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By Robert Rapier on Jun 21, 2012 with 23 responses

How Much Oil is Left in the World?

Over the next two to three weeks, I am going to post a series of short articles utilizing graphics I created from the recently released 2012 BP Statistical Review of World Energy. Because I am working on the roll-out of a new product which will be geared specifically toward those with a financial interest in the world of energy (more on that in the coming days), I will take a break from my video blogs during this time, and catch up on accumulated questions after I finish this series.

World Oil Reserves Facts and Figures

The topic of this first article in the series is oil reserves. Just to review, an oil resource refers to the total amount of oil in place, most of which can’t be recovered. The proved oil reserve refers to the amount of oil that can be recovered economically with existing technology. More details can be found in Setting the Record Straight on U.S. Oil Reserves.

The first graph shows that despite the growth in oil production over the years, reserves continue to grow.

Over the past 30 years, 90% of the reserves additions have come from OPEC countries. However, many feel that OPEC reserves are overstated. The following excerpt is from my book Power Plays, which explains the controversy over OPEC reserves growth in the early 1980′s:

In 1982, OPEC introduced a system of production quotas based partly on the oil reserves in each country. Shortly after, a number of OPEC countries raised their reserves estimates sharply, as a larger reserve would increase their production quota. In 1983, Kuwait increased its reserves by nearly 40%, from 67 billion barrels to 93 billion barrels, and Iran added 34 billion barrels to its reserves. In 1984, Venezuela increased its reserves by nearly 100%, from 28 billion barrels to 55 billion barrels. In 1985, the UAE nearly tripled its reserves from 33 billion barrels to 97 billion barrels. In 1988, Saudi Arabia raised its reported reserve number by 85 million barrels over the previous year.

Over the decade of the 1980s, OPEC’s stated reserves increased from 425 billion barrels of oil in 1980 to 763 billion barrels by 1990—an increase twice the size of Saudi Arabia’s entire estimated oil reserves in 1982 . By 2010, OPEC’s stated reserves had further grown to 1.1 trillion barrels of oil and accounted for 90% of the global oil reserve additions of the previous 30 years.

So reserves growth in the early 1980′s was primarily due to OPEC countries restating reserves, which many believe to have been motivated by OPEC’s quota system. The sharp uptick in 1999 was a result of a large block of Canada’s oil sands being moved from the resource category into the reserve category.

Finally, reserves growth over the past five years has been primarily a result of Venezuela moving some of their heavy oil sands into the reserve category. Venezuela increased their stated reserves from 99 billion barrels in 2007 to nearly 300 billion barrels in 2011, and this accounts for 80% of global reserves growth during that period of time. Some, including me, would question whether those resources should have been placed in the reserves category, as there are significant questions about Venezuela’s ability to develop them.

Mystery of the Self-Replenishing Reserves

The next graphic shows the history of proved reserves in the U.S. over the past 31 years, and it tells an interesting tale:

In 1980, U.S. proved reserves were 36.5 billion barrels. In 2011, U.S. proved reserves were 30.9 billion barrels. Over the course of 31 years, the U.S. produced 103 billion barrels of oil, but U.S. reserves only fell by 5.7 billion barrels. This is a result of continued improvements in oil extraction technology (e.g., hydraulic fracturing) as well as from new discoveries (especially offshore). But it also demonstrates that one must allow for reserves growth when looking at a country’s proved reserves. I think it’s a safe bet that even though U.S. proved reserves are 30.9 billion barrels, a lot more oil than that will ultimately be produced in the U.S.

U.S. Reserves Just a Blip on the Radar

The final graphic, however, puts U.S. reserves in perspective. Relative to global reserves, U.S. reserves are minuscule (the tiny red line at the bottom which you may have missed), and declining as a percentage of global reserves. To the extent that global reserves growth is real — again predominantly in OPEC countries — this forewarns of a shifting of economic and political power from those who are dependent on oil to those who control it.

In the next article, I will discuss global oil production trends.

Link to Original Article: How Much Oil is Left in the World?

By Robert Rapier

  1. By BS on June 21, 2012 at 1:17 pm

    The prediction that a lot more than 31 billion barrels will be produced in the US in the future is an extrapolation of the past. Such optimism.

