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Oil Production Trends

April 25, 2016
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By Paul Homewood 

 

 

We had a bit of a debate last week about the outlook for oil production and reserves.

I don’t hold any particularly strong views either way on this subject, but thought it might be helpful to look at past trends.

 

 

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http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

 

As we can see, annual growth in oil production has been pretty steady since the 1960s, with the exception of the small blip in 1975 and the bigger one that followed the global economic crisis in the early 1980s.

 

 

For completeness, we should also look at gas production as well, which shows a similar trend.

 

image

http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

 

 

Interestingly, the BP Energy Outlook 2016 suggests that annual growth in oil and gas production in the next 20 years will continue at a similar rate to the past 20 years. (As a share of total primary energy, oil is forecast to decline, but in absolute terms it will grow as overall energy consumption increases).  

 

 

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10 Comments leave one →
  1. April 25, 2016 6:34 pm

    Gas production will likely increase globally driven by places like US and China, thanks to fracked gas shales. Petrochemicals already moving from Europe to US. Could be quite substantial increase beyond BP projections if the Siluria Technologies catalysts for turning natural gas into ethylene and then gasoline and diesel work at scale. First is provingnout at large pilot scale. Second works in the lab.Then there would be an inexpensive way to convert natural gas to liquid transport fuels as crude production starts to decline.

    My view, having written parts of two detailed books on the subject, is that BP is overly optimistic about crude production. Global conventional oil production already peaked ~2007. Conventional is precisely defined as API >10 (inverse of viscosity, higher API is lower viscosity), from a reservoir with porosity>5% and permeability >10 darcies. Peak all sources can be projected in various ways, and is sometime around 2025. So second half of BP outlook is suspect. There is some uncertainty about rate of production decline thereafter. Plateau for a while then decline (IHS scenario)? Slow but accelerating decline from peak? Decline at 5.1% per year, the present average of ~800 fields supplying >2/3 of global crude today?

  2. RAH permalink
    April 25, 2016 6:58 pm

    As for reserves. Nobody knows what for we humans so far is unknowable. I just look at the history and temper what is being said now with what has been said before. And thus I am as skeptical every time someone claims to know how much extractable oil there is on this planet as I was when Dr. David Viner said that ” within a few years winter snowfall will become “a very rare and exciting event”……“Children just aren’t going to know what snow is”
    Speaking of which how did you folks enjoy your little spat of very late arriving winter weather this morning?

    • April 25, 2016 7:25 pm

      RAH, there is a very robust way to estimate remaining yet to be discovered TRR (technically recoverable reserves ignoring cost). It is called a creaming curve, cumulative discovered TRR over time. This asymtotically approaches an inverse hyperbolic limit determined by statistical curve fit.. To be accurate, needs to be by basin, like North Sea or North Slope. Then the limits are added. USGS has done this for conventional and unconventional heavy crude separately. If you want to read details, they are USGS Fact Sheets 2012-3024 and 2009-3028 respectively. Both available free on line. To those add Athabasa Bitumen CPP estimate 280Bbbl, and global shale oil EIA eatimate 6/10/13 of 345 (high because of an Error with Bahzenov, see essay Matryoshka Reserves.) I also recommend Deffeyes three books on this. Sedimentary geologist from Princeton.

      • Dorian permalink
        April 26, 2016 8:21 am

        Be very careful here Ristvan, you are starting to sound like a Global Warming Acolyte. The creaming curve is based upon well data of used up wells, that is, it is a model. There are large assumptions of how it is to be used, and it has been found wrong many times, companies have gone under with its use.

        RAH has a very valid point. I would like to also add, that much of the oil/gas data that is made public is actually false data. For instance, the Saudi’s have been lying about their oil reserves and their production outputs for decades.

        In short, there is NOTHING robust about the creaming curve, and it should be used with great care, there are very dubious assumptions that should be held with great sceptical concern.

        The only thing these charts tells us is that as a portion of global energy source, oil and coal are less important now than they have been for the past nearly 50 years, and are becoming ever more less important.

        This specifically means this whole crying about fossil fuels use is ill placed. Since the world has been slowly bleeding it self of the use of oil and coal for the last two generations of humanity. Furthermore, despite what the deranged morons on the left like to think, this occurrence has all to do with a natural tendency of market and economic forces and not with rants and raves by the green/eco/leftist movements.

        The central message of this piece would have been better titled, “Natural Market Forces Weaning Society of Oil and Coal: Not Leftist Policies”. This is what everybody should be really talking about.

        Of course, there is the counter argument that gas is picking up, but gas compared to oil and coal is much cleaner, something that most people are ignorant about. As for Renewables, nothing can really be stated until it has been around at least for another 50 years or so. But I do doubt, that Renewables, will work out, economically and practically, they fail on all levels; whereas oil, coal and gas has never required to have subsidies to start like Renewables.

  3. Broadlands permalink
    April 25, 2016 7:16 pm

    There was a drop in gas production in 2009 (seen on the column chart), and I checked the numbers at the BP source. Down 76 BCM from 2008. Production was steady until then and it resumed on path afterwards rising 191 BCM in 2010. What was the reason for that drop? And for the huge rise the next year. Anyone know?

    • April 25, 2016 7:33 pm

      Just checked. IEA data also show this blip, but does not give an explanation.

      • April 25, 2016 8:48 pm

        Did some more research. IEA and BP are independent estimates, so not likely a data artifact. Found the 2010 IEA analysis of 2009 natural gas production and consumption. They basically say the decline is due to the global recession.

  4. Ben Vorlich permalink
    April 26, 2016 8:29 am

    I see BP has posted a first quarter replacement cost loss of $485 million, I’m not sure what a replacement loss is but I don’t suppose the share holders are happy bunnies today.

    • Dorian permalink
      April 26, 2016 9:11 am

      @Ben Vorlich:

      It is isn’t “replacement loss”, it is “replacement COST loss”. The distinct is very important. What RCL means, is cost that the oil company incurred when replacing some of its reserves. Meaning in general, if BP had some oil reserves which it valued say $50 a barrel of reserves (that is oil that may still be in the ground) at some previous time, but then sold them later for $75 a barrel, then BP made $25 a barrel profit. But what we actually see is that it made a replacement cost loss, meaning that it bought oil reserves that cost more previously than they do today. In other words, when they bought these oil reserves, the price was higher than what it would get if they sold them today; and that loss amounts to $485 million. This really is just an accounting number, they have NOT REALLY lost anything, unless of course they drill the oil out of the ground and sell it today, when prices are low.

      All BP is REALLY stating is a paper loss. But what BP is really doing is that they have bought oil reserves which they think will go up in price at a future date, and then they will drill for it, and will make money; for oil prices will go back up, without doubt.

      So BP has really lost nothing, but because they have declared a replacement cost loss, they can use this to offset their taxes. It is just shrewd tax-accounting.

      In short, don’t worry about BP. But this does go to show how people once again, with ignorance, get the wrong impression. Ben, you shouldn’t talk about things or even form and opinion when you are ignorant about the facts.

      As for the shareholders, for those who know what they are doing, they know full well that what BP declare is smart and good accounting, and that a replacement cost loss here only means MORE profits staying in the company than going out the door to the tax-man.

      • Dorian permalink
        April 26, 2016 9:22 am

        Just to belabour the point to extreme. With $485 million replacement cost loss, and if BP is paying say 30-35% tax on its profits, then this $485 million will go to reducing its income, and thus some $160 million will be saved in taxes. So @Ben, what you thought is a $485 million loss, is actually $160 million saved in taxes!!

        BP just saved another $160 million. You think the shareholders are going to be unhappy about that!

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