Spoiling the barrel

BP’s review of global reserves is tainted by ‘political’ oil, and distorts our view of future supply

As the oil price probes ever higher, people are increasingly wondering if supply can keep meeting demand, even in a world abandoning its Hummers and Ryanairs. The publication on Wednesday of BP’s annual statistical review of world energy was therefore timely. According to the oil giant’s chief executive, Tony Hayward, this digest of proven reserves, production and consumption is “one of the most reliable sources for energy data worldwide”.

But that statement, as with so much about today’s oil industry, demands closer inspection. Tiny printing on the inside cover of the document reveals a catch-all caveat. The information presented comes not from primary BP research but from “official sources and third-party data” and “does not necessarily represent BP’s view of proved reserves by country”. This astonishing get-out clause has been inserted in the BP review every year since Shell was caught lying about its reserves in 2004.

At the seminar releasing the review, I asked BP’s lead author whether he could put an uncertainty range on the data in the report, since it came with a health warning in the small print. He wasn’t able to, other than to confess that there were certainly “some good apples and some bad apples” in among the data from the official sources and the third parties. Those of us who worry about peak oil know about a few of these bad apples. That is one of the many reasons we are worried.

Opec decided to set its annual production quotas according to size of national reserves in 1983. A few years later Gulf countries started finding that they had underestimated their reserves. They added more than 300 billion barrels to their collective tally: fully a quarter of current supposedly proven global reserves of 1,200 billion barrels. From then on – year after year, country by country – they have tended to report exactly the same figure for proven reserves as they did the year before. They ask us to believe by strange coincidence that they find exactly the same amount of oil each year that they sell to the world market. And BP relays it all in its annual review.

Many in and around the oil industry believe that the 300 billion barrels of Opec reserves additions from the 1980s are – let us put it politely – political oil. Among those who have spoken out about this overstatement is the former head of production at Saudi Aramco, Sadad al-Husseini. Hayward’s reliable source for energy data would not pass the first hour in a court of inquiry were people like al-Husseini summoned as witnesses.

Those of us concerned about peak oil worry that there are a good few other bad apples in the data: that 300 billion barrels may be just the beginning of the political oil. We worry that the ancient and giant oil fields from which so much Opec oil comes may collapse in the same way that Mexico’s giant Cantarell field, and the entire North Sea, are now doing. We worry that global oil production will peak soon, and that this peaking – compounded by a steep descent beyond the peak – will hit an unprepared and fundamentally oil-addicted world hard.

Hayward professes that it is “a myth” that the world is running out of hydrocarbons. Running out is not the issue, though all geologists know that the oil resource is finite. The issue is meeting demand with supply so that we can keep our economies on track while they convert to alternative energy. BP encourages complacency in this vital national security mission. Its statistical review does worse: it relays nonsense from Opec and other governments, and claims reliability for it.

· Jeremy Leggett is chairman of Solarcentury and author of Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis[email protected]

http://www.guardian.co.uk/commentisfree/2008/jun/13/bp.oil