Jargon

The oil industry is littered with jargon which is possibly why it is so difficult for the ordinary man and woman to understand it. Since the oil companies seem to want to keep quiet about peak oil (assumedly so as not to effect their share prices), they probably are happy to use such terms. On this page are some definitions which you will need.

General Definitions

Oil

You would think that a simple term like oil would be straightforward enough. Unfortunately not.
Crude oil (or petroleum) is one form of a substance known as hydrocarbons that form part of what we call ‘fossil fuels’. The other hydrocarbon is natural gas. Coal is not usually considered a hydrocarbon. Oil itself comes in different forms with consistencies from liquid to nearly solid.

Regular or Conventional Oil

Conventional oil is generally defined as oil which is produced by primary or secondary recovery methods. These methods are from its own pressure, physical lift, water flooding, and pressure from water or natural gas. Generally refers to free flowing oil so excludes tar sands, heavy oil, deepwater, polar and NGL. This accounts for about 95% of all oil production.

Unconventional Oils

• Bitumen: generally means hydrocarbons in a solid or semi-solid state. Principally the tar sands of Canada, defined by viscosity, from which synthetic oil is made.

• Coal and Gas Conversion: oil produced from the conversion of coal or gas to oil.

• Deepwater Oil: oil below 500m in depth of water. Defined differently from regular oil because of its significantly different geology, operating conditions and the state of knowledge regarding it.

• Extra Heavy Oil: oil less than 10ºAPI. Production is controlled by its extraction rate rather than the resource base. Mainly in Venezuela and Canada.

• Gas Condensates: hydrocarbon liquid dissolved in saturated natural gas that comes out of solution when the pressure drops below the dew point.

• Heavy Oil: oil less than 17.5ºAPI but greater than 10º API (“Extra Heavy Oil”). Production is controlled by its extraction rate rather than the resource base.

• NGL (Natural Gas Liquid): hydrocarbons that exist in fields as constituents of natural gas but which are recovered separately as liquids. Natural gas liquids include propane, butane, pentane, hexane and heptane, but not methane and ethane, since these hydrocarbons need refrigeration to be liquefied.

• Oil Shale: a petroleum source rock that has never been converted to oil. It can be converted to liquid oil by mining, crushing and heating.

• Polar Oil: defined differently from regular oil because of its significantly different geology, operating conditions and the state of knowledge regarding it.

• Tar Sands (Oil Sands): an oil field which has been exposed at the surface so that only a nearly solid tar is left. It can be converted to liquid oil by mining, heating and separation.

• API (Gravity): a measure of oil density. By definition, the API Gravity of fresh water is 10. Higher API Gravities correspond to lower-density (ie.'lighter') liquids.

Recovery

Primary Recovery

This is the first stage of oil or gas production when the natural pressure of gas or water inside the reservoir forces the hydrocarbons to the surface naturally. As the pressure drops, it is necessary to bring in pumps such as the 'nodding donkeys' to assist but this is still classed as primary production. Only about 10-20% of the source is produced in this stage and it ends when the production rates are too low to be economical or the amount of gas or water in the output is too high.

Secondary Recovery

Here an external fluid such as water or gas is injected into the reservoir to create an artificial pressure, enough to drive the hydrocarbons to the surface. 15-40% of the source can be produced by secondary recovery and it ends when too much of the injected fluid is being returned at the well head.

Tertiary Recovery

In the last stage, sophisticated techniques are used to increase pressure and improve fluid flow. These involve altering the original properties of the gas or oil. The three main methods are chemical flooding, CO2/hydrocarbon injection, and thermal recovery (steam-flooding or combustion). 5-15% may be recovered using tertiary production. Tertiary recovery is also known as "Enhanced Oil Recovery" (EOR).

The chart above shows the amount of oil each form of recovery is likely to extract from a reservoir. It shows that, even at the very (unlikely) best, 20% of the oil will remain in the ground. Usually you could not expect to get more than about 60% from a field.

