The oil industry is littered with jargon which is
possibly why it is so difficult for the ordinary man and woman to understand
it. Since the oil companies seem to want to keep quiet about peak oil
(assumedly so as not to effect their share prices), they probably are
happy to use such terms. On this page are some definitions which you will
You would think that a simple term like oil would be straightforward
enough. Unfortunately not.
Crude oil (or petroleum) is one form of a substance known as hydrocarbons
that form part of what we call fossil fuels. The other hydrocarbon
is natural gas. Coal is not usually considered a hydrocarbon. Oil itself
comes in different forms with consistencies from liquid to nearly solid.
Regular or Conventional Oil
Conventional oil is generally defined as oil which is produced by primary
or secondary recovery methods. These methods are from its own pressure,
physical lift, water flooding, and pressure from water or natural gas.
Generally refers to free flowing oil so excludes tar sands, heavy oil,
deepwater, polar and NGL. This accounts for about 95% of all oil production.
Bitumen: generally means hydrocarbons in a solid
or semi-solid state. Principally the tar sands of Canada, defined
by viscosity, from which synthetic oil is made.
Coal and Gas Conversion: oil produced from the conversion
of coal or gas to oil.
Deepwater Oil: oil below 500m in depth of water.
Defined differently from regular oil because of its significantly
different geology, operating conditions and the state of knowledge
Extra Heavy Oil: oil less than 10ºAPI. Production
is controlled by its extraction rate rather than the resource base.
Mainly in Venezuela and Canada.
Gas Condensates: hydrocarbon liquid dissolved in
saturated natural gas that comes out of solution when the pressure
drops below the dew point.
Heavy Oil: oil less than 17.5ºAPI but greater
than 10º API (“Extra Heavy Oil”). Production is controlled
by its extraction rate rather than the resource base.
NGL (Natural Gas Liquid): hydrocarbons that exist
in fields as constituents of natural gas but which are recovered separately
as liquids. Natural gas liquids include propane, butane, pentane,
hexane and heptane, but not methane and ethane, since these hydrocarbons
need refrigeration to be liquefied.
Oil Shale: a petroleum source rock that has never
been converted to oil. It can be converted to liquid oil by mining,
crushing and heating.
Polar Oil: defined differently from regular oil
because of its significantly different geology, operating conditions
and the state of knowledge regarding it.
Tar Sands (Oil Sands): an oil field which has been
exposed at the surface so that only a nearly solid tar is left. It
can be converted to liquid oil by mining, heating and separation.
- API (Gravity): a measure of oil density. By definition,
the API Gravity of fresh water is 10. Higher API Gravities correspond
to lower-density (ie.'lighter') liquids.
This is the first stage of oil or gas production when the natural pressure
of gas or water inside the reservoir forces the hydrocarbons to the surface
naturally. As the pressure drops, it is necessary to bring in pumps such
as the 'nodding donkeys' to assist but this is still classed as primary
production. Only about 10-20% of the source is produced in this stage
and it ends when the production rates are too low to be economical or
the amount of gas or water in the output is too high.
Here an external fluid such as water or gas is injected into the reservoir
to create an artificial pressure, enough to drive the hydrocarbons to
the surface. 15-40% of the source can be produced by secondary recovery
and it ends when too much of the injected fluid is being returned at the
In the last stage, sophisticated techniques are used to
increase pressure and improve fluid flow. These involve altering the original
properties of the gas or oil. The three main methods are chemical flooding,
CO2/hydrocarbon injection, and thermal recovery (steam-flooding or combustion).
5-15% may be recovered using tertiary production. Tertiary recovery is
also known as "Enhanced Oil Recovery" (EOR).
The chart above shows the amount of oil each form of recovery
is likely to extract from a reservoir. It shows that, even at the very
best, 20% of the oil will remain in the ground. Usually you could not
expect to get more than about 60% from a field.
