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Page added on August 30, 2007

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Global oil reserves up only 1% last year: Canada’s Oilsands Sole Booster

Record global oil and gas profits of US$243-billion and record spending of US$401-billion have resulted in a marginal 1% increase in world oil reserves last year –all of it coming from a 1.9-billion-barrel addition from Canada’s oilsands, according to a new study.

Without Canada’s contribution, 228 public oil and gas companies active globally and included in the study would have collectively produced more oil than they found, John S. Herold, a U.S.-based independent petroleum research company, and Harrison Lovegrove&Co., a global oil and gas advisory firm, said in the 2007 Global Upstream Performance Review, released yesterday.
“With many prospective regions still off-limits, oil reserve and production growth remains infinitesimal,” says the study, the 40th conducted annually by the two organizations and based on data filed with the U.S. Securities Exchange Commission and similar agencies worldwide.

“Global oil reserves would have fallen by 2.1% over the last two years without a 6.4 billion barrel increase in Canada. Oil production barely budged from 2005.”

The industry had disappointing reserve addition results despite looking hard for new deposits: Exploration spending grew by 39%, the largest jump in five years.

Meanwhile, with too much cash from high oil prices chasing too few prospects, oil and gas companies spent more money buying back their stock in the past two years than they did acquiring proved reserves, the study found. Dividends in 2006 reached a record of US$83-billion and share repurchases increased to US$88-billion.

“The industry has been able to generate enormous wealth for its shareholders over the last several years, both from the upstream and downstream sectors,” the report says. “However, questions are remaining as to the sustain-ability of this performance. We see the primary challenges lying in reserve maintenance, particularly for oil, and in controlling the costs of finding and producing hydrocarbons in a fiercely competitive environment.”

Despite record profits last year, the sector overspent its cash flow for the first time since 1999 while margins were lower after rising for three years, as all types of costs soared.

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