# Presentation: 506538

## RESOURCE DEPLETION:Modeling and forecasting oil production

**RESOURCE DEPLETION:****Modeling and forecasting oil production**

**for OAK RIDGE NATIONAL LABORATORY (April 2006)**
**Dr Michael R. Smith, Chief Executive, Energyfiles**

**Notes:**
Focusing here on upstream supply issues

## Discussion points

- Why all the uncertainty?
- A hypothetical model
- Compare real cases
- Why all the uncertainty revisited?
- Our true global condition

## Why all the uncertainty (1)

- When geologists say they are “optimistic”, the truth is that “realism” will give a different result
- Industry may under report for regulatory reasons
- Industry may over report to maximise value
- Governments over report for promotional reasons
- Both governments and industry do not update
- Conflicting public data sources
- Oil & Gas Journal, World Oil, BP, Oil industry databases, USGS, Energyfiles etc. give different numbers so individuals pick the one that suits their argument

**Bias**

## Why all the uncertainty (2)

- There are no standard definitions
- Treatment of unconventional sources varies – do you include or exclude oil with different economics? (oil sands, NGLs etc.)
- Estimates are technically uncertain
- what’s proven, probable or possible?
- Misunderstanding the time element:
- Reserves divided by production (R/P ratio) is thought to be years of supply remaining; a meaningless number in practical terms
- Production peak is not dependent on reserves
- You only truly know what reserves a field holds after it has been abandoned but you know its peak well before

**Ambiguity**

## A hypothetical model

- A sedimentary basin anywhere in the world
- First fields discovered are large and relatively easy to find
- They come onstream within 3 or 4 years of discovery
- All fields have a production profile set by the:
- reservoir characteristics (poroperm, etc.)
- fluid type (oil, gas, viscosity, etc.)
- pressure, temperature
- environment of production (on or offshore, market, etc.)
- and investment level and timing
- Output for each field rises to a plateau within 2 or 3 years, stays at plateau for two or three years then declines at 5% to 15% depending on above
- As time passes discovered fields generally get progressively smaller

## Slide 6

## Slide 7

## Slide 8

## Slide 9

## Slide 10

## Last fields do not affect peak; they slow decline

- After peak technology (e.g. EOR) can also only slow decline

## Slide 12

## Production peak lags discovery volume peak by around 25 years

- Discovery peak is a signal

## Flattening cumulative discovery curve can be extrapolated to define total reserves

## Slide 15

## Slide 16

## Slide 17

## Piper Alpha disaster

## Slide 19

## Slide 20

## Slide 21

## Slide 22

## How many countries past peak?

- Poland
-  Austria
-  Germany
-  Bulgaria
-  USA
-  Bahrain
-  Israel/Palestine
-  Romania
-  Iran
-  Trinidad & Tobago

-  Myanmar
-  Ghana
-  Tunisia
-  Chile
-  Croatia
-  Bosnia
-  Serbia
-  Morocco
-  Peru
-  Albania

- Spain
-  Cameroon
-  Greece
-  Hungary
-  Benin
-  Netherlands
-  Taiwan
-  Congo Kinshasa
-  Jordan
-  Belarus

- UK
-  Oman
-  South Africa
-  Denmark
-  Norway
-  Bangladesh
-  China
-  Yemen
-  Australia
-  Guatemala
-  Surinam
-  Mexico

- Georgia
-  Russia
-  Tajikistan
-  Ukraine
-  France
-  Senegal
-  Turkey
-  Japan
-  Egypt
-  Papua New Guinea
- Kyrgyzstan

- Syria
-  Czech Republic
-  Slovakia
-  Gabon
-  India
-  Italy
-  New Zealand
-  Argentina
-  Barbados
- Uzbekistan
- Colombia

## Past-peak modelling

- To evaluate all countries past peak:
- Analyse sedimentary basins (plays) individually
- Review any special circumstances in the history of production
- If possible look at every field production profile
- Define individual and group decline rates
- Assess yet-to produce and yet-to-find including through EOR
- Compare the results with other areas
- Do they make sense!

## Pre-peak modelling

- There are 64 countries currently past peak but there are 35 countries pre-peak:
- Discoveries are a signal. They peak around 25 years prior to production peak
- Individual fields already past peak indicate decline rates
- Plateau/peak followed by permanent decline is inevitable
- Cumulative plots give idea of yet-to-find and yet-to-produce
- Must review special histories

## Slide 26

## Why all the uncertainty? (3)

- Around 35 countries are yet to reach peak
- Offshore areas and those developed with newer technologies peak faster (especially deep water)
- Areas with production restrictions peak later due to:
- Conservation of resources (mostly OPEC countries)
- Unable to export (e.g. Iraq)
- Price support/conservation (US pre-1970, OPEC 1984-2003)
- Lack of investment (e.g. FSU in the 1990s)
- High prices hit demand which increases spare production capacity (lowering prices and reducing investment)
- Bias and ambiguity
- Wishful thinking amongst the protagonists

## Why all the uncertainty? (4)

- Nevertheless all production peaks are broadly predictable provided you have some knowledge of:
- Detailed field production and discovery histories
- Discovery peak
- Current depletion rate
- Exploration and development histories
- Political and fiscal histories
- Must look at individual field profiles
- ...and assess *yet-to-produce* and *yet-to-find* based on geological **and** engineering principles in specific areas

## Slide 29

## Global oil peak estimate

| Demand growth 
(constant to peak year) | Pre-gap year 
(last year in which supply can match demand)  | Supply shortfall in 2020 
(mm bbls per day) |
| --- | --- | --- |
| Flat | 2018 | 3.7 |
| 1% | 2014 | 17.1 |
| 2% | 2010 | 32.5 |
| 3% | 2006 | 50.2 |

## Slide 31

## CONCLUDE:

- Companies and governments must take more energy risks:
*With capital intensive projects, alternative energy sources, new modes of transport*
*...**and with taxes *

## CONCLUDE:

- Companies and governments must form mergers, alliances or partnerships:
*Connecting those who have expertise, with those who have resources, with those who have capital*
*...**or global conflict will escalate further*

## CONCLUDE:

- Energy efficiency is not enough as demand grows faster than savings are made
*Conservation is a necessity*
*...**but it will be painful*

## FORECASTS OIL & GAS PRODUCTION, CONSUMPTION AND ACTIVITY USING GEOSCIENTIFIC AND ECONOMIC METHODS

**Energyfiles Ltd**
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- Email: 	_**admin@energyfiles.com**_
- Web: 	_**www.energyfiles.com**_

**Notes:**
Focusing here on upstream supply issues

## DISCLAIMER: Whilst the information and interpretation presented here are believed to be correct, no representation or warranty, express or implied, is made as to the completeness, accuracy or fairness of any information contained in this presentation and no responsibility is accepted in relation to such information, whether fact or whether opinion or conclusion that may be drawn. 

- DISCLAIMER: Whilst the information and interpretation presented here are believed to be correct, no representation or warranty, express or implied, is made as to the completeness, accuracy or fairness of any information contained in this presentation and no responsibility is accepted in relation to such information, whether fact or whether opinion or conclusion that may be drawn.
- Any decisions based on information contained in this presentation are the responsibility of the reader.