Rolling the Dice on the last unturned stone of World Oil and Gas Resources

Webmasters Note: Better published late than never. A great piece, written last summer by ASPO Canada board member J. David Hughes.

At 4 pm my time here on the Pacific Coast on Wednesday, July 23, 2008, the U.S. Geological Survey issued a press release on its Circum-Arctic Resource Appraisal (CARA) entitled “90 Billion Barrels of Oil and 1,670 Trillion Cubic Feet of Natural Gas Assessed in the Arctic”. The CARA study was billed as “the first publicly available petroleum resource estimate of the entire area north of the Arctic Circle”. This release was uncritically picked up by the media worldwide and reported as a certainty, and by Thursday I had started to receive emailed links to newspaper articles published in the U.K, the U.S. and elsewhere. Given the USGS’s record of publishing controversial oil and gas assessments, most notably the 2000 World Oil Assessment, I thought this deserved a closer look.

The starting point of my analysis was the USGS CARA website. Here a 4 page document provides an overview of the study, which notes that “...because of the sparse seismic and drilling data in much of the Arctic, the usual tools and techniques used in USGS resource assessments... ...were not generally applicable”. Although this document also notes that “The probabilistic results reflect the wide range of uncertainty inherent in frontier geological provinces, such as those of the Arctic” it goes on to provide a table of resource estimates of the 25 geological provinces assessed to the nearest 10,000 barrels! – a leap of faith and false representation of precision if there ever was one.

So just how precise are these estimates? More detailed reports are available on the CARA website for 7 of the 25 geological provinces assessed. These reports represent 32% of the oil, 17% of the natural gas and 30% of the natural gas liquids identified in the overall assessment, and provide the only information from which to judge the precision of the total resource estimates provided with such assurance to the media by the USGS. In addition to the “mean” estimates, estimates are also reported at F95, F50 and F5 confidence levels. An F95 confidence level means that there is a 95% chance (19 chances out of 20) the reported resource actually exists, a F50 confidence level indicates a 50-50 chance that the reported resource exists and an F5 confidence level indicates a 5% chance (1 chance out of 20) that the reported resource exists.

So let’s take the “West Greenland – East Canada” geological province report as an example. The included table indicates there is a 95% probability that at least zero oil resources exist, a 50% probability that 0.26 billion barrels exist and a 5% probability that 34.5 billion barrels exist. So the USGS rolls the dice and reports a “mean” estimate of 7.265 billion barrels to the media, when this amount has likely a 1 in 10 chance or less of existing! And yet there is not a hint of this uncertainty in the press release. 
For all 7 geological provinces for which these more detailed data are provided there is a total of 3 billion barrels of oil at the 95% confidence level, 11.8 billion barrels at the 50% confidence level and 96.7 billion barrels at the 5% confidence level, and the USGS reports a “mean” estimate of 28.9 billion barrels. So roll the dice and take your chances – how much risk are you willing to accept to turn over the last stone of world petroleum in some of the most hostile environments on earth? The USGS estimates for natural gas and natural gas liquids in these 7 provinces suffer the same incredible lack of precision, and by extension the whole CARA assessment, covered over with a facade of accuracy in its press release and as a result communicated to the public by the media.

Notwithstanding the dubious nature of these resource estimates, and the incredible obstacles to be overcome in recovering them even if they did exist, they represent less than 3 years of global oil consumption and 16 years of gas consumption, and would likely take many decades to recover. So rather than rejoicing, these estimates should underscore the dilemma facing us and spur radically accelerated actions to reduce vulnerability to the inevitable depletion of global petroleum supplies – if this is the last great white hope for sustaining business-as-usual we are in very serious straits indeed.

If one were a conspiracy theorist, the timing of the release of this assessment could be viewed as suspect at a time when Congress is searching for bogie men responsible for high oil prices (speculators, oil company conspiracies etc.).  In particular, the slide presentation accompanying the release is very bullish on world oil resources citing the BP Statistical Review and stating “World oil resources are at an all time high” and have increased from 891 billion barrels in 1996 to 1238 billion barrels in 2008. The perception that oil reserves have nowhere to go but up could perhaps dissuade speculators from bidding up oil markets still higher, to the detriment of the U.S. and the World economy. In fact, the BP Statistical Review for 2008 reports a slight decrease in world oil reserves. There have also been many questions raised about the veracity of reported world oil reserves, most notably by Colin Campbell and Matt Simmons, and BP itself notes that its reported reserves do “not necessarily meet the definitions, guidelines and practices used for determining proved reserves at company level... ... nor does it necessarily represent BP’s view of proved reserves by country”. The politicization of the USGS at such a crucial time in the energy dilemma facing this planet would mark an extreme low point at a time when the clearest and most objective thinking about our energy options is crucial in order to minimize the trauma of the inevitable transition to a more sustainable energy future.

David Hughes is a geoscientist whose career spans nearly four decades in the energy sector, including 32 years with the Geological Survey of Canada. He has studied and lectured widely on Global and North American energy issues. He is the Team Leader for Unconventional Gas for the Canadian Gas Potential Committee and is also a Board Member of ASPO-Canada and a Fellow of the Post Carbon Institute.