     

    Aloha

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    • By Robert Rapier on June 21, 2012 at 3:01 pm

      The prediction that a lot more than 31 billion barrels will be produced in the US in the future is an extrapolation of the past.

      Unless you believe technology for producing oil has hit a wall and that no more discoveries will take place, it’s the logical answer. I will make a bet with you. This year the U.S. will produce more than 3 billion barrels of oil but reserves will fall by less than 1 billion. Care to take that bet?

      RR

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      • By zaphrail on June 21, 2012 at 4:29 pm

        This year the U.S. will produce about 2 bb of oil, the rest – ethanol and NGLs…

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        • By Robert Rapier on June 21, 2012 at 4:48 pm

          Yes, that is about right. 2.2 billion barrels of oil, but a quarter of the LNG production does go into transportation fuel (and it could be more if the price is right).

          RR

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      • By BS on June 22, 2012 at 11:20 am

        The technology will not hit a wall, but EROEI will. The tar sands and shale oil are already well below 10. Perhaps below 5. We keep burning that 20-80 oil very quickly.

        How about a prediction on production costs or EROEI? After all, aren’t those the limiting factors?

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        • By Robert Rapier on June 22, 2012 at 2:34 pm

          Of course production costs and EROEI are limiting now. That’s why we don’t develop trillions of barrels of oil shale. That’s also why the recovery on oil sands is limited. But as long as natural gas is cheap, some very low EROEI sources will be tapped.

          Certainly there are limits. That’s not my point. It’s just that those limits have historically been vastly underestimated. Many people don’t realize, for instance, that when Hubbert called for a peak in oil production in 2000, he expected that peak to be around 35 million barrels per day.

          RR

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          • By BS on June 22, 2012 at 3:56 pm

            So Hubbert’s estimates were wrong because he extrapolated historical production but your estimates are right because you are extrapolating reserve increases.

            I would argue reserve additions result more from low initial estimates driven by the minimum required for project funding leaving as much room as possible for later additions to keep shareholders happy. Horizontal drilling and deeper wells have brought actual reserve increases but I am not betting in SITU tar sands, deepwater,  and Venezuelan technology are going to keep that reserve line positive in the future. 

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            • By Robert Rapier on June 22, 2012 at 4:04 pm

              So Hubbert’s estimates were wrong because he extrapolated historical production but your estimates are right because you are extrapolating reserve increases.

              I didn’t make any specific estimates other than we will recover a lot more oil than our remaining reserves. But his estimates were wrong because he underestimated both technical advances and the  amount of new discoveries. In fact, he doubted that the U.S. production peak would be in 1970 (he predicted 1965, but 1970 as a stretch case) because that would require the discovery of “8 new giant Texas oil fields.” In fact, those fields were “discovered” in existing fields through improvements in recovery technology.

              RR

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    • By tennie davis on June 22, 2012 at 3:41 am

      BS, if you take Robert’s bet, you better make it a trivial amount, because you’re gonna lose that bet!

      Reminds me of Julian simon’s bet with Paul Ehrich.

      Peak oil dogma is like a cult.

      Doomers have historically been on the losing side.

      You might think it’s extrapolation but it’s not, it’s logic.

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      • By Warren Stephens on June 23, 2012 at 8:13 am

        > Julian simon’s bet with Paul Ehrich.

        That bet was for 10 years using 5 commodities, and Ehrlich did lose, but if the bet had been extended until last year then Ehrlich would have won.

        Peak oil is not dogma.

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  2. By Justin on June 21, 2012 at 1:19 pm

    Robert, is there any chance that OPEC’s overstatment of proven reserves to raise production quotas may actually be correct 30 years later because they’ve understated or didn’t add reserve growth. For example Kuwait added nearly 23 billion barrels in 82, but with reserve growth since then that original figure might actually be correct. Just a thought.

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    • By Robert Rapier on June 21, 2012 at 3:05 pm

      Robert, is there any chance that OPEC’s overstatment of proven reserves to raise production quotas may actually be correct 30 years later because they’ve understated or didn’t add reserve growth.

