Oil Reserves.

The term "oil reserve" refers to quantities of crude oil that are claimed or estimated to be recoverable given a prevailing set of economic and operating conditions, i.e. mainly in regard to price. If the price of oil increases than more may be transferred from the resource to the reserve, as is true of all commodities.

The term "oil in place" is that amount of oil which is estimated to be held by a given oil reservoir, including that which will prove unrecoverable, in consequence of the particular geology and other properties (e.g. degree of fracture) of the reservoir. It is thus to be classified as the resource, while the fraction that can be produced is the reserve.

The term "recovery factor" is the ratio of producible oil reserves to total oil in place for a given field, and these vary from field to field. They may also change over time Recovery factors vary greatly from oil field to oil field. The recovery factor of any particular field may change over time, according to price and as new technologies for extracting oil, e.g. enhanced recovery methods, are introduced.

There are four criteria that must be fulfilled for the classification of a reserve, namely that it must be:

(1) discovered through one or more exploratory wells,

(2) recoverable using existing technology,

(3) commercially viable (given the contemporary economic climate),

(4) remaining in the ground.

All reserve estimates carry a degree of uncertainty, according to the available geological data and how these are interpreted. Accordingly, a further subdivision is introduced to indicate a relative degree to that uncertainty, using the classifications, proved and unproved, as defined below.

Proved Reserves.

These are reserves that are claimed to have a reasonable certainty (usually at a confidence of 90%) of being recoverable under existing economic and political conditions, and using existing technology. In the industry, this is known as P90 (i.e. with a 90% certainty of being produced). Proved reserves are also known in the industry as 1P.

Proved reserves are further sub-classified as Proved Developed (PD) and Proved Undeveloped (PUD). PD are reserves that can be produced from existing wells, or from additional reservoirs where any additional investment (operating expense) is minimal. PUD reserves require additional capital investment, e.g. drilling new wells and introducing gas-pressurisation in order to bring the oil and gas to the surface.

Companies listed on U.S. stock exchanges must substantiate their claims, however, there are governments and national oil companies which do not do this leading to some speculation that e.g. the Saudi fields may hold less oil than is claimed.

Unproved Reserves.

Probable reserves are based on median estimates, and claim a 50% confidence level of recovery, which is referred to in the industry as P50 (i.e. with a certainty of being produced of 50%). This case is referred to in the industry as 2P (i.e. proved plus probable).

Possible reserves have a lower probability of being recovered than probable reserves. The term P10 is often used for reserves with at least a 10% certainty of being produced. Reasons for classifying reserves as possible include varying interpretations of geology, reserves not producible at commercial rates, uncertainty due to reserve infill (seepage from adjacent areas), projected reserves based on future recovery methods. The term in the industry is 3P (proved plus probable plus possible).

Unproved reserves are used internally by oil companies and government agencies for future planning purposes, but do not normally feature among the numbers quoted in external publications, which tend to err on the side of caution. This is perhaps no surprise since in 2004 Shell got itself into a lot of trouble when it was found to have considerably overestimated the amount of oil in its holdings.

Dr Richard Pike, the CEO of the Royal Society of Chemistry, and an "oil-man" of some 24 years experience, has made the case that the normal procedure of simply adding together the individual oil holdings to make a grand world total of 1.2 trillion barrels, is inaccurate and that a probabilistic analysis (i.e. according to the amount that it is likely to be recovered according to the probability of recovery from different fields) is a better approach. The result is significantly different since it suggests that the amount of recoverable oil is most likely more than double the accepted estimate, i.e. in excess of 2.4 trillion barrels.

I have no dispute with what Dr Pike is saying, and there may well be more oil down there than is generally spoken of. However, if that oil cannot be recovered at a sufficient rate (given the prevailing economic situation) to match rising demand for it, a demand-supply gap will ensue. Economically this will push up the price of oil and encourage further development of even previously non-economic sources, but a rocketing oil price is likely to force an economic downturn overall, as we have seen in these last months of 2008. Indeed, a number of oil-development projects have been put on-hold because the contemporary oil-price is so low as to not make them worthwhile.

