Report: Technology Only Accelerates Oil Depletion Rate
Abstract: In this paper we use results from the Hotelling model of non-renewable resources to examine the hypothesis that technology may increase petroleum reserves. We present empirical evidence from two well-documented mega-oilfields: the Forties in the North Sea and the Yates in West Texas. Patterns of depletion in these two fields suggest that when a resource is finite, technological improvements do increase supply temporarily. But in these two fields, the effect of new technology was to increase the rate of depletion without altering the fields' ultimate recovery - in line with Hotelling's predictions. Our results imply that temporary low prices may be misleading indicators of future resource scarcity and call into question the future ability of current mega-oilfields to meet a sharp increase in oil demand.
...Evidence from two well-documented mega-fields, the Forties in the North Sea
and the Yates field in West Texas, calls into question the traditional economic view that technological improvements will increase proven reserves of petroleum. These two mega oilfields have been subject to enhanced oil recovery (EOR) technologies. EOR measures (also called secondary and tertiary measures) are often cited as a viable means of increasing future oil recovery rates by mobilizing resources and enhancing the recovery of oil and gas in place. This include the possibility of boosting the extraction rates by better drainage of the oil in place: when the pressure in the oil field has decreased to a level where the viscosity of oil dominates the production profile leading to lower extraction rates, pressure can be raised artificially by water or gas injection, or by reducing the viscosity with the injection of steam or a chemical surfactant . EOR technologies are widely used and do have the potential to enhance oil production.
However, evidence shows that these measures increase the production rate for a short period of time, but enhance the decline in the long term – EOR makes it possible to extract temporarily the oil faster, but not to increase the total overall oil recovery – more today means less tomorrow. The subsequent decline rate is steeper.
Download: Technology and Petroleum Exhaustion: Evidence from Two Mega-Oilfields PDF
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