Running Into Oil
“Some commentators hope that new technology will lead to important deepwater finds. Some new deepwater areas with giant potential, such as the Perdido Trend in the western Gulf of Mexico, will no doubt be found, but generally, the geology of most deepwater tracts is not very promising.”
- Colin Campbell (founder: Association for the Study of Peak Oil), Noroil, December 1989.
The past week was a bad one for peak oil enthusiasts, as three separate announcements indicated the abundance of undiscovered petroleum.
First, BP announced that it has found a field in the Lower Tertiary basin in the deepwater Gulf of Mexico, named Tiber, containing something on the order of 3 billion barrels.
Next, Petrobras announced another discovery in the pre-salt basin, this one Guara, containing about 1 billion barrels of recoverable oil.
And in the Bakken Shale, a new zone was proven to be productive and possibly capable of producing another billion or so barrels.
While some (like Matt Simmons and Jeremy Leggett) have pointed to these developments as evidence of the ‘need’ (sic) for going to extremes to find more resources, in fact it highlights the manner in which better technology and knowledge are making previously uneconomic resources viable.
Others have argued that the discovery size of ‘only’ (sic) three billion barrels suggests resource scarcity, since that amount represents only a couple of weeks of consumption. Which is a typical context-free remark: few discoveries amount to more than a small portion of the resource. The super-giant Prudhoe Bay field, for instance, only represents about six months of global oil consumption. During the 1980s and 1990s, large amounts of production came online around the world in areas like Yemen, Oman, Colombia, where the discoveries were smaller than what is now being found.
More important, each of these recent developments shows progress in a new geological area, and progress can be expected to advance sharply as activity increases and knowledge improves. This is only the beginning of a long process of exploitation which will see large-scale resources developed; any given field typically represents only ten percent or so of the play’s resources.
But it also discredits the oft-repeated argument that there are no new plays left. Years ago, when new technology made it possible to perform seismic studies of the large subsalt area of the Gulf of Mexico, I noted to my mentor M. A. Adelman that this was being described as the ‘last new play’ to be exploited. I asked him how many times he’d heard that before. He said, “all my career” (which began in the 1950s). Since that time, new plays included the presalt in Brazil and the Lower Tertiary in the Gulf of Mexico.
The assertion by resource pessimists that there are no new areas is based on the false assumption that geological knowledge of the Earth is so extensive that every area must be already identified. But in fact, while most are identified, at least in a general way, many remain untested for the simple reason that they are difficult to access for political, legal or geographical reasons.
The recent discoveries in east Africa are a clear demonstration of this: the government of Uganda had simply been too preoccupied with its political troubles to seek exploration until recently.
The reality remains that the conventional petroleum resource appears so extensive as to satisfy the world’s needs for decades to come, with the primary obstacle being the imagination of the pessimists. And with enough statism and dulled minds in place of vibrant free-market entrepreneurship, the pessimists will be ‘right.’ As David Osterfield wrote: “Perhaps the kernel of truth in the catastrophist position is that a completely closed or controlled society would, in fact, face the ominous prospect of resource depletion.”(1) Well said.
(1) David Osterfeld, Prosperity Versus Planning: How Government Stifles Economic Growth (New York: Oxford University Press, 1992), p. 102.