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Oil reserves

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Oil reserves refer to portions of oil in place that are claimed to be recoverable under current economic constraints. In this context, oil refers to conventional oil and excludes oil from coal, oil shale, bitumen and extra-heavy oil (tar sands).

Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally as the amount of oil remaining is reduced. The recovery factor (RF) is the percentage of oil in place which is expected to be economically recoverable under a given set of conditions. (It is therefore important to realize that as the price of oil goes up on the markets, the amount of petroleum in the ground that is economically recoverable goes up, because the oil that is more expensive to get is now recoverable at a profit. As the price goes down, the amount that is economically recoverable goes down. So the amount of oil you can say you have in your SEC statements--i.e. "bookable barrels"--depends on the price of oil on the markets as well as the actual amount of oil in the ground. A large change in price will radically change the amount of oil understood to be part of the reserve, regardless of whether any oil has been lifted from the wells in question or not.)

Oil reserve estimates are ideally a measure of geological and economic risk — of the probability of oil existing and being producible under current economic conditions using current technology. The international authority for reserves definitions is generally the Society of Petroleum Engineers. The U.S. Securities and Exchange Commission demands that oil companies with exchange listed stock adopt reserves accounting standards that are consistent with common industry practice. However these standards are based on historical production practices and are not always meaningful in dealing with deep-water and non-conventional oil fields that are becoming the source of more and more of the world's oil production. In addition, many of the world's largest oil-producing countries do not follow normal industry standards in estimating their oil reserves and do not publish any data which would allow their estimates to be verified.

Types of oil reserves

Proven, probable and possible reserves are the three most common categories of reserves used in the oil industry. They are intended to represent the probability that a reserve exists based on the geologic and engineering data and interpretation for a given location, though many governments refuse to disclose verifying data to support their claims. Proven Reserves - defined as oil and gas "Reasonably Certain" to be producible using current technology at current prices, with current commercial terms and government consent, also known in the industry as 1P. Some industry specialists refer to this as P90, i.e., ideally having a 90% certainty of being produced. Proven reserves are further subdivided into "Proven Developed" (PD) and "Proven Undeveloped" (PUD). PD reserves are reserves that can be produced with existing wells and perforations, or from additional reservoirs where minimal additional investment (operating expense) is required. PUD reserves require additional capital investment (drilling new wells, installing gas compression, etc.) to bring the oil and gas to the surface. Probable Reserves - defined as oil and gas "Reasonably Probable" of being produced using current or likely technology at current prices, with current commercial terms and government consent. Some Industry specialists refer to this as P50, i.e., ideally having a 50% certainty of being produced. This is also known in the industry as 2P or Proven plus probable.

Possible Reserves - i.e., "having a chance of being developed under favourable circumstances". Some industry specialists refer to this as P10, i.e., ideally having a 10% certainty of being produced in the foreseeable future. This is also known in the industry as 3P or Proven plus probable plus possible.

Proven reserves in order

Summary of Reserve Data as of 2007
Country''' Reserves 1 Production 2 Reserve life 3
(109bbl) (106bpd) (years)
Saudi Arabia 260 8.8 81
Canada 179 2.7 182
Iran 136 3.7 101
Iraq 115 2.2 143
Kuwait 99 2.5 108
United Arab Emirates 97 2.5 107
Venezuela 80 2.4 91
Russia 60 9.5 17
Libya 41.5 1.8 63
Nigeria 36.2 2.3 43
United States 21 4.9 12
Mexico 12 3.2 10
Notes:
1. Estimated reserves in billions (109) of barrels. (Source: Oil & Gas Journal, January, 2007)
2. Production rate in millions (106) of barrels per day (Source: US Energy Information Authority, September, 2007)
3. Reserve life in years, calculated as reserves / annual production. (from above)

Saudi Arabia

With a quarter of the world's proven oil reserves and some of its lowest production costs, Saudi Arabia produces over 4 gigabarrels (600 million tons) of oil per year (17 tons per second). In spite of recent increases in oil income, Saudi Arabia faces serious long-term challenges, including rates of unemployment of at least 13 percent, one of the world's fastest population growth rates (its population grew sixfold since 1960), and the need for political and economic reforms.

