ASPO WORKSHOPUppsala

THE ASSESSMENT AND IMPORTANCE OF OIL DEPLETION

by

C.J.Campbell

Welcome

We have come a long way in a year

“Let Uppsala be to Oil Depletion what Kyoto is to Climate Change”

- and a good deal better

Thanks to Professor Aleklett

Thanks to Professor Wellmer

Welcome too to Sarah Astor from ODAC in London

Three Missions for ASPO

1. To study the endowment of oil and gas in Nature

2. To model depletion, taking into account economics, technology & politics

3. To raise awareness of this critical subject and the consequences for Mankind

The challenges are great, but we have made good progress

A Geological Starting Point

Geology is the bedrock of this subject

A short introduction to petroleum geology sets the scene for our debate

The Geological Origins of Oil

A few brief epochs of extreme global warming gave the bulk of the world’s oil

Algal blooms gave organic matter, which was locally preserved in stagnant troughs

It was converted to oil and gas on burial

The processes are well understood.

Oceanic Anoxic Events

0

200

400

600

800

1000

1200

1400

Oil

& G

as G

bo

e

0 100 200 300 400 500 600

Million Years

Global Warming

Continental break-up

North SeaOil Generating

Trends-

Where oil is and

where it is not

Oil

Gas

Water

Geology of an Oilfield

Sandstone Reservoir

Source

What a Reservoir looks like

Oil fills the pore-space between the grains of sand, which are often coated in a film of water. It has to flow through these constrictions.

OIL

Amazing Seismic Resolution

ConclusionKnowledge of petroleum geology has

advanced greatly

The world has been intensively exploredThe more promising areas were investigated first

The larger fields were also found first, being too large to miss

The record of the past points to declining future discovery

Understanding Depletion

Understanding depletion is simple

Think of an Irish pubThe glass starts full and ends empty

There are only so many more drinks to closing time

It’s the same with oilWe have to find the bar before we can drink

what’s in it

Peaks : the eternal pattern

Peak

Discovery Production

US-48 1930 - 40 years - 1970

N.Sea 1973 - 28 years - 2001

World 1964 - 40-50 yrs - 2005-10

Peak comes at about the midpoint of depletion

But unreliable data obstruct forecasting

The Growing Gapbetween Discovery and Consumption

-20

-10

0

10

20

30

40

50

60

Gb,

yea

r

0

2

4

6

8

10

12

1960 1965 1970 1975 1980 1985 1990 1995 2000

Wild

cats

(x10

00)

Drilling moredoes not help

Simple plumbing- draining the tanks

140 Yet-to-Find

875 Produced1760 DISCOVERED

885 Remaining

?Filling at 6/yr

Emptying at 23/yr

One in - four out

Full or empty ?

Surprise

Billion barrels

Distribution of OilConventional Oil

-250 -150 -50 50 150 250 350 450 550

ME Gulf

Eurasia

N. America

L. America

Africa

W. Europe

East

ME.Other

Produced

Reserves

Yet-to-Find

All Hydrocarbons2002 Base Case Scenario

0

10

20

30

40

50

1930 1950 1970 1990 2010 2030 2050

Pro

du

cti

on

, G

bo

e/a

Non-con Gas

Gas

NGLs

Polar Oil

Deep Water

Heavy

Conventional

All boundaries fuzzy

Europe’s predicamentThe decline of the N.Sea

0

1000

2000

3000

4000

5000

6000

7000

1960 1980 2000 2020 2040

Pro

du

ctio

n k

b/d

0

2

4

6

8

10

Dis

cov

ery

Gb

Gas is different

Gas has a higher molecular mobility

More is recovered

It depletes differently witha long plateau set by infrastructure

an abrupt end

Difficult to model

Also provides liquids

Gas - the unexpected cliff Hidden Spare Capacity

No market signal of cliff

Production Plateau

Flawed Economics

Economic theory was built in the Industrial Revolution, 200 years ago

Man was perceived Master of his Environment in a world of perpetual growth & prosperity

The relationship has changed due to more people

resource depletion

We need new economic principles to match

Some practical proposals

ASPO needs to adopt - and firmly adopt - a model of depletion, cutting through all the confusion

It needs a simple one that everyone can understand

It needs to shift the onus onto those with counter views or motives to justify their position with facts and detailed numbers

A simple model

Let’s talk only of production avoiding confusing reserve definitions1. Past production

2 Future productiona) based on current wells = Proved Reserves

b) from known fields = Proved & Probable Reserves

c) from new fields = yet-to-find

3. Total (to a certain date)

Let’s divide the work

Let’s divide up the countries of the world so that each ASPO member need be responsible for only a few.

We can start with what we have and let members audit the results, with the help of their governments or national oil companies, who may co-operate

Conclusions

We have made good progress

The basic story is sure and easy to grasp

Let’s co-operate and finish the job– We have a voice that can be heard– Let’s thank the media for making it heard

The world deserves better government than just an open market

There are solutions