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TELL TALE TANKER: When it comes to oil reserves, there's no doubt who’s the captain of the ship.
6
Middle East Well Evaluation Review
a
ic
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Am
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La
WORLD OIL RESERVES
C H A R T I N G
T H E
F U T U R E
The Middle East controls the lion's share of the world's oil reserves. Most of the region's vast reservoirs,
which contain three-quarters of the earth's known oil, can be developed for less than $5 a barrel - four
times cheaper than in other parts of the world. But will this dominance continue well into the next
century?
Terry Adams, General Manager of the Abu Dhabi Company for Onshore Operations (ADCO), has spent
the past 16 years studying trends in the world's oil industry. In this article he presents his personal view
of the future and predicts that the Middle East will hold centre stage for many years to come.
Many of the figures in this article are derived from data contained in the Annual Reports from British Petroleum & Shell.
Number 10, 1991
7
FIG 1.1: SCOURING THE SEDIMENTS: Most of the world’s sedimentary basins have now been
explored and it is unlikely that any new major oil reserves lie undetected. This map shows the
major onshore (green) and offshore basins (blue). The brown line indicates the 1000m submarine
contour.
T
Reservoir
Source
Seal
Fig 1.2: THE EXPLORATION TRIPLET: Source,
reservoir and seal are the three essential
ingredients that go into making an oil
reservoir. The Middle East’s thick and porous
stratigraphic units also help!
8
he total dominance of the
Arabian Gulf within the world
petroleum industry is an
inescapable fact. Members of the
Organisation of Petroleum Exporting
Countries (OPEC) hold more than 75%
of total world reserves.
The full impact of this statistic is
realised when production costs are considered. OPEC producers in The Gulf
can develop 90% of their future
reserves for less than $5 a barrel. By
comparison, only 30% of non-OPEC oil
reserves could be developed at prices
below $10 a barrel. Up to 70% would be
economically developed at $20 a barrel
and it would cost $30 a barrel,
minimum, to develop 90% of non-OPEC
reserves.
It is highly unlikely that the current
distribution of world reserves will
change significantly. After the two oil
shocks of 1974 and 1978, the oil industry
embarked on a global search for oil
resources. Today, there are few sedimentary basins in the world that have
not been investigated by modern exploration technology. Essentially, it is now
unrealistic to expect the unexpected.
The oil multinationals are confident in
their predictions of new reserves.
This is particularly true of The Gulf
Basin. On a global basis, this basin is
geologically unique. It has not only the
essential Exploration Triplet — source
rocks, reservoirs and seals — but it also
has very large and very simple structural traps.
The exploration triplet in the area
comprises thick stratigraphic units of
particularly rich source sediment; highly effective porous rocks which persist
over vast areas, acting both as hydrocarbon transfer beds and reservoirs;
and especially effective shale and evaporitic sealing sequences to entrap
migrating oils. As a result, the Middle
East has more than two-thirds of the
world’s proven petroleum reserves
within one mega-basin. It also has the
capacity to replenish this potential with
new reserves, throughout the foreseeable future.
“Essentially, it is
now unrealistic to
expect the
unexpected.”
Middle East Well Evaluation Review
Reserves are those petroleum
resources that are both technically and
economically
recoverable.
Consequently, the concept of ultimate
recoverable reserves has little meaning.
When planning reserves and making
predictions, a ‘40-year look ahead’ provides a practical cut off point. This article takes this viewpoint and also
assumes that reserves are recoverable
and are simply split into two categories known (proven and probable) and yetto-find (predicted).
There is now a substantial global
data-base compiled by both governments and industry. Through constant
revision, reserve compilations are
refined to high levels of accuracy and
confidence. Future predictions are tied
to our contemporary understanding of
global geology and our understanding
of how sedimentary basins behave.
Nevertheless all future reserve predictions must assume that:
✍ Oil price will grow in real terms, stimulating investment by industry.
✍ Favourable capital, fiscal and political
environments will exist for continued
investment by industry.
✍ Oil recovery factors will improve
through the application of commercially
viable technology.
✍ Reserves will continue to grow
through extensions to known discoveries.
Many expert compilations of world
reserves have been published over the
past 30 years (see box). Not unexpectedly, estimates have grown through
time. But there is now a well considered
global view that world oil reserves
(both known and yet-to-find) should
peak within an envelope of between
1700 to 2000 billion barrels (1 billion =
9
10 ).
