Survey of Energy Resources 2007
Reserves and Resources
Defining what to Measure
There are several different categories of oil, each having different costs, characteristics and, above all, depletion profiles. Some are easy, cheap and fast to produce, whereas others are the precise opposite.
The terms 'Conventional' and 'Non-Conventional' (or 'Unconventional') are in wide usage, but lack a standard definition, adding greatly to the confusion. Here, 'Conventional Oil' will be identified and defined to exclude the following categories: oil from coal, shale, bitumen and Extra-Heavy Oil.
Besides this, 'Reserves' are differentiated from 'Resources'. 'Reserves' are the amount currently technologically and economically recoverable. 'Resources' are detected quantities that cannot be profitably recovered with current technology, but might be recoverable in the future, as well as those quantities that are geologically possible but yet to be found.
In terms of global consumption, crude oil remains the most important primary fuel, accounting for 36.4% of the world's primary energy consumption (without biomass) (BP, 2006). Forecasts (e.g. IEA, 2005, 2006) of the development of energy consumption imply that there will be no significant change in the importance of oil in the next few decades.
The 'estimated ultimate recovery' (EUR) of conventional crude oil was about 387 billion tonnes at the end of 2005. This amount is higher than the amount of 381 billion tonnes given in the 2005 energy study (BGR, 2006). The regional distribution of 'estimated ultimate recovery' of conventional crude oil, comprising cumulative production, reserves and resources, is very uneven (Fig. 2-1). The Middle East has the highest EUR. About 65% of North America's EUR has been recovered so far. In the CIS countries, this applies to about 37 % and in the Middle East to about 24% of the EUR. The OPEC countries have an EUR of about 206 billion tonnes, accounting for more than 50 % of the global EUR, of which only about 28% has been recovered so far. The OECD countries have an EUR of only 74 billion tonnes, of which nearly 62% has already been recovered.
Global crude oil reserves increased slightly from 2004 by 2 billion tonnes to about 162 . This increase in reserves results mainly from a higher assessment of known fields and only to a small extent from the discovery of new fields. About 62% of the global reserves are located in the Middle East, about 13% in North and South America and about 10% in the CIS countries.
The OPEC countries have about 76% of global reserves (of which 61% is to be found in the Persian Gulf region), the OECD about 7%, leaving about 18% for the rest of the world. (Fig. 2-1 )
Global crude oil production increased only moderately till 2003. In 2004 and 2005, there was a significant increase up to 3 900 mt - anew absolute production maximum. The regions with the highest production in 2005 were the Middle East, North America and the CIS countries.
Cumulative crude oil production until the end of 2005 reached 143 billion tonnes - half of it was produced within the last 23 years. This means that 47% of the total reserves of conventional oil discovered so far has been consumed. Taking into consideration also the expected resources of 82 billion tonnes, more than 37% of the EUR has been consumed. The depletion mid-point - when half of the EUR will have been recovered - will be reached within the next 10 to 20 years. Afterwards, the decline of conventional oil production is inevitable.
About two-thirds of the crude oil produced in 2005 was transported between different countries and regions, sometimes covering large distances by tanker or pipeline. For crude oil, there is a single global market with nearly uniform prices. However, there was a significant increase in price differentials between oils of different quality due to a general increase in oil prices.
Oil prices increased sharply in the last three years and reached their short-term maximum in August 2006 at nearly US$ 79/bbl for Brent crude. In real terms (taking inflation into account), this price is somewhat below the historical maximum of about US$ 80/bbl at the end of 1979. In terms of the Euro, this development is slightly more moderate. (Fig. 2.2 )
The reasons for the currently very high oil price, which in nominal terms is much higher than after the oil price crises in 1973 and 1979, are interpreted differently. Some experts regard an imminent shortage of oil reserves (peak oil discussion) as the driving force. Others consider that a combination of different factors is most likely to be the reason for this development. Among these factors are:
increasing worldwide demand for oil, after some years of stagnation, caused by prospering economies and strong demand for oil in the USA, China and India;
" supply disruptions caused by strikes in leading supplier countries (Venezuela, Nigeria, Norway) and terrorist attacks in Iraq, as well as natural disasters (e.g. hurricanes in the Gulf of Mexico);
political instability in the Middle East and the Yukos affair in Russia, as well as a fear of terrorist attacks;
lack of additional production capacity in most of the producing countries;
the weak US Dollar;
speculation in the oil business due to low interest rates on the capital markets.
To summarise, the following developments can be expected for crude oil in the future:
From a geological point of view, the remaining potential for conventional oil can provide for a moderate increase in oil consumption over the next 10 to 15 years. After that, an insufficient supply may be expected, owing to decreasing production when the depletion mid-point has been passed. Demand will then have to be met by other fuels. The percentage of oil production by the OPEC countries (especially in the Persian Gulf region) will increase for several decades to come.
The percentage of non-conventional oil will rise to 5-10% of total oil production by 2020, as oil prices will stay at relatively high levels. In its International Energy Outlook 2006, the US Energy Information Administration (EIA, 2006) predicted the share of non-conventional oil in world oil consumption as 9.7% in 2030, including synthetic fuels from natural gas (GTL), coal (CTL) and biomass (BTL), whereas the IEA predicts a share of 8.9% in 2030 of non-conventional oil in its World Energy Outlook 2005, with synthetic fuels providing 22.5% of non-conventional oil.
Predicting oil price fluctuations is very difficult, owing to a variety of factors. Important factors influencing their development are likely to be the behaviour of OPEC countries, the availability of additional production and refining capacities, as well as the development of the global economy. Daily fluctuations in crude oil prices up to a range of several US$ per barrel are likely in both directions, owing to speculation in the oil market business.
There are numerous uncertainties that could possibly affect the availability of crude oil:
the R/P ratio could possibly be shortened by a downward revision of OPEC reserves. These reserve numbers were sharply boosted in the 1980s, presumably for political reasons in order to keep OPEC production quotas in balance;
the R/P ratio can be lengthened due to uncertainties in reserve assessment. Proved reserve figures do not normally include probable and possible reserves.
As a rough indicator of the future availability of geo-energy fuels, the ratio of resources (in the BGR sense of additional reserves) to (proved) reserves can be used (Fig. 2-3). The larger the indicator, the more 'resources' can be converted into 'reserves'.