Slippery Language and Slick Definitions: Petroleum Terminology - GD Part 2.5

The petroleum industry has existed for over 150 years, but until very recently didn't have universally accepted definitions for all of the terminology associated with oil resources and production. There is a somewhat lengthy history involved in the establishment of rules and terms associated with assessment, measurement, and reporting of resources.

Terms that the news media, government officials, and oil industry PR agents throw around have definitions which historically have been unclear, changing, and oftentimes misrepresented. For this reason, I'd like to direct you to a .pdf document on the Society of Petroleum Engineers website www.spe.org :

Petroleum Resource Management System (PRMS)

Sponsored by:
Society of Petroleum Engineers (SPE)
American Association of Petroleum Geologists (AAPG)
World Petroleum Council (WPC)
Society of Petroleum Evaluation Engineers (SPEE)
Society of Exploration Geophysicists (SEG)


This is not only a helpful document in terms of understanding terms and definitions (there is a glossary of "Reference Terms" at the end), but it also includes a short history of petroleum terminology, outlines procedures for classifying different resources, and provides insight into the methods used in assessing petroleum resources, along with a peek into cost and recovery factors.


The terminology used by the oil industry seems deliberately misleading and confusing. One prime example is the confusion between the terms "shale oil" and "oil shale." Here are these and a few other definitions to get you started:

Shale Oil most often refers to "tight oil" (what is usually light or medium viscosity conventional oil) trapped in pockets within shale formations. The Bakken Formation in North Dakota, is one such formation. The process used to extract this resource is called hydraulic fracturing (or more commonly: fracking), and involves injecting a mixture of water and chemicals at very high pressures into the shale to pulverize the stone and make the liquid petroleum accessible for pumping out of the ground. This technology is not new- it only recently became profitable due to high oil prices- although oil companies have made modifications to the technique in the past few decades.

While oil prices remain high, the industry will continue to use fracking to gain access to the large quantities of technically recoverable shale gas and shale oil trapped within such formations in the lower 48 states of the US.

Oil Shale refers a waxy, solid hydrocarbon substance called kerogen found within some sedimentary rock formations, or it may refer to a number of other bituminous compounds found in rock. This resource is not oil; it requires either extreme heating or chemical processing in order to transform it into synthetic oil, and cannot directly be pumped out of the ground because of its solid state. The industry has been experimenting with various other processes, including heating the underground formations to 500 degrees Celsius, or transmitting very high energy radio waves into the formations. Without somehow changing the state of the kerogen, the resource must be mined. In any case, extensive processing and refining is necessary to create a commercial product. The oil industry does not currently have many commercial-scale kerogen extracting sites and estimates on the development of new ones are usually quoted in decades, even when laying out optimistic assessments.

Reserves/Proven Reserves are not how much oil a country possesses in a warehouse somewhere or even underneath the ground, but rather reserves are an estimate of how much oil can be extracted with today's technology at a cost that is profitable at today's prices. There are usually three figures in calculating reserves- a low (1P- also taken to be "Proved/Proven Reserves"), medium (2P = Proved + Probable Reserves) and high (3P = Proved + Probably + Possible Reserves) estimate. We can generally assume that the figures being reported in official reports by the US Geological Survey, the EIA, The Oil & Gas Journal, OPEC and British Petroleum are the 1P Reserve values if they cite "Proved Reserves." News reporters, bloggers, politicians, pundits and sometimes even oil industry executives like to quote whatever figure is convenient to make their point, and rarely cite their sources or disclose which figure they are using.

Reserve Growth is a situation in which over a given year or time period, despite oil production and sales, a country's/region's Proven Reserves grow instead of shrinking. This happens for many reasons:

• New oil fields are discovered
• New/improved methods/equipment/technology allow greater recovery factor of oil resources
• The price of oil went up, allowing previously unprofitable deposits to become economically recoverable

Recovery Factor/Recovery Efficiency is a numerical expression (usually a percentage) of the amount of oil in a known deposit that can be ultimately recovered using existing processes of extraction.


