Discoveries

Surprisingly enough, despite the differences in how reserves are worked out, there is some consensus on how much oil remains and that is between 1000 and 1100 Gb. The key question, the point where the optimists and pessimists differ, is how much there is left to discover.

Chart R3 shows that oil discoveries have been falling consistently since the 1960s. In Chart D1, ASPO’s figures show that discovery is expected to continue to decline into the future (probably with a few bumps as before). This is the data that the optimists would dispute.

D1. Discovery (3 year average - past and projected) **

BP’s statistics do not make any predictions for discovery but some people have made estimates. One of the ASPO members, Colin Campbell, estimates undiscovered oil at 130 GB (less than five years of oil at present consumption rates). But that oil will not all be discovered at once. As Chart D1 shows, it is expected to decline from 6 GB/year to zero over the next fifty years.

One example of the optimist (oil industry) view is Wolfgang Schollnberger’s presentation to the IP Week conference in February 2002. He estimates a further 500 GB to be found with 280 GB to be found by improved recovery. To put this staggering 780 GB figure in proportion, the proved reserves of the whole Middle East in the BP Review was 100 GB smaller!

But even if this figure were accurate, it would not be as cheerful as you might think. As mentioned, oil is not all discovered at once. If we spread it over fifty years, that equates to 15.5 GB a year. Remembering that consumption is 27 GB/year and growing, even this massive (and unlikely) addition would not stop the decline, just slow it a little. It takes around five years to progress a major offshore field from discovery to production; an onshore field about three. So even if we discover massive new sources of oil in the future, we would be depleting the existing reserves for years before we could put it into production. There simply isn’t enough time to wait.

Salutary fact: Saudi Arabia has the world’s largest proved reserves, 262.7 GB according to the BP Review (about twice as big as the next largest country, Iraq). If we found another source as large as the whole of Saudi Arabia, its oil would lengthen the P/R ratio by less than ten years!

The Example of the USA

For those who feel that science will provide the answer with new discoveries or improved methods of extraction, it may be wise to look at the USA (mainland) as an example. They have been searching for and extracting oil for longer than anyone, since 1859, and have had more financial and technological muscle than anyone. If anyone could turn around oil declines, it would be that country. Yet, look at the following chart of US oil production. Oil peaked in 1971 and has fallen with barely a pause since then. Thirty years of money and research has neither slowed nor reversed the decline. Why then should the world fare any better?

D2. Production (USA lower-48)

The Importance of the Discovery Curve

One of the most important weapons for attempting to work out when peak production occurs is the discovery curve, the chart of accumulated oil discoveries. Common sense tells you that you cannot produce oil until it is discovered – when discoveries fall, so too (eventually) must production.

While production can vary depending on external matters such as wars, recessions and OPEC internal politics, discovery tends to be more regular. Actual discoveries are quite irregular as in chart D1 but if you construct a chart of cumulative discovery (D4), the curve is much smoother and clearer. When discoveries are increasing, the curve will be concave – when they are falling, the curve will be convex. The point where the curve changes (the point of inflection) is the equivalent of peak production.

The discovery curve mirrors approximately the production curve with a lag that varies from country to country. The US-48, for example, had a lag of 41 years whilst the UK North Sea production, with its urgency and technological basis had a lag of 25 years. The World's lag is estimated to be 36 years.

So far World production has been on the upslope, the concave curve. Comparison with the discovery curve suggests the production curve might be at the point of inflection.

Other Sources of Energy

It seems unlikely then that there will be any major new discoveries to prevent the decline of oil, but you may have heard of other kinds of oil, such as heavy oil and tar sands. And what of gas and coal? I have tried to stick to conventional oil so far to keep a complicated subject as simple as possible. But I look at other sources of energy on another page (Alternate Energy Sources).