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History Between 1859 and 1968, 200 gigabarrels (200 billion barrels, 31 km³) of oil were used. As of 2006, as prices approached the inflation-adjusted record highs from 1980, world consumption is on track to reach 30 gigabarrels per year. * As the price of oil increases a vast number of oil-derived products will become more expensive to produce, including gasoline, lubricating oils, plastics, tires, roads, synthetic textiles, etc. Science has so far been unable to find an affordable alternative to any of these products, even when compared to crude oil prices of $50/bbl and above. Categories Proven, probable and possible reserves are the three most common categories of reserves. They represent the certainty that a reserve exists based on the geologic and engineering data and interpretation for a given location. The international authority for reserves definitions is generally the Society of Petroleum Engineers. The U.S. Securities and Exchange Commission has, in recent years, demanded that oil companies with exchange listed stock adopt reserves accounting standards that are consistent with conservative industry practice. In a notable case, Royal Dutch Shell was required to write down the value of its oil reserves for 2001 and 2002 based on application of more strict definitions of reserves categories. World Oil Reserves It has been estimated that there was initially a total of 2,050 (Colin Campbell, 2005) to 2,390 gigabarrels (380 km³) of crude oil on Earth, of which, depending upon which estimate is used, about 45% to 70% has been used so far. According to the 2006 BP Statistical Review of World Energy, from the years 1965-2005 approximately 917,558,609,280 barrels of oil were produced globally.* The World Energy Resources Program of the United States Geological Survey produces the official estimates of the world oil resources for the U.S. Federal Government. They estimate that the remaining world oil reserves are about 1,000 gigabarrels, and current estimates place the exhaustion of the remaining known reserves within the next 50 years. Estimates of undiscovered reserves range widely from 275 to 1,469 gigabarrels (44 to 234 km³). (It should be noted that one barrel equals 42 US gallons, or 158.97 litres.) The Middle East has about 50% of the known remaining world oil reserves. The USGS estimates the total reserves are about three times the known amount. There are margins of uncertainty concerning the actual size of proven oil reserves. * Presumably for political reasons, some nations have not allowed audits of the size of their fields. This is especially true of Middle East members of OPEC, as well as nations that belonged to the USSR. OPEC limits the amount of oil output a member nation can produce to a portion of the remaining reserves, giving an incentive to manipulate the data. For example, in 1985 Kuwait increased the estimated size of their oil fields by 50%, which allowed them to increase their output. Other member nations quickly followed suit. The Saudi national oil company controls the largest amount of proven oil reserves in the world. Some estimates, such as the USGS, predict that oil reserves will become economically unrecoverable by the 2050s. However, these numbers are open to debate as they include only reserves that are presently in development or considered economically recoverable. They do not include tar sands and bitumen, nor do they take into account possible coal-derived production, methane extraction from waste, the recycling of tires, or recycled plastics. Estimates also do not include any reserves in Antarctica, which is protected from exploration by environmental treaties. Although none of these sources are currently economical, they could be used to produce significant quantities of hydrocarbons in the future, and they may become important as crude oil production dwindles, or if new technology makes them easier to recover. Higher crude oil prices also make these sources more attractive; industry observers believe that sustained prices above $40/bbl will provide the incentive and return on investment to make previously undesirable oil deposits economically viable. Definition of Oil Reserves Oil reserves are a primarily a measure of geological risk — of the probability of oil existing and being producible under current economic conditions using current technology. The three categories of reserves generally used are proven, probable, and possible reserves. Reserve Booking Oil and gas reserves are the main asset of an oil company. Booking is the process by which they are added to the Balance sheet. This is done according to a set of rules developed by the Society of Petroleum Engineers (SPE). The Reserves of any company listed on the New York Stock Exchange — which in practice means virtually every commercial company in the world — have to be stated to the U.S. Securities and Exchange Commission. In many cases these reported reserves are audited by external geologists, although this is not a legal requirement. The U.S. Securities