Peak oil will come, as it must, if it has not done so already, but it is the gap between demand and supply that is the real issue: the actual peak will simply make matters worse, by drawing down the supply side further and enlarging the chasm between the two. Then the price of oil will increase relentlessly.

Related Reading.

[1] http://en.wikipedia.org/wiki/Oil_reserves
[2] "Peak Oil Postponed", By Andrew Orlowsi: http://www.theregister.co.uk/2008/09/17/richard_pike_rcs_interview/

Water Vapour Heating Planet.

Just a quick note that I thought might be of interest to you. NASA have made the most detailed measurements yet of water vapour in the lowest ten miles of the atmosphere, using a satellite with specific sensors for this gas, which is strongly absorbent of radiated heat from the surface of the earth. It is thought that the heat-trapping ability of water vapour could increase the effect of global warming by carbon dioxide by as much as twice that it its absence.

Andrew Dessler from Texas A & M University has employed data gathered from the Atmospheric Infrared Sounder (AIRS) on the NASA Aqua satellite, measured over the period 2003 - 2008. The devise is the first with the ability to differentiate between different amounts of water as are present at different altitudes.

Through a combination of the satellite data and global average surface temperature readings, information has been garnered to determine how exactly water vapour influences and changes with temperature. It appears that a warming of the planet by 1 degree C will cause an elevation in humidity, and trap heat with an additional 2 Watts per square metre, which is in line with the predictions of climate models. Thus, the feedback effect of water vapour on global warming is both large and positive.

Related Reading.
"Water Vapour Warming,"By Olive Hefferman. http://www.nature.com/climate/2008/0812/full/climate.2008.129.html

A Recent History of Oil Prices.

In January 1999 the price of a barrel of oil reached a low point of $16 when Iraq increased its oil production at the time of the Asian Financial Crisis when demand for oil fell. Prices then increased rapidly, reaching $35 in September 2000, and after a temporary fall reached $40-50 by September 2004. Crude oil prices surged to a record high above $60 in June 2005, and by early August 2005 hit $65 as consumer demand was maintained. In September 2007, the price of US crude oil broke the $80 barrier. In October 2007 a barrel of US light crude oil exceeded $90 for the first time, due to a combination of tensions in eastern Turkey and a fall in the value of the US dollar. The next psychological watershed of $100 was briefly breached in early 2008, but the price fell again until the end of February after which it remained and rose well above this new setting. Then a visible ramping effect became evident and so the price exceeded $110 on March 12, 2008; $125 on May 9, 2008; $130 on May 21, 2008, $140 on June 26, 2008 and $145 on July 3, 2008. The record was reached on July 11, 2008 at $147.27 as a consequence of geopolitical tensions over Iranian missile tests.

The above data stress the point that the price of oil is highly sensitive to the world political situation and to a general sense of confidence, including that in the stock markets. When the $147 barrel appeared, it did appear there would be no stopping the escalating price of oil, and that by December 2008 a barrel of oil might cost around $150 or more, amid speculation that by the end of 2009, it would be nearer $200. However, oil prices declined by more than $20 over the next two weeks in July 2008, and seemed to stabilise at near $125 a barrel on July 24, 2008. A forcing factor came into play, which was that the very high price of oil had changed people’s behaviour and they were now driving less with a reduced demand for oil. Oil prices then dipped further, reaching $112 a barrel, on August 11, 2008.

On September 15 the $100 psychological barrier was again broken, but in reverse, when the price fell below $100 for the first time in seven months. On October 11 there occurred a massive crash in the value of global equities, with a barrel of oil falling by 10% to $77.70. In consequence of further economic slowdown the price continued to slide and today (December 4, 2008) it is trading at around $45 a barrel. Rather than the $200 predicted last summer some analysts are now predicting a $20 barrel sometime during 2009. I must stress, however, that even if this does happen it will be a short-lived event, because the facts of geological limits to production, increased production costs to obtain more difficultly recovered oil and that demand is still rising (demand is simply rising less steeply during this economic recession, but it is still in the ascendant).