Measurements

Even the measuring of oil is confusing. The most common unit is the barrel which is 42 US gallons (approximately 35 UK gallons or 159 liters). Because oil is used in such large amounts, it may consequently be measured in terms such as ‘million barrels’, ‘thousand million barrels’ and ‘gigabarrels’. Just to confuse things even further, it is also sometimes measured in tonnes (and ‘thousand tonnes’ and ‘million tonnes’, etc.) One tonne is the equivalent of 7.33 barrels.

A gigabarrel is a thousand million barrels. If this seems a rather extreme measurement, consider that daily consumption of oil is over 80 million barrels (BP) - that is about 150,000 liters a second! (Imagine around 1,000 average baths being filled in one second). A year’s consumption would be about 29 thousand million barrels. It is easier to talk about 29 gigabarrels and this will generally be the measurement I will use on this site.

Note: the 42 US gallon barrel is now an abstract measurement. The common oil drum usually holds 55 US gallons.

See also Units and Conversions below.

Wildcats

An oil well speculatively drilled in an area not known to be productive. Clearly an increasing number of wildcats indicates that oil is getting harder to find, especially if they come up dry.

Swing Producers

Generally, a swing producer is a country which extracts more oil than it consumes. In particular it refers to the five main oil producing countries of the Middle East – Saudi Arabia, Kuwait, Iran, Iraq and the UAE – whose massive oil reserves and low consumption make them the key producers in the peak oil saga.

OPEC

The Organisation of the Petroleum Exporting Countries. Its purpose, according to its website:

All eleven members are developing countries, whose economies rely on oil export revenues. One of OPEC’s primary missions is to achieve stable oil prices, which are fair and reasonable for oil producers and consumers.

At the present time, it consists of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela.

Optimists and Pessimists

The two sides of the peak oil debate. The optimists are those (primarily in the oil industry and governments) who believe that plentiful supplies of oil will last far into this century at least. The pessimists are mainly retired or independent oil geologists who believe that oil will peak and go into decline within a decade or two. (Guess on which side I stand.)

EROEI

"Energy Returned on Energy Invested". To produce energy, whether it is an oil well or a wind turbine, you need to use energy. EROEI is a way of comparing how 'efficient' an energy source is. For more details, see Alternate Energy

EPR

"Energy Profit Ratio". A different way to use the figures in EROEI (above). More details are also in Alternate Energy.

Referring to Oil Resources

Resource (Everything that’s still there)

All of the oil, both discovered and undiscovered, whether it can be recovered or not.

Recoverable Resource (What we can get out)

The part of the resource that is considered recoverable. This depends on
a) the oil price (if it costs more to recover the oil than to sell it, it is not worth recovering. A rise in oil price might make some deposits previously not worth recovering economically viable.)
b) technology (in the diagram, if our man acquires a ladder, the oil on the other side of the wall now becomes recoverable.)

Reserves (We know where it is and we can get it)

The recoverable resource that has been found but not yet used.

Yet-to-Find (We can get it but we haven’t found it yet)

The recoverable resource that is still to be found.

Cumulative Production (We've already got it out)

The resource that has already been recovered, either in store or used.

Ultimately Recoverable Reserves (AKA the ‘Ultimate’)

The original reserves, the same as the Recoverable Resource. So
Ultimate = Yet-to-Find + Reserves + Cumulative Production

Proved Reserves (How much we think is in the reserves)

Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions. (BP Definition)

In other words, not the total amount of oil that is in the ground but the amount that is considered worth extracting. As economic conditions change (the price of oil changes) and new technology comes in, the proved reserves can and often do change.

Proved, Probable, Possible (P10, P50, P90)

We can never be sure exactly how much oil is actually in the reserves but they can be estimated. Consequently the amount thought to be in the reserves is generally estimated as three figures:

• Proved or Proven (P or P90) The lowest figure, the amount that the geologists are 90% sure is there (sometimes 95% is used which would be P95).
• Probable or Proved+Probable (2P or P50) The average figure (median or mean), the figure that is expected to be closest to the true reserves.
• Possible or Proved+Probable+Possible (3P or P10) The highest figure, the amount that the geologists are 10% sure is there (sometimes 5% is used which would be P5).

