[tt] NS: Have we underestimated total oil reserves?

[Premise Checker]

Have we underestimated total oil reserves?
http://environment.newscientist.com/article.ns?id=mg19826602.800&print=true
11 June 2008

Black gold might not be as scarce as we thought. This week oil
prices escalated to a record $139 per barrel, but that may partly be
because the amount of available oil in known reserves has been
significantly underestimated.

So says Richard Pike, a former oil-industry adviser and chief
executive of the UK Royal Society of Chemistry, who blames flawed
statistical calculations.

Oil companies produce a bell-shaped probability distribution for how
much each oil reservoir might hold, and then quote as an indicator
of the reservoir's capacity a figure they are 90 per cent certain
they can exceed. When publishing a result for multiple reservoirs,
they simply add up the figures for each one. And this is where the
problem lies.

"They should be combining the bell curves for each reservoir," says
Pike. Adding the numbers for each reservoir ignores statistical
information about the extremes of the distribution, giving a result
which underestimates the true total figure for all the reservoirs.

According to published estimates, there are 1200 billion barrels
still to be extracted, but Pike says there could in fact be twice as
much. "The figures are almost meaningless and just provide a
conservative estimate for shareholders."

Pike claims that most oil companies do calculate statistically
accurate estimates of the combined capacity of their oil reserves,
but no one can access this information to work out how much oil
there really is in total. "All companies keep their internal
probabilistic estimates quiet," he says.

Energy and Fuels - Learn more about the looming energy crisis in our
comprehensive special report.

Related Articles

Brace yourself for the end of cheap oil
http://environment.newscientist.com/article/mg17924061.100
2 August 2003

Weblinks

Petroleum Review article by Richard Pike
http://www.rsc.org/images/PETReview2006_tcm18-122358.pdf