Even the measuring of oil is confusing. The most common unit is the barrel
which is 42 US gallons (approximately 35 UK gallons or 159 liters). Because
oil is used in such large amounts, it may consequently be measured in
terms such as million barrels, thousand million barrels
and gigabarrels. Just to confuse things even further, it is
also sometimes measured in tonnes (and thousand tonnes and
million tonnes, etc.) One tonne is the equivalent of 7.33
A gigabarrel is a thousand million barrels. If this seems a rather extreme
measurement, consider that daily consumption of oil is over 80
million barrels (BP) - that is about 150,000 liters a second! (Imagine
around 1,000 average baths being filled in one second). A years
consumption would be about 29 thousand million barrels. It is easier
to talk about 29 gigabarrels and this will generally be the measurement
I will use on this site.
Note: the 42 US gallon barrel is now an abstract measurement. The common
oil drum usually holds 55 US gallons.
See also Units and Conversions below.
An oil well speculatively drilled in an area not known to be productive.
Clearly an increasing number of wildcats indicates that oil is getting
harder to find, especially if they come up dry.
Generally, a swing producer is a country which extracts more oil than
it consumes. In particular it refers to the five main oil producing countries
of the Middle East Saudi Arabia, Kuwait, Iran, Iraq and the UAE
whose massive oil reserves and low consumption make them the key
producers in the peak oil saga.
The Organisation of the Petroleum Exporting Countries. Its purpose, according
to its website:
All thirteen members are developing countries, whose economies rely
on oil export revenues. One of OPECs primary missions is to achieve
stable oil prices, which are fair and reasonable for oil producers
At the present time, it consists of Algeria, Angola, Ecuador, Indonesia,
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela.
The present high oil prices suggest that OPEC's primary mission is no
longer possible. They may now become a mutual defence force against resource
Optimists and Pessimists
The two sides of the peak oil debate. The optimists are those (primarily
in the oil industry and governments) who believe that plentiful supplies
of oil will last far into this century at least. The pessimists are mainly
retired or independent oil geologists who believe that oil will peak and
go into decline within a decade or two. (Guess on which side I stand.)
"Energy Returned on Energy Invested". To produce energy, whether
it is an oil well or a wind turbine, you need to use energy. EROEI is
a way of comparing how 'efficient' an energy source is. For more details,
see Alternative Energy
"Energy Profit Ratio". A different way to use the figures in
EROEI (above). More details are also in Alternative
Referring to Oil Resources
Resource (Everything thats still there)
All of the oil, both discovered and undiscovered, whether it can be recovered
Recoverable Resource (What we can get out)
The part of the resource that is considered recoverable. This depends
a) the oil price (if it costs more to recover the oil than to sell it,
it is not worth recovering. A rise in oil price might make some deposits
previously not worth recovering economically viable.)
b) technology (in the diagram, if our man acquires a ladder, the oil on
the other side of the wall now becomes recoverable.)
Reserves (We know where it is and we can get it)
The recoverable resource that has been found but not yet used.
Yet-to-Find (We can get it but we havent found it yet)
The recoverable resource that is still to be found.
Cumulative Production (We've already got it out)
The resource that has already been recovered, either in store or used.
Ultimately Recoverable Reserves (AKA the Ultimate)
The original reserves, the same as the Recoverable Resource. So
Ultimate = Yet-to-Find + Reserves + Cumulative Production
Proved Reserves (How much we think is in the reserves)
Generally taken to be those quantities that geological and engineering
information indicates with reasonable certainty can be recovered in
the future from known reservoirs under existing economic and operating
conditions. (BP Definition)
In other words, not the total amount of oil that is in the ground
but the amount that is considered worth extracting. As economic
conditions change (the price of oil changes) and new technology comes
in, the proved reserves can and often do change.
Proved, Probable, Possible (P90, P50, P10)
We can never be sure exactly how much oil is actually in the reserves
but they can be estimated. Consequently the amount thought to be in the
reserves is generally estimated as three figures:
- Proved or Proven (P or P90) The lowest figure, the
amount that the geologists are 90% sure is there (sometimes 95% is used
which would be P95).
- Probable or Proved+Probable (2P or P50) The average
figure (median or mean), the figure that is expected to be closest to
the true reserves.
- Possible or Proved+Probable+Possible (3P or P10)
The highest figure, the amount that the geologists are 10% sure is there
(sometimes 5% is used which would be P5).
For example, if geologists estimates that there is a 90% chance that
a particular field contains 500 million barrels but only a 10% chance
that it will yield 2,000 million more barrels, then the lower figure should
be cited as the P90 estimate and the higher as the P10.
