That the traditional optimism of the oil industry can easily become irrational is perfectly exemplified by recent Canadian experience. Application of this experience to the world scene is illuminating.

Forecasts of "potential" reserves based on volumes of sedimentary rock, without the incorporation of probability factors, must be abandoned. It is impossible to quantify the unknowable by this form of analogy. The only type of forecast that can be based on experience takes into account the facts that (1) no readily accessible area of potential production remains in any real sense unexplored, and (2) the rate of addition to the Free World's conventional reserves appears to be established on a negative slope.

The production-depletion curve can be extended beyond its mathematically determinable "tail" only by the discovery of basins capable of very prolific production (e.g., basins such as the North Sea basin). The type of oil field characteristic of North America now makes no perceptible difference in the projections. Such new productive basins almost inevitably will be in remote, hazardous, or insecure regions, largely offshore and in deeper or more dangerous waters. Operation in such areas requires not merely large fields, but fields with thick "pay" zones, so that fixed platforms can be used. Such fields are almost bound to be in structural traps; in offshore areas, structural traps are very likely to be diapiric and should be identifiable early in the exploration of the basins.

Geographic, political, engineering, and other factors determine the producibility characteristics required to make any new basin economically viable compared with alternative sources of hydrocarbons (comparable production from oil ["tar"] sands, oil shales, or coal). Empirically derived probability factors then must be incorporated into the quantities of production required to extend the tail of the production-depletion curve. These probability factors appear to be of the following order: (a) probability that an explored basin will yield a single field of 500 million bbl, about 1 in 6; (b) probability that an explored basin will yield a single field of 1 billion bbl, about 1 in 10; (c) probability that an explored basin will yield one 1-billion bbl field capable of development by abou 64 wells (4 times 16 well platforms), about 1 in 20 or less; (d) probability that an explored basin will contain more than 5 billion bbl of recoverable reserves (to justify a 30-in. pipeline with 20-year life), about 1 in 14; (e) probability that an explored basin will contain more than one supergiant oil field, about 1 in 45.

With risk factors of these orders incorporated into projections, the odds may now be that the Free World's undiscovered reserves of conventional oil are smaller than the amount already produced.