According to British Petroleum Statistical Review of World Energy, as of 2007 Saudi Arabia reported it had 264.3 billion barrels of proven oil reserves, around 21% of proven, conventional world oil reserves. Although Saudi Arabia has around 80 oil and gas fields, more than half of its oil reserves are contained in only eight fields, and more than half its production comes from one field, the Ghawar field. The raw data are not available to outside scrutiny.

A dissenting opinion regarding Saudi oil reserves came from Matthew Simmons who claimed in his 2005 book "Twilight in the Desert" that Saudi Arabia's oil production is declining, and that it will not be able to produce more than current levels — about 4 gigabarrels per year. In addition to his belief that the Saudi fields have hit their peak, Simmons also argues that the Saudis may have irretrievably damaged their large oil fields by overpumping salt water into the fields in an effort to maintain the fields' pressure and thus make the oil easier to extract. Simmons interpretation of normal oilfield practice into a future crisis has been rejected by reservoir engineers at CERI.

Since 1982 the Saudis have withheld their well data and any detailed data on their reserves, giving outside experts no way to verify the overall size of Saudi reserves and output. Despite high oil prices, Saudi crude oil production declined to 8.60 million barrels per day (bpd) in February 2007 (from an average of 9.55 bpd in 2005 and 9.15 bpd in 2006) and remained at that level before rising to 8.80 bpd in September. After US President Bush asked the Saudis to raise production on a visit to Saudi Arabia in January 2008, and they declined, Bush questioned whether they had the ability to raise production any more.

Canada

Canada's proven oil reserves were estimated at 179.2 billion barrels as of 2007, placing it second only to Saudi Arabia. Over 95% of these reserves are oil sands deposits in the province of Alberta. Although Alberta contains nearly all of Canada's oil sands and about 75% of its conventional oil reserves, several other provinces and territories, especially Saskatchewan and offshore Newfoundland, have substantial oil production and reserves. Total Canadian oil production was about 1.2 gigabarrels in 2006, giving Canada about 150 years of reserves at current production rates.

Over 99% of Canadian oil exports are sent to the United States, making Canada, not Saudi Arabia, the United States' largest supplier of oil. The picture is complicated somewhat by the fact that Canada has a highly sophisticated energy industry and is both an importer and exporter of oil and refined products. In 2006, in addition to producing 1.2 gigabarrels, Canada imported 0.44 gigabarrels, consumed 0.8 gigabarrels itself, and exported 0.84 gigabarrels to the U.S. The excess of exports over imports was 0.4 gigabarrels.

The addition of 174 gigabarrels of the vast Alberta oil sands deposits, mostly in the Athabasca Oil Sands, to proven reserves by the Alberta Energy and Utilities Board (AEUB), was controversial at the time because oil sands contain a semisolid form of oil referred to as bitumen by Canadian government authorities, rather than conventional crude oil.. The existence of the deposits (historically referred to as "tar sands") has been known for centuries since major rivers cut through the sands to reveal the bitumen in the river banks, but their development had to wait for high prices and the invention of new technology. In recent years technological breakthroughs have overcome the challenges of producing it and most Alberta oil is now non-conventional production from oil sands rather than conventional oil fields. The AEUB estimates that by 2016 Alberta oil sands production will triple to amount to 86% of the province's total oil production, and Alberta will by then be one of the largest oil producers in the world.

The difference between crude bitumen and crude oil is somewhat arbitrary since bitumen is really just an unusually thick and viscous grade of crude oil, and many U.S. oil refineries have been modified to handle it in recent years as domestic U.S. oil production declines. The main problem is that it must be heated or diluted with solvents before it will flow through pipelines.

A problem for companies trading on U.S. stock markets is that outdated U.S. Securities and Exchange Commission (SEC) rules do not allow them to report oil sands production as an oil and gas activity, so they cannot report their oil sands reserves as oil reserves. This can produce a seriously underestimated value for the assets of companies with large oil sands operations such as Petro-Canada. As of 2008 the SEC was reported to be looking at putting oil sands reserves on the same footing as conventional crude oil.