The upshot will be a gap between the demand for crude oil and the limits of how much of it can be produced, a quantity that must inevitably fall beyond the point of arrival of “peak oil”, which will force the price up again. Thus oil will become a commodity that is both increasingly scarce and relentlessly expensive. The price of oil (and that of all commodities), is subject to major variations over time, since they are inextricably linked into to the overall business cycle. When the demand-supply gap is reached, oil prices will soar, but the commitments and habits that determine the energy use of oil-users will take time to adjust. It is time-consuming and expensive to introduce more production capacity in the near term, but in the longer run, both businesses and individuals will act to cut back their oil use in response to the driver of high prices. An optimistic economist might argue that high prices promote new investment in production and so new sources of oil will emerge on the market, gradually restoring a supply-demand balance.

The remarkable hike in the price of oil in the summer of 2008 was driven partly by a period of brevity when global demand for oil outran its supply. The OPEC nations were encouraged to ramp-up their production to get the price down for western nations who would be unable to maintain their demand for oil if its price remained at such high (and relentlessly increasing) levels. My suspicion is that the summer-spike in oil prices, led to a fall in oil-use and a significant curb in demand for cars and other goods, which became notably more expensive, and precipitated the present economic downturn. Job losses and less disposable income then meant that many in the low-income bracket would be unable to pay-back their mortgages and a credit-crunch ensued, with a lack of confidence in and among banks who had lent money rather carelessly. The increased output of oil by OPEC along with a contraction and the threat of further slowdown in the business sector, hence less oil being used, has created a minor glut, thus forcing down the price of oil, and increasingly so along with the declining value of all equities. While a low oil price should help businesses to invest and expand, the credit crunch and fear by the banks to lend money has acted in the reverse of this, and prompted a recession.

On the basis of microeconomic theory, when supply exceeds demand, the price of a commodity should reduce to the nominal cost of production of the most expensive source. In the case of oil, as its price drops, the most expensive wells become uneconomical and are shut down, at least temporarily. A price equilibrium is met at a point near the production cost of the most expensive source required to meet global demand. The variation between what the market can bear in the first days of shortage to the marginal cost of the last well in times of surplus can be enormous. Indeed, the price of the majority of commodities including metals and food are subject to equivalent large swings over time. As global oil production begins to decline, following “peak oil”, oil prices are likely to become increasingly volatile than before the peak, because the range of production costs among all sources supplying the market will be much wider. Major oil fields exist where the cost of production is comfortably below US$10 per barrel, and for decades their output was sufficient to meet the whole of global demand for oil. Indeed, many such cheap wells still provide a substantial proportion of the world’s oil .

The shortages and high prices that are inevitable in the future will render viable the extraction of oil sources that cost $50, $70, or $100 or more, a barrel, including offshore/deep water fields, oil sands, oil shale, and enhanced/secondary recovery from depleted fields. As couched in the jargon of microeconomic theory, the supply curve will be much steeper than in past years. Shifts in demand, either up or down, will hence cause swings of relatively greater amplitude in the market price. Nonetheless, even the most expensive sources of oil will be unable to provide anywhere close to the 30 billion barrels of crude oil that the world currently depends on each year. It is the rate of supply (variously termed rate of flow, rate of conversion or rate of recovery) that is at issue. Put simply, it doesn’t matter how big the volume of the resource is, if oil cannot be recovered at a rate of 85 million barrels a day to meet present demand (and rising), we must learn to live by using less oil. This poses a challenge that is simple but not easy, since it must involve curbing our reliance on personalised transport, mainly cars, which most of the world’s crude oil is currently used to run. The corollary to this is the need to develop rapidly, more localised communities, that depend far less on cheap oil-based transportation, which will no longer exist.

