[ReserveGrowthRulz]

Wow. That was some exhaustive calculating and deducting and messing around if I ever saw it. Looks like quite a bit of work went into it.

I didn't read the thing exhaustively, not having the rest of the evening to sit through it all, but I went through as much of the general methodology and assumptions as I could. It looked like what I would call a general "adding up" of expected outcomes.

He also appears to dis reserve growth numbers generated by the USGS without actually attacking the scientific basis they used to generate them...sort of a "kill the messenger" approach to modelling which isn't particularly effective at refuting the assumptions and scientific work which went into the numbers in the first place.

For reference, this is one of the guys who did early and interesting work, here is one of his general papers. My favorite is in the reference list, 5th reference down, its generally referred to as the "Enigma" paper.

http://pubs.usgs.gov/fs/fs-202-96/FS-202-96.html

[WebHubbleTelescope]

Wow. That was some exhaustive calculating and deducting and messing around if I ever saw it. Looks like quite a bit of work went into it.

I didn't read the thing exhaustively, not having the rest of the evening to sit through it all, but I went through as much of the general methodology and assumptions as I could. It looked like what I would call a general "adding up" of expected outcomes.

He also appears to dis reserve growth numbers generated by the USGS without actually attacking the scientific basis they used to generate them...sort of a "kill the messenger" approach to modelling which isn't particularly effective at refuting the assumptions and scientific work which went into the numbers in the first place.

For reference, this is one of the guys who did early and interesting work, here is one of his general papers. My favorite is in the reference list, 5th reference down, its generally referred to as the "Enigma" paper.

http://pubs.usgs.gov/fs/fs-202-96/FS-202-96.html

This is what Tufte calls "lying with graphics":


Notice that the moron does not plot it with the zero on the y-axis displayed. Do it that way and it does not look like an order of magnitude effect. However, the way he plots it, on first glance the effect looks huge.

You say you are an engineer. Engineers where I come from tend to give conservative estimates. They do this so they don't freakin get fired. I would sincerely ask what happened to the error bars on the plot as well. Could it be that they took the error bars off the plot to once again "lie with graphics"?

The only thing enigmatic so far is why you thought this holds some sort of secret.

[ReserveGrowthRulz]

For starters, I would hardly call someone who has a bona fide example of reserve growth as a "moron" simply because I don't like the axis of his graph. And since the data is data, and you don't appear to refute the DATA, you are simply unhappy with the way it is displayed, this hardly constitutes a falsehood on the part of the author of the graph.

What you are talking about is nothing more than a relative effect, and no "moron" who I've ever worked with would be silly enough to be misled by it unless they were blind, mute and incapable of asking someone to tell them what the Y-Axis is, or some rank amateur who can't add 2 + 2 and get the same answer twice.

Please....is the insulting of other people necessary just because you don't like the conclusions they draw from THEIR data? What conclusions might YOU draw from their data which is different? How is their data flawed? How was it assembled incorrectly? All of this are reasonable lines of attack against something you don't like, name calling hardly qualifies as a device to dispute anothers conclusions.

For example, it required me a second to notice it isn't zero'ed at 0,0, and 2 seconds after that to size up the scale difference between year 1978 and year 1990 and notice its what, a 50% in stated ultimate gain over a 12 year time period? No order of magnitude problems even without a 0,0 point to reference off of.

As far as my credentials, this is the internet, I can manufacture whatever BS story I want, particularly at a forum like THIS one.....I have chosen not to. Please give me some benefit of a doubt than other people you are familiar with who evidently aren't capable of reading X,Y axis values and calculating differences off a simple and rather self explanatory cartesian graph.

As far as how engineers give conservative estimates, I would agree. From personal experience, when in doubt, being reasonable always struck me as a better path doing SEC reserves than getting hairbrained and going to the mat with the auditors. Your assumption on conservative being required as part of the job is wrong, bosses usually wanted you to show MORE on the reserve report than you were comfortable with. SEC reserves didn't require error bars on them when I did them, and I doubt they do now. The SPE reserves definitions only changed about a decade ago to include probabilities, and industry standard software that I am familiar with doesn't do probabilities of reserves at all except as some sort of half assed guess, its still expressed as a deterministic number.