Analysts estimate that a price of $30 to $40 per barrel is required to make oil sands production profitable. With oil prices reaching $100 per barrel as of 2008, oil sands production has become profitable enough to trigger over $100 billion worth of new oil sands projects. The biggest constraint on oil sands development is a serious labor and housing shortage in Alberta as a whole and the oil sands center of Fort McMurray in particular. According to Statistics Canada, by September, 2006 unemployment rates in Alberta had fallen to record low levels and per-capita incomes had risen to double the Canadian average. Another problem was that Canada was running out of pipeline capacity to ship rapidly increasing exports of oil to U.S. markets, and the National Energy Board warned that exporters could face pipeline apportionment by the third quarter of 2007.

An indicator of how the economics of oil sands had changed became apparent as of 2007 when Royal Dutch Shell stated in its annual report that in 2006 its Canadian oil sands unit made an after tax profit nearly double its worldwide profit on conventional crude. A few days later Shell announced it was going to build a $27 billion oil sands refinery near Edmonton, one of a string of oil sands upgrader announcements that could boost Canada's synthetic oil production to 3.46 million barrels per day by 2015.

As of 2006, Canada was the only major oil producer in the Organisation for Economic Co-operation and Development (OECD) showing an oil production increase. The other major OECD producers (the United States, United Kingdom, Norway and Mexico) were all in decline. According to the Conference Board of Canada, total crude oil production in Canada is projected to increase by over 10 per cent in 2007, following an increase of 5 per cent in 2006. As a result of new nonconventional oil projects, total crude oil production is forecast to increase by an average of 8.6 per cent per year from 2008 to 2011.

Iran

Iran had the world's second largest reserves of conventional crude oil at 136 gigabarrels as of 2007, although it ranks third if Canadian reserves of non-conventional oil are included. This is roughly 10 percent of the world's total proven petroleum reserves. Iran is the fourth largest oil producer in the world and is OPEC's second-largest producer after Saudi Arabia. As of 2006 it was producing an estimated 3.8 million barrels per day (bbl/d), equal to 5 percent of global production. At 2006 rates of production, Iran's oil reserves would last 98 years if no new oil was found.

Iranian production peaked at 6 million bbl/d in 1974, but it has been unable to produce at that rate since the 1979 Iranian Revolution due to a combination of political unrest, war with Iraq, limited investment, US sanctions, and a high rate of natural decline. Iran's oil fields need enhanced oil recovery (EOR) techniques such as gas injection to maintain production. Domestic consumption is increasing due to a growing population and large government subsidies on gasoline, and Iran consumed 1.6 million bbl/d of its own oil as of 2006. Due to a lack of refinery capacity, Iran is the second biggest gasoline importer in the world after the United States. High oil prices in recent years have enabled Iran to amass nearly $60 billion in foreign exchange reserves, but have not helped solve economic problems such as high unemployment and inflation.

Iraq

Iraq has the third largest reserves of conventional oil in the world, although it would rank fourth if proven reserves of non-conventional oil in Canada are considered.

According to the Oil and Gas Journal, Iraq has proven oil reserves of 115 billion barrels, although these statistics have not been revised since 2001 and are largely based on 2-D seismic data from three decades ago. International geologists and consultants have estimated that unexplored territory may contain an estimated additional 45 to 100 billion barrels (bbls) of recoverable oil. However, in the absence of exploration data these do not meet the industry definitions of proven, probable, or possible oil (see above).

After more than a decade of sanctions and two Gulf Wars, Iraq’s oil infrastructure needs modernization and investment. Despite a large reconstruction effort, the Iraqi oil industry has not been able to meet hydrocarbon production and export targets. Long-term Iraq reconstruction costs could reach $100-billion or higher, of which more than a third will go to the oil, gas and electricity sectors. Another challenge to Iraq's development of the oil sector is that resources are not evenly divided across sectarian lines. Most known resources are in the Shiite areas of the south and the Kurdish north, with few resources in control of the Sunni population in the center.

