The Facts about the Natural Petroleum Reserves Remaining in the World

Defining Natural Petroleum

Natural Petroleum (also known as crude oil or black gold) refers to the dark-coloured liquid found in porous rocks between the upper layers of some areas of the Earth’s crust. It is a constituent of the major energy-producing fossil fuels such as coal and natural gas. Formed from the compression by overlying Earth and subsequent decomposition of dead plants and animals remains over millions of years, it is a varied mixture of chemical compounds containing carbon and hydrogen, used in making plastics and petrol.

Differences in Reserves and Resources
Natural petroleum reserves are defined as those amounts of petroleum in the ground which are expected to be economically recoverable from a given date. Even if oil can be extracted from a reservoir, the costs involved in doing so may be more than the value of the oil recovered at predicted prices, and in this case the petroleum is not economically recoverable and is classified under contingent resources. Potentially recoverable from undiscovered petroleum accumulations, are defined as prospective resources. The estimates do not include petroleum stored in inventory.

In general, all reserves are estimates based on many factors including the competency of the evaluator, the geologic or engineering information available, the geographical development of the region, improved recovery methods, and government regulations and how much petroleum is extracted at that given instant. Whether the reserves are economic recoverable is determined by average past petroleum prices extraction costs, corporate procedures, contract obligations and government regulations involved in reporting these reserves.

Classification of Reserves and Estimation methods
Depending on the uncertainty in the estimate, reserves can be broadly classified into either proved or unproved (as stated by World Petroleum Council and Society of Petroleum Engineers). Proved reserves are more likely to be recovered than unproved reserves.

Deterministic estimation yields a single best estimate while probabilistic estimation generates a range of estimates with their associated probabilities. There are two methods to estimate reserves: the volumetric method and decline curve analysis. The volumetric method is largely based on interpretations of complex geological data while decline curve analysis, the more accurate method, is by projections from available production history.

Proved reserves

When the probability that petroleum reserve actually recovered will equal or exceed the estimate is at least 90%, the reserve is proved. This probability is usually supported by actual production or formation tests, taking into account productivity of the well and actual quantities of petroleum reserves.

Proved reserves can be categorized as developed or undeveloped. Developed proved reserves are based on existing operational facilities whereas undeveloped proved reserves are classified provided the locations of the well
(1) are within the known proved productive regions
(2) conform to existing well spacing regulations
(3) will most likely to be developed

Unproved Reserves

The key reason why some reserves are classified as unproved rather than proved is due to the uncertainties involved in estimating the reserves. Unproved reserves are usually estimated taking into account changes in economic conditions and improvements in technological developments.

Unproved reserves can be classified as probable reserves and possible reserves, with the former more likely to be recovered than the latter. Using probabilistic methods, if the probability that the amount actually recovered will equal or exceed the total proved and probable reserves is at least 50%, the reserves is classified as probable reserve. Likewise, if the probability that the amount actually recovered will equal or exceed the total proved, probable and possible is at least 10%, the reserves is classified as possible reserve.

Natural petroleum reserves remaining in the world
According to the Oil & Gas Journal (a reliable primary source for worldwide reserves) worldwide reserves were 1.27 trillion (1,270,000,000,000) barrels of oil. These estimates are 53 billion (53,000,000,000) barrels of oil higher than the previous year, showing new discoveries, improving technology, and changing economics.

At 2003 consumption levels, the remaining reserves represent 44.6 years of oil (from U.S. Energy Information Administration, International Energy Annual 2002). However, it is not true that the world will be out of oil in about 45 years, a theory that had emerged since 1970s. In fact, the natural petroleum reserves remaining in the world have remained relatively constant over the past few decades because of new discoveries of more oil deposits and improved methods to extract oil deposits. Also, increasing oil prices causes marginal non-economically recoverable reservoirs to be developed economically, adding to the current reserve base.

Increasing natural petroleum reserves in the world
The countries with the largest amounts of remaining oil reserves are: Saudi Arabia, Canada, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela, Russia, Libya, and Nigeria (According to the Oil & Gas Journal).

Nonetheless, oil reserves will increase as more oil deposits are found around the world. Potential sites offshore Brazil, the Gulf of Mexico, Alaska, off the western coast of Africa, Russia, and many areas of Asia and the Pacific, where the industry has been successful in discovering significant new oil reservoirs. Despite the Middle East countries with majority of the oil reserves, many observers agree that significant oil deposits remain undiscovered there. North America and Europe have already been explored heavily and it is unlikely that there will be new discoveries.

It is unknown how much oil remains to be discovered. Estimates of world oil resources to 2025 are more than two times current reserves, based on an estimate from the U.S. Energy Information Administration (EIA) using U.S. Geological Survey (USGS) data. EIA estimates that in 2025, countries around the globe will still have more than 900 billion barrels of oil remaining to be discovered. EIA estimates total world oil resources at more than 2.9 trillion barrels of oil.

For example, USGS estimated that the onshore U.S., including Alaska, has undiscovered, technically recoverable resources of 112.3 billion barrels of oil. In a separate assessment of offshore resources completed in 2000, the U.S. Minerals Management Service (MMS) estimated that 75 billion barrels of oil underlie areas off U.S. coasts.

Technology ensures adequate energy for the world in the future
Technology development allows the oil industry to enable more accurate drilling and extraction of a higher percentage of oil from each well, extending the life of each well. In addition, advanced technology allows development of resources that were not previously economically viable, for example unconventional deep oil reservoirs and deep-sea fields. Together, these new sources of oil will replace existing wells as they die off

Furthermore, technology advancement has ensured alternative energy sources such as hydroelectric, solar and wind. Petroleum forms within the earth too slowly to be sustainable but even if it runs dry, substitute like hydrogen, ethanol and oil from oil shale to assure adequate fuel supplies to meet growing world energy needs in the future.