Yikes! Things Just Got Worse ... what just got worse? It has to do with the claimed oil reserves in Kuwait. The article discusses a report published by Petroleum Intelligence Weekly (PIW) titled Oil Reserves Accounting: The Case Of Kuwait. Unfortunately the subscription price puts me off so I can't read the report myself.
Supposedly the report discusses details of Kuwait's claimed oil reserves. Kuwait's reported oil reserves are 99 billion barrels. Kuwait has been an oil exporter since 1946, and has a massive oil field. However it's clear the reserves have been overstated.
The PIW report is based upon data circulating within the top echelons of the Kuwait Oil Co. (KOC). KOC is the upstream arm of state-owned Kuwait Petroleum Corp. KOC has primary responsibility for conducting exploration, drilling and production from Kuwait's oil fields. The PIW report claims that Kuwait's remaining proven and nonproven oil reserves total about 48 billion barrels, or 51 billion fewer barrels than previously advertised.
That 51 billion fewer barrels of reserves represent 5% of stated world reserves. Especially troubling is I've read several articles claiming that many oil producing countries have been overstating their reserves as well. What isn't overstated is the world consumption, especially the growing consumption levels in India and China resulting from their economic expansion.
How did this come about? Well, it's not a simple matter of bravado (e.g. the stereotypical men boasting about the size of X or Y or oil fields). In this case it is about distinguishing between "proven," "probable" and "possible" reserves.
Kuwait (and others?) have stated their reserves as the sum of all three. Well, I don't know about you, but "possible" reserves doesn't sound very promising. Especially when you consider most oil wells turn up dry, even on a good day.
As I said, the oil consumption rate is known (and growing). What isn't so clear are the actual reserves. One thing that's clear is the Hubbert model which predicts the peak oil phenomenon. It's not that an oil field produces fine until one day it just fizzles to a stop. Instead it produces fine until the peak occurs, after which it's a constant struggle to get oil out.
This means the world oil situation will appear fine, but with more and more oil fields tilting to the "struggle" phase as each individual oil field peaks.
That, in a nutshell, is the peak oil phenomenon. The last several years of oil use will be characterised by a struggle to retrieve oil, and therefore the actual oil "production" will inexorably decline.
In the face of America stupidly continuing the glut of oil use and gas guzzling way of life, along with India and China rapidly expanding their oil use, this will not be pretty to watch.
I should warn you the author of the article I've linked to -- well -- he works for a financial investment company. They purport to having some investment ideas related to the scenario they describe. While I agree with the scenario, there may be some tilting of the rhetoric on their part.
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