Officially, Venezuela has the largest oil reserves in the world with 303 billion barrels of proven reserves. However, much of this oil is particularly heavy crude oil and it may not be economical to produce at prevailing prices. Therefore, part of Venezuela's barrels can not really be in the Reserved Reserves category.
Consider that Venezuela's proven reserves have risen from 80 billion barrels in 2005 to 300 billion barrels in 2014. The main reason for this was not a series of new oil discoveries. No, it was the fact that oil prices were three digits, making Venezuela's extra-heavy oil economically viable. In other words, "resources" (the oil in the soil) have been placed in the category "proven reserves" (economically producible oil).
Saudi Arabia reported 264 billion barrels of reported reserves in 2005 and 267 billion barrels in 2014. Saudi Arabia's barrels were considered to be economically viable, even if oil prices had not risen. That's why I consider the proven reserves of Saudi Arabia – 16 percent of the world's total – as of paramount importance to the global oil market.
However, there are doubts about the amount of Saudi Arabia's reserves for years. In 1982, Saudi Arabia ceased to allow verification of oil and gas data. Previously, outsiders had access to information about their reserves. After the closure of this accessibility, oil reserves in Saudi were estimated at 166 billion barrels.
By 1988, Saudi Arabia increased its proven reserve estimate by 90 billion barrels. Many experts suspect that this upward revision was based on internal OPEC policy. With reserves no longer subject to external scrutiny, there was great skepticism about the official numbers the Saudis had released.
Skepticism worsened when it was estimated that Saudi reserves were 260 billion barrels in 1990 and today, nearly 30 years later, 266 billion barrels. Meanwhile, Saudi Arabia produced over 100 billion barrels between 1990 and 2017. How then could their reserves remain essentially unchanged? Related: Is Ocasio-Cortez entitled to refuse atomic energy?
In preparation for a potential IPO, Saudi Aramco, the national oil company of Saudi Arabia, has commissioned an external audit of the proven reserves. The external audit found that oil reserves in Saudi Arabia are at least 270 billion barrels.
However, there are still doubts. For example, the oil economist Dr. Mamdouh G. Salameh, who is a visiting professor of energy economics at the ESCP Europe Business School in London, recently:
My calculation of Saudi reserves based on Saudi Arabian production since the discovery of oil in 1938 (for which we have figures) and the deduction of an annual depletion rate of Saudi aging fields averaging 5% to 7% over the same period, gives a 70-74 bb remaining reserves. My numbers more or less agree with those of other experts. "
I once made a similar calculation. I began by assuming that the estimate of 166 billion barrels in 1982 was correct, and then I simply deducted Saudi production since then. I have calculated their total production since 1982 at ~ 100 billion barrels, leaving 66 billion barrels of reserves.
However, I then conducted a reason check that cast doubt on this calculation. I did the same calculation for proven US reserves over the same period.
In 1982, US crude oil reserves of 35 billion barrels were reported to have been reported. Until 2005 – and before the shale oil boom was underwayThe proven US reserves had fallen to only 30 billion barrels. However, total US production between 1982 and 2005 was 77 billion barrels.
If we extend this calculation by the end of 2017, proven reserves in the US have actually risen to 50 billion barrels (2018 BP according to the Statistical Review), and since 1982, 117 billion barrels have been produced in the US.
To repeat, in 1982, US oil reserves had 35 billion barrels. In the US, 117 billion barrels of oil were produced between 2017 and 2017, while proven reserves rose to 50 billion barrels. Related topics: Can Ukraine gain energy independence?
How did it happen? There were new discoveries, technological improvements that allowed more barrels to be extracted from existing fields, and higher prices that could economically extract additional resources.
I think it is reasonable to assume that Saudi Arabia has also found additional barrels since 1982. They also have access to the same technologies that will improve the recovery in the US. Therefore, I do not believe that it is legitimate to consider the exhaustion of a historical reserve number for estimating current reserves. Such an exercise would have suggested that US oil production would have fallen to zero by 1991.
Therefore, I find no reasonable basis for concluding that the reserves of Saudi Arabia are much lower than their official figures. Their published reserves are in line with the independent audit and are in line with US reserve experience despite significant oil production.
If you do not believe the US results are untypical, you can repeat this exercise for each of the world's largest oil producers and find the same. Beginning with the proven reserves in 1982 and subtracting the subsequent production, the reserves are not accurately predicted at any time in the future. In many cases, as in the US, cumulative production was higher than the proven reserves of 1982.
So far I have found no valid reason to doubt Saudi Arabia's official numbers.
By Robert Rapier
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