232. INTERPRETING THE USGS STUDY

[Note from JD: Rembrandt Koppelaar is author of the World Oil Production & Peaking Outlook, the first bottom-up study of future oil production with an open methodology/ sources and no expensive price tag. He has kindly offered to contribute to POD from time to time. This is his first article.]

The problem with the world petroleum assessment of the USGS is not the study itself. As JD has noted "The USGS explicitly says that it is not making a forecast". The problem lies with the interpretation made by various institutes, of which the most problematic is the one by the International Energy Agency. They use the numbers of the USGS as the ultimate guideline to predicting a peak beyond 2030. Interestingly enough the IEA stopped copying the numbers directly in their World Energy Outlook 2005 as opposed to the WEO 2004:

World Energy Outlook 2004:

World Energy Outlook 2005:

The main change is that instead of using data as of 1 January 1996 from the World Petroleum Assessment 2000 by the USGS, they are probably citing up-to date numbers per December 2004. The numbers from the World Energy Outlook 2004 caused various institutes (which I will not call by name) in Holland to believe that we had only used 717 billion barrels up till end 2004, while this number was dated until end 1996. Who reads small letters below tables anyway? And there is even one governmental example who interpreted remaining ultimately recoverable resources as proven reserves. Talking about a misinterpretation…

Anyway what can we learn from the difference between 2004 and 2005 in respect to the USGS study? The total ultimately recoverable resources stayed the same, 3,345 billion barrels, while 331 billion barrels have been produced between 1996 and 2005. It's hard to tell what their real view is since these tables are not explained in detail. For instance in the WEO 2004 they are noting 939 billion barrels of undiscovered per January 1996 quoting the mean value from the USGS study. In the WEO 2005 they are noting 883 billion barrels of undiscovered, mainly outside of MENA (Middle-east North Africa), based upon the USGS study but no starting date is given. What amount of oil has been discovered according to the IEA in the period between 1996 and 2005? We cannot subtract 939 from 883 billion barrels since more oil was discovered in this period.

The biggest shift is observable in reserve growth, going from 730 billion barrels to 308 billion barrels while remaining reserves have increased. According to the "IEA/USGS mix", it's hard to tell what their real view is since these tables are not explained in detail. We could interpret the shift as a large amount of oil went from the reserve growth category to the remaining reserves category and the cumulative production category. But since no underlying method is given, this is quite speculative. It could also be that reserve growth was reassessed (below the table it says IEA analysis based on USGS).

The amount of reserve growth between 1995 and 2003 according to IHS energy amounted to a maximum of 190 billion barrels. If we take this rough number and subtract it from 730 billion barrels we get a number of 540 billion barrels of reserve growth remaining in 2005. This would mean a downgrade of reserve growth by the IEA of 232 billion barrels. That is a massive difference in figures from the IEA within one year, which I find disturbing. But since these tables are very vague, and nobody is pressing on answers from the IEA, we will not know what is behind them.

-- by Rembrandt Koppelaar