      Yes. In fact I made that exact point about Saudi’s reserves at The Oil Drum a few years ago. I pointed out reserves growth in the U.S. and said that one could also expect reserves growth in Saudi. A lot of people did not like that answer.

      It’s amazing how many people are wrapped up in a certain narrative, and if you challenge it some of them can be quite nasty. I was pointing out (it was 2006 or so) that I did not believe Saudi Arabia was about to suffer a sharp decline, while others were predicting immediate plummeting oil production. That talk has quietened down a lot, but I never heard anyone step up and admit to being wrong. They rationalize that they will be proven right.

      RR

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  3. By ben on June 21, 2012 at 1:51 pm

    Thanks for offering perspectives on supply,  The demand-side doesn’t look too encouraging (unless you’re in sales:), as the emerging economies of Asia will continue in their thirst until such time alternatives offer any consequential relief–and that is no time soon. 

    OPEC bowed, last week, to market reality in maintaining current production (30 Mbd), as IEA’s Maria van der Hoeven helped reinforce an increasingly urgent message that global economic conditions remain tenuous, at best, and reduced energy costs pose some prospective offset to less the stimulative fiscal policies on the part of the world’s largest economies.    The prospects of falling oil/gas prices has, as an example, introduced an approximately $60B benefit to US consumers in the 2nd Q courtesy of falling prices at the pump and some additional relief from lower power generation costs resulting from favorable weather conditions.  By the looks of the Fed’s revisions to projected growth for the balance of 2012, and similar reduction from the IMF for global output, any additional stimulus in the form of lower costs is most welcome. 

    The targeted range for (sustainable) crude prices by the folks in Riyadh remains a decent guess on where thing are headed over the near-term.   The longer term prospects for low(er) costs do not look all that great and RR’s graphs in today’s blog offer a brief glimpse on why a structural imbalance between supply and demand currently points to a return to rising costs, as the global economy fully recovers after the financial market’s systemic deleveraging has run it’s course and begins allowing for asset valuation recovery in a number of critical sectors not the least of which is real estate and household wealth.    The good news is that sobriety remains the operative plan for the time being.  The bad news is that the hangovers remain to blur the vision a bit.  Regrettably, the politicians appear to be, unsurprisingly, the ones with the nearly empty bottle still in hand.

    Again, thanks RR for Playing Sergeant Friday;  “Just facts, sir, just the facts.”  

    Ben

      

          

      

     

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  4. By anon on June 21, 2012 at 4:34 pm

    “Finally, reserves growth over the past five years has been primarily a result of Venezuela moving some of their heavy oil sands into the reserve category. Venezuela increased their stated reserves from 99 billion barrels in 2007 to nearly 300 billion barrels in 2011, and this accounts for 80% of global reserves growth during that period of time. Some, including me, would question whether those resources should have been placed in the reserves category, as there are significant questions about Venezuela’s ability to develop them.”

    Is there some technical problem with producing Venezuela’s oil sands?  I seem to remember something Laherrere wrote once stating that a pipeline in the side of a hill was sufficient to get a flow.

    My thinking has been that it would be a much easier job to extract and process Venezuelan oil sands, than the Canadian operation.  The holdup has been political, and the financial risk involved for numerous reasons I don’t want to go into.

    Can you shed some light on this?  I was also under the impression Venezuelan reserves were far vaster than what is in Canada.

    My expectation is that one day the Chinese will go in, after making some kind of deal with Chavez, or whoever follows him, and produce something that dwarfs what Canada has been doing.

    Are my impressions wrong?  They might never do it, but is there something technical stopping something like this?  The Chinese certainly have the manpower, money, and need to do this if they want.

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    • By Robert Rapier on June 21, 2012 at 4:50 pm

      I expect you are right about the Chinese, but right now they don’t have the technology to develop it. Venezuela’s heavy oil is some of the most challenging to develop. It does not flow naturally. COP and XOM spent billions to be able to extract the oil, and once they did they were expropriated. Following that, Venezuela’s production fell, and has been in free fall ever since (although it did come up last year for the first time in a long time).

      RR

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  5. By mac on June 21, 2012 at 9:16 pm

    “How much oil s left in the world ?”

