297. HOW ABOUT THOSE ANOMALOUS INCREASES IN OPEC RESERVES?
Another cornerstone of peak oil theory is the so-called "anomalous increases" in OPEC reserves in the 1980's. Here's some standard peak oiler boilerplate on the topic from the ASPO March 2004 Newsletter:
Unreliable OPEC Reserves and Upgrading the Depletion ModelHere's Savinar parroting the party line:
The spurious nature of the reserves reported by the major OPEC countries has long been obvious. The early numbers were evidently too low, having been inherited from the foreign companies before they were expropriated. Nothing particular happened in the oilfields in the late 1980s to justify the huge increase, and in any event the valid revisions should be backdated to the discovery of the fields concerned which had been found as much as fifty years before. The increases were almost certainly prompted by OPEC quota considerations, and have barely changed since, suggesting that subsequent production has not been deducted.Source
During the late 1980s, several OPEC countries drastically increased their reported oil reserves even though they had no major oil discoveries. How is that possible? The answer probably has something to do with the fact an individual OPEC member’s quotas are proportional to their proven reserves. The more they report in reserves, the more they are allowed to export, which means the more money they make. Thus, they have a huge incentive to report "reserve growth." (Source: "The Oil Age is Over" by Matt Savinar)A nice graphic by Stuart at the Oil Drum showing the situation:
Stuart's comments on the situation:
Note that OPEC production quotas are in part dependent on proved reserves - giving these countries an incentive to exaggerate. The huge jumps in reserves were not associated with the discovery of any particular large new fields. These time series are extremely implausible on their face and suggest mendacity.In a nutshell, the peak oilers are saying the OPEC countries are lying. They fraudulently inflated their reserves to expand their production during the "quota wars" of the 1980s.
Halfin from the Oil Drum, however, has an excellent rebuttal to this argument which needs to be brought to the forefront. To see what he is talking about, let's look at the status of non-OPEC* reserves over time from the BP Statistical Review of World Energy (graph by Stuart at the Oil Drum):
Non-OPEC countries have no incentive to exaggerate their reserves to secure larger quotas, and yet look at the reserve growth. Non-OPEC reserves grew by about 28% from 1980 to 2004. Even more astounding is this. Working from the BP figures, we find that in 1980, the non-OPEC countries had 232.5Gb of reserves, and in 2004 they had 298.2Gb of reserves. In the period from 1980 to 2004, the non-OPEC countries produced 376Gb of oil. This means that, over 24 years, the non-OPEC countries produced 160% of the reserves they had in 1980, and still ended up with 30% more reserves than they started out with it. So Campbell's point that the OPEC reserves "have barely changed since, suggesting that subsequent production has not been deducted" is obviously a crock. If we simply deducted non-OPEC production over 1980-2004 from non-OPEC reserves in 1980, non-OPEC would currently have reserves of -143.5Gb. The actual value is +298.2Gb, so (as I said) Campbell's criticism is a crock.
Massive reserve increases, despite constant production, are nothing unusual in the non-OPEC world. Here's some miscellaneous reserve increases from various countries over the period 1980-2004 (from the BP statistical review, referenced above):
Canada: 8.7Gb(1980) => 16.8(2004) = 93% increase
Brazil: 1.3Gb(1980) => 11.2(2004) = 761% increase
South/Central America minus Venezula: 7.3Gb(1980) => 24Gb(2004) = 229% increase
Norway: 3.6Gb(1980) => 9.7Gb(2004) = 169% increase
Angola: 1.4Gb(1980) => 8.8Gb(2004) = 529% increase
Asia Pacific minus Indonesia: 22.2Gb(1980) => 36.4Gb(2004) = 64% increase
Compare this with the reserve figures and increases which are supposedly anomalous:
One example should suffice to demonstrate the underlying principle. Norway in 1980 had 3Gb of reserves, and by 2004 this had increased to 9.7Gb, an increase of 169%. Meanwhile, in the period from 1980 to 2004, Norway produced 18Gb of oil -- 6 times more oil than they had in reserves in 1980. So what is so surprising about a doubling of Middle East reserves, despite constant production, over the same period? Norway wasn't involved in any "quota wars". Why do peak oilers assume that Middle East reserves should have remained constant or declined over that time, while Norway's didn't? After all, the Middle East is where, we all admit, most of the remaining conventional oil exists.
The bottom line: Increases in OPEC reserves aren't anomalous at all, and are perfectly consistent with reserve trends worldwide.
*) Here I am deviating from the nomenclature in the BP review, and using the term non-OPEC to refer to all countries outside of OPEC, including the former Soviet Union (FSU).
-- by JD