Sludge Report #141 – Discussing Oil With The Beeb

Tuesday, 24 September 2002, 5:03 pm
Column: C.D. Sludge

In This Edition: Discussing Oil With The Beeb - You Be The Judge

NOTE: Authors of this report will be anonymous and wide ranging, and occasionally finely balanced. Indeed you are invited to contribute: The format is as a reporters notebook. It will be published as and when material is available. C.D. Sludge can be contacted at sludge@scoop.co.nz. The Sludge Report is available as a free email service..Click HERE - http://www.scoop.co.nz/mason/myscoop/ to subscribe...

Sludge Report #141

Shooting The Breeze With The Beeb

Every now and then Sludge comes across an article written by a fellow journalist that deeply irritates.

The following correspondence is the result of a recent such experience.

As readers peruse this discussion C.D. Sludge hopes that - even if the correspondence fails to actually illuminate a key truth about the real nature of the world and its relationship with oil - then at the very least they may discover some questions which they ought to be asking their elected representatives.

Namely, if it is really arguable that there is 35 years or less oil supply left on planet earth, why are the Ministry of Economic Development’s energy boffins basing long term energy forecasts - to the year 2020 - on an assumption of “oil prices dipping to US$19 per barrel in 2002 before rising US$22 per barrel in 2015 and stable thereafter“ ?

(See … http://www.med.govt.nz/ers/en_stats/outlook/index.html if you want to look more closely at the MED boffin’s view of reality. )

TO: The Editor, BBC World News, UK
CC: Paul Reynolds, BBC News Online World Affairs correspondent

Dear Sir/Madam

RE: Iraq: Is it about oil? http://news.bbc.co.uk/1/hi/world/middle_east/2263993.stm

Paul Reynolds in his article above concludes with the following:

"Oil experts say that oil is a far more available product now than it was even 10 years ago, and that the world is unlikely to run out of it for decades and decades to come. More and more oil is being recovered. The amount of oil which can be pumped from an oil field is now up from the traditional 15% to 20% to 30% to 40%. Oil, while still important, is less of a strategic issue than it used to be. But it is still an issue. "

This statement is absurd, wrong and dangerous.

I believe it is important that your website and television programmes correct this error.

An Extremely Simple Calculation

OPEC's fact sheet on current oil production - August (See....http://www.opec.org/NewsInfo/mi/MI.asp) shows that oil production is presently approximately 77 million barrels per day.

76 * 365 = 28105

i.e. Current global oil production is 28 billion barrels per year.

According to the US department of energy (See.. http://www.eia.doe.gov/emeu/iea/table81.html) there are 1004 billion Barrels of oil in global oil reserves.

1004 / 28 = 36

i.e. At current levels of oil production we will run out of oil in 35 years. That is three and half decades not "decades and decades to come".

Now, as it happens - according to the OPEC link above- it would appear that oil production has already peaked. This may be because it has actually peaked, in which case we will all be soon starting to learn how to run our lives with an ever decreasing amount of oil, or it may be because the present lagging international economy simply doesn't want more oil.

However, if normal growth in production resumes shortly, lets say 3% per annum, then we do not have 35 years of reserves in hand, but just 25.

Now I do not know who Paul Reynold's oil experts are, but it would seem on the face of things that they have been telling you lies.

Regards
C.D. Sludge New Zealand

Dear Sludge,

A lot of the argument about revolves not around figures for reserves but recovery of those reserves. As I said, the latest view is that recovery rates from all fields are getting so much better that oil might be available for much much longer than was feared certainly in the seventies. Oil is also being recovered from much more difficult areas.

But it is of course debatable.

Regards

Paul Reynolds

Dear Paul,

Thanks for the reply. In order to check exactly this question I forwarded my message and calculation off to the person at the US DOE who compiled the table I used in my calculation. I guess she might be described as an “oil expert”.

Her complete reply is attached below. Which in essence confirms my calculation.

Pertinently she comments.

“This is just a general method for estimating the number of years remaining. These reserves are sourced to be proved reserves recoverable at today's technology. There will probably be more reserves discovered and improved technology in the future, so this data is always subject to change as well as the years remaining.”

So I presume that means the 2001 table was up to date with latest measures as at that time, not on the basis of figures produced in the “seventies”.

Whichever way you look at it we are looking at running out of oil at the latest halfway through this century, and certainly in my lifetime.

This does not provide me with any great feeling of security, and I would contend it does not support your contention that the situation in Iraq is not about oil. Meanwhile it is more than obvious that once the public realise that they have just 30-40 years left of SUV driving, it will have an immediate impact on planning for things like roads, car manufacture, public transport, international trade, aircraft purchasing etc.

regards
C.D.Sludge

... forwarded message follows...

From: "Smith, Patricia" Department of Energy
Subject: RE: Hello I Was Wondering If You Might Check Something...

Dear Sludge,

The calculation below is a response to another customer with a similar inquiry.