In 2006, Iraq's oil production averaged 2.0 million barrels per day (bbl/d), down from around 2.6 million bbl/d of production prior to the US invasion in 2003. At this rate of production, Iraq would have 158 years of reserves if no new oil was discovered.

United Arab Emirates and Kuwait

The United Arab Emirates and Kuwait and as of 2007 were nearly tied for the fourth largest conventional oil reserves in the world at 98 and 97 gigabarrels, respectively. Both countries produce approximately 0.8 gigabarrels per year, leaving around 100 years of reserves in each. Abu Dhabi has 94 percent of the UAE's oil reserves while most of Kuwait's oil reserves are in the Burgan Field, the world's second largest oil field after Saudi Arabia's Ghawar. Kuwait hopes to step up oil production to reach capacity of 4 million bbl/d by 2020, but since Burgan was found in 1938 and is getting very mature, this will be a challenge.

Venezuela

According to the Oil and Gas Journal (OGJ), Venezuela had 77.2 gigabarrels of proven conventional oil reserves as of 2007 (80 years of future production), the largest of any country in the Western Hemisphere. In addition it has non-conventional oil deposits similar in size to Canada's - at 1,200 billion barrels approximately equal to the world's reserves of conventional oil. About 267 billion barrels of this may be producible at current prices using current technology. Venezuela's Orinoco tar sands are less viscous than Canada's Athabasca oil sands – meaning they can be produced by more conventional means, but are buried deeper – meaning they cannot be extracted by surface mining. In an attempt to have these extra heavy oil reserves recognized by the international community, Venezuela has moved to add them to its conventional reserves to give nearly 350 billion barrels of total oil reserves. This would give it the largest oil reserves in the world, even ahead of Saudi Arabia. In October 2007 the Venezuelan government said its proven oil reserves have risen to 100 billion barrels. The energy and oil ministry said it has certified 12.4 billion additional barrels of proven reserves in the country's Faja del Orinoco region.

Venezuela’s development of its non-conventional oil reserves is mainly limited by political unrest. In late 2002 and early 2003 a strike at the state oil company PDVSA resulted in a dramatic drop in Venezuelan oil production and the firing of most of the oil company’s workers. This has significantly limited its ability to develop and produce oil.

Estimates of Venezuelan oil production vary. Venezuela claims its oil production is over 3 million barrels per day, but oil industry analysts and the U.S. Energy Information Administration believe it to be much lower. In addition to other reporting irregularities, much of its production is extra-heavy oil, which may or may not be included with conventional oil in the various production estimates. The U.S. Energy Information Agency estimated Venezuela's oil production in December 2006 was only 2.5 million barrels per day (approx 0.9 gigabarrels annually), a 24% decline from its peak of 3.3 million in 1997. Notwithstanding that, Venezuela continues to be the second or third largest supplier of oil to the United States, sending about 1.5 million barrels per day to the U.S. Venezuela is also a major oil refiner and the owner of the Citgo gasoline chain.

Russia

Although Russia holds the world's largest natural gas reserves, it has only the eighth largest oil reserves, with proven oil reserves of around 60 billion barrels as of 2007. Despite that, Russia is the the world's second largest oil exporter, at times even exceeding Saudi Arabia. With production around 9.7 million barrels per day as of 2006, Russia has about 17 years of oil reserves at 2006 rates of production.

Following the collapse of the former Soviet Union, Russia’s oil output fell sharply, and has rebounded only in the last several years. Russia reached a peak of 12.5 million barrels per day in total liquids in 1988, but production fell to around 6 million bbl/d in the mid 1990's. A turnaround in Russian oil output began in 1999, which many analysts attribute to the privatization of the industry. Higher world oil prices, the use of Western technology, and the rejuvenation of old oil fields also helped. As of 2006 Russian production had recovered to 9.7 million bbl/d and is expected to continue increasing. Eastern Siberia is one area where little exploration has taken place and as of 2007 it was estimated that another 35 million barrels of oil exist in the region.