Related Reading.

This is the final section to an article entitled: The Oil Question: Nature and Prognosis" which will be published in the popular science journal "Science Progress", probably before Christmas. I thought I would put it as a posting on here for any general interest and/or comments.

Climate Change Not Caused by CO2?

I have put a question mark at the end of the title, since that sentence, made as a statement is highly controversial. Indeed, the term "denier" has been accoladed to the still substantial faction, including some serious and respected scientists, who challenge the assertion, based on computer models of the earth's climate that the increase in atmospheric CO2 derived from fossil fuel carbon is causing the planet to warm-up, perhaps by an additional 5 - 6 degrees C by 2100.

Let me emphasise my own perspective here. I am not a climatologist, but I do see that the most immediate impact on human life on earth will be caused by the dearth of cheap oil, then gas, and finally coal. Unless fast-breeder reactors, including thorium-based systems (the simpler liquid fluoride reactors rather than the vastly complex accelerator driven systems) are introduced fast and on a large scale, or other deposits of uranium are found, nuclear too will overrun its energy supply within 40 - 50 years, or sooner if nuclear power is proliferated as most western governments aspire to do.

If the climate models are correct in their predictions, the impact of carbon emissions will be felt later than that, and it is debatable how much we can moderate this, simply by reduced carbon emissions strategies (see yesterday's posting). Once we begin to eliminate fossil fuels, either through new "clean" technologies or by simply running out of them, the anthropogenic burden of CO2 will begin to level off. However, if the oceans are becoming saturated with CO2 in the surface layers and are less able to dissolve more of the gas, the consequences of carbon emissions both past and future may haunt us for millennia.

Since various computer models give different answers, e.g. warming by as little as 1 degree or as much as 5 degrees by the end of the century, it would be handy to have some experimental data to make recourse to. Obviously, we can't know the future, and that will only unfold as time passes. However, there is the geological record which gives some clues as to past behaviour. In a nutshell, according to ice-core samples, rather than the CO2 increasing and then the earth heating up, what may be deduced is the reverse of this; i.e. the planet warms and then, with a lag of around 800 years, the CO2 levels increase in the atmosphere.

The observables are a little less direct than this, since the temperature at a particular time in history is deduced from the ratio of heavy (deuterium) to light (protium) hydrogen isotopes (and O-18/O-16) in water (ice-cores), i.e. the ratio of heavy water to (ordinary) light water. Since the heavy water tends to evaporate more when it is hot, an increase in the heavy/light water ratio is observed, and vice versa for cold periods. There has been some speculation as to the accuracy of such isotopic thermometers, and corrections are proposed that close the gap somewhat between the temperature and CO2 levels suggesting a closer correspondence between the two, but nonetheless the initial heating period cannot be explained as being caused by rising CO2 levels, even though it may well be that once the CO2 concentration increases, its heat-trapping effect does introduce a thermal feedback to the climate.

One might speculate what exactly is the mechanism for that initial warming process if it cannot be simply explained in terms of CO2. Possibly, Milankovich cycles (changes in the amount of solar energy received by the Earth according to changes in the periodicity of its orbit over time) may play some role. For example, the roughly 100,000 year period between ice-ages corresponds to an "orbital forcing factor", between the closest and most distant approach of the Earth to the Sun, following the slightly undulating ellipse of its solar-orbit.

Some recent papers provide evidence that the global climate is subject to variation even over the past few centuries, i.e. before humans began burning up to the present 7 billion tonnes of carbon fuels each year. Global temperatures declined abruptly by around 2 degrees C from the Medieval warm period (1200 AD to 1500 AD) to the little ice-age (1500 AD to 1850 AD), when skaters built fires to roast chestnuts on the frozen surface of the river Thames in London. More detrimentally, there were widespread and frequent crop failures during the latter cold period which led to perhaps a million deaths from famine and disease. After 1850, average temperatures rose by around 4 degrees C, and this was before humans began releasing huge amounts of CO2 into the air. This amount of global warming was about 7 times the temperature increase observed during the past century and cannot be attributed to CO2 emissions since the CO2 levels in the atmosphere were relatively low then.

