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Oil and gas forecasting: Reflections of a petroleum geologist
Book reviews
account, decreased exchange rate volatility in an exporting country exerts an influence on both commodity output and prices. The final chapter, ‘Commodity policy-price stabilization versus financing’, by R. Herrman, K. Burger and H.P. Smit, compares the stabilizing effects of the IMF Compensatory Finance Facility and the EEC STABEX scheme in the context of the coffee export quota agreement and the natural rubber buffer stock scheme. The authors take an actual performance or policy operational view in their econometric evaluations of stabilization impacts. Their findings of limited impacts should be of interest to policy workers in this area. Missing after this chapter is a concluding chapter which would consolidate the results of the authors in the form of prospects for future research. For example, how should commodity market researchers adopt some of the suggested improvements in performing future studies of price behaviour or stabilization? Or what kind of certainty equivalents should researchers adopt, given the demise of the rational expectations method? For readers of this journal the book provides a variety of quantitative approaches and policy evaluation approaches suitable for natural resource price analysis and forecasting. For commodity modellers, the book provides an excellent assessment of the problems and prospects of dealing with commodity market disequilibria and rational expectations in econometric market modelling. Also handled adeptly is the explanation provided concerning the relations between futures markets, foreign exchange markets and commodity prices. This book is indeed a must for commodity researchers and policy makers interested in new approaches for improving the modelling and forecasting of commodity price behaviour.
W.C. Labys Department of Mineral and Energy Resource Economics West Virginia University Morgantown, WV, USA
RESOURCES
POLICY June
1991
Personal history OIL AND GAS FORECASTING: Reflections of a Petroleum Geologist Lawrence
J. Drew
International Association for Mathematical Geology Studies in Mathematical Geology No 2, Oxford University Press, 1990, 252 pp, US$45.00 Larry Drew is a principal player in geoscience’s diverse, collegial, oil and gas resource-base quantification effort. That effort began, rather tentatively and simply, in the 1950s. It came of age in the late 1960s and early 197Os, as the industrialized world began to perceive economic effects arising from the finite nature of its indigenous oil and gas resources.
Informative Reflecting its author’s innate character, the book is sometimes wry, sometimes amusing and, for those unfamiliar with its subject area, very informative. It presents a personal history of his and his colleagues’ efforts to assemble data on oil and gas occurrence, to make sense of these data in the context of the exploration process, and to apply their newly won knowledge to forecasting the expectable volume and component field size distribution of the remaining, undiscovered oil and gas resource base. Belying the obvious and more inclusive interpretation of the book’s somewhat unfortunate title, he states ‘In a broad sense, the book is about petroleum resource assessment; in a narrow sense, it is about forecasting oil and gas discovery rates and the associated task of determining the distributional form of oil and gas field size distributions.’ Alas, the book does not discuss temporal forecasting of the conversion of undiscovered resources to supply, the ‘other half’ of the oil and gas forecasting pie, for which the quantitative resource estimates are key inputs. In fact, given that it does not do so, the author is overly hard on the economists to whom that unenviable task falls.
It is always difficult to know how to judge the juxtaposed human and scientific elements which comprise a book such as this. Scientists’ personal histories are usually intended for a relatively general readership, and all too frequently their authors visit violence on either the science content or the involved humankind in the process of composing them. I am happy to report that neither has happened here. With one possible minor exception, the author’s portrayals of the individuals he encountered or worked with-the vast majority of whom I also know - are reasonably objective and accurate, as are his portrayals of institutions as they existed at the time cited. The scientific basis for his and his colleagues’ work, and its logical progression over the years, are well laid out. Nevertheless, a working knowlege of basic statistics and a smattering of petroleum geology background will provide the casual reader with a much greater comfort factor. Those who really wish or need to examine the science should proceed from the book to the relevant literature, as peripheral details are not always discussed in the book.
Lack of data Beyond a few proofreading errors and consistently incorrect labelling of the Energy Information Administration as the Energy Information Agency, a substantive problem I have with the content of the book is Chapter 8’s strong assertion that the parent (or supra-) population of observed oil and gas field size distributions is itself distributed log geometrically. While the general consequences and implications of so concluding are undoubtedly correct, they might equally flow from assumption of any number of similarly J shaped distributions that would have somewhat different implications in their extreme (tail) regions. For example, Figure 8.1 (p 1.51) indicates a 0.9 to 3.0 range of interclass ratios of field size, with a mean of 1.67 and a standard deviation of approximately 0.5. Even allowing for the kind of com-
161
Book reviews/Resources
reading
pleteness and quality problems that are endemic where domestic oil and gas data are concerned, this is not very robust statistical evidence. Assuming normality of the errors, only 50% of interclass ratio observations would be expected to lie between about 1.3 and 2.0. Due mostly to lack of adequate data, similar work has yet to be performed on a sufficient number of plays to, in my view, render the blanket and very specific assertion of a log geometric parent population more than a promising candidate hypothesis. The author may well prove to be right in the long run, but I harbour a suspicion that the whole story has yet to be discovered and told. Then again, maybe I am just a die hard sceptic. Of such stuff is science made! In any event, I commend this book to all with an interest in oil and gas resource assessment, exploration for hydrocarbon or mineral resources, or the contemporary working context of applied geoscience.
