The Hydrocarbon Highway – Chapter 2

Chapter 2 – Reserves, Peak Oil and Medieval Maps explores how global oil and gas reserves are quantified,
classified, and interpreted. It examines the economic and technological factors influencing reserve estimates,
and questions whether current methodologies provide an accurate picture of the world’s remaining hydrocarbons.
The chapter contrasts physical and psychological interpretations of “peak oil” and introduces the concept
of a “medieval map” — an analogy for outdated perspectives on global reserves.

Overview

• Defines oil and gas reserves and explains how they are measured and audited.
• Analyzes the link between reserves, production, and financial performance.
• Describes classification systems — SPE, SEC, Russian, and Norwegian — and their differences.
• Examines the uncertainty of reserves measurement and “missing barrels.”
• Explores global reserves distribution and the ongoing debate over “peak oil.”
• Introduces the metaphor of the “medieval map” to illustrate incomplete global exploration.

Key Topics and Concepts

• Reserves and Financial Performance – How stock prices, KPIs, and credit ratings are influenced by proved reserves.
• Reserves Classification – The “Three Ps”: Proved (P90), Probable (P50), and Possible (P10) reserves.
• Measurement Standards – Comparison between SPE and SEC systems; variations in international definitions.
• Uncertainty and Auditing – Challenges in measuring subterranean hydrocarbons and the role of technology.
• National vs. International Oil Companies – The influence of reserves on national economies and OPEC quotas.
• Peak Oil Debate – Differentiating physical resource limits from psychological and technological factors.
• Technological Evolution – Advances in deepwater, subsalt, and directional drilling redefining recoverability.

Case Studies and Examples

• Comparison of SPE and SEC reserves definitions — and their financial implications.
• BP Statistical Review (2008) data illustrating 1.238 trillion barrels of proved oil reserves.
• Illustration of the “Three Ps” and “P-factor” probability system used in industry forecasts.
• Examples of Russian (A–D2) and Norwegian (0–9) reserves classifications.
• Continental plate reconstruction linking West Africa and Brazilian offshore basins.
• Exploration potential in the Amazon Complex, Arctic Circle, and Empty Quarter.
• Deepwater breakthroughs in Gulf of Mexico, West Africa, and Brazil’s Subsalt Frontier.

Scientific Methods and Models

• Geologic Risk Assessment – Assigning probabilities to plays based on net pay, porosity, and permeability.
• Play Analysis – Modeling accumulations with shared geological and temporal properties.
• Probabilistic Classification – Using “P-values” to quantify confidence in recoverable volumes.
• Technological Factors – The impact of seismic imaging, horizontal drilling, and geosteering on reserves estimation.
• Extended Reach Drilling (ERD) – Environmental and economic benefits of extreme offset wells.

Key Figures and Illustrations

• Global oil and gas resource distribution charts (EPRasheed).
• Diagram of probability versus production (“Three Ps”).
• Historical map analogy showing “missing continents” to illustrate incomplete data.
• Continental reconstruction linking West African and Brazilian basins.
• Petrobras deepwater development schematic – depth progression to ultra-deepwater.
• Finding costs per region (EPRasheed, 2009).

Summary

The chapter concludes that the world is not running out of oil, but rather operating with incomplete data — a “medieval map”
of global reserves. While petroleum remains finite, exploration technology continuously expands the boundaries of what is
economically and technically recoverable. “Peak oil,” therefore, represents a psychological and methodological limitation
rather than a definitive geological event. The ultimate constraint on production is cost — not scarcity.

Download Chapter 2

Download Chapter 2 (PDF)