If tar sands is too expensive, why is production booming? And from before the recent price surge?
Mike Lynch

From what I can tell of the estimates, they do not include tar sands. It is considered unconventional oil by mainstream experts. Deepwater oil is not considered unconventional.
Mike Lynch

I would argue that Masters et. al. were too conservative, though, and that the actual number should be significantly higher. The follow up USGS report (by Ahlbrandt et. al.) did not discuss oil-in-place, unfortunately, so their higher URR estimate, which was based mainly on reserve growth, might have represented only a transfer from "discovered subeconomic".

Masters ran 4 studies, and increased the estimate of total URR from 1700 to 2400 over 15 years.

Oil is finite and production will peak. But no one seems concerned about coal, copper, etc. We have a number of resource problems, like Chilean sea bass, red snapper, old growth forests, etc., all of which are RENEWABLE resources. That should tell you something.
Mike Lynch

Oy, as they say.
SEC rules are extremely conservative and need to be revised. CERA did a great report on that.

OPEC official reserves are not highly reliable, but not very relevant. We know that the main Middle East countries have lots of unexploited and/or undiscovered oil.

In the 1970s, many suspected the some countries were under reporting reserves to explain their reluctance to increase production. In the late 1980s, a bunch increased reserves as the cartel was considering writing a formal rule for quotas that would (maybe) include reserves. The Saudis, in particular, are thought not to be exagerrating their reserves. They claim it was merely a reassessment of their fields based on better data, new technology, etc. I suspect that it is true. (They also claim that they are being more conservative than the industry as a whole.)

Most small producers do not update their reserves on a regular basis. In the 1980s, I built a model of Egyptian oil production and tried to use reserve changes, but found that they were inconsistent and couldn't be used.

But Shell's reserve problems had nothing to do with the existence of the oil and gas, rather how it was treated in a financial sense. Thus, it is irrelevant to the oil supply debate.
Mike Lynch

Gee, that's interesting. People predicted the imminent peak of US gas production for about 25 years. And it isn't declining, it's roughly flat. The problem has been the explosion of power generation from gas turbines, which raised demand sharply, and supply couldn't increase in kind.
Mike Lynch

Aha! That is a very good question, and something much more interesting than nearly everything being discussed.

In theory, depletion rates have increased, as technology allows more rapid exploitation of a reserve. You can see a little bit of this in the data, particularly for the US. But it's not huge.

And the 5-6% doesn't seem higher than in the past (although companies didn't usually bother to report it, to my knowledge).

(PS Read Morry Adelman's book, The Economics of Petroleum Supply, for an explanation of the calculation of depletion rates)

My graph was made using reserves and production, that is, a=Q/R, where a is depletion. That's consider pretty reliable, but approximate.

About 8 years ago, David Purcell (working for Simmons & Associates) did a very good study showing US natural gas fields in the Gulf were declining faster over time. I haven't seen any comparable oil study. (Matt Simmons has argued for the same thing for world oil fields, but I have never seen any supporting data.)
Mike Lynch
PS Off to do a radio show, will add some data later.

That is not what Sempra would have us believe:

Link

I've come to the conclusion that Lynch is another snake oil salesman-
perhaps just misguided (and maybe all of the analysts in the debate
are misguided in one way or another)- but equally vacuous.

He dismisses the Nth American gas experience with a wave instead
of looking at the list of sources quoted in the Hirsch report and their unbridled optimism
for gas production (all statments made in the early 2000 period). I'd cite them here but can't them out of the pdf.

Equally, he dismisses current gas prices as being due to raised demand, but the Hirch report identifies them as being due to dwindling supply.

Lynch, what a great game this is! What a bollocks of a discipline. If economics is a dismal science, this is a simple joke.

Do you and others make a living off this crap? No wonder prices
bounce around. With data like this to inform markets and producers
it's a wonder we have a market at all. NO_ONE can agree on
production, resources, rates of explotation, exploration or anything
else. There's always another explanation for something or other.

No, there wasn't dwindling production, it's just that the tankers changed
size or the pipelines got more friction. Demand increased because
of a surge in hamburger sales due to pizza production decline from
a mozarella cheese blight across Europe.

ANYONE can say ANYTHING with this data!

I actually DO analyse real data for a living and publicly available oil data
is a joke- biased, partial, missing, inflated, deflated, incorrect. And
then overinterpreted to death when not a single agreed fact or figure
is accepted by any kind of consensus.