    LOTS of it………

    Will it be economical to extract it in the face of numerous, cheaper competitors  ?

    At some point………….  probably not.

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  6. By ben on June 22, 2012 at 1:03 pm

    I have been writing here about the virtues of recently declining prices for fossil fuels.  The attendant benefits of such cost saving are both timely and ameliorating of our curent economic conditions.  There should be something said, however, for the salutary (if unintended) benefits of markedly higher prices of recent years, as this higher baseline–if we dare consider it as such–for traditional energy supplies introduced a positive dynamic into renewable energy investments that has, in turn, allowed a new generation of research and pilot demonstrations of clean technologies that were little more than a gleam in the eye of would-be entrepreneurs until the pricing mechanism flashed ”go.”  

    Notwithstanding the presumption that the election of an Oil Patch president in 2000 would likely be the death-knell for green energy and how the eventual financial meltdown toward the end of the Bush administration’s tenure in Washington would further stiffle any appetite for cleantech start-ups, the truth is that old-fashion price signals have sustained investor interest in many energy alternatives.   That is a good thing and something from which we will reap major benefits in the years ahead.  

    The current administration has held great enthusiasms for the long-awaited transformation to a “green economy” though anyone taking a the time to scrutinize their strategic overview of renewable energy’s potential for systemic change (issued last year), well, let’s just say that most would have branded it “Bush-lite” if released by the previous White House.  In fact, a close reading speaks to an indictment routinely directed toward the current president and his team; instinctively seeking the safety of the middle while harping about the urgency for change.   To be fair, maybe that’s all that that’s achievable given the partisanship/acrimony of contemporary politics.  Yet, somehow, I think the public expects much more of an argument for systemic change that demands measures of self-discipline, so long as it is rests on a belief that proposed changes involve fair, shared sacrifice that aim purposefully toward a future that is better because it is well-founded upon sustainable activities that add to the wealth of nations without mortgaging the next generation’s freedom and security.   Ah, so much for that vital contract struck two-and-a-quarter centuries ago this very summer in Philadelphia.

    Ben                 

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  7. By mac on June 22, 2012 at 9:43 pm

     Two barrels of oil  consumed for each barrel discovered.

    Hmm….

    Sounds like a oil disaster scenario ?

    Okay. …….. Well,  maybe not—

    (We can go back and inject steam (etc) into old wells)

    Increasing Recovery rates aside,  it looks like a zero-sum game for oil alone.

     

    How is that extra barrel going to hit the market ????

     

    And ….(holy catfish)…………….  that’s just to stay even…….. (consumption versus discovery)

     

     

     

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  8. By Tony Weddle on June 23, 2012 at 5:41 am

    I’d expand on BS’s opening comment. The notion that the US will produce a lot more than 30.9 billion barrels is based on the optimistic idea that the US will exhibit a stable enough society and functioning economy to permit, effectively, business as usual recovery of resources, including crude oil. Under business as usual, how long would it take to produce even 31 billion barrels? 50 years? 100 years? Will there even be a United States of America in 50 years? Who knows, but I think the assumption that oil extraction will still be going on under normal economic and business conditions in 50-100 years is, if not fanciful, then extremely optimistic.

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  9. By Robert Rapier on June 23, 2012 at 6:33 am

    Under business as usual, how long would it take to produce even 31 billion barrels? 50 years? 100 years?

    11 years. The reserve/production ratio from this year’s BP report was 10.9; in other words if there was no more oil found then the U.S. would produce that 31 billion barrels in 11 years at current production rates.

    RR

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  10. By Greg on September 19, 2012 at 9:11 am

    Hi,
    Could you produce the global proved reserves graph, but scaled with oil consumption every year, please?
    I really wonder how it would look like.

    Thanks a lot for your work, I wonder why BP don’t produce thes plots themselves…

    Greg 

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  11. By William Benson on March 26, 2013 at 8:08 pm

    The Bakken Shale formations alone carry an estimated 18 billion barrels worth of oil. Through the Fracturing process, these resources are being tapped, producing roughly around 450,000 barrels a day (currently…it will continue to grow)

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