Petroleum Resources is a slippery term. One way to look at this is that it denotes the amount of resources estimated to be in the ground- whether it is deemed recoverable or not- and often this figure includes any amount which has already been extracted. When that is the case, it should be referred to as "Total Petroleum Resources Originally in-Place" or "Original Resources In-Place" or some other permutation of similar terms.
Example: A hypothetical oil field, discovered in 1934, has "Total Petroleum Resources Originally In-Place" of 132 million barrels, a technically recoverable amount of 32 million barrels (due to geological limitations), and has been in continuous operation for 80 years. In that time, 7 million barrels of oil have been produced. In 2014, due to economic factors, the field has Proven Reserves (1P) of 5 million barrels, 2P estimate of 8 million barrels, and 3P estimate of 11 million barrels-- but the figure for "Original Petroleum In-Place" will continue to be counted as 132 million barrels, forever.
Sometimes, without notice or explicit explanation, quantities referred to as "Petroleum Resources" will reference "Total Petroleum Resources Originally In-Place."



Stay tuned! More to come!

NO KEYSTONE XL PIPELINE - GD Part 2.4

This is a <<"Mommy, What are Sparks Made Of?">> Comment on the U.S. Department of State (DOS) Notice: Presidential Permit Applications: TransCanada Keystone Pipeline, L.P, National Interest Determination

NO KEYSTONE XL PIPELINE

The United States must divest from petroleum. The benefits of that fuel over the last century have been enormous-- because cheap oil has effectively been like steroids to the economy of the 20th century, but cheap oil is a thing of the past. Our economy is addicted to oil and we desperately need to break the habit, or risk continuous global economic instability. 

Committing to the Keystone XL Pipeline is the wrong move-- economically and environmentally. The SAGD bitumen removal system provides a low EROI, which makes the tar sands a poor energy choice. Over 30 oil companies have been working on this project for decades and the best extraction method they've come up with yields perhaps a 4:1 energy gain *prior to* cracking, shipping, and refining; while using a substantial amount of natural gas (to extract the projected amount of 173 billion bbl of proved reserves requires approximately 7.2 trillion cubic meters/254 trillion cubic feet of natural gas-- 4.3 times Canada's current natural gas reserves).

The overall benefits of the project will be barely noticeable. Even when the tar sands region reaches target production, we will barely know that it's even happening. We will neither experience a substantial gain in supply over the long run, nor a reduction in price; in fact, the Tar Sands project depends upon high oil prices to continue.

Transport by pipeline to Gulf Coast refineries will look very good on the books-- but in real life, the gains are slim and the potential costs are immense. TransCanada promises an absurd amount of job creation, but looking over the actual staff of existing pipelines shows that few actual permanent jobs will be involved in maintaining this new one. 
Proponents say that Keystone XL will be safer than "oil trains" -- but it would be foolish to assume that the pipeline would end transport by train (and if it does, did the pipeline just net negative job creation?). A temporary reduction in shipping by train may occur, but eventually the bitumen will be shipped by *both* train and pipeline. The chances of spills/accidents will have increased, not decreased.

From the pipeline to the tailpipe, this "oil" resource is dirty and environmentally disastrous.

The cost/benefit analysis of this project has netted positive results only in the "best case scenario" and even then, the advantages are rather insignificant and temporary. It is not worthwhile to approve this pipeline. The United States needs to put more effort into reducing its dependence on oil and other fossil fuels. The best way to meet that end is to make fewer future commitments to oil, and concentrate more on research & reduction in the present. 

The US could be a leader in alternative energy research and production, and could serve as an example to the rest of the world -- the developing world especially -- to divest from fossil fuels and build a more sustainable and resilient world economically and environmentally, but we cannot do this by expanding our current dependence. 

Say "NO" to TransCanada's Keystone XL project.