246. REMBRANDT ON THE "GROWING GAP" (PART TWO)

[Note from JD: This is a continuation of #241. As before I've added my follow-up questions/remarks in italics below Rembrandt's responses.]

Item 230: the growing gap

2) "Regular Conventional Oil", is a grave problem for the argument here. The chart excludes the "discovery" of, for example, the Alberta tar sands, heavy oil in Venezuela, NGL (which is routinely counted as oil production), coal to liquids, the upcoming surge of GTL projects, ethanol and biodiesel. Coal reserves, for example, ARE oil reserves, as I noted in #43. COAL LIQUEFACTION. So why don't coal discoveries factor into the curve? Or sugar cane ethanol "discoveries"?

This is a nonsense argument since you have to divide between production and reserves. Regular conventional oil has a production pattern that is very different than from coal liquefaction or tar sands or NGL and so forth. Describing the regular conventional oil discovery pattern therefore gives a reasonably good outlook for the trend. The only discussion point here is if you should include deepwater oil or not. In total, cumulative deepwater discoveries amount to approximately 70 GB. Campbell does not include deepwater in his discovery trends.

[JD's response: I still maintain that there is something fundamentally wrong with counting unconventional as production, but not as discovery. Even Campbell himself states, in the chart at the front of the most recent ASPO newsletter, that non-regular (unconventional) oil accounted for 17% of total "oil" production in 2005. Campbell's figure for non-regular production is 13.7mbd, significantly larger than the production of Saudi Arabia. To me, that seems a little too large to omit as irrelevant. Particularly if you are excluding it from the discovery side while including it in the production side, so as to conveniently accentuate the "gap". Even that 70Gb of deepwater alone would have a significant effect on the most recent years of the discovery curve. And what about NGL? It accounted for 6.9mbd in 2005 according to Campbell (a contribution roughly twice as large as deepwater, which was 3.6mbd). Why isn't NGL discovery included? I can understand your point about tarsands and CTL because the resource must be mined, but I don't think there is any significant difference in production rate between regular oil on the one hand, and deepwater/polar/NGL on the other. They're all liquids which are counted by everyone (except Campbell) as oil production. So why shouldn't they be counted as oil discovery?

Also, I would disagree that conventional discovery gives a good indication of the trend. According to Campbell, conventional production peaked two years ago, while your own research forecasts a liquids peak around 2012, roughly 8 years later. There's a significant disconnect between conventional oil trends and liquids trends.]

3) Also note how the shape of the graph has inexplicably mutated. The 1940 spike, which was about 27Gb in the 2002 graph, has grown to about 35Gb in the 2006 graph. Similarly, the 1950 spike of 42Gb in the 2002 graph has grown to about 55Gb in the 2006 graph. Apparently about 50 new Gigabarrels (i.e. about four Prudhoe Bays) magically appeared from somewhere between 2002 and 2006. This seems to suggest that the whole past curve is in flux. So how can you extend a trend when the thing you are trying to extend is still changing?

The difference between the 2002 and 2006 graph is between taking the average from an approximate of years. The most recent graph shows the 3 year average trend. The 2002 graph probably shows a 5 year average trend. The size under the curves in both graphs, or in other words, cumulative discovery, should be exactly the same.

[JD: If the area under the two graphs is the same we have a big problem because the 2002 graph is for "All Liquid Hydrocarbons", while the 2006 graph is for "Regular Conventional Oil". Also, even assuming this rumor about a 3-year/5-year average is correct, Cambell is still guilty of shoddy scholarly practices. If a graph is smoothed with a moving average, the graph itself should have a note to that effect. Bona-fide scientists disclose all relevant information necessary to interpret their graphs.]

4) Where's the 26Gb from Azadegan in 2001, and the 38Gb from Ferdows/Mound/Zagheh in 2003? (See #228 below.)

The potential reserves of Azadegan amount to approximately 5-6 Billion barrels according the source of your number. Higher numbers have been cited at other sources. Azadegan comprises of 2 reservoirs, one having light (above 20 API) and the other having heavy oil (between 10 and 20 API). Ferdows/mound/Zagheh consists out of heavy and extra heavy (below 10 API). Since Campbell’s graph does not include extra heavy and heavy oil. The Ferdows/Mound/Zagheh discovery is not included in the chart. The amount of oil that could be extracted from the Ferdows/Mound/Zagheh complex is probably between 5% to 20% of the 38 Gb amount.

[JD: Yes, you're right it is going too far to include the total OOIP (Oil Originally In Place) figures. On the other hand, I still don't understand why Campbell does not count heavy oil as discovery, even though it is counted as oil by everybody (EIA etc.) when it is produced. "Heavy oil discovery doesn't count as oil discovery because Campbell doesn't count it that way" isn't a very good reason. Why is it that Colin Campbell is the one gets to decide what is oil, and what isn't?

I also find it odd that when we talk about adding a new field like Azadegan to the discovery curve, Campbell and the peak oilers insist on taking the smallest possible number for URR (to keep discovery numbers down). But when the URR eventually grows over time (through reserve growth), they reverse themselves and say that such growth must be backdated to the original year of discovery, thereby inflating the very same number they insisted on minimizing in the first place. Campbell and Laherrere often talk about how initial URR estimates are too conservative (thus leading to the "illusion" of reserve growth) but when they add new discoveries to their discovery curve, they insist that the initial URR numbers should be conservative. It's self-contradictory.]

Item 237. GLITCH IN CAMPBELL'S DISCOVERY FIGURES

1) Sooo.... What's going on here? Why are Campbell's numbers so low? Where is he getting them from? Why is it the industry has -- verifiably -- announced roughly 12.6Gb in discoveries for 2005, while Campbell claims we have only discovered 4.9Gb?


Campbells number is lower because he does not include deepwater. Pup55 his number is too high due to his method. IHS Energy gives an amount of 7 Gb in discoveries for 2005, of which approximately 2 Gb in deepwater, which Campbell has subtracted in his graph, claiming 4.9 Gb. The same applies for 2004, A total of 7.7 Gb was discovered in 2004 (including condensates) according to IHS Energy, of which approximately 3 Gb in Deepwater, which is omitted from the graph.

[JD: Okay. I'll take your word for it on the IHS figures. Just out of curiosity, why do you think pup55's numbers are too high?]