“The Quest” Questioned #3: We’re Finding Oil Faster Than We’re Using It?

23 Sep 2011

One of energy historian Daniel Yergin’s key stats is that in recent years, the world has added more oil to its proved reserves than it has consumed. If true, that would mean that we’re increasing the amount of oil that we have on hand, ready to go—and that be a good sign.

The problem is, Yergin’s statistic doesn’t stand up—and I’ll show why by looking at it from a number of angles.

(This is the third in a series of posts exploring the problems with Yergin’s new book The Quest. The whole series is available at this page.)

In a Wall Street Journal article, “There Will Be Oil,” that’s based on his book, Yergin makes this claim: “Just in the years 2007 to 2009, for every barrel of oil produced in the world, 1.6 barrels of new reserves were added.” (He repeats this stat in a Wall Street Journal video interview.)

If true, this would seem to shoot down what the peak oil camp says, since most of them say that discoveries have been declining for decades. So where Yergin get his number come from?

I went to the freely available and widely used Statistical Review of World Energy from BP, and looked the reserves figures for the years Yergin mentioned, as well as production figures. I calculated all the additions to reserves during 2007 to 2009, and added up the production over that time, and got a ratio of 1.5. Pretty close—so it seems that Yergin is using BP’s numbers, or others that are very similar.

If we look at BP’s numbers, though, they’re highly suspect.

One problem with BP’s figures is that OPEC members in the Middle East have reserve numbers that are—to put it politely—magical. These countries’ figures for “proved reserves” only go up or stay flat—and never go down. Kuwait’s “proved reserves” stayed at 96.5 billion barrels from 1991 to 2002, and then have crept upward from there. From 1989 to today, Saudi Arabia’s “proved reserves” have barely budged, creeping up slightly from 260.1 to 264.6 billion barrels. Meanwhile, these countries have produced tens of billions of barrels of oil. It’s as if a huge corporation told auditors that their bank account always held exactly $572 million dollars, for decades. It’s not believable.

(I covered this problem with OPEC reserve data in detail in another article (link to pdf), “From Wikileaks or Saudi Sheiks?”)

UPDATE: Data from IHS—the company Yergin works for—has shown that these reserves figures are sometimes overstated, as Euan Mearns covered on the Oil Drum in 2006: “IHS Data Suggest Kuwaiti and Global Proved Oil Reserves Significantly Lower Than BP Estimates.”

Another problem with Yergin’s apparent use of BP data is that two countries—Canada and Venezuela—more than doubled their “proved reserves” in just the last few years. Looking more closely, nearly all of those increases came precisely during that window of time that Yergin chose to emphasize, 2007 to 2009.

Canada and Venezuela are both major producers, and no one suddenly discovers that much oil that quickly. So what happened? They had known for decades that they had huge deposits of tar sands and heavy oil, which is basically junk that no one wanted before. But after the price of oil skyrocketed starting in 2001, and an apparent lack of more desirable sources of oil in other places outside the Middle East, the tar sands and heavy oil began to be relied on much more heavily.

It’s odd that Yergin, as a historian, would choose such a small window of time to look at, just three years, from 2007 to 2009. Why not include 2010? Why not go back decades?

To find out what more credible numbers might show, I asked Jean Laherrère, a retired geophysicist who was the head of exploration and production at the French oil giant Total. Laherrère has access to figures from IHS—the company that Yergin works for—and he said that while they’re supposed to be confidential, everyone in the industry knows them. A French journalist who writes on oil asked Laherrère the same question about Yergin’s figures, and he posted the numbers Laherrère supplied.

There, Laherrère uses “proved plus probable reserves,” also known as 2P reserves, which include the proved reserves plus additional oil that producers think they can get out of the ground. (Proved reserves, that Yergin cites, are also called 1P reserves.) Proved plus probable reserves of an oil field is supposed to represent the best guess for how much oil a field is going to produce for the long term.