Do you know anything at all about the oil industry, reserves calculations and probabilities or do you just make up all these hair brained assumptions to try and trick those of us who do this for a living?

The question I have for you goes like this....what is incorrect about the base conclusion drawn from the graph YOU provided, which looks like a 50% increase in ultimate over a 12 year time span? Otherwise known as a reasonable demonstration of reserve growth, and is demonstratable across wells, fields, counties, states and countries.

[DigitalCubano]

RGR,

You'll soon come to learn WHT's modus operandi:
-Insult any source in disagreement
-Engage in a red herring about something trivial to conclude that the author is being dishonest (e.g. the graph's axes)
-Post a link to his model
-Post a picture of output from his model that shows we'll all be cannibalizing each other next week
-Launch a diatribe against the oil industry and all contrarians, potraying them all as righ-wind dingbats

Really, he's harmless. Let him vent and move on. It allows the discussion to move forward.

[DigitalCubano]

Why don't the optimist ever produce a model?

Yea, you would think that if they are so confident about supply giving us the peak later scenario, a depletion model would be easy.

So we've now moved on to proving the negative? Great! I contend that the sun won't rise tomorrow. The onus is on you to prove that it will. *shaking my head in disbelief*

[shakespear1]

Gents

Lets not get hot about reserve growth. It does happen and it happens due to better knowledge of the area. I stress the area. So North Sea is going dry. There is nothing to say that we won't find another pool in that area. The issue is will it be as big as the ones we have already found!!! This is the wishful part.

Reserves also grow because over time we applied better techonology: fracking, water injection, gas injection, pattern reconfiguration, horizontal wells and maybe 3-D seismic to really look close.

For more on this look here

Understanding the Enigma of ...

Reserves Growth: Enigma, Expectation or Fact?

Some interesting discussion on modeling issues

Natural Gas in the U.S.: How Far Can Technology...

[shakespear1]

Here is another Gem written in the early 90's. This may not belong in this thread but ...

An exploration of alternative measures of natural
resource scarcity: the case of petroleum resources
in the U.S.
Cutler J. Cleveland
Center for Energy and Environmental Studies and Department of Geography,
675 Commonwealth AL’e., Boston, MA 02215, USA
(Received 23 September 1991; accepted 9 June 1992)
ABSTRACI
Cleveland, C.J., 1993. An exploration of alternative measures of natural resource scarcity:
the case of petroleum resources in the U.S. Ecol. Econ., 7: 123-157.
The concern about natural resource scarcity has traditionally focused on changes in the
cost, quality, and availability of energy and material inputs to the production process.
Ecological economists are increasingly concerned with an additional aspect of scarcity -
the growing scarcity of environmental services that sustain human economic existence. The
analysis here explores economic and biophysical indicators of natural resource scarcity. The
indices are quantified for the extraction of petroleum resources in the U.S. The economic
indicators are the market price of crude oil and natural gas, the unit (capital plus labor) cost
of extraction, and the average total cost of extraction (dollars per Btu extracted). The
biophysical index is the energy return on investment (EROI). All indices show a trend of
decreasing and then increasing scarcity of petroleum at the wellhead. The economic and
biophysical cost indices indicate that the 1960s marked the transition from a decreasing to
an increasing cost resource base. The market price of oil is influenced by nonscarcity forces
to the extent that it does not reflect that turning point. The increase in the energy cost of
petroleum extraction is in stark contrast to the changes in the energy cost of producing
other goods and services in the U.S. economy, which generally declined in the last 20 years.
The increase in the energy cost of extraction has important economic implications. From
1954 to 1987, the fraction of total industrial output in the U.S. generated in the petroleum
extraction sector declined almost 40%. Despite the declining share of its output, the
petroleum industry’s share of direct energy use (fossil fuels and electricity) generally
increased in that period. The result is a clear increase in the amount of energy diverted
from other potential uses to secure an additional unit of output in the petroleum sector.
None of the indicators reflect to any degree substantial nonmarketed environmental cost of
petroleum extraction. The biophysical perspective, however, emphasizes the coupling between
physical scarcity and the demands that extraction places on renewable resources and
ecosystem services. The extraction of one barrel-of-oil-equivalent, for example, requires 250
gallons of fresh water and emits more than 60 pounds of CO:, and these costs are
increasing.

