Oil-industry statistics are full of errors, omissions and bald-faced lies
from Lewis L. Smith
BP is one of the world’s largest oil companies. It is also big on “hubris”. In fact, this hubris is undoubtedly a contributing factor to the magnum disaster which BP has just caused in the Gulf of Mexico.
["Hubris" is the ancient Greek word for "overweening pride".]
Now, as if nothing had happened to tarnish its image, BP has just presented its “Annual Statistical Review” with great self-assurance, at an invitation-only meeting in London.
To no one’s surprise, BP is one of the few remaining optimists on the question of future crude-oil supplies. In fact, its Chief Economist said at the meeting, “Oil will never peak” !
A reporter, Jeremy Leggett, who attended the meeting, is not so sure —
I scanned my copy of the “Statistical Review”. At the top of the inside cover I read, in a big, bold font — “The Review is one of the most widely respected and authoritative publications in the field of energy economics, used for reference by the media, academia, world governments and energy companies.” A “bible” in other words. Journalists base statistics in articles on it, the world over. Students base learned papers upon it. World governments base their energy policies on it. And energy companies echo it, for it most part, to all who will listen. And in small print at the bottom of the same page I read — “The data series for proved oil and gas reserves … does not necessarily meet the definitions, guidelines and practices used for determining proved reserves at [the] company level, for instance, …. as published by the US Securities and Exchange Commission (SEC) . Nor does it necessarily represent BP’s view of proved reserves by country. Rather, the data series has been compiled using a combination of primary official sources and third-party data.”
And that, my friends, is precisely the problem. The “Review” is not a review but merely “a compilation” of reports, mostly from untrustworthy sources, with no independent checking of current data or correction of past errors. Like DOE’s Energy Information Administration and Oil & Gas Journal, BP does not challenge its sources, perhaps out of fear that it will be “cut off”. As a result, oil-industry statistics, while are not as bad as those for the wine industry, are still pretty bad.
Indeed oil-industry statistics are full of errors, omissions and bald-faced lies. This is particularly true with regard to statistics relating to “reserves”. Reserves are estimates of the amount of oil which remains to be extracted from known reservoirs, at current prices and with current technology whether the reservoirs are active [in production] or prospective, that is, known only by geological soundings and maybe exploratory drilling.
For example, the reserves of one major producer in the Middle East are reliably believed to by overstated by 110% !
For example, the figures for the reserves of many other countries remain unchanged for years, which is absurd. There are at least five different reasons why reserve figures must increase [or decrease] every year. If they don’t, don’t believe the figure for either year.
For example, statistics for production and reserves do not deduct the crude-oil equivalent of the energy used to extract oil from active reservoirs which have suffered drops in their natural pressure or from those located in difficult geological formations. Examples of the latter are reserves found in shale rock or tar sands. In the first case, the oil-equivalent of the fuel used in extraction can run from 10 to 15% of the gross amount extracted. For worst-case tar sands, it can run from 35 to 45%.
Forgive me, those of my readers who have heard this all before. However, it bears repeating because too many people still rely on BP’s numbers and because of the quote cited above, “Oil will never peak !”
One suspects that this statement will come to be included in the category of “famous last words”.
For the full Leggett article, see — http://www.guardian.co.uk/commentisfree/cif-green/2010/jun/09/oil-spill-credit-crunch-bp
courtesy of the Oil Depletion Analysis Centre “newsletter”, June 11, 2010.