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Officially, Venezuela has the largest reserves of crude oil in the world, with 303 billion barrels of proven reserves. However, much of this oil is extra-heavy crude oil and may not be economical to produce at prevailing prices. Thus, a portion of the Venezuelan barrels could actually no longer belong to the category of "proven reserves".
Consider that Venezuela's proved reserves went from 80 billion barrels in 2005 to 300 billion barrels in 2014. The main reason was that the new oil discoveries were not there. No, it was the fact that oil prices had reached three digits, making Venezuelan extra-heavy oil production economical. In other words, the "resources" (oil in the ground) have been transferred to the category "proven reserves" (oil whose production is economic).
By contrast, Saudi Arabia reported proven reserves of 264 billion barrels in 2005 and 267 billion barrels in 2014. Saudi Arabia's barrels were judged to be economically sound even before the outbreak. oil price. It is for this reason that I believe that Saudi Arabia's proven reserves of 16% of the world's total are the most important for the world oil market.
But doubts about the amount of Saudi reserves have persisted for years. In 1982, Saudi Arabia stopped allowing the scrutiny of its oil and gas data. Previously, foreigners had access to information about their reserves. When this accessibility was closed, proven Saudi reserves were estimated at 166 billion barrels.
However, by 1988, the Saudis increased their proven reserves estimates by 90 billion barrels. Many experts have suggested that this upward revision was based on the internal policy of OPEC. Since the reserves were no longer subject to external audit, the official figures published by the Saudis aroused considerable skepticism.
Skepticism worsened when it was estimated that Saudi reserves accounted for 260 billion barrels in 1990 and today, nearly 30 years later, they would be 266 billion barrels. Meanwhile, Saudi Arabia has produced more than 100 billion barrels between 1990 and 2017. How then could their reserves remain essentially unchanged? Related: Does Ocasio-Cortez have the right to reject nuclear energy?
In anticipation of a possible IPO, Saudi Arabian oil company Saudi Aramco has commissioned an external audit of its proven reserves. The external audit revealed that proven oil reserves in Saudi Arabia were at least 270 billion barrels.
But doubts persist. For example, Mamdouh G. Salameh, an oil economist, is a guest professor in energy economics at the ESCP Europe Business School in London, recently writing:
My calculation of Saudi reserves based on Saudi production since the discovery of oil in 1938 up to now (for which we have figures) and a deduction of the annual depletion rate of Saudi deposits aged 5 to 7 % on average for the same period, gives a figure of 70-74 bb of the remaining reserves. My figures are more or less in line with those of other experts. "
I have already done a similar calculation. I started from the assumption that the 1982 estimate of 166 billion barrels was correct, and then I just subtracted the Saudi output since then. I've calculated their total output since 1982 at around 100 billion barrels, leaving 66 billion barrels of reserves.
However, I then did a common sense test that cast doubt on this calculation. I did the same calculation for proven US reserves over the same period.
In 1982, the United States proved that the crude oil reserves were 35 billion barrels. In 2005 – and before the oil shale boom was underwayThe proven US reserves were only 30 billion barrels. But the total production of the United States between 1982 and 2005 was 77 billion barrels.
If we extend this calculation until the end of 2017, proven reserves in the United States have actually jumped to 50 billion barrels (according to the Statistical Review of 2018), and there were 117 billion barrels of oil production per year. United States since 1982.
To reiterate, in 1982, the United States proved that crude oil reserves rose to 35 billion barrels. Between that date and 2017, the United States produced 117 billion barrels of oil, but proven reserves reached 50 billion barrels. Related: Can Ukraine win its energy independence?
How did it happen? There have been new discoveries, technological improvements that have allowed to extract more barrels from existing fields and higher prices that have made the extraction of additional resources more profitable.
I think it's safe to assume that Saudi Arabia has also found additional barrels since 1982. They also have access to the same type of technology that has improved recovery in US fields. Therefore, I do not think it is a legitimate exercise to consider the depletion of a number of historical reserves to estimate current reserves. Such an exercise would have suggested that US oil production would have fallen to zero by 1991.
Thus, I find no reasonable basis for concluding that Saudi Arabia's reserves are well below their official figures. Their published reserves are in line with the independent audit and experience of US reserve growth despite significant oil production.
If you think the US results are atypical, you can repeat this exercise to one of the world's leading oil producers and find the same thing. Starting with the proven reserves of 1982 and subtracting the next production will not accurately predict the reserves at some point in the future. In many cases, as in the United States, cumulative production was greater than the number of proved reserves in 1982.
That's why I have so far found no good reason to doubt official figures from Saudi Arabia.
By Robert Rapier
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