and Exchange Commission rejects the probability concept and prohibits companies from mentioning probable and possible reserves in their filings. Thus, official estimates of proven reserves will always be understated compared to what oil companies think actually exists. For practical puposes companies will use proven plus probable estimate (2P), and for long term planning they will be looking primarily at possible reserves Other countries also have their national hydrocarbon reserves authorities (for example the GKZ, State reserves commission of Russia) where companies operating in these countries have to report. Other types of risk also exist: economic risk, technological risk, and political risk. Economic risk is the probability that the oil exists but cannot be produced at current prices and costs. There is a vast quantity of oil in this category, so economists will always be more optimistic than geologists. Technological risk is the probability that the oil exists but cannot be produced using existing technology. Again, there is a great deal of oil and near-oil in this category, such as the world's oil shale deposits. And political risk is the risk that oil exists but cannot be produced because political conditions prevent it. Since most of the world's oil is in politically unstable countries, political risk is usually the biggest risk and the most difficult to quantify. An example of technology increasing reserves is the recent increase of Canadian oil reserves from 5 to 179 gigabarrels, moving Canada to second place in world oil reserves. There is no geological risk in the Canadian oil sands — their existence has been known for centuries. The change occurred because of the learning curve combined with disruptive technology. Under heavy cost pressure, companies reduced their production costs from $30 per barrel to $10/bbl. Meanwhile, the Alberta Oil Sands Technology and Research Authority developed a new process called steam assisted gravity drainage (SAGD) to recover the deeper oil sands. At the same time, improvements in directional drilling technology made drilling horizontal SAGD wells much cheaper. At the end of it all, the Alberta Energy and Utilities Board (AEUB) plugged new numbers into its computer models and with the stroke of a keyboard, quadrupled North American proven oil reserves. No new oil had been found, some potential reserves had just reached an economic and technological tipping point. Canada Alberta's proven oil reserves in recent years have been raised from total conventional oil reserves of around 5 gigabarrels, to the much larger figure of around 180 gigabarrels which includes the Athabasca Oil Sands * deposit, placing Canada second only to Saudi Arabia. Other estimates (BP Statistical Review of World Energy) place Canada's petroleum reserves in the 17 gigabarrel range, by only counting oil sands under development. Although Alberta contains about 75% of Canadian conventional oil reserves, most of the other provinces and territories, especially Saskatchewan and offshore Newfoundland, hold significant production and reserves *. Estimates of oil sands reserves can be misleading because oil sands contain a semisolid form of oil known as bitumen. Companies only book oil sands as proven reserves after they finish a strip mine or thermal facility to extract them and an upgrader to convert them to synthetic crude oil (syncrude or SCO). On the other hand, the Alberta government bases its reserve estimates on drilling cores and wireline logs from 19,000 wells drilled in the oil sands. Alberta uses the term "crude bitumen" rather than "crude oil" and refers to "established reserves" rather than "proven reserves" to differentiate them from oil company estimates. These estimates did not attract much attention until the prestigous Oil and Gas Journal added them to its estimates of Canada's proven oil reserves, which quadrupled North American reserves at the stroke of a key. Alberta production and Canadian exports are steadily increasing despite the fact that Alberta's conventional oil reserves are almost exhausted. When oil prices were low, oil sands companies such as Suncor Energy and Syncrude reduced their costs to around US $15/bbl. As a result, the oil price increases of 2004-2006 to over $75/bbl is high enough to cause over $100 billion worth of oil sands projects to be planned and initiated. Alberta oil sands production in 2005 was around 0.4 gigabarrels per year. It is expected to rise to 0.7 gigabarrels per year or 67% of Albertan production by 2010. The Canadian Association of Petroleum Producers predicts that by 2020, Canadian oil production will be 1.75 gigabarrels per year, of which only 10% will be conventional light and medium crude oil. The most serious constraint on future development is an historically unprecedented labor and housing shortage in Alberta as a whole and Fort McMurray in particular. According to Statistics Canada, by September, 2006 unemployment rates in Alberta had fallen to record low levels, lower than any other Canadian province or U.S. state, and per-capita incomes had risen to double the Canadian average. In a global context Alberta's economic growth rate was second only to China's. United States United States proven oil reserves declined to a little more than 21 gigabarrels by the end of 2004 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. Since there have been millions of oil wells drilled in the US and there is nowhere left for an elephant the size of ANS to remain hidden, it appears that US oil reserves are on a permanent downward slide. As oil fields get closer to the end of production, estimates of what is left become more accurate. Consequently, US oil reserve numbers are very accurate compared those of 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 by early 2006. In fact, production in the fall of 2005 fell to only 1.5 gigabarrels per year as a result of hurricanes in the Gulf of Mexico — a level not seen since shortly after World War II. At the same time, US consumption of petroleum products increased to over 7.3 gigabarrels per year. The difference 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 at the end of 2005. Imports of oil and products now account for nearly half of the US trade deficit. With the shut-in of the supergiant Prudhoe Bay oil field for pipeline repairs in August 2006, the immediate future looks even worse since Alaska production will be cut in half and total U.S. production by 8%. BP, the operator of Prudhoe Bay, has refused to predict when the pipeline will be able to resume operation. The United States has the largest known concentration of oil shale in the world, according to the Bureau of Land Management and holds an estimated 800 gigabarrels of recoverable oil, enough to meet U.S. demand for oil at current levels for 110 years. Oil shale is developable given high enough oil prices, and the technology for converting oil shale to oil has been known since the middle ages. However, the main constraint on oil shale development is probably going to be that Albertan oil sands are only about half as expensive to produce, and the US has full access to oil sands production under the North American Free Trade Agreement NAFTA. In addition, there are environmental concerns about oil shale development. The oil shale areas are semi-arid, in which mine scars last for centuries, and are at the headwaters of several important rivers, notably the Powder River in a region in which water rights are very important. By contrast, the Alberta oil sands are in a largely uninhabited boreal forest that is periodically destroyed by forest fires, and the rivers are very large and flow into the Arctic Ocean. As a result, the oil shales are probably not going to see development until oil sands production is well underway. Mexico While the government of Mexico claims it has over 100 gigabarrels of oil, as of January, 2006, the prestigious Oil and Gas Journal estimated its proven reserves at only 12.9 gigabarrels. The reason for the discrepancy is that, while the oil may exist in theory, in practice, politics prevents it from being developed. 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, taking 60% of its revenues in taxes, according to Business Week on 13 Dec 2004. 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. 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, but which has recently peaked and started a terminal production decline. In 1997, PEMEX started a massive nitrogen injection project to maintain oil flow, which now consumes half the nitrogen produced in the world, but this largely just accelerates depletion rather than adding new reserves. As for its other fields, 40% of Mexico's remaining reserves are in the Chicontepec Field, which was found in 1926, but which has remained undeveloped because the oil is trapped in impermeable rock. The remainder of Mexico's fields are much smaller, much more expensive to develop, and contain heavy oil that buyers do not want. As a result of concentrating on its one good oil field and ignoring everything else, Mexico's proven reserves have fallen every year for more than a decade, and it has less than 10 years worth of oil reserves at current production levels. Venezuela According to the Oil and Gas Journal (OGJ), Venezuela has 77.2 billion barrels of proven conventional oil reserves, 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. 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 and in 2006 reports indicated that Venezuela was having to buy oil from Russia to meet its sales commitments to other countries. Venezuela claims its oil production is around 3 million barrels per day, but oil industry analysts and the U.S. Energy Information Administration estimate it to be closer to 2.6 million barrels per day. It is difficult to verify actual production because PDVSA has stopped filing reports to the U.S. Securities and Exchange Commission, as required as owner of the Citgo gasoline chain. * Notwithstanding that, Venezuela continues to be the second or third largest supplier of oil to the United States, with 2/3 of its oil exports going to the U.S. 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