Looking at the figures from IHS for 2007 to 2009, Laherrère says that discoveries totaled 35.4 billion barrels, while the production was 78.1 billion barrels. So according to those figures, the ratio is about 0.45—that is, the world used about twice as much oil as it added to its 2P reserves. Looked at in this way, the world is definitely using up oil faster than it is finding it.

Over the longer term, there has been a clear peak and decline of crude oil discoveries. That is, we are no longer finding as much as we use. Here’s Laherrère’s graph of annual discoveries compared with production, based on IHS data and other sources.

One reason for the difference between the two is that Yergin is apparently talking about all sources of liquid fuels, whereas the IHS reserve numbers that Laherrère cites exclude extra heavy oil, including tar sands. But even so, this doesn’t explain the whole gap between their figures, since it would still mean that Yergin was relying on the magical OPEC reserve figures.

In an email to me, Laherrère came to this biting conclusion about Yergin, arguably IHS’s most prominent spokesman: “Yergin should read IHS reports and consult the IHS database.”

In The Quest, there are other strange problems with Yergin’s statistics on oil. On page 239, he states two conflicting numbers global oil supplies. In one spot, he writes, “At the end of 2009… the world’s proved oil reserves were 1.5 trillion barrels.” Then farther down the page, he says, “Currently, it is thought that there are at least 5 trillion barrels of petroleum resources, of which 1.4 trillion is sufficiently developed and technically and economically accessible to count as proved plus probable reserves.”

I underlined part of the text to highlight that the first figure is for proved reserves (1P) and the second figure is for proved plus probable reserves (2P). Since the latter includes proved reserves, it has to be a bigger number—and should be a lot bigger. Yet Yergin says the 1P reserves are 1.5 trillion barrels, and then that the 2P reserves are 1.4 trillion barrels, which doesn’t make sense. If he’s drawing on estimates from two different sources, it’s not clear.

Perhaps it’s just a typo. On page 287, he has an apparent typo in a section that focuses on Saudi Arabia entitled “One quarter of world reserves.” There, Yergin writes “Saudi Arabia [has] about a fifth of the world’s reserves.” So is it a fifth, or a quarter? The BP figures say Saudi Arabia has 19.1% of world reserves—or about one-fifth. This again suggests Yergin is using BP figures—and that the book is somewhat sloppily written. These numbers are one, I’d think, that Yergin should know inside and out.

There’s another spot in which Yergin seems to use the BP reserve figures. On page 4, he says “the Persian Gulf region … holds 60 percent of conventional oil reserves.” (He also said this in his McClatchy interview.) The numbers in BP’s 2008 Statistical Review match up with that, but the number is a bit out of date now. The latest report lists Persian Gulf reserves as 55% of the world’s total—and that percentage has dropped precisely because of the large rise in unconventional oil reported for Canada and Venezuela, the same figures that gave Yergin his hopeful ratio of 1.6 that I started this post with.

This may all seem nitpicky. But I’m trying to figure out where Yergin is getting his numbers, and whether they’re credible. With the inconsistencies I’ve found, plus other errors that Foreign Policy’s Steve LeVine points out, plus Yergin’s apparent use of questionable numbers from BP, I think anyone should be careful about taking Yergin’s figures at face value.


books I've read on failure & grace

The World Without Us
The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man
A Paradise Built in Hell: The Extraordinary Communities That Arise in Disaster
Hell and High Water: Global Warming--the Solution and the Politics--and What We Should Do
The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl
The Tipping Point
Three Cups of Tea: One Man's Mission to Promote Peace... One School at a Time
The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization
Out of Poverty: What Works When Traditional Approaches Fail
The Little Ice Age: How Climate Made History, 1300-1850
Confessions of an Eco-Sinner: Tracking Down the Sources of My Stuff
Deep Economy: The Wealth of Communities and the Durable Future
The Geography of Bliss: One Grump's Search for the Happiest Places in the World

Mason's favorite books »