An exploration of alternative measures of natural ...

[WebHubbleTelescope]

What you are talking about is nothing more than a relative effect, and no "moron" who I've ever worked with would be silly enough to be misled by it unless they were blind, mute and incapable of asking someone to tell them what the Y-Axis is, or some rank amateur who can't add 2 + 2 and get the same answer twice.

Of course not. But this is not about you or me. It is about the masses of people (sheeple) that get taken up by this sleight-of-hand. So I call him a moron because he deserves the same kind of framing that he is trying to put on others. I am planting a seed that he is incompetent, just like he is planting a seed to deceive.

[WebHubbleTelescope]

Your assumption on conservative being required as part of the job is wrong, bosses usually wanted you to show MORE on the reserve report than you were comfortable with.

How naive. They do that because then they can blame you when the numbers don't come out right. Do you sign the report when you give the estimate? I would recommend not signing it if you don't want to take full responsibility when your prediction falls short, and it comes up drier than expected.

Bosses get to their position in part because they know how to pass the buck and place the blame on others. I suppose the oil industry could rise above this kind of office politics, but I kind of doubt it.

[WebHubbleTelescope]

The SPE reserves definitions only changed about a decade ago to include probabilities, and industry standard software that I am familiar with doesn't do probabilities of reserves at all except as some sort of half assed guess, its still expressed as a deterministic number.

Another trait of the modern-day middling engineer -- blame the software. I really don't care if the software can't handle the job, you should really be able to figure this out if it's part of your job description. Usually you can get margins on prediction by varying the margins on your assumptions. The output error is either an amplification or a filtering of the input margins supplied.

I know I would never be able to get away with this kind of excuse ("bu..bu..but the software doesn't do it!") in my line of work.

[WebHubbleTelescope]

RGR,

You'll soon come to learn WHT's modus operandi:
-Insult any source in disagreement
-Engage in a red herring about something trivial to conclude that the author is being dishonest (e.g. the graph's axes)
-Post a link to his model
-Post a picture of output from his model that shows we'll all be cannibalizing each other next week
-Launch a diatribe against the oil industry and all contrarians, potraying them all as righ-wind dingbats

Really, he's harmless. Let him vent and move on. It allows the discussion to move forward.

I've been following the energy crisis off and on ever since I was a teenager in the 1970's and started subscribing to a popular sports-fishing magazine called Fishing Facts. Every freshwater fisherman worth his salt and a lot of wannabe's subscribed to that particular mag. The striking thing was that the publisher of that magazine wrote regular editorials pointing out such arcane subjects as the Hubbert peak and energy independence. He would actually supply graphs and charts. This was circa 1976.

It's now 30 years later, and I ask you how far have we come. That publisher probably did more to enlighten than whatever came out of the billions of dollars poured in to the petrochemical industry. You guys have been sitting on your asses for all this time and yet you complain about me wanting to push my model?

You doth project way too much, buddy.

And about the cannabalism quip, we all know that corporations are the ones that have perfected that art.

[seahorse]

Why don't the optimist ever produce a model?

Yea, you would think that if they are so confident about supply giving us the peak later scenario, a depletion model would be easy.