Since 1977, both the Earth mean temperature and the atmospheric CO2 levels have increased, which is usually taken as causative of the former, and yet during the 30 years prior to then, the temperature actually fell despite the fact that CO2 levels were increasing monotonically year on year. Surely if CO2 levels determine the temperature, the latter should have risen between 1945 and 1977, rather than the converse.

Although some 80% of the total manmade CO2 has been emitted since 1945, more than half of the warming observed in the past century occurred between 1890 and 1945, which could not have been a result of CO2 emissions. Of course, we may have more warming to come from those later emissions of CO2. We don't know yet.

It may be concluded that CO2 does not cause planetary temperature rise, but there are other regulatory systems at work. Now, it is impossible to state that the present unprecedentedly high levels of CO2 will not cause the earth to warm to the extent that the climate models indicate, but there is no direct evidence that recent global warming is caused by rising CO2 levels.

It has been argued that if global warming is not caused by CO2, then mathematical predictions of global catastrophe are meaningless, and we enter the red-zone of an arrogant belief that we can re-engineer the earth systems by curbing our carbon emissions, and hey presto global warming will be switched-off. As noted, the inertia in the system may be far greater than these models indicate if the ocean sinks for CO2 are becoming saturated.

There are however two imperatives. Firstly, we have to use less oil, gas and ultimately coal because these are present only in finite reserves, and so energy efficiency and conservation in relocalised (less transport-intensive) societies appears a must. It becomes arguable just how much of our effort and resource should be spent on actual carbon-remediation schemes (e.g. biochar production and other carbon capture technologies) , if CO2 is not the problem, and the earth has its own agenda irrespective of what we do.

Moreover, if we cannot ameliorate global warming, surely it makes more sense to devise strategies for how to survive under the stresses that it will impose upon us, in terms of sea-level rise, keeping those in vulnerable health comfortable during especially hot periods, and providing enough water for all of us. We need to take realistic and practical action. The rest is theory, untested and probably untestable until nature's own plan is revealed to us in full.

Related Reading.
"CO2 might not be cause of climate change." By Dr Don J. Easterbrook. htt://www.mtexpress.com/story_printer.php?ID=2005114101

No Quick Fix to Greenhouse CO2 levels.

The surface layers of the oceans are becoming saturated with CO2, and less able to absorb more of it; hence, policies to curb carbon emissions will not have an immediate impact, and it may take hundreds of thousands of years for the natural (pre-industrial) balance of the gas to be restored. I have tried to keep an open mind about the facts of Anthropogenic global warming and climate change, whereby it is assumed that our profligate use of fossil fuels has contributed to an excess of CO2 in the atmosphere, which will cause the planet to heat-up, with concomitant climate change that will prove detrimental to life on Earth. The general consensus is that we should reduce our use of fossil-fuels, in the hope that the planet will recover its equilibrium, through natural absorption processes. Around 40% of the carbon burned from fossil fuels since 1950 has been absorbed, while the remainder has accumulated in the atmospheric burden of CO2.

More proactive measures are proposed too: for instance the growth of plants, to absorb CO2 from the atmosphere through photosynthesis, which are then pyrolysed in the absence of oxygen to form various gaseous and liquid products that might feed markets for fuel and organic chemicals, leaving a residue of carbon ("biochar") which could be dug into soil, both to improve its fertility and to bury some of that miscreant greenhouse carbon. The latter would pose a considerable undertaking, however, and to restore CO2 levels to those of the pre-industrial era would require pyrolysing most of the world's biomass for the next 40 years, and burying its thermal residue of biochar.

