Estimating undiscovered resources and reserve growth: contrasting approaches

Abstract

Assessments of oil and gas potential provide insight into future energy use. With regard to undiscovered resources, this paper contrasts the approach of pure statistical extrapolation with an alternate approach based on geological study of petroleum systems combined with a study of the exploration history of the assessed area. With regard to reserve growth, this paper contrasts a simplified approach with an approach relying on more detailed analysis of the data. An approach to estimating undiscovered resources using pure statistical extrapolation is quick, inexpensive and requires relatively little data and few personnel. Subjective judgment is not avoided, however, in that the choice of one assessment methodology over another is, in itself, very subjective. By calculating resource estimates based on a limited number of variables, statistical extrapolation ignores critical types of information. These methodologies commonly rely on assumptions that production history curves are simplistic, despite evidence to the contrary. Pure statistical extrapolation methodologies also inappropriately apply play-level exploration trends to larger features such as basins or countries. Reserve growth, the additions to booked reserves of previously discovered fields, is quantitatively a large portion of the potential additions to oil and gas supply. Reserve growth is not just a US phenomenon, but has been demonstrated in many countries. Even estimates that, by definition, should grow 50% of the time and shrink 50% of the time, grow much more often than they shrink. Nor was it brought about merely by OPEC countries trying to increase their production quotas. Although M. King Hubbert’s work was advanced for his time, the reported success of his prediction of the year of peak US oil production has been overrated and is more than balanced by a lack of success in other predictions. The focus on the year of peak world oil production in Hubbert’s methodology distracts attention from the more important questions of what the real constraints on increased production are, and how regional distribution of resources has a great effect on economics and politics world-wide.