As of 2006, Russia produced roughly 9.8 million bbl/d of liquids, consumed roughly 2.8 million bbl/d in liquids, and exported (in net) around 7 million bbl/d. Over 70 percent of Russian oil production was exported, while the remaining 30 percent was refined locally.

Libya

Libya holds the largest oil reserves in Africa and the ninth largest oil reserves in the world with 41.5 billion barrels as of 2007. Oil production was 1.8 million barrels per day as of 2006, giving Libya 63 years of reserves at current production rates if no new reserves were to be found. Libya is considered a highly attractive oil area due to its low cost of oil production (as low as $1 per barrel at some fields), and proximity to European markets. Libya would like to increase production from 1.8 million bbl/d in 2006 to 3 million bbl/d by 2010-2013 but with existing oil fields undergoing a 7-8% decline rate, Libya's challenge is maintaining production at mature fields, while finding and developing new oil fields. Most of Libya remains unexplored as a result of US sanctions and disagreements with foreign oil companies.

Nigeria

Although Libya has more reserves, Nigeria with 36.2 billion barrels of proven reserves as of 2007 ranks as the largest oil producer in Africa and the 11th largest in the world, averaging 2.28 million barrels per day as of 2006. At current rates this would be 43 years of supply if no new oil was found. Pipeline vandalism, kidnappings, and militant takeover of oil facilities have reduced production, which could be increased to 3 million barrels per day in the absence of such problems. The Nigerian government hopes to increase oil production capacity to 4 million bbl/d by 2010. Nigeria is the world’s eighth largest exporter of crude oil and sends 42% of its exports to the United States. Nigeria is heavily dependent on the oil sector, which accounts for 95% of its export revenues.

United States

United States proven oil reserves declined to a little less than 21 gigabarrels as of 2006 according to the Energy Information Administration, a 46% decline from the 39 gigabarrels it had in 1970 when the huge Alaska North Slope ('ANS') reserves were booked. With production of around 5 million barrels per day as of 2006, this represents about an 11 year supply of oil at current rates. With consumption at 21 million barrels per day (7.7 gigabarrels per year) (2007), US reserves alone could satisfy US demand for only three years.

No oil fields of similar size to the ANS reserves have been found in the US since 1970. With over 2.3 million wells having been drilled in the US since 1949, there are very few unexplored areas left where another supergiant oil field is likely to be found. US oil reserve numbers are very accurate compared to those of most other countries.

United States crude oil production peaked in late 1970 at over 4 gigabarrels per year, but declined to 1.8 gigabarrels per year as of 2006. At the same time, US consumption of petroleum products increased to over 7.3 gigabarrels per year. The difference (5.5 gigabarrels ) was mostly made up by imports, with the largest supplier being Canada, which increased its exports of crude oil and refined products to the US to 0.8 gigabarrels per year as of 2005. Imports of oil and products now account for nearly half of the US trade deficit. As of 2007, the Energy Information Agency (EIA) of the U.S. Department of Energy projected that in 2007 oil consumption would rise to 20.9 million barrels per day, while oil production would fall to 5.1 million barrels per day, meaning that oil consumption would be nearly four times as high as oil production.

Oil shale

The United States has the largest known deposits of oil shale in the world, according to the Bureau of Land Management and holds an estimated 2,500 gigabarrels of potentially recoverable oil, enough to meet U.S. demand for oil at current rates for 110 years. However, oil shale does not actually contain oil, but a waxy oil precursor known as kerogen. For this reason and because there is not yet any significant commercial production of oil from oil shale in the United States as of 2008, its oil shale reserves do not meet the petroleum industry definition of proven oil reserves.

Mexico

The Oil and Gas Journal (OGJ) estimated that as of 2007, Mexico had 12.4 billion barrels of proven oil reserves. Mexico was the sixth-largest oil producer in the world as of 2006, producing 3.71 million barrels per day. However, at that rate its oil reserves represent only a 9 year supply of oil, and Mexican oil production has started to decline rapidly. The US Energy Information Administration estimates that Mexican production will decline to 3.52 million barrels per day in 2007 and 3.32 million barrels per day in 2008.