Much has been made of improvements in the recovery factor from existing reserves. On average, recovery factors of 45% can be expected. However,
future improvements will be constrained by cost since the technological
expense is substantial. A realistic maximum improvement would be 10% on
current recovery factors. Nevertheless,
that alone would add more oil to the
world portfolio than is currently being
added by new exploration per decade.
Number 10, 1991
50 YEARS OF CRUDE ESTIMATES
Estimates of the world’s ultimately recoverable crude oil from conventional sources.
bbl
1942
1946
1946
1948
1949
1949
1953
1956
1958
1959
1965
1967
1968
1968
1969
1970
1972
1972
1972
1973
1973
1974
1974
1975
1977
1977
1978
1978
1978
1979
1979
1979
1979
1980
1981
1981
1981
1982
1983
1984
1984
1987
PRATT, WEEKS & STEBINGER 600
DUCE
400
PROGUE
555
WEEKS
610
LEVORSEN
1,500
WEEKS
1,010
MACNAUGHTON1,000
HUBBERT
1,250
WEEKS
1,500
WEEKS
2,000
HENDRICKS (U.S.G.S.)
2,480
RYMAN (ESSO)
2,090
SHELL
1,800
WEEKS
3,550
HUBBERT
1,350 -2,100
MOODY (MOBIL)
1,800
WARMAN (BP)
1,900
MOODY & EMMERICH (MOBIL)1,800 -1,900
BAUQUIS, BRASSEUR &
MASSERON (IFP)
1,950
SCHWEINFURTH (U.S.G.S.) 2,964
LINDEN (INST. GAS TECH.)
2,945
BONILLAS (SOCIAL)
2,000
HOWITT (BP)
1,800
MOODY (MOBIL)
2,000
WORLD ENERGY CONF.
"CONSENSUS"*
2,265
NELSON (SOCIAL)
2,000
DE BRUYNE (SHELL)
1,600
KLEMME (WEEKS)
1,750
NEHRING (RAND)
1,700..-2,300
NEHRING (RAND)
1,600 -2,000
HALBOUTY & MOODY
2,130
MEYERHOFF
2,190
ROORDA (SHELL OIL)
2,400
WORLD ENERGY CONF.
2,595
HALBOUTY
2,275
STRICKLAND (CONOCO)
2,071
COLITTI (AGIP)
2,082
NEHRING (RAND)
2,400
MASTERS & ROOT (U.S.G.S.)
& DIETZMAN (E.I.A.)
1,722
MARTIN (BP) (to year 2020)
1,685
IVANHOE
1,700
MASTERS (U.S.G.S.)
1,744
40s
50s
60s
70s
80s
*Average of the two-thirds middle range replies out of 29 estimates.
9
USA
900
Latin America
Rest of World
800
Socialist Countries
Middle East
700
Reserves bbl
600
500
400
300
200
100
0
69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89
Year
150
700
1985 estimate
600
Remaining
reserves
R/P ratio
500
1971 estimate
400
100
Annual
production bbl
30
300
20
200
50
Reserves production ratio
Proved reserves of oil are those
reserves of oil that geological and engineering information indicate with reasonable certainty can be recovered
from known reservoirs, under existing
economic and operating conditions.
From British Petroleum’s Statistical
Review of World Energy (1990), the current best estimate for proven world
reserves at the end of 1989 is 1012 billion barrels (figure 1.3). This represents
a reserves increase of some 471 billion
barrels in the last two decades.
Currently the Middle East holds 66.3%
of world reserves, followed by 19.5% for
Latin America. The rest of the world
holds the ba1ancing 14.2%.
It is interesting to look at a plot of
cumulative world proven reserves from
1930 to 1985 (figure 1.4). Reserves have
been backdated to the year of discovery, (ie not when they were actually
developed). The diagram shows a
curve compiled in 1985, above the same
plot compiled in 1971. The quantum
leap in reserves discovered in the 50s
and 60s, reflects the remarkable number of giant discoveries made in the
Middle East at that time. However, the
difference between the two curves
shows the dramatic reserves growth or
additions to known discoveries - around
100 billion barrels - that occurred
between 1977 and 1985. Reserves
growth will continue to be an important
factor world wide, particularly for the
giant fields of the Middle East. It is
worth remembering that the reassessment of recoverable reserves from
Ghawar in Saudi Arabia, changed world
total reserves by 5%.