David Morehouse Arlington, VA 22206, USA
A database MINING AND THE ENVIRONMENT 2: A Reference List Institution of Mining and Metallurgy, London, 1990, f20.00 Mining and mineral processing are not environmentally benign. The air, water and land all are affected to varying degrees by these activities and there is growing public agreement worldwide that mining companies and governments need to pay more attention to controlling the impacts of mining and mineral processing on human health, wildlife and other aspects of environmental quality. To respond appropriately to this growing public sentiment, mining companies and governments need information both on environmental impacts and on how to reduce these impacts. The Institution of Mining and Metallurgy provides a useful starting point for anyone beginning a library search in this area with its volume Mining and the Environment 2, a list of some five hundred recent references on environmental aspects of
Khawlie (Manse11 Publishing, London, UK, 1990, 132 pp, f27.50, ISBN 0 7201 20403) Blueprint for Antarctica - The Tinker Foundation Workshop (The World Re-
sources Institute, 1709 New York Avenue, NW, Washington DC 20006, USA, 1989, 33 PP) Competitiveness of the Minerals and Metals Industry by National Materials Advisory
Board, Commission on Engineering and Technical Systems, US National Research Council (National Academy Press, Washington, DC, USA, 1990, 118 pp, ISBN 0 309 042453) Conflict over Natural Resources in SouthEast Asia and the Pacific by Lim Teck
Ghee and Mark J. Valencia (Oxford Uni-
162
versity Press, Walton St, Oxford 6DP, UK, 1990,256 pp, 225.00)
OX2
The Economics of Copper 1990 (Roskill Information Se&ices _Ltd, 2 Clapham Road. London SW9 OJA. UK. 1990. f655.00, US$1310.00, DM2290.00) Energy and Mineral Resource Systems: An Introduction by B.A. Tapp and J.R. Wat-
kins (Cambridge University Press, The Edinburgh Building, Shaftesbury Road, Cambridge, CB2 2RU, UK, 1990, 150 pp. f6.95) Environmental Management in Development: The Evolution of Paradigms by M.E.
Colby, World Bank Discussion Paper No 80 (The World Bank, Washington, DC, USA, 1990, 46 pp, US$5.95, ISBN 0 8213 1559 5) Envisioning
Information
Roderick G. Eggert Colorado School of Mines Golden, CO, USA
Tufte (Graphics Press, Box 430, Cheshire, CT 06410, USA, 1990, 126 pp, US$48.00, ISBN 0961 3921 18)
Resources reading Beyond the Oil Era: Arab Mineral Resources and Future Development by M.R.
mining and mineral processing. It actually is a companion volume to the Institution’s 1986 publication Mining and the Environment, which lists about five hundred earlier references. References in both volumes are selected from the Institution’s 40 OOO-entry database on the mineral industry, and both lists are available on 5.25 and 3.5 inch computer disks. The articles themselves also are available directly from the Institution for a small charge. References are grouped into four categories: planning and the environment; pollution and environmental monitoring; waste disposal; and reclamation, revegetation and landscaping. Articles falling into more than one category appear in more than one list. The entries represent a variety of sources, including books, trade journals such as Metal Bulletin, academic journals such as Resources Policy, conference proceedings (eg 11th North Australian Mine Rehabilitation Workshop, Darwin, 1989), and government reports (eg from the US Bureau of Mines).
by Edward
R.
