Reports of major oil discoveries get quick attention from the general media these days, even when the discoveries aren’t really news or, for that matter, discoveries. While the attention can be misleading, it shows welcome recognition that new quantities of hydrocarbons are important, especially when large. Yet some governments miss the message.
Remarks by a Brazilian official last week showed how eager the world seems to be for word of the next proverbial elephant. Haroldo Lima, general director of the National Oil, Natural Gas, and Biofuels Agency, told reporters Petrobras may have found “reserves” of 33 billion bbl in deep water off Rio de Janeiro. The price of Petrobras stock jumped. At least one analyst said the report disproved “peak-oil” pessimism.
‘Reserves’ premature
Trouble is, the discovery wasn’t exactly news, and discussion of “reserves” is premature. Petrobras issued a clarification pointing out that its report of the discovery, in the Carioca area of the Santos basin, asserted the need for further assessment. It made that report last September (OGJ, Oct. 1, 2007, Newsletter). Only one well has been spudded since the discovery, and it hasn’t reached target depth.
Without question, Petrobras and its partners have something important under way around Carioca and the earlier Tupi discovery nearby (OGJ, Nov. 20, 2006, p. 43). But it’s too soon to suggest that this one area has reserves almost as large as all of Nigeria’s.
In the ambiguous realm of oil and gas reserves, confusion is understandable. The industry that finds and produces fluid hydrocarbons, after all, has yet to agree even on a definition of the term. Enthusiastic officials and news reporters can be forgiven their occasional mishandling of the numbers.
It’s the enthusiasm on display that’s important here. Until recently, growth in volumes of recoverable oil, no matter how large, seldom made news outside the regional and trade press. Yet when the US Geological Survey raised its estimate of technically recoverable oil and gas in an expansive formation of the Williston basin this month, the headline “Billions of Barrels of Oil May Lie Under Northern Plains” showed up in, of all places, the New York Times.
The headline writer did justice to uncertainty. USGS assessed the undiscovered part of a specific resource, not reserves. Someone still must find the 3.7 billion bbl of crude oil, 1.85 tcf of natural gas, and 148 million bbl of gas liquids that USGS said might be technically recoverable from the Devonian-Mississippian Bakken shale in Montana and North Dakota. Quantities don’t become reserves until the hydrocarbons are not only discovered but also determined to be technically and economically recoverable. Even then, they remain estimates.
The USGS assessment thus speaks probabilistically to the size of an exploratory target rather than to volumes relevant to immediate oil and gas supply. To supply years and decades from now, however, the assessment is crucial. The numbers are large. And the 25-fold increase they represent over a 1995 assessment of the Bakken shale testifies to the power of technology. The USGS report was indeed newsworthy, even if it had nothing to do with the general media’s usual obsession: the price of gasoline.
Can it be that public attention has finally found its way to the connection between today’s work and tomorrow’s energy supply (and, therefore, price of gasoline)? If so, news organizations would perform a service by brushing the dust off estimates published by the US Minerals Management Service in November 2006 and promptly forgotten. The estimates are of technically recoverable resources in federal land inaccessible to oil and gas operators: 10.8 billion bbl of oil and 50.1 tcf of gas.
Potential supply
Those values equate to half of US oil reserves and a quarter of US gas reserves. They represent potential future energy supply, domestic and therefore secure, that the US deliberately shuns. They also represent possible income that the US denies Americans and receipts it denies governments.
Official foreclosure of these benefits, especially in the face of a faltering economy, deserves the attention of a vigorous press. It is, in fact, a scandal.