While there may be more oil fields elsewhere in Mexico, the constitution of Mexico gives the state oil company, PEMEX, a monopoly over oil production, and the Mexican government treats Pemex as a major source of revenue. As a result, Pemex has insufficient capital to develop the resources on its own, and cannot take on foreign partners to supply money and technology it lacks. To address some of these problems, in September 2007, Mexico’s Congress approved reforms including a reduction in the taxes levied on Pemex.

Since 1979, Mexico has produced most of its oil from the supergiant Cantarell Field, which is the second-biggest field in the world by production. Because of falling production, in 1997 PEMEX started a massive nitrogen injection project to maintain oil flow, which now consumes half the nitrogen produced in the world. As a result of nitrogen injection, production at Cantarell rose from 1.1 million barrels/day in 1996 to a peak of 2.1 million barrels per day in 2004. However, during 2006 Cantarell's output fell 25% from 2.0 million barrels/day in January to 1.5 million barrels/day in December, and as of 2007 the decline was continuing.

As for its other fields, 40% of Mexico's remaining reserves are in the Chicontepec Field, which was found in 1926. The field has remained undeveloped because the oil is trapped in impermeable rock. The remainder of Mexico's fields are smaller, more expensive to develop, and contain heavy oil and trades at a significant discount to light and medium oil, which is easier to refine.

In 2002 PEMEX began developing an oil field called "Proyecto Ku-Maloob-Zaap", located 105 kilometers from Ciudad del Carmen. It is estimated that by 2011 the field will produce nearly 800,000 barrels/day. However, this level of production will be achieved by using a nitrogen injection scheme similar to that of Cantarell.

In June, 2007 former U.S. Federal Reserve Chairman Alan Greenspan warned that declining oil production in Mexico could cause a major fiscal crisis there, and that Mexico needed to increase investment in its energy sector to prevent it.

Arctic reserves

Arctic basins tend to be richer in natural gas than in oil. The abundance of gas in the Arctic so far from main markets will require moving gas long distances. Problems of ensuring that oil and gas keep flowing freely in Arctic subsea pipelines are virtually identical to those experienced at a depth of in the Gulf of Mexico, where temperatures are at or close to the freezing point (at that pressure) along the seafloor where hydrates can form. Technology for moving oil from the seafloor to the shore is similar to that employed in Norway, and may someday have application in Alaska.

Some large oil companies believe Arctic waters, including those of northern Alaska, hold great potential as an oil and natural gas frontier. Most of these basins are unexplored and undeveloped. The social, environmental, and economic aspects of development will be challenging.

Extensive drilling in the Canadian Arctic by such companies as Petro Canada and Dome Petroleum discovered significant oil reserves, but not enough to justify an oil pipeline to southern Canada or the United States. All the oil wells which were drilled have since been abandoned. Currently, the Arctic ice pack makes the shipping season too short to justify shipping oil out by tanker, but it is possible future global warming could melt the Arctic ice pack and make tanker shipment feasible. In 2007 the Canadian Navy announced its intention to build eight new Arctic patrol vessels to assert sovereignty over its Arctic waters in anticipation of such an eventuality.

Middle Eastern reserves

There are varying estimates of how much oil is left in Middle Eastern reserves. Several oil companies and the U.S. Department of Energy state that the Middle East has two-thirds of all the world's oil reserves. Other oil experts, however, argue that the Middle East has two-thirds of only all proven oil reserves, and that the percentage of all oil reserves it has could be much lower than two-thirds. The U.S. Geological Survey says that the Middle East has only between half and a third of the recoverable oil reserves in the world.

Suspicious official estimates of oil reserves from OPEC countries

The OPEC countries decided in 1985 to link their production quotas to their reserves. What then seemed wise provoked important increases of the estimates in order to increase their production rights. This also permits the ability to obtain bigger loans at lower interest rates. This is a suspected reason for the reserves rise of Iraq in 1983, then at war with Iran.

