Reserves numbers aren't oil's only market perplexity

Bob Tippee
Editor

Numbers about the oil and gas market aren't always what they seem to be.

It's forever disturbing, for example, to see elaborate arithmetic performed with reserves data.

Nobody can measure oil and gas reserves. The numbers are estimates based on interpretation—often quite a lot of interpretation—of sparse data about indirect indicators like well and seismic information.

Yet people who don't know better see numbers and assume they represent measurements, as if from some geophysical dipstick. Reserves aren't measurable and probably won't be anytime soon.

Even market factors that are, unlike reserves, at least theoretically measurable can be just as difficult in the vast, complex, and politically influenced oil and gas business.

In its Oil Market Report this month, the International Energy Agency discusses vagaries of numbers representing global oil supply and demand, which of course play no small role in determining oil prices.

IEA calls attention to a category in its monthly oil-balance table called "miscellaneous to balance."

This is the rubber ruler of petroleum economics, an important tenet of which is that supply and demand always balance, net of inventory changes, at some price. The numbers, though, never add up.

The problem isn't the theory but rather the myriad measurements in the equation. Some of them turn out to be nearly as reliant as reserves are on estimation and interpretation. Into this category fall such vital numbers as Chinese demand and inventories outside industrialized countries.

IEA addressed the difficulty in its report because the miscellaneous number reached a hefty 1.3 million b/d in the second quarter.

In addition to the timing disparities and fuzzy-number areas that always bedevil oil balances, IEA said, the growth category of ethanol and biodiesel demand has become a challenge. And many countries still won't publish important data.

Adjusting for estimated errors in the uncertain categories brings the miscellaneous fudge factor down to 300,000-400,000 b/d. That, IEA says, allows analysis to focus on fundamental issues: economic growth, tight diesel and jet-fuel markets, hurricane threats, and geopolitical and project-completion risks.

Just don't forget that the adjustments, no matter how carefully estimated they might be, still can be wrong.

(Online Sept. 15, 2006; author's e-mail: bobt@ogjonline.com)

Related Articles

Western Australia taps Kimberley site for LNG hub

12/29/2008 Western Australia has chosen a site called James Price Point about 60 km north of Broome on the Kimberley coast to establish a proposed LNG hub for...

MMS chief hopes next president, Congress won't reinstate OCS bans

12/19/2008 US Minerals Management Service Director Randall B. Luthi said on Dec. 9 that he hopes the Obama administration and Congress seriously consider expa...

Pakistan plans $1 billion TAPI, IPI gas storage

12/17/2008 Pakistan says it will require $1 billion to build underground storage for gas to be imported from Iran and Turkmenistan, according to the country's...

MMS OCS Policy Committee plans first post-moratorium meeting

12/12/2008 The US Minerals Management Service's Outer Continental Shelf Policy Committee will hold its next meeting Dec. 9-10 at the Washington Dulles Crowne ...

BLM defends Utah lease sale as its state office defers more tracts

12/12/2008 The US Bureau of Land Management defended its scheduled Dec. 19 oil and gas lease sale in Utah on Dec. 2 as its state office deferred additional pa...

BLM Utah director defers lease parcels in response to Park Service concerns

12/12/2008 US Bureau of Land Management Utah State Director Selma Sierra agreed on Nov. 25 to defer from a Dec. 19 oil and gas lease sale all parcels of conce...

DOE appoints clean coal chief to lead fossil energy operations

11/28/2008 The US Department of Energy named Victor K. Der, a 35-year employee with DOE and its predecessors, as its new principal deputy assistant secretary ...

As BLM completes Utah resource plans, possible December lease sale draws fire

11/07/2008 New resource management plans for five of the US Bureau of Land Management's six Utah field offices received final approval on Oct. 31, while the s...

EPA diesel fuel emission reduction grants go to North, South Carolina

10/31/2008 The US Environmental Protection Agency presented grants of $295,320 each on Oct. 23 to North Carolina and South Carolina state agencies to establis...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected