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Page added on October 21, 2016
Who Has More Oil Reserves? Who Cares?
Investors and oil market watchers are constantly wondering just how much oil is in the ground. Just how large are each country’s oil reserves? The market seems to cycle between cries that we have reached “peak oil” (a term indicating the maximum rate of oil extraction after which oil extraction will permanently decline), and waves of new discoveries. For the last five to seven years we seem to be in the latter part of the cycle with major new discoveries of recoverable oil made in Brazil, the United States, Venezuela and Canada. These discoveries lead to exuberant optimism about the amount of oil beneath the surface. But what do we really know about oil reserves and why is it important?
For investors and industry watchers the major issues are: 1 – size of reserves 2 – efficiency of recovery and 3 – long term industry stability. All three of these – not just reserve size – are essential to understanding the health of a country’s oil industry and the economic power it can command.
A pair of specialists study a screen at a post on the floor of the New York Stock Exchange, Wednesday, Oct. 5, 2016. (AP Photo/Richard Drew)
This past July, Rystad Energy, an independent research group based in Norway, released a new study claiming that the United States actually has the largest oil reserves in the world – greater than even Saudi Arabia, Russia and Venezuela. The group analyzed 60,000 oil fields around the globe over the course of three years and concluded that the United States holds 264 billion barrels of recoverable oil. The problem with Rystad’s study is that the 264 billion barrel number is largely based on projected discoveries, not actual proven oil reserves. Projected discoveries are calculated based on the rate of recent oil discoveries, which the United States happens to have a particularly high number of, and extrapolating a continued similar rate into the future.
Once projected discoveries and probable discoveries are removed from the equation, the number drops to only 40 billion barrels (not counting this month’s announcement of a new discovery of an estimated 10 billion barrels in Alaska). The data from Rystad’s report really indicate that the United States has a higher rate of new oil discoveries in recent years and greater expectations for future discoveries than other countries, not that the United States has more proven oil resources.
Rystad is not the only group providing estimates of global oil reserves by country. OPEC also regularly reports on estimated oil reserves. The most recent data from OPEC and non-OPEC countries can be found in its 2015 Annual Statistical Bulletin. OPEC does not specify how it collects and measures this data and acknowledges that it relies on member and non-member countries to self-report and that while “reasonable efforts have been made to ensure the accuracy of the ASB’s content,” its data may be flawed and usefulness limited. According to OPEC statistics, Venezuela and Saudi Arabia – both OPEC countries – have far and away the most proven oil reserves of any country.
Perhaps a more compelling statistic for investors is the estimated value of a country’s petroleum exports. OPEC calculates such statistics for OPEC member nations only. Among them, Saudi Arabia completely overpowers every other OPEC country by nearly 30%. No other OPEC country even comes close. This means that, economically, Saudi Arabia commands the most power amongst OPEC members. Its oil industry is more efficient and cost effective, even though its proven oil reserves are estimated at slightly less than Venezuela’s.
The dream among frackers and their proponents is for the U.S. (in conjunction with Canada, most likely) to eventually rival Saudi Arabia for estimated value of petroleum exports. To achieve that level of production and exporting success, North America has a long way to go in technological innovation, resource discovery and industry-government cooperation. However, such measures of economic success are a better gauge of power in the energy market than mere oil reserve estimates.
Ellen R. Wald, Ph.D. is a historian and scholar of the energy industry. She writes and consults on the intersection of geopolitics and energy.
16 Comments on "Who Has More Oil Reserves? Who Cares?"
Rockman on Fri, 21st Oct 2016 9:06 am
“The problem with Rystad’s study is that the 264 billion barrel number is largely based on projected discoveries, not actual proven oil reserves. ” Not only are they not “proven oil reserves” they don’t even qualify as any category of reserves. At best the might be classified as “resources”. And most of those bbls are probably in the shale plays. As such the “rate of discovery” approach is complete bullsh*t. First neither the Eagle Ford nor Bakken are “fields”…they are trends. Trends that were discovered more the 50 years ago. And the estimated “inplace” amount of oil was estimated in the many billions of bbls at that time.
Again it was high prices that pushed a huge volume of those resource bbls into commercial recoverable reserve bbls. Just like the oil price collapsed has downgraded many of those bbls back to resource category.
And given the US has been a major NET OIL IMPORTER for decades it’s silly to bring exportes into the conversation. And lastly the “value” of any contry’s oil reserves is not just a function of the amount of commercially profucable bbls they have in the ground and the price of oil but the amount of time it will take to produce those reserves. IOW a field that willing produce 100 million bo in 10 years has a much greater value then if it took 30 years to recover the same amount.
Survivalist on Fri, 21st Oct 2016 3:06 pm
Hey Rockman, how do you feel about the world total 1P and 2P reserve numbers in the Rystad report, 381 and 655 billion respectively?
Apneaman on Fri, 21st Oct 2016 3:25 pm
Electric car revolution may drive oil ‘investor death spiral’
The multi-trillion-dollar ‘big crash’ could start as soon as 2023, Bloomberg warns.
https://thinkprogress.org/oil-investor-death-spiral-35773e131250#.nhs0xae1a
Survivalist on Fri, 21st Oct 2016 4:20 pm
“Aside from the horrendous ignorance about the nature of alternative energy sources (and the extent to which we can convert to electricity), this attitude doesn’t really represent an increase in consciousness at all. It is still part of magical thinking.”
http://questioneverything.typepad.com/question_everything/2016/10/a-new-human-society-part-5.html
makati1 on Fri, 21st Oct 2016 5:29 pm
Forbes … Pimp for the Wall Street Casino. Pure bullshit.
Truth Has A Libetal Bias on Fri, 21st Oct 2016 5:49 pm
I would like to thank Mak for offering such deep and profound insight! Your education must surely have been top notch. Please don’t hold back! I am on the edge of my seat awaiting your next utterance.
Rockman on Fri, 21st Oct 2016 5:50 pm
Survivalist – “…how do you feel about the world total 1P and 2P reserve numbers…” This might sound extreme but I don’ consider them…period. But this is what I’ve done for a living for 41 years. A geologist can show me maps, seismic, cross sections, etc. and tell me he’s estimated X bbls of oil of proven reserves. And I couldn’t care less. Calculating any level of risked fossil fuel reserves is more subjective then most outside the business can imagine. And that includes work by interpreters making a honest effort. And there are many being guided by other agendas.
There’s a very old oil patch saying: Nothing can ruin you as fast as a geologist who truly believes his own sh*t. LOL. But seriously. We can be very zealous about our interpretations.
I can evaluate anyone’s reserve number…just show me all the detailed data that was used and I’ll assign my own risk factor. Without that their number means nothing to me. Which doesn’t mean it isn’t accurate. But it also doesn’t mean it isn’t a gross overestimate. Or a gross underestimate…does happen but very rarely. It just means I have no basis for accepting it.
onlooker on Fri, 21st Oct 2016 6:31 pm
Anyone with half a brain knows Forbes is a compromised propaganda outlet for the financial corporate agenda
Boat on Fri, 21st Oct 2016 7:00 pm
Wall Street shouldn’t have an outlet like Forbes? Whats wrong with you. About every thing ever written has some kind of spin to it. What do you read that does not inject opinion.
onlooker on Fri, 21st Oct 2016 7:24 pm
Precisely. Thus do not expect any kind of objective critique about BAU from Forbes
Truth Has A Liberal Bias on Fri, 21st Oct 2016 9:17 pm
@ onlooker
If everyone with half a brain knows it then why do you feel the need to say it? Does it make you feel smart or do you just need to say something obvious that everybody knows?
Hey the sky is blue! The moon revolves around the earth! Skunks have a smelly ass!
Thanks for sharing onlooker. It’s obvious you have nothing important or insightful to say or you’d say it. But as it is you just repeat the same shit over and over and over. Get a fucking life loser.
GregT on Fri, 21st Oct 2016 10:23 pm
@ Onlooker,
Sounds like you’ve struck a couple of nerves here. Next time you might try ‘dimwitted’, or ‘intellectually challenged’. Neither are as offensive to the half brainers.
And BTW, thanks for your posts, always appreciated, even when we don’t see eye to eye. (which is seldom)
GregT on Fri, 21st Oct 2016 10:50 pm
Boat spouted:
“Wall Street shouldn’t have an outlet like Forbes? Whats wrong with you.”
Onlooker has a rare condition Kevin, more commonly known as intelligence. Something that you need not be concerned about….
makati1 on Fri, 21st Oct 2016 11:47 pm
Hahahahahaha! Thanks GregT, I appreciated that laugh at Boat’s expense.
Even those of us with intelligence do not always see the same picture, but I appreciate the viewpoints. Some I avoid because the indoctrination is just too deep to tolerate. They know who they are.
Rockman on Sat, 22nd Oct 2016 9:06 am
To be honest I’m always drawn to the Forbe’s stories. Often good for a laugh but also typically giving extreme interpretations which tend to mimic the public’s attitudes.
Kenz300 on Sun, 23rd Oct 2016 11:55 am
Reserves do not last forever. They are being depleted rapidly.
The sooner the world transitions away from fossil fuels the better.
No more WARS for OIL.
Climate Change is real….. we will all be impacted by it
Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist
http://www.huffingtonpost.com/entry/exxon-evil-bill-mckibben_561e7362e4b028dd7ea5f45f?utm_hp_ref=green&ir=Green§ion=green