In fact, Dr. Ali Samsam Bakhtiari, a former senior executive of the National Iranian Oil Company, has stated unequivocally that OPEC's oil reserves (notably Iran's) are grossly overstated. In an interview to Bloomberg in July 2006, he stated that world oil production is now at its peak and predicted that it will fall 32% by 2020.

Declared reserves with suspicious increases (in billion of barrels) Colin Campbell, SunWorld, 80-95
Year Abu Dhabi Dubai Iran Iraq Kuwait Saudi Arabia Venezuela
1980 28.00 1.40 58.00 31.00 65.40 163.35 17.87
1981 29.00 1.40 57.50 30.00 65.90 165.00 17.95
1982 30.60 1.27 57.00 29.70 64.48 164.60 20.30
1983 30.51 1.44 55.31 41.00 64.23 162.40 21.50
1984 30.40 1.44 51.00 43.00 63.90 166.00 24.85
1985 30.50 1.44 48.50 44.50 90.00 169.00 25.85
1986 31.00 1.40 47.88 44.11 89.77 168.80 25.59
1987 31.00 1.35 48.80 47.10 91.92 166.57 25.00
1988 92.21 4.00 92.85 100.00 91.92 166.98 56.30
1989 92.20 4.00 92.85 100.00 91.92 169.97 58.08
1990 92.20 4.00 93.00 100.00 95.00 258.00 59.00
1991 92.20 4.00 93.00 100.00 94.00 258.00 59.00
1992 92.20 4.00 93.00 100,00 94,00 258.00 62.70
2004 92.20 4.00 132.00 115.00 99.00 259.00 78.00
2007 ? ? 136.30 115.00 101.50 262.30 80.00
The world's total declared reserves are 1.3174 trillion barrels (January 2007). The years 2004 and 2007 were added later. Some figures from the year 2007 are missing because these are from a listing in the Oil and Gas Journal from dec. 2006, which listed only the top ten suppliers.

The table suggests that, firstly, the OPEC countries declare that the discovery of new fields, year after year, replaces exactly or near exactly the quantities produced, because the declared reserves do not vary a lot from one year to the other. For example, Saudi Arabia extracted 9.55 million barrels per day in 2005, i.e. 3.4 billion barrels a year. Yet, their stated reserves do not decline, implying that they discover previously unknown reserves of exactly this amount, year after year. Abu Dhabi, in the United Arab Emirates, declares exactly 92.3 billion barrels since 1988, but in 16 years, 14 billion barrels were extracted.

Also, there is much competition between states. For example, Kuwait gave to themselves 90 billion barrels of reserves in 1985, the year of the reserves link. Abu Dhabi and Iran responded with slightly higher numbers, to guarantee similar production quotas. Iraq replied with around 100. Apparently, with all this amount of inflation, Saudi Arabia was forced to reply, two years later, with its own revision.

Other examples suggest the inaccuracy of official reserve estimates:

  • January 2006, the magazine Petroleum Intelligence Weekly declared that reserves of Kuwait were in fact only 48 billion barrels, of which only 24 billion were "completely proven", backing this statement on "leaks" of official confidential Kuwaiti documents. The value is half of the official estimate.

  • Shell company announced 9 January 2004 that 20% of its reserves had to pass from proven to possible (uncertain). This announcement led to a loss in the value of the stock; a lawsuit challenged that the value of the company was fraudulently overvalued. Shell later revised its reserves estimates three times, reducing them by 10,133 million barrels (against 14,500 million). Shell's president, Phil Watts, resigned.
  • As can be seen on the table the reserves declared by Kuwait before and after the Gulf War 1990-1991 are the same, 94 billion barrels, despite the fact that immense oil-well fires ignited by the Iraqi forces had burned off approximately 6 billion barrels.
  • In 1970, Algeria increased its "proven reserves" estimate (until then 7-8 billion barrels) to 30 billion. Two years later, the estimate was increased to 45 billion. After 1974, the country's estimate was less than 10 billion barrels (as reported by Jean Laherrère).
  • Pemex (state company of Mexico) in September 2002 decreased its reserve estimate by 53%, from 26.8 to 12.6 billion barrels. Later the estimate was increased to 15.7 billion.
  • Other examples exist of reserves being underestimated. In 1993, the reserves of Equatorial Guinea were limited to some insignificant fields; the Oil And Gas Journal estimated them at 12 million barrels. Two giant fields and several smaller ones were discovered, but the numbers announced stayed unchanged until 2003. In 2002, the country still had 12 million barrels of reserves according to the journal, while it was producing 85 million barrels in the same year. The reserves of Angola were at 5.421 billion barrels, (four significant numbers, it gives the impression of great precision) from 1994 to 2003, despite the discovery of 38 new fields of more than 100 million barrels each.

