty concluded with the sobering thought that for every four barrels
    that the world consumed in the last decade, the industry found only one new
    barrel of oil.
            “Twenty years ago there were 15 oil fields capable of producing one million
    barrels of oil per day, he said, but today there are only four:
    Guwar (Saudi Arabia)
    Kirkuk (Iraq)
    Canterall (Mexico)
            “’It really starts blowing your mind when confronted with information
    revealing that 90 percent of the current production comes from fields found
    more than 20 years ago,’ he said.” Vern Stefanic, “77 Giant Fields Found
    Over Last Decade,” AAPG Explorer, August 2001, p. 30

    Like I said, I hope the USGS is right. I don't think they are.

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