1000
Remaining reserves bbl
Today’s proven reserves
10
100
Annual production
0
0
1930
1940
1960
1950
1970
0
1980 1985
120
Super-giant fields (5 bbl or more)
Other discoveries
100
Fig. 1.3: (Top): Latin America and the
Middle East currently hold almost 85%
of world reserves.
Fig. 1.5: (Bottom): There has been no
giant field discovery for over a decade.
80
Reserves bbl
Fig. 1.4: (Middle): Discoveries of the
Middle East’s super-giant fields made a
major impact on world reserves after the
1950s.
60
40
20
0
10
1910
1920
1930
1940
1950
1960
1970
1980
Middle East Well Evaluation Review
520 bbl
500
The significance of
super-giants
490
Confidence about
the future
There are over 30,000 producing oilfields in the world today. Four fields
contribute 17% to total world proven
reserves (Ghawar, Saudi Arabia; Greater
Burgan, Kuwait; Bolivar, Coastal
Venezuela; Safaniya Khafji, Neutral
Zone, Kuwait-Saudia Arabia). Twenty
five fields contribute a staggering 34%.
Clearly, we cannot overstate the
impact of super-giant oilfields on world
reserves. However, when discoveries
are plotted through time, it is seen that
no super-giants have been found for
more than a decade (figure 1.5). This is
a direct result of the global data base
reaching maturity. It is unlikely that
such major finds will ever be found in
the future. It is a fact of exploration life
that any obviously large structures have
already been tested.
480
470
460
450
Twenty oil provinces contribute 84% to
world discoveries (figure 1.6). The global data base suggests that most yet-tofind reserves will also come from these
top 20 provinces - the bulk from the
Middle East. A Shell prognosis (1988)
for undiscovered oil, predicts a discovery envelope of between 350 to 410 billion barrels yet-to-find (figure 1.7). BP
independently predicts a similar potential of 350 billion barrels yet-to-find. This
conformity of view between the two
majors promotes some confidence in
their predictions.
Total world production to the end of
1991 was some 585 billion barrels. As we
have seen, proven remaining reserves
totalled 1,012 billion. Future yet-to-find
reserves should add between 350 to 410
billion. Therefore the global figure for
world oil reserves is now forecast to fall
to around 2000 billion barrels. This conforms with the expert global estimates
given earlier. The predominance of
Middle East reserves within this global
total is profound (figure 1.8). It is an
irrefutable fact that OPEC countries
hold more than 75% of world total
reserves.
Fig. 1.6: POLE POSITION: Most new oil
discoveries are likely to occur in these
20 regions. The Middle East will always
be the number one area.
430
420
60
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40
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50
Middle East
Reserves bbl
440
10
0
Number 10, 1991
11
SR
US
80
75a
ni
cea
a/O
Asi 55-65
t
Eas
dle
Mid 5-120
9
ope
Eur 25
20a
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th A 75
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55
ca
Afri 5
3
25-
a
ric
me
h A 0
3
25
t
Sou
80
Fig. 1.7: (Top) TREASURE MAP: The Middle
East’s yet-to-find reserves are thought to be
between 95 and 120 billion barrels - more
than the yet-to-find reserves of North and
South America put together.
Fig. 1.9: (Bottom): The current state of the
world’s major oil producers.
Rest of World
USA
Socialist Countries
70
60
Million barrels daily
Fig. 1.8: (Middle): OPEC countries hold
more than 75% of world reserves.
OPEC
50
40
30
20
10
1000
0
69
71
73
75
77
79
81
83
85
87
89
Year
800
600
bbl
400
200
Cumulative production
Remaining reserves
0
12
USSR & E.Europe
Far East & Australasia
Middle East
Africa
Western Europe
Latin America
400
North America
Estimated future discoveries to year 2030
200
Middle East Well Evaluation Review
Production price
and power
1991
World production persists at around 60
million barrels per day (figure 1.9). At
current levels, the Middle East has over
105 years of production life from existing reserves (figure 1.10). In all forecasts this predominance remains
unchanged.
However, uncertainty over future oil
prices clouds the commercial development of new reserves. Planners in the
past have consistently failed to protect
against price volatility and, without any
doubt, price volatility will continue (figure 1.11).