So we've now moved on to proving the negative? Great! I contend that the sun won't rise tomorrow. The onus is on you to prove that it will. *shaking my head in disbelief*

Digital,

Your analogy of proving the sun will rise to proving oil won't peak is flawed. Its an analogy that doesn't work. First, it doesn't work bc we can all see the sun, but we can't see the oil. We can see the sun each day with our eyes and at night via telescopes. Second, the oil/sun analogy doesn't work, because we aren't using the sun's energy and depleting it. Oil is finite and we are depleting it at fairly well known rates.

In the end, the sun analogy just doesn't work with oil. Unlike the sun, oil is finite, and being depleted at known rates. Further, we can't see the oil. Your analogy just isn't a good one.

Since oil is finite and businesses and literally lives depend on it, we come up with various models plugging in the various variables to estimate how long it will last. This is a good thing, since we know one day it will peak and our lives depend on it. It just like a fuel gauge in your car. We would be foolish not to be having this debate.

Shakespear makes a good point on the reserves additions. Basically, we haven't found a North Sea in a long time. Some people, like me, find this a little concerning. I liken it to driving around the desert in an SUV without a fuel gauge and not having passed a gas station in some time. I have two passengers, Campbell and Digitalcubano. Campbell says I ought to slow down and start conserving, slowing down the car, turning off the ac, etc. He quickly begins trying to calculate our remaining fuel reserves by scribbling out figures such as like our estimated distance travelled, trying to estimate the fuel economy of the vehicle by trying to calculate is weight and average speed, trying to estimate the size of the fuel tank.

DigitalCubano on the other hand tells me not to worry. He points out the obvious that we haven't run out of gas yet, turns on the air conditioning and radio, and says that Campbell is just a worry wort.

All DigitalCubano's optimism doesn't reassure me all that much though. I would feel better if he would get the binoculars out and find me another filling station or start scibbling some figures down to prove to me that Campbell is wrong in his calculations.

[WebHubbleTelescope]

Gents

Lets not get hot about reserve growth. It does happen and it happens due to better knowledge of the area. I stress the area. So North Sea is going dry. There is nothing to say that we won't find another pool in that area. The issue is will it be as big as the ones we have already found!!! This is the wishful part.

Reserves also grow because over time we applied better techonology: fracking, water injection, gas injection, pattern reconfiguration, horizontal wells and maybe 3-D seismic to really look close.

For more on this look here

Understanding the Enigma of ...

Reserves Growth: Enigma, Expectation or Fact?

Some interesting discussion on modeling issues

Natural Gas in the U.S.: How Far Can Technology...

Couple of things to note in the first Enigma article. The authors are consultants and they are from Canada. Does this color their outlook? Let's look at the charts. The first chart shows a growth that appears fairly significant, perhaps an order-of-magnitude effect on reserve growth for oil and gas. However the second and third chart shows much more moderate growth.







But the first chart has a time scale that dates back 100 years. I don't have any idea of how they came up with this chart, but you have to ask how good were the estimates 100 years ago?

They also show another chart that has a big order-of-magnitude increase for heavy oil. What is heavy oil in the USA and Canada? Can you say oil shale and tar sands?

A very muddled paper IMO. The authors aren't willing to state their results clearly, instead relying on innuendo and inferences. Fortunately they do show their data so that we can muddle our way through it as well.

[shakespear1]

Code: Select all

Edwin L. Drake drilled the world's first oil well in 1859

My suspicion is that the 100 years attempts to look at the "extreme" history of oil industry in the US.

To me the curves don't relate any reality but rather "trends". However how over the years the reserves numbers can change is well explained in articles. I would love to see this for North Sea or perhaps Russia.
.

[WebHubbleTelescope]

DigitalCubano on the other hand tells me not to worry. He points out the obvious that we haven't run out of gas yet, turns on the air conditioning and radio, and says that Campbell is just a worry wort.

That's a pretty good analogy. I would only modify it to say that DigitalCubano isn't even a passenger in the car. He is actually feeding instructions to the driver via a cell phone, directing him to drive over the cliff coming up. The driver agrees, thinking it must be a good short-cut.