Saudi Arabia With one-fourth of the world's proven oil reserves and some of its lowest production costs, Saudi Arabia produces over 4 gigabarrels of oil per year and is likely to remain the world's largest oil exporter for the foreseeable future. However, there are serious political risks involved in Saudi Arabian domination of the world oil market. 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 has tripled since 1980), and a political system best described as medieval. According to the Oil and Gas Journal, Saudi Arabia contains 262 gigabarrels of proven oil reserves, around one-fourth 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. One challenge for the Saudis in maintaining or increasing production is that their existing fields sustain 5-12 percent annual decline rates, meaning that the country needs new capacity each year to compensate. The challenge is that the Ghawar field, found in 1948, has produced about half its total reserves, and is starting to run into production problems — notably, there are rumors that it is now producing more water than oil. Other Saudi fields are not only smaller, but more difficult to produce. Historically, when Saudi Arabia has run into production problems in other fields, it has simply shut them in and stepped up production in Ghawar, but if Ghawar runs into problems that no longer will be possible. Since Saudi Arabia is the world's largest producer of oil, their reserves are analyzed very closely and estimates vary on the amount of economically recoverable oil in Saudia Arabia. The raw data is not available to outside scrutiny. The International Energy Agency has predicted that Saudi oil output will double during the next two decades, projecting production of 7 gigabarrels per year in 2020, although this seems unlikely, if only for political reasons. A dissenting opinion regarding Saudi oil reserves came from Matthew Simmons who claimed in his 2004 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. 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. However, experts question the Saudi claim that recent declines in production are due to lack of demand (which no other producer has experienced), and pointed to the fact that the number of drilling rigs in Saudi Arabia has tripled with no comparable increase in production as disturbingly similar to what happened in Texas when US production peaked and started to decline in the 1970's. This could mean that many Saudi oil wells have peaked and have begun the decline toward the end of their economic usefulness. Only with verifiable data can production and reserves increases or declines be demonstrated. Iran Iran has the world's second largest reserves of conventional crude oil at 133 gigabarrels, according to the CIA World Factbook, although it should be noted that both Canada and Venezuela have larger reserves if Non-conventional oil is included. Iran is the second largest oil holder globally with approximately 9% of the world's oil. Iran averages about 1.5 gigabarrels per year, which is a significant decline from the 6 gigabarrels per year it produced when the Shah of Iran was in power. The United States prohibits imports of oil from Iran, which limits its exposure to an Iranian oil cutoff, but does not reduce the likelihood that an interruption of Iranian oil would cause a spike in world oil prices. American pressure on Iran to renounce Iran's nuclear program makes the possibility of military confrontation quite high, and the political risks of Iranian oil far outweigh any geological ones. Iraq Iraq has the fourth largest reserves of conventional oil in the world at 112 gigabarrels. Despite its vast oil reserves and low costs, production has not recovered since the US-led 2003 invasion of Iraq. Constant looting, insurgent attacks, and sabotage in the oil fields has limited production to around 0.5 gigabarrels per year at best. Political risk is thus the main constraint on Iraqi oil production and likely to remain so in the near future. Unfortunately the oil of Iraq has not been made a clear progress for Iraqis. The oil was totally budgeted for wars during the ex-regime and since 2003 and so far some Iraqi leaders export this oil illegally and the money goes for personal accounts in countries such as Iran, Syria, Jordan, Emirates, Egypt, and American as well. United Arab Emirates and Kuwait The United Arab Emirates and Kuwait are nearly tied for the fifth largest conventional oil reserves in the world at 98 and 97 gigabarrels, respectively. The UAE produces about 0.8 gigabarrels per year and has about 100 years of reserves at that rate while Kuwait produces about the same amount and also has about 100 years of reserves. 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. Furthermore, according to data leaked from the Kuwait Oil Company (KOC), Kuwait's remaining proven and non-proven oil reserves are only about half the official figure - 48 gigabarrels. 2020 Vision The US EIA (Energy Information Administration) reduced their forcast for Saudi 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 Internation Energy Outlook 2005 table E1 *. 