200
00
0
10
20
20
90
21
30
2080
2020
70
20
20
Fig. 1.10: ONE HORSE RACE: At current
production rates, the Middle East’s existing
reservoirs will last for 105 years.
Fig. 1.11: World events since the turn of the
century have played havoc with the price of
oil.
20
40
60
20
2050
Growth of
Venezuelan
production
Discovery of
Spindletop,Texas
40
Africa
Latin Amercia
Middle East
North America
Asia & Australasia
Western Europe
Loss of
Iranian
supplies
East Texas
field
discovered
Fears of
shortage
in US
US dollars per barrel
Total World
Socialist Countries
Post-war
reconstruction
Suez
crisis
Iranian
revolution
Iraq invades
Kuwait
Gulf war
ends
Yom
Kippur
war
30
20
10
1988
OPEC
introduce
netback
pricing,
and later,
production quotas
Money of the day
0
1900-09
Number 10, 1991
1910-19
1920-29
1930-39
1940-49
1950-59
1960-69
1970-79
1980-89
1990-91
13
Consequently commercial risk more
frequently overshadowed exploration
risk in all exploration investment decisions (figure 1.12). Within non-OPEC
countries, many commercially submarginal fields have been developed
through failure to predict low oil price
scenarios. Recent events in Kuwait generated short-term windfall profits, with
inflated oil price, but the price soon
dropped when the conflict ended.
In any realistic supply-demand prediction, there is still a persistent excess
of production capacity available in the
market (figure 1.13). This excess falls
under OPEC’s control (primarily in The
Gulf), where production development
costs are extremely low.
And this is why non-OPEC new
exploration investment must always be
at risk. The Arabian Gulf will always
dominate our industry. Governmental
and commercial planners who ignore
this fact, do so at their peril.
The new world of the 1990s has
already seen tumultuous political
change, and our industry will inevitably
go through similar revolutions. The
decade of the state oil companies has
arrived and by the end of this century
the structure of the multinationals will
have changed out of all recognition. By
then, the days of the small independents will be more or less over.
However, the real unknown is what
will result from the immense global
pressures that are developing on our
industry from the world environmental
lobbies and the ‘greening’ of Europe
and America. Oil as a fossil fuel is a
prime contributor to the threatening
‘greenhouse gases’ and global climatic
change. Will demand for cleaner fuels
see a switch from oil? In the short term,
no. But within a ‘40-year scenario’,
which is where this story started, accelerated investment in gas and nuclear
fuels must pose a real threat through
substitution.
$/bbl (1985)
50
40
30
20
10
0
1970
1975
1980
1985
1995
1990
2000
Fig. 1.12: ANYBODY'S GUESS: In the early 70s, a group of petroleum economists made
predictions of the highest and lowest prices of oil - shown as the green envelope. This
completely under-estimated oil prices. The same team updated their predictions a few years
later - the yellow envelope - which missed the highs and lows.The later, red prediction
envelope has proved far too optimistic. The failure to predict a drop in oil prices has led to
many sub-marginal fields being developed in non-OPEC countries.
Million b/d
60
Excess capacity
20
50
40
OPEC
30
29
20
10
Non-OPEC
0
1970
1975
1980
1985
1987
Fig. 1.13: There has been an excess in production capacity since the mid 70s - and this is
under OPEC’s control.
14
Middle East Well Evaluation Review
Development of reserves
Acknowledgements
Proportion of resources available %
80
70
60
50
40
30
20
10
0
5
10
15
20
25
$/bbl
Figure 1.14: Only 10% of available world resources can be economically
developed when oil is $5 a barrel. And all that oil lies in the Middle East. The
price of oil would need to reach $25 a barrel before it became economical to
develop 80% of world resources.
This paper was originally
presented as a lecture to the
Society of Explorationists in
the Emirates and SPE in Abu
Dhabi and Dubai. The views
expressed are the author’s
alone. The background
information has evolved from
a long-term involvement with
the subject in BP. In addition,
Shell provided several very
useful briefing papers.
However, the primary data
source for many of the
illustrations is the BP
Statistical Review of World
Energy, June 1990, to which all
readers are referred as well as
to several key papers by Dr D.
Jenkins, Chief Executive
(Technical), BP Exploration.
Figure 1.15: In the ‘40-year scenario’ nuclear energy could erode the
importance of oil as a result of accelerated investment.
Number 10, 1991
15