The best choice of estimate to use is P50. Since a 50% estimate is just
as likely to be higher than lower, they would on average even out when
added together. Using P90 only would leave too much oil to be found in
the future so make estimates of oil depletion difficult. Using P10 would
make your estimates over-optimistic, again confusing future trends.
Different countries use different P values (see above) for reporting.
The USA SEC (Securities and Exchange Commission) insists on P10, the former
Soviet Union used P90, while most countries use P50. The problem with
using P10 is that, over time, the reserves figure will rise, giving the
impression that more oil is being discovered. In fact, we are not finding
any new oil, only adjusting the original estimates.
This 'reserve growth' is used by the optimists and economists to suggest
that the amount of oil in the world is growing, creating charts of World
reserves like the one on the left below (chart R2 on Reserves
page). If you backdate this reserve growth (adjust the original value
given at the time of discovery), you get a chart such as the one on the
right (chart R6 on Reserves page) which gives
a truer view of what World reserves are doing.
If you're still not sure about reserve growth and the importance of backdating,
have a look at my Reserve Growth
for Dummies page.
Reserves/Production (R/P) Ratio
If the reserves remaining at the end of any year are divided by the
production in that year, the result is the length of time that those
remaining reserves would last if production were to continue at that
level. (BP Definition)
This is a common ratio in the oil business. As we shall see, it is pretty
useless except for comparing different fuel reserves (eg. how long coal
would last compared to oil).
The creaming curve is the cumulative discoveries versus the cumulative
number of new field wildcats (NFW). (Jean Laherrère).
Not as complicated as it sounds. Basically its a way of estimating
the amount of oil reserves by examining how easy it is to find the oil.
It generally gives the most accurate estimates. See Creaming
Curves on the Reserves page.
Production is how much oil a field or country is outputting. In many
cases, production is at a maximum the field is pumping out oil
as fast as it can. But some countries, notably Saudi Arabia and other
OPEC countries (see Swing Producers), have overcapacity and reduce their
production to keep oil prices high.
Cumulative production figures are fairly accurate since the oil companies
use meters on their wells. Any errors, such as the Kuwaiti oil burnt by
Iraq in 1991 and not included in official statistics, are easily remedied.
Consumption, or demand for oil, is fairly straightforward. It generally
increases as populations do, and also as less technologically advanced
countries progress. High oil costs, recessions and other economic downturns
Units and Conversions
Orders of Magnitude
|a millionth or 10-6
||A grain of granulated sugar has a mass of about 1 µg.
|a thousandth or 10-3
||There are 25.4 mm in an inch.
|a hundredth or 10-2
||There are about 30.5 cm in a foot.
|1,000 or 103
||A typical UK household uses energy at an average rate of about 3kW.
|a million or 106
||A 5-MW power station could supply enough energy for a small town.
|a billion or 109
||The output of a large modern power station is about 1 GW.
|a million million or 1012
||The world is consuming primary energy at a rate of about 12 TW (1997)...
|a million billion or 1015
||...which is equivalent to about 43 PJ an hour...
|a billion billion or 1018
||or about 370 EJ a year.
Table from "Energy a Guidebook" by Janet
- The joule (J) is the unit of energy and is defined as equal to the
work done by a force of one newton when its point of application moves
one metre in the direction of action of the force.
- A watt (W) is the unit of power and is defined as one joule per second.
- A kilowatt-hour (kWh) if the amount of energy converted in 1 hour
at a rate of 1 kW.
- 1 barrel of oil = 42 US gallons ≈ 34.972 UK gallons ≈
158.987 liters. The density of oil varies but averages about 7.3 barrels
to the tonne (so 1 barrel ≈ 0.137 tonnes).
- 1 calorie = 4.19 J
- 1 BTU = 1055 J
Energy in Materials
- 1 barrel of oil = 5,700 MJ
- 1 tonne oil equivalent (toe) = 42,000 MJ (42 GJ)
- 1 tonne coal = 29 GJ average (varies from <20 GJ to >30GJ)
- 1 tonne gas (methane) = 55 GJ
- 1 tonne hydrogen = 130 GJ
- 1 tonne wood = 15 GJ
- 1 tonne dried dung (imagine!) = 16 GJ