We are running out of oil

Petroleum Intelligence Weekly have produced their annual Global Oil Reserves Survey which is based (they claim) on liquid hydrocarbons, natural gas liquids, tar sands and crude oil, that are economically recoverable at current prices.

They claim that for the first time reserves of approximately 1.459 trillion bbl at the end of 2006 shows a decline of some 13 Mn barrels or nearly 1%. = the Global oil industry is producing more oil than it finds and can define as exploitable reserves.... we are starting to run out of oil.

Big increases have been declared for both Brazil, and Kazakhstan but generally reserves have declined or were not expanding. The survey also confirms recent comments about OPEC producers overstating reserves to allow larger output under OPEC "rules" e.g Kuwait.

PIW published a detailed report in January 2006 which stated that the Kuwaiti data indicate that, of the current remaining 48 billion barrels of proven and nonproven reserves, only about 24 billion barrels are so far fully proven - roughly equivalent to the US reserves or double those of the North Sea. It is also suggested that far from declining at a modest 4% they posibly may be declining (as per the North Sea) at near 10%.


Dr Colin J Campbell wrote a book called The Coming Oil Crisis in which he laid out the arguments for his belief that worldwide production of conventional oil will head into permanent and irreversible decline in the 2005-10 timeframe.

The term "conventional oil" is used by him to refer to oil that is produced from conventional reservoirs and does not include oil from tar sands, polar areas, or deepwater areas, or oil from coal or shale. Conventional oil accounts for 95 percent of all oil produced today and will remain the determining factor in world oil production for the foreseeable future. According to Campbell, world oil discovery peaked in the 1960s and has declined steadily since. When he wrote the book we produced four barrels for every one we discover. If the PIW report is correct we are now beyond the balancing point.Clearly, this is an unsustainable situation, since long-term discovery and production must be roughly equivalent.

At the time Campbell contended that OPEC reserve estimates were politically motivated and exemplified this with the behaviour of reports of Kuwait reserves.. Kuwait is an excellent example of what is wrong with the way OPEC countries report reserves. The country reported a gradual decline in its reserve base from 1980-84. This should be expected from a mature producing country. However, in 1985 the country reported a 50 percent increase in reserves with no corresponding discovery. The Kuwaiti government increased its reserve estimate because of the implementation of an OPEC production quota system that based country production levels on country reserves. Kuwait was not alone in increasing its reserve estimates for political reasons. In 1988, Abu Dubai, Dubai, Iran and Iraq all significantly increased their reported reserves for political reasons. Even OPEC heavyweight Saudi Arabia reported a massive increase in reserve estimates in 1990 for similar reasons.

Such overstatements are not restricted to undemocratic countries Royal Dutch/Shell reported a whopper of a reserve writedown in January 2004. The company reported that its reserves had been regularly overstated by a stunning 20 %.

It is a sobering thought that the main reason for the poor performance in growing reserves is a lack of additions to reserves from new discoveries, which account for 20% or less of additions in the last few years. Against this exploration costs are rising fast, and recovery costs increasing .

Baker Hughes undertakes rig counts which gives a broad figure for activity as BH says ," Rig count trends are governed by oil company exploration and development spending, which in turn is influenced by the current and expected price of oil and natural gas."

The oil industry has never been busier looking for and exploiting oil and gas. These are the average rig figures for the last 5 years starting 2002 : 1,829, 2174, 2395, 2764, 3043, and for March 2007 3247. So this indicates the industry is working harder, faster to sustain and meet output.

Meanwhile crude oil for June delivery, reached a record high today.