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 *. Oil supplies The term oil supplies is sometimes used to mean the same thing as oil reserves. However, Oil reserves refer mainly to oil in the ground that can be recovered economically. Oil supply also includes the oil production and processing facilities and the oil delivery systems that provide oil to the end user. When there is a 'shortage' of supply it is more often a problem of the delivery systems than a failure of reserves. While geologists are sure the world will eventually run out of oil, economists are sure there will always be a price at which supply will meet demand, albeit possibly at a higher price than people would like to pay. Oil exploration 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 8,000 feet in the Gulf of Mexico, where temperatures are at or close to the freezing point 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. Shell, one of the world's largest oil companies, believes Arctic waters, including those of northern Alaska, hold great potential as an oil and natural gas frontier. Shell sees the Arctic as a very tantalizing opportunity to develop new oil and gas resources and the last remaining frontier. The company's views tend to support studies by academics and agencies that Arctic basins contain 25% of the world's remaining undiscovered resources. Most of these basins are unexplored and undeveloped. Shell recognizes how "difficult and challenging" the social, environmental, and economic aspects will be. Shell believes that technology solutions developed for other areas, such as the deepwater, will have applications in the offshore Arctic. However, in early 2006, Royal Dutch Shell made a bold move into non-conventional oil when purchased C$465 million worth of leases in northern Canada just outside the Athabasca Oil Sands. Mysteriously, Shell did not assign the property to Shell Canada, which already has a large oil sands operation in the area, but created a new, wholly-owned subsidiary called SURE Northern Energy Ltd. (SURE Northern) to develop the leases. While the area is known to contain large oil deposits, it is not included in current Canadian oil reserves because the geology is harder and more rocky than the sand which characterizes most oilsands projects. 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. China, the second largest consumer of oil after the United States, has begun a plan to build strategic crude reserves as the country's demand for energy continues to grow. The size of this future Chinese strategic petroleum reserve will be in the neighborhood of approximately 0.15 gigabarrels. It has also told its three largest state oil groups to purchase foreign oil holdings to ensure adequate strategic energy supplies to power the country's rapidly growing economy. 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. Japan, the third largest consumer of oil, has its own state controlled strategic petroleum reserve. According to Japan's Agency for Natural Resources and Energy, Japan has state reserves of petroleum for 92 days of consumption and privately held reserves for another 78 days of consumption, for a total of 171 days of consumption. These reserves are particularly important for Japan since they have practically no domestic petroleum production and import at least 95% of their oil. 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. Oil reserves by country
Countries that have already passed their production peak Note: this table is a work in progress, and not all classifications of countries are correct. Compare, for example, production figures for Canada**, which show total petroleum production has been higher than the 1973 "peak" since 1993. Note: this chart lists when, as a historical matter, oil production peaked. Peaking can occur for many reasons, related or unrelated to technical extraction difficulties, such as discovery of more accessible oil elsewhere, or changes in regulations. Inclusion on this list does not necessarily mean oil extraction cannot exceed the previous peak in that country. Data from * and the annual British Petroleum Energy Report*. 1 OPEC member 2 former OPEC member Countries where production can be increased Data from * and the annual British Petroleum Energy Report. 1 OPEC member 2 Because of various historical events, production has dropped, and so there are still possibilities for further increases in output even though the main peak has passed. 3 The Burgan field, the largest oil field in Kuwait, peaked in November 2005, years earlier than expected. This estimate thus requires revision. Countries to be classified The vast majority of these countries have tiny oil reserves, making classification difficult a single new field, even very small by world standards, could change everything for one of them. 1 Substantial oil, natural gas and coal reserves may exist, but because of an international treaty, no extraction is allowed. Alternative fuels
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