Lesser scale operations could pull-down enough CO2 from the atmosphere to restrain it from the putative 450 ppm tipping-point, beyond which the climate runs out of control. The level is around 390 ppm now. However, a new study offers little cheer that even such gargantuan feats of political cooperation and engineering might save us, even if they could really be done. The findings contradict prevailing views that CO2 will be cleaned-out of the atmosphere during the next century or so by natural forces, if we simply curb our emissions by around 80% by 2050, as Britain has pledged to do, by switching over to carbon-free sources of energy. Now this is a massive imperative in its own right, and I wonder as to the viability or veracity of such a policy.

Enter, Professor David Archer of the University of Chicago, who is quoted as saying: "the climatic effects of releasing fossil fuel carbon dioxide into the atmosphere will last longer than Stonehenge, longer than time capsules, far longer than the age of human civilization so far. Ultimate recovery takes place on timescales of hundreds of thousands of years, a geologic longevity typically associated with public perceptions of nuclear waste."

Most of the CO2 that is removed from the atmosphere is absorbed by the oceans, but the process is becoming slower. The ocean waters to a depth of around 100 metres, which is where CO2 is principally and initially dissolved are becoming saturated with the gas, which increases their acidity, and discourages further uptake. In order to re-activate the solvent power of the surface layers of water, fresh seawater from lower depths needs to recycle upward, but this process takes "centuries or a millennium." If the surface waters are becoming warmer too, the process is slowed-down yet further.

In a forthcoming paper (to be published in Annual Reviews of Earth and Planetary Sciences) the additional posit is made that the recycling process per se is insufficient to absorb all the unwanted CO2 from the atmosphere, and the snail-pace weathering of rocks which locks-up CO2 as solid limestone will be required, taking thousands of years to be accomplished. Professor Ken Caldeira, a co-author of the report, raises his game still. He concludes that even after the "pollution" by CO2 stops, the mean temperature of the Earth will settle at a new higher level, rather than falling.

This makes sense, if the heating effect of CO2 is as severe as climate-models indicate, and the concentration of the gas remains steady and relatively high over long periods. James Hansen, director of the NASA Goddard Institute of Space Studies, concludes that the "long lifetime of CO2 emitted by fossil fuel burning" means that simply reducing emissions does not provide a solution, and that some of these fuels must "be left in the ground" forever, and that gas must actually be removed from the air. Now that latter point does sound potentially like the biochar strategy.

What Hansen in fact proposes is removing CO2 by growing trees (you'd need an awful lot of them!), and then burning them to produce electricity and capturing the CO2 before it is emitted. Interesting that BP have just pulled out of the carbon capture game. He also thinks that there should be no more coal-fired power plants built.

Growing trees, other biomass, algae etc. is probably the only way we can withdraw significant amounts of CO2 from the atmosphere. The question is what do we do with that carbon-rich material once we have it? Pyrolyse it and bury the carbon biochar, or burn it and bury the carbon dioxide? Leaving more of the fossil fuels in the ground (i.e. not using them) makes a lot of sense, and seems to point to some combined strategy of energy efficiency and curbing inefficient oil-based transportation. We will need to do these things anyway, as fossil and other resources run expensive and eventually short, but if these scientists are right, it just won't do much to alleviate global warming and climate change.

If the predictions prove true, then we are stuck with the consequences of our actions and will need to weather climatic shocks and changes of various kinds. That noted, it is the instance of running-out of plentiful oil and then natural gas that will impact most immediately on human life and indeed all life, along with limiting supplies of clean water. Testing the theoretical models of scientists may be a luxury for future generations. Our practical actions now will contribute to how that future may unfold, and whether it contains civilisation as we have come to know it.


Related Reading.
"Greenhouse gases will heat up planet 'for ever'." http://www.independent.co.uk/environment/climate-change/greenhouse-gases-will-heat-up-planet-for-ever-1041642.html