The Greek Mining Activity in 1987 by M. Goudeli (The Institute of Geology and Mineral Exploration, Athens 608, Greece, 1990, 80 pp, $35.00)
The Lead and Zinc Industries: Long-Term Prospects by Alfred0 J. Dammert and
Jasbir G.S. Chabra (The WorldBank. 1818 H Street, NW, Washington, DC 20433, USA, 1990,250 pp, $13.95)
The Making of Economic
Policy in Africa
by R. Gulbat;, ED1 Seminar Series (The World Bank, Washington, DC, 1990, 111 pp, US$7.95, ISBN 08213 1341 X) Minerals Handbook 1990-91: Statistics and Analyses of the World’s Minerals Industry
by Phillip Crowson (Globe Book Services Ltd, Macmillan Stockton House, 1 Melbourne Place, London WC2B 4LF, UK, 1990, 334 pp, f65.00)
RESOURCES
POLICY June 1991
account, decreased exchange rate volatility in an exporting country exerts an influence on both commodity output and prices. The final chapter, ‘Commodity policy-price stabilization versus financing’, by R. Herrman, K. Burger and H.P. Smit, compares the stabilizing effects of the IMF Compensatory Finance Facility and the EEC STABEX scheme in the context of the coffee export quota agreement and the natural rubber buffer stock scheme. The authors take an actual performance or policy operational view in their econometric evaluations of stabilization impacts. Their findings of limited impacts should be of interest to policy workers in this area. Missing after this chapter is a concluding chapter which would consolidate the results of the authors in the form of prospects for future research. For example, how should commodity market researchers adopt some of the suggested improvements in performing future studies of price behaviour or stabilization? Or what kind of certainty equivalents should researchers adopt, given the demise of the rational expectations method? For readers of this journal the book provides a variety of quantitative approaches and policy evaluation approaches suitable for natural resource price analysis and forecasting. For commodity modellers, the book provides an excellent assessment of the problems and prospects of dealing with commodity market disequilibria and rational expectations in econometric market modelling. Also handled adeptly is the explanation provided concerning the relations between futures markets, foreign exchange markets and commodity prices. This book is indeed a must for commodity researchers and policy makers interested in new approaches for improving the modelling and forecasting of commodity price behaviour.
W.C. Labys Department of Mineral and Energy Resource Economics West Virginia University Morgantown, WV, USA
RESOURCES
POLICY June
1991
Personal history OIL AND GAS FORECASTING: Reflections of a Petroleum Geologist Lawrence
J. Drew
International Association for Mathematical Geology Studies in Mathematical Geology No 2, Oxford University Press, 1990, 252 pp, US$45.00 Larry Drew is a principal player in geoscience’s diverse, collegial, oil and gas resource-base quantification effort. That effort began, rather tentatively and simply, in the 1950s. It came of age in the late 1960s and early 197Os, as the industrialized world began to perceive economic effects arising from the finite nature of its indigenous oil and gas resources.
Informative Reflecting its author’s innate character, the book is sometimes wry, sometimes amusing and, for those unfamiliar with its subject area, very informative. It presents a personal history of his and his colleagues’ efforts to assemble data on oil and gas occurrence, to make sense of these data in the context of the exploration process, and to apply their newly won knowledge to forecasting the expectable volume and component field size distribution of the remaining, undiscovered oil and gas resource base. Belying the obvious and more inclusive interpretation of the book’s somewhat unfortunate title, he states ‘In a broad sense, the book is about petroleum resource assessment; in a narrow sense, it is about forecasting oil and gas discovery rates and the associated task of determining the distributional form of oil and gas field size distributions.’ Alas, the book does not discuss temporal forecasting of the conversion of undiscovered resources to supply, the ‘other half’ of the oil and gas forecasting pie, for which the quantitative resource estimates are key inputs. In fact, given that it does not do so, the author is overly hard on the economists to whom that unenviable task falls.
It is always difficult to know how to judge the juxtaposed human and scientific elements which comprise a book such as this. Scientists’ personal histories are usually intended for a relatively general readership, and all too frequently their authors visit violence on either the science content or the involved humankind in the process of composing them. I am happy to report that neither has happened here. With one possible minor exception, the author’s portrayals of the individuals he encountered or worked with-the vast majority of whom I also know - are reasonably objective and accurate, as are his portrayals of institutions as they existed at the time cited. The scientific basis for his and his colleagues’ work, and its logical progression over the years, are well laid out. Nevertheless, a working knowlege of basic statistics and a smattering of petroleum geology background will provide the casual reader with a much greater comfort factor. Those who really wish or need to examine the science should proceed from the book to the relevant literature, as peripheral details are not always discussed in the book.
Lack of data Beyond a few proofreading errors and consistently incorrect labelling of the Energy Information Administration as the Energy Information Agency, a substantive problem I have with the content of the book is Chapter 8’s strong assertion that the parent (or supra-) population of observed oil and gas field size distributions is itself distributed log geometrically. While the general consequences and implications of so concluding are undoubtedly correct, they might equally flow from assumption of any number of similarly J shaped distributions that would have somewhat different implications in their extreme (tail) regions. For example, Figure 8.1 (p 1.51) indicates a 0.9 to 3.0 range of interclass ratios of field size, with a mean of 1.67 and a standard deviation of approximately 0.5. Even allowing for the kind of com-
161
Book reviews/Resources
reading
pleteness and quality problems that are endemic where domestic oil and gas data are concerned, this is not very robust statistical evidence. Assuming normality of the errors, only 50% of interclass ratio observations would be expected to lie between about 1.3 and 2.0. Due mostly to lack of adequate data, similar work has yet to be performed on a sufficient number of plays to, in my view, render the blanket and very specific assertion of a log geometric parent population more than a promising candidate hypothesis. The author may well prove to be right in the long run, but I harbour a suspicion that the whole story has yet to be discovered and told. Then again, maybe I am just a die hard sceptic. Of such stuff is science made! In any event, I commend this book to all with an interest in oil and gas resource assessment, exploration for hydrocarbon or mineral resources, or the contemporary working context of applied geoscience.