[WebHubbleTelescope]

Code: Select all

Edwin L. Drake drilled the world's first oil well in 1859

My suspicion is that the 100 years attempts to look at the "extreme" history of oil industry in the US.

To me the curves don't relate any reality but rather "trends". However how over the years the reserves numbers can change is well explained in articles. I would love to see this for North Sea or perhaps Russia.
.

A most minor nit but arguably the world's first oil well was at Bibi-Aybat near Baku.

What you call trends appear more to be engineering estimation margins, AKA job security statements. Most everything is about a factor of two, which is a traditional choice for making a conservative estimate.

I find it ironic that we laud engineers for making the conservative estimates but then when oil depletionists use these same estimates they get called "scaremongers" and the apologists start begging for updates to prove them wrong.

[WebHubbleTelescope]

In order for any dynamic model to have a chance you have to include all the major variables, this is common sense among applied mathematicians but apparently its still arguable among petroleum engineers (webhubble telescope excluded).

Thanks Elijah. (if the above statement appeared a bit ambiguous, let me point out that I am not a petroleum engineer or geologist nor am I associated with the oil industry)

It's never too late to start contributing to the mathematical modeling. If you start early enough they can call you a futurist. If you take your time, you get to be called a historian. Either way, it's a challenging exercise, and something extremely suitable for doing as a collaborative effort.

[backstop]

EJ -

With regard to your call to incorporate all the variables into a depletion model as a primary requirement, you referrred I think to the positive issue of reserve growth.

I've yet to find any account here or on the web of the prospect of reserve 'decline' due to the impacts of climate destabilization, yet this is, to some degree undoubtedly happenning as GW advances.

Consider :
Rigs on what was permafrost, but is now turning to tundra bog, which is massively vulnerable to damage by surface vehicles.

O S Rigs around Scotland, that has seen a doubling of severe weather events in the last decade (according both to the Met office and the Air-sea rescue service).

Rigs in the GOM -need I say more.

In each case the difficulty of extraction is increasing, which I would presume means that the pool's abandonment date is being advanced, thus diminishing the recorded reserve.

As one who is a well-contented sand-box mathematician, I can only hope that you and the others of this excellent collaboration may see fit, and find a means, to incorporate an effective climate factor into your calculations.

And, by the way, I hope you won't allow yourselves to be distracted from useful work and discussion by the trivial sniping of the unproductive.

regards,

Backstop

[DigitalCubano]

It's now 30 years later, and I ask you how far have we come. That publisher probably did more to enlighten than whatever came out of the billions of dollars poured in to the petrochemical industry. You guys have been sitting on your asses for all this time and yet you complain about me wanting to push my model?

Hey buddy, don't blame me as I am not affiliated with the petrochemical industry. Much like you I have been following the energy issue out of personal interest. I don't begrudge your advocacy or model (and yes, from a mathematical standpoint I am in a position to understand your model). Rather, I just take umbrage at the vitriol you spew against individuals whose analyses and views differ from yours. There are better ways to frame your argument than by harping on something trivial to the point of mischaracterizing the other's position. Much of your argumentation strikes me as disingenuous. One perfect example was how quickly and irrationally you disparaged a journal which published one of Mike Lynch's publication (in the Mike Lynch thread). Furthermore, your repeated name-calling of Mike Lynch and others, which you try to rationalize as your righteous inability to suffer fools, borders on juvenile.

Thus, my objections aren't borne out of what the likes of EJ or you would simply dismiss as intellectual envy. I think that the modelling of the depletion picture would be an enightening, albeit Herculean, task that would be of great importance. Indeed, if I weren't so utterly averse to dealing with your ill-temper and EJ's hubris, I would have jumped in enthusiastically as I have valuable experience in developing stochastic models of technological risk and development as part of my dissertation. Whatever. Good luck with the modelling and I hope that you guys will give an honest listen to the people who both have experience in the field and whom are willing to contribute to your work.