In PO-speak, the sun both sets and rises at the same time, or not
at all and people can be partially pregnant.

It's not worth our time subjecting the PO process to this rubbish
yardstick and court jester logic.

I hope you make a decent living at it because it's an utterly vacuous,
wasted existence. But better than flipping burgers I suppose.

POilers would be better off accepting its eventual reality and help
the transition to a post carbon economy without concern for date.
The available data is worse than an erratic clock- with that you actually
begin to ignore it. With PO data people waste their lives on a fractured
crystal ball using mud stained glasses.

Spike,

Again, I agree that with the past models and current models, virtually nothing can be predicted - too many unknowns.

However, let's concentrate on what we do know, which is North American natural gas is on a plataeu, which you agree with.

(1) If North American gas is on a plataeu, then how can we increase tar sand development? Bc natural gas is needed to heat the oil.

(2) If natural gas is on a plateau, then how can we grow our economy? I ask this question bc a significant portion of our electrical generation comes from natural gas. If natural gas is on a plateau, how will we be able to expand our electrical generation capacity needed to "grow" an economy?

(3) If the answer is to import and use LNG, then how many LNG refineries need to be built, by when, and at what cost?

(4) Last, How much oil from tar sands will Canada be able to produce in the year 2010? 2015? 2020? Again, let's be realistic. Let's look at how many refineries they have now, and how many can they realistically build in the time alloted with the money available?

I hope you will take the time to continue answering the 27 original questions I submitted to you.

P.S. - you mention other things like copper are not renewable, but suggest no one is worried about those. You also say that people don't worry about depletion of renewable resources like fish, and I would throw in wood. However, its not correct to say that people aren't concerned with those. Many books have been written on depletion of those issues. Just peruse the internet, and you will find many many people writing about saving fish populations, burning the Amazon forest, lack of silver, etc. So, its simply not accurate to say that people aren't concerned with those other resources (including fresh water). The reason those resources are not discussed at length here on this website is b/c this website is primarily concerned with the issue of peak oil, although the other issues are tangentially related in some discussions here.

Tar sands extraction is currently, but need not necessarily be, dependant on NG. There are many ways to use the bitumen itself as a fuel. MSAR, THAI etc. Please get up to speed on the facts before bashing someone else for not knowing their facts.
The problem with the tar sands is scaling. CAPP projects 3.9mbpd by 2015. (conventional and unconventional combined) It could be higher than this, particularly if there are good results from the THAI pilot project. Note that I do not see this as a solution to PeakOil… rather it is a large reserve tank that can be drawn on at slow rates for a long time.

Tar sand extraction depends on hot water to soften the bitumen to get it out of the ground. heat=electricity=gas.

Furthermore, the real problem with tar sands is not scaling. It is eroei. it will always be too expensive to dig dirt to power our north american way of life. The last dwindling drops of diesel will be used to ship pretty things to the shopping mall and not to power large diesel-demanding bucket shovels and trucks.

The same logical and thermodynamic fallacy undermines bio-fuel schemes. Tar sands and (methanol, bio-diesel, algae etc.) production requires a massive industrial infrastructure that can only be powered by cheap petroleum.

FatherofTwo,

Asking a question is not "bashing" someone. Read my post again, I ask how we can increase Canadian tar sand development if natural gas has plataeud? That's not bashing anything. As your post states, tar sands are currently being heated with natural gas. So, until something else is being used, its a good question. I stand by the question, and hope that you and Lynch can provide an answer. All these pilot projects don't provide us with an answer.

I understood that Shell misclassified 25% of their stated reserves as proved.

When in fact they were not proved.

Does this not make it relevant to supply-side questions?

And how wide-spread are these misclassification's?



We know this how?



And yet decades after this "revision", the Saudi's claim to have the same size reserves.

Not even showing the depletion from oil we know they have extracted, how can we accept such data as credible?

You should not bound all participants in these forums so tightly together. I am here for the education, not to worry numbers. This thread is particularly important as Micheal Lynch (for better or worse) does represent the best of consensus conventional thinking. The character of your critique (learned frustration?) and your resume lend it weight and I hope that you remain engaged.

A Gentle Reminder...

Mr. Lynch is an invited guest here, so I caution everyone on how you choose to express yourselves.

Regulars here know I am a critic of many of Mr. Lynch's conclusions myself, but I respect his efforts and extend our professional courtesy in acknowledgment of his considerable expertise.

So let's keep this thread flame free please...

Violators will be dealt with in the customary fashion.