An approximate calculation would be to use the reserves with present production (or consumption). The two data sources for reserves differ so I used both (The Oil & Gas Journal and World Oil).

Data for production , consumption, and reserves are from the International Energy Annual, 2000. (published May 2002) (Tables 1.2, 2.2, and 8.1) The tables can be found at web address : http://www.eia.doe.gov/emeu/iea/contents.html (production, consumption, reserves)

World Production, Consumption, and Reserves

2000 Oil production 68,102 thousand barrels per day (24.9 billion barrels per year) (68,102 x 366)
2000 Oil consumption 76,021 thousand barrels per day (27.8 billion barrels per year)

Jan-1-2001 Oil reserves (Oil & Gas Journal) 1,028.1 billion barrels per year
Jan-1-2001 Oil reserves (World Oil) 1004.1 billion barrels per year

Using Production

Oil and Gas Journal ==1028.1 / 24.9 = 41.3 years
World Oil ==1004.1 / 24.9 = 40.3 years

Using Consumption

Oil and Journal ==1028.1 / 27.8 = 37.0 years
World Oil ==1004.1 / 27.8 = 36.1 years

This is just a general method for estimating the number of years remaining. These reserves are sourced to be proved reserves recoverable at today's technology. There will probably be more reserves discovered and improved technology in the future, so this data is always subject to change as well as the years remaining.

Hope this is helpful.

Patricia

Sludge,

We can argue till the cows come home. I got my assessment from folks at BP who said that reserves were always changing as was technology. In fact one of them said that there would still be oil in 100 years..I toned that down to decades and decades, leaving it intentionally vague.

You will note that I said it would be naive to suppose that this was not partly about oil. There would be a negative value in removing it from Saddam's control as John Chipman pointed out. And I quoted the Economist to stress that there would be benefits to the US from this.

But I do not think it is wholly about oil. The current US administration has other priorities as well.

regards

Paul

Thankyou Paul,

Can you supply the email of the BP contact and I will ask them?

Best Regards

C.D. Sludge

Sludge

I am sure you can contact BP and others yourself. I cannot give you the names as the condition was background.

The key point though is not the amount of oil left in the world. That is a huge subject needing separate treatment. The issue I addressed is whether this Iraq crisis is about oil. I concluded that the lack of an immediate oil shortage meant that it is not; the Bush people have strategic interests at stake. But I also said that of course oil is a factor. The assessment I got from a confidential BP source backed up the assessment that there is no immediate shortage and by immediate I include the 25 year range as well.

I would say that oil is not at the forefront of US strategy but is in the background.

regards

Paul

Dear Paul,

I find your response remarkable in the circumstances.

Perhaps you could provide me with the email of the PR people for BP and I can deal with them. As I am in NZ it is far harder for me to get in touch with contact lists for such people.

For the record is the following correct?

- You have published an un-attributed comment from a large petroleum company which has a vested interest in the area.

- This comment has been subsequently clearly shown to be wrong by information provided by an official in the US Department of Energy.

- This comment is central to the conclusions in your article.

- And you now refuse to acknowledge that there is anything wrong with this, journalistically or otherwise.

I am a journalist too and I find your response, as I say, remarkable.

At the very least were I in your position I would contact my source and ask them whether they stand by their information.

After all it is not they who have put their name to an article that is patently misleading in a central aspect of its thesis.

I am sure you will agree that if there is likely to be a shortage of oil in the next 10 years - as the DoE information suggests - then that would be a material issue weighing on the minds of military and political planners considering the war in Iraq.

Perhaps as you suggest you should now address your efforts to answering the question of how much oil there is left. It is a question I and many BBC readers would be - I am sure - interested in having answered.

regards
C.D. Sludge

Dear Sludge

I can only go back to my central issue -- which was to consider whether the impending US attack on Iraq is motivated by a need and desire for oil, as Tariq Aziz charged!

I was not considering in detail whether the supply of oil will last for a hundred years. The point is that there is not an imminent shortage.

I quoted the Economist as saying that oil was a possible factor ( alternative to Saudi Arabia) etc. I quoted John Chipman of the IISS as saying that oil was not the motivating factor, though denying Saddam its use was a consideration.

You want a debate about the future of oil itself - a proper subject and one we might well look at at some stage.

Good luck with BP and others.

Regards

Paul

You Be The Judge

So, you be the judge.

Who do you believe? The Department of Energy expert, or the faceless, nameless person at BP?
Is there an imminent shortage or not?
Do we need more roads?
Do you think now is a good time to take that overseas trip?
Is the war in Iraq all about oil?

Anti©opyright Sludge 2002

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Alastair Thompson

Scoop Publisher

Alastair Thompson is the co-founder of Scoop. He is of Scottish and Irish extraction and from Wellington, New Zealand. Alastair has 24 years experience in the media, at the Dominion, National Business Review, North & South magazine, Straight Furrow newspaper and online since 1997. He is the winner of several journalism awards for business and investigative work.

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