David Morehouse Arlington, VA 22206, USA
A database MINING AND THE ENVIRONMENT 2: A Reference List Institution of Mining and Metallurgy, London, 1990, f20.00 Mining and mineral processing are not environmentally benign. The air, water and land all are affected to varying degrees by these activities and there is growing public agreement worldwide that mining companies and governments need to pay more attention to controlling the impacts of mining and mineral processing on human health, wildlife and other aspects of environmental quality. To respond appropriately to this growing public sentiment, mining companies and governments need information both on environmental impacts and on how to reduce these impacts. The Institution of Mining and Metallurgy provides a useful starting point for anyone beginning a library search in this area with its volume Mining and the Environment 2, a list of some five hundred recent references on environmental aspects of
Khawlie (Manse11 Publishing, London, UK, 1990, 132 pp, f27.50, ISBN 0 7201 20403) Blueprint for Antarctica - The Tinker Foundation Workshop (The World Re-
sources Institute, 1709 New York Avenue, NW, Washington DC 20006, USA, 1989, 33 PP) Competitiveness of the Minerals and Metals Industry by National Materials Advisory
Board, Commission on Engineering and Technical Systems, US National Research Council (National Academy Press, Washington, DC, USA, 1990, 118 pp, ISBN 0 309 042453) Conflict over Natural Resources in SouthEast Asia and the Pacific by Lim Teck
Ghee and Mark J. Valencia (Oxford Uni-
162
versity Press, Walton St, Oxford 6DP, UK, 1990,256 pp, 225.00)
OX2
The Economics of Copper 1990 (Roskill Information Se&ices _Ltd, 2 Clapham Road. London SW9 OJA. UK. 1990. f655.00, US$1310.00, DM2290.00) Energy and Mineral Resource Systems: An Introduction by B.A. Tapp and J.R. Wat-
kins (Cambridge University Press, The Edinburgh Building, Shaftesbury Road, Cambridge, CB2 2RU, UK, 1990, 150 pp. f6.95) Environmental Management in Development: The Evolution of Paradigms by M.E.
Colby, World Bank Discussion Paper No 80 (The World Bank, Washington, DC, USA, 1990, 46 pp, US$5.95, ISBN 0 8213 1559 5) Envisioning
Information
Roderick G. Eggert Colorado School of Mines Golden, CO, USA
Tufte (Graphics Press, Box 430, Cheshire, CT 06410, USA, 1990, 126 pp, US$48.00, ISBN 0961 3921 18)
Resources reading Beyond the Oil Era: Arab Mineral Resources and Future Development by M.R.
mining and mineral processing. It actually is a companion volume to the Institution’s 1986 publication Mining and the Environment, which lists about five hundred earlier references. References in both volumes are selected from the Institution’s 40 OOO-entry database on the mineral industry, and both lists are available on 5.25 and 3.5 inch computer disks. The articles themselves also are available directly from the Institution for a small charge. References are grouped into four categories: planning and the environment; pollution and environmental monitoring; waste disposal; and reclamation, revegetation and landscaping. Articles falling into more than one category appear in more than one list. The entries represent a variety of sources, including books, trade journals such as Metal Bulletin, academic journals such as Resources Policy, conference proceedings (eg 11th North Australian Mine Rehabilitation Workshop, Darwin, 1989), and government reports (eg from the US Bureau of Mines).
by Edward
R.
The Greek Mining Activity in 1987 by M. Goudeli (The Institute of Geology and Mineral Exploration, Athens 608, Greece, 1990, 80 pp, $35.00)
The Lead and Zinc Industries: Long-Term Prospects by Alfred0 J. Dammert and
Jasbir G.S. Chabra (The WorldBank. 1818 H Street, NW, Washington, DC 20433, USA, 1990,250 pp, $13.95)
The Making of Economic
Policy in Africa
by R. Gulbat;, ED1 Seminar Series (The World Bank, Washington, DC, 1990, 111 pp, US$7.95, ISBN 08213 1341 X) Minerals Handbook 1990-91: Statistics and Analyses of the World’s Minerals Industry
by Phillip Crowson (Globe Book Services Ltd, Macmillan Stockton House, 1 Melbourne Place, London WC2B 4LF, UK, 1990, 334 pp, f65.00)
RESOURCES
POLICY June 1991