For example, if geologists estimates that there is a 90% chance that a particular field contains 500 million barrels but only a 10% chance that it will yield 2,000 million more barrels, then the lower figure should be cited as the P90 estimate and the higher as the P10.
The best choice of estimate to use is P50. Since a 50% estimate is just as likely to be higher than lower, they would on average even out when added together. Using P90 only would leave too much oil to be found in the future so make estimates of oil depletion difficult. Using P10 would make your estimates over-optimistic, again confusing future trends.

Reserve Growth

Different countries use different P values (see above) for reporting. The USA SEC (Securities and Exchange Commission) insists on P10, the former Soviet Union used P90, while most countries use P50. The problem with using P10 is that, over time, the reserves figure will rise, giving the impression that more oil is being discovered. In fact, we are not finding any new oil, only adjusting the original estimates.

This 'reserve growth' is used by the optimists and economists to suggest that the amount of oil in the world is growing, creating charts of World reserves like the one on the left below (chart R2 on Reserves page). If you backdate this reserve growth (adjust the original value given at the time of discovery), you get a chart such as the one on the right (chart R6 on Reserves page) which gives a truer view of what World reserves are doing.

If you're still not sure about reserve growth and the importance of backdating, have a look at my Reserve Growth for Dummies page.

Reserves/Production (R/P) Ratio

If the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that level. (BP Definition)

This is a common ratio in the oil business. As we shall see, it is pretty useless except for comparing different fuel reserves (eg. how long coal would last compared to oil).

Creaming Curve

The creaming curve is the cumulative discoveries versus the cumulative number of new field wildcats (NFW). (Jean Laherrère).

Not as complicated as it sounds. Basically it’s a way of estimating the amount of oil reserves by examining how easy it is to find the oil. It generally gives the most accurate estimates. See Creaming Curves on the Reserves page.

Production

Production is how much oil a field or country is outputting. In many cases, production is at a maximum – the field is pumping out oil as fast as it can. But some countries, notably Saudi Arabia and other OPEC countries (see Swing Producers), have overcapacity and reduce their production to keep oil prices high.
Cumulative production figures are fairly accurate since the oil companies use meters on their wells. Any errors, such as the Kuwaiti oil burnt by Iraq in 1991 and not included in official statistics, are easily remedied.

Consumption

Consumption, or demand for oil, is fairly straightforward. It generally increases as populations do, and also as less technologically advanced countries progress. High oil costs, recessions and other economic downturns reduce consumption.

Units and Conversions

Table from "Energy a Guidebook" by Janet Ramage.

Definitions

• The joule (J) is the unit of energy and is defined as equal to the work done by a force of one newton when its point of application moves one metre in the direction of action of the force.
• A watt (W) is the unit of power and is defined as one joule per second.
• A kilowatt-hour (kWh) if the amount of energy converted in 1 hour at a rate of 1 kW.

Conversions

• 1 barrel of oil = 42 US gallons ≈ 34.972 UK gallons ≈ 158.987 liters. The density of oil varies but averages about 7.3 barrels to the tonne (so 1 barrel ≈ 0.137 tonnes).
• 1 calorie = 4.19 J
• 1 BTU = 1055 J

Energy in Materials

• 1 barrel of oil = 5,700 MJ
• 1 tonne oil equivalent (toe) = 42,000 MJ (42 GJ)
• 1 tonne coal = 29 GJ average (varies from <20 GJ to >30GJ)
• 1 tonne gas (methane) = 55 GJ
• 1 tonne hydrogen = 130 GJ
• 1 tonne wood = 15 GJ
• 1 tonne dried dung (imagine!) = 16 GJ