A running debate over how to classify oil reserves has split analysts into two camps: optimists and pessimists.
Paul Appleby, senior economist for British Petroleum Co. plc, is an optimist, judging by an article he wrote for a BP house magazine.
Citing BP estimates, Appleby wrote that worldwide oil production amounts to 700 billion bbl to date. Oil reserves stood at a little more than 1 trillion bbl at the end of 1994, with another 500 billion bbl described as "yet to find" reserves.
"The average oil field yields only about 35% of the oil that is in place," said Appleby.
"The best fields are achieving recovery factors of 60-80%. In other words, doubling the reserves for a given source of oil in place, compared with an average field."
Optimist, pessimist
Appleby, sounding the optimist's view, said this reserves growth and new discoveries have enabled total reserves to grow faster than production: "By this measure, rather than running out of oil we seem to be running into it. The perception of oil as a dwindling resource seems to be a hangover from the late 1970s."
BP predicts that within the next 15 years the industry will reach the point at which half of the world's oil reserves will have been recovered. Appleby said worldwide oil production will flatten and start falling by 2010.
Among the pessimists is Colin J. Campbell, associate consultant for Petroconsultants SA, Geneva. He believes the world is running out of cheap oil quicker than many pundits expect.
Petroconsultants reckons the oil industry has produced 750 billion bbl and has about 1 trillion bbl left to produce, that 23 billion bbl is produced each year while output is rising, and less than 7 billion bbl/year is being found.
Campbell divides oil reserves into conventional and nonconventional. The former consists of easy to access oil, while the latter includes reserves added by enhanced oil recovery, upgrading oil reserves, and infill drilling.
Campbell said, "One error is to think that when the oil price rises, nonconventional production will replace conventional. Instead, a field's conventional oil production drives the production profile over its peak, and nonconventional production comes in only at the tail end."
Price warning
In a country by country depletion profile based on this idea, Campbell classifies producing nations according to when half their reserves have been produced, which he said usually coincides roughly with peak production.
U.S. is past its peak, but most countries have not reached the half way point. Saudi Arabia, Kuwait, Iraq, Iran, and Abu Dhabi are well short of the half way point yet own more than half the world's remaining oil.
"However," Campbell said, "20 or so countries are a year or so from their peak and will soon enter a decline. The five Middle East producers will peak around 2015, while the rest of the world will peak around 2000."
Campbell expects the five Middle East countries to produce 60% of the world's oil by 2010, up from 27% today.
"The share of worldwide production from the Middle East is set to rise," he said. "How these countries use this position is anybody's guess, but they won't sell cheaply. They could even double the oil price within the next 2-3 years."
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
