Date: Thu, 19 Feb 1998 09:34:35 -0500
From: jonathan flanders <72763.2240-AT-CompuServe.COM>
Subject: M-I: Scientific American on Oil Reserves


Here is some credible back-up for Mark J's contentions on world oil
reserves.

Jon Flanders

Subj:   FEATURE/Shortage Looms in Worldwide Oil Supplies
Date:   98-02-18 07:22:09 EST


FEATURE/Shortage Looms in Worldwide Oil Supplies

    NEW YORK--(BUSINESS WIRE FEATURES)--Feb. 18, 1998-- 

  Experts Say Production of Conventional Oil Will Decline Within   10
Years; Reported Growth in Oil Reserves Since 1980 is "Illusion"

     Contrary to most oil industry forecasts, global production of
conventional oil will most likely begin to decline within ten years,
possibly resulting in radical increases in oil prices, according to an
article published in the March issue of Scientific American.

     The authors, respected geologists and oil industry consultants Colin
J. Campbell and Jean H. Laherrere, explain why the flow of conventional oil
-- the cheap, easily recovered crude that currently supplies about 95
percent of the world demand for oil -- will peak and then drop off
permanently before 2010. Unless demand for oil falls or substitutes are
found, the industrial world's dependence on Middle Eastern oil will again
increase dramatically. That could lead to price shocks similar to those
seen in the 1970s, the authors warn.

     This provocative article leads off Scientific American's 19-page
special report on oil production and technology, "Preventing the Next Oil
Crunch." As the report makes clear, the world is not on the verge of
running out of oil altogether. By a variety of technologies detailed here,
it is possible to tap unconventional sources for oil that have
traditionally been ignored as too costly or difficult to reach. The
challenge is whether those technologies can be developed in time to prevent
a crisis from the decline of conventional oil.

     According to Campbell and Laherrere's analysis, the oil industry has
already discovered about 90 percent of the roughly 1.8 trillion barrels of
conventional oil that the earth contained. Almost half that endowment is
now gone, and geological constraints will soon force production to slow,
even as the demand for oil continues to rise rapidly.

     Campbell and Laherrere have each worked in the oil industry for more
than 40 years. Campbell served as chief geologist for Ecuador with Amoco,
while Laherrere supervised exploration techniques worldwide for the French
oil company Total. Both men are currently associated with Petroconsultants
in Geneva.

     Their article points out numerous flaws in the statistics usually used
to track oil reserves. According to most industry reports, world oil
reserves have marched steadily upward over the past 20 years and will
continue to do so. Even the U.S. Energy Information Administration has
projected that oil production will continue to rise unhindered for decades,
increasing by nearly two-thirds by 2020.

     Such growth is an illusion produced by inconsistent definitions of
reserves, by improper accounting of revised estimates, and by suspiciously
large reserve increases reported by OPEC member nations in the late 1980s,
the authors contend. Among their findings:

-    Countries of the former Soviet Union often report wildly

     optimistic estimates of "proved" reserves that are only ten

     percent likely to be met. Subsequent official accounts of world

     reserves often fail to correct such inconsistencies.

-    Revisions in oilfield estimates are commonly treated as though

     they were newly discovered fields, rather than as mere

     corrections. If revisions are properly backdated to the year in

     which the oil field was actually discovered, the true trend

     becomes visible.

-    Oil companies have drained more oil than they discovered during

     each of the past 20 years.

-    About 80 percent of the oil produced today flows from fields that

     were found before 1973, the great majority of which are

     declining.

     Why aren't the oil industry and governments more alarmed about this
situation?

     Many observers pin hopes on expected technological advances. Also,
economists point out that the world contains enormous caches of
unconventional oil -- heavy oil in Venezuela and tar sands and shale
deposits in Canada and Russia -- that can substitute for conventional oil.
But the authors think that the industry will be "hard- pressed for time and
money need to ramp up production of unconventional oil quickly enough."

     However, Campbell and Laherrere say that with substantial preparation,
the transition to the post-oil economy need not be traumatic. "Safer
nuclear power, cheaper renewable energy and oil conservation programs could
all help postpone the inevitable decline of conventional oil," they write.
They suggest that if advanced methods of producing liquid fuels from
natural gas can be made profitable and scaled up quickly, gas could become
the next source of transportation fuels -- a prospect that is also explored
in the magazine's special report.

     Other articles in Scientific American's special report on oil
production and technology include a survey of the methods now used to
extract oil trapped in Canadian oil sands, as well as innovations in
underground imaging, steerable drills and deep water oil production.

     Scientific American reaches more than three million globally by
subscription, on newsstands, and on the Web at www.sciam.com. Published in
New York City by Scientific American, Inc., the magazine won the 1997
National Magazine Award for Single Topic Issue.

CONTACT: 

Ellen Ryder 212/226-6563

www.sciam.com

Jon Flanders


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