Note however that the definition of proven reserves varies from country to country. In the USA, the conservative rule is to classify as proven only the reserves that are being produced[cn]. On the other hand, Saudi Arabia classifies as proven reserves known fields not yet in production[cn]. Venezuela includes non-conventional oil (bitumens) of the Orinoco in its reserve base.

2020 Vision

The US EIA (Energy Information Administration) reduced their fore cast for Saudi Arabia oil production to 15.4 mb/day in 2020 and Middle East OPEC countries increasing to 35.2 mb/day by 2020 from 20.7 mb/day in 2002. These estimates were further reduced in the 2006 Annual Energy Outlook, in which Middle East OPEC production was projected to be 29.4/27.0/18.5 mb/day in 2020 assuming $34/$51/$85 oil prices respectively.

Strategic oil reserves

Many countries maintain government-controlled oil reserves for both economic and national security reasons. Although there are global strategic petroleum reserves, the following highlights the strategic reserves of the top three oil consumers.

The United States maintains a Strategic Petroleum Reserve at four sites in the Gulf of Mexico, with a total capacity of 0.727 gigabarrels of crude oil. The sites are enormous salt caverns that have been converted to store crude oil. The US SPR has never been filled to capacity; the largest amount reached thus far was 0.7 gigabarrels on August 17, 2005, whereafter reserves were drawn down to meet demand in the aftermath of Hurricane Katrina. This reserve was created in 1975 following the 1973-1974 oil embargo, and as of 2005 it is the largest emergency petroleum supply in the world. At current US consumption rates (over 7 gigabarrels per year), the SPR would supply all normal US demand for approximately 37 days.

In 2004 China's National Development and Reform Commission (NDRC) began development on a 101.9 million barrel strategic reserve. This strategic reserve plan calls for the construction of four storage facilities. An updated strategic reserve plan was announced in March 2007 for the construction of a second strategic reserve with an additional 209.44 million barrels. Separately, Kong Linglong, director of the National Development and Reform Commission's Foreign Investment Department, said that the Chinese government would soon move to establish a government fund aimed at helping its state oil groups purchase offshore energy assets.

As of 2003 Japan has a SPR composed of the following three types of stockpiles; state controlled reserves of petroleum composed of 320 million barrels, privately held reserves of petroleum held "in accordance with the Petroleum Stockpiling Law" of 129 million barrels, privately held reserves of petroleum products for another 130 million barrels. The state stockpile equals about 92 days of consumption and the privately held stockpiles equal another 77 days of consumption for a total of 169 days or 579 million barrels.

OPEC countries

Many countries with extensive oil reserves are members of the Organization of the Petroleum Exporting Countries, or OPEC. The members of the OPEC cartel hold about two-thirds of the world's oil reserves, allowing them to significantly influence the international price of crude oil.

See also

Notes

References

  • Adams Neal, Terrorism & Oil (2002, pg.66), ISBN 0-87814-863-9
  • Various, The Oil Industry of the Former Soviet Union: Reserves, Extraction, Transportation (1998, pg. 24-59), ISBN 90-5699-062-4
  • Robert J Art, Grand Strategy for America (2003, pg.62), ISBN 0-8014-4139-0
  • Paul Roberts, "The End of Oil", (2004 p47-p52), Bloomsbury, pbk, ISBN 0-7475-7081-7
  • Survey of energy resources. 21, World Energy Council (WEC).
  • Matthew R. Simmons Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Wiley.

External links



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