The Staton Jones Report

I sense a "level setting" post about Hydrogen, the un-fuel, coming soon. This will open some eyes, let me tell you folks.

Steve, the article mentions Petroconsultants. Is that the firm you worked for, once upon a time?

Yes! It is! Here's the quote:

In the mid-1990s Campbell repeated the exercise using data from Petroconsultants, which had figures on reported reserves plus oil that had been found but not yet developed.

Petroconsultants, S.A. is the firm that my great uncle, Harry Wassall, III started in 1959 with two partners in Geneva, Switzerland. It's good to see their data are still in the game ... they had the largest collection of petroleum production information in the world (outside the U.S.) throughout the sixties, seventies and eighties. Lane, you would have loved to pour through their archives. I once had a map of every field and well in the Persian Gulf on AutoCAD. We're fighting wars over that map now.

There has been quite a bit in the news recently about the preference of some oil companies to grow their base of reserves through the magic of accounting, rather than the old fashioned method of exploration. It's kind of scary to think about the fact that there are evidently some rather strong financial incentives for these experts to keep their projections of oil reserves on the optimistic side.

Reserve estimation is confusing, to say the least, and in several ways resembles black magic. Reserves are measured along several axes. Among them are proved/unproved and conventional/unconventional. Proved is the estimated amount of an in-ground reserve that is economically produceable using current technology. Conventional is, roughly, the kind of black gold that come a-shootin' up through the ground on Jed Clampett's farm; ie, it is easily extracted liquid crude. Unconventional includes heavy crude that is trapped in shale and/or sand, tar, and anything that requires drilling under water deeper than about 1500 feet. Unconventional is expensive to extract and bring to market as a usable product.

As for accuracy of reported proven reserves, U.S. firms (those traded publicly on U.S. exchanges) are held accountable by the SEC. Even so, there is plenty of room for interpretation, and as we've recently seen, statements have been revised, generally downward.

But, there is no world regulatory agency with sufficient executive power to hold to the fire the feet of big international players like Saudi Aramco. And, there are more than just financial reasons to over-estimate reserves.

That said, there is a large chunk of land in Saudi Arabia that is relatively unexplored and totally undeveloped. The Dow Jones Newswire recently quoted Saudi Aramco's second-in-command and head of exploration and production Abd Allah Al-Saif as claiming that there are 30-40 completely unexploited fields in this region. And, in fact, Saudi Aramco has recently let four gas exploration concessions to Asian and European exploration firms for this region.

Nevertheless, Matthew Simmons has a book coming out in about a month that will attempt to detail the future nonviability of the Saudi petroleum monster to satisfy rapidly growing world demand. Should be interesting, and no doubt we will hear about it in the popular media.