“US oil reserves surpass those of Saudi Arabia and Russia”… Well, not really.

Guest post by David Middleton

Rystad

US oil reserves top both Saudi Arabia and Russia

The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study.
Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.

The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.

[…]

CNBC

While I have no doubt that the petroleum resource potential in these United States, onshore and offshore, is huge and probably surpasses that of Saudi Arabia and Russia, the word “reserves” has a specific definition:

Reserves

According to the Society of Petroleum Engineers, reserves are “those quantities of petroleum claimed to be commercially recoverable by application of development projects to known accumulations under defined conditions.” Well, that clears things up, right? No? Well, to clarify, the SPE says petroleum quantities must fit four criteria to be classified as reserves. They must be (1) discovered through one or more exploratory wells, (2) recoverable using existing technology, (3) commercially viable, and finally (4) remaining in the ground. Sound okay? Good, because it gets more tricky from there. There are currently three classifications for reserves: proved, probably and possible. Here’s how they break down:

Proved reserves
are those with a “reasonable certainty” (a minimum 90% confidence) of being recoverable under existing economic and political conditions. We can discussed the differences between proved developed, proved undeveloped, etc. with a later post. However, it should be pointed out that proved reserves are the only reserves recognized by the U.S. SEC. This is why energy companies strive to get the latest technology and recovery methods recognized by the government, therefore increasing the chance of “reasonably” recovering oil and gas assets and therefore raising their reserves as well.

Probable reserves
are petroleum and gas quantities with a 50% confidence level of recovery. Basically, you may be able to get some, you may not.

Possible reserves
are quantities with a minimum 10% certainty of being produced. Basically, your long shot discoveries. Only gamble on these types of assets if your Magic 8-Ball tells you to. All right! That takes care of reserves! But what about resources?

Resources

For those of you who have looked at on the market ads, you’ll spot this term a lot in the literature. So what is resources? Again, we turn to the SPE. There are two categories of resources: contingent and prospective. are quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the projects are not yet considered mature enough for commercial development due to one or more contingencies. In other words, there’s a good idea of how much oil and gas is in the reservoir, but issues such as political and social events or even a lack of market prevent production. There can be a major oil discovery in the Congo right now. You want to risk getting shot to get to it? are quantities of petroleum estimated to be potentially recoverable from undiscovered accumulations by application of future development projects. These sorts of resources basically exist in the minds of marketing people. That’s not to say that they don’t exist in the real world as well, it just means that E&Ps are thinking of future oil and gas discoveries in new areas, based on upcoming technology and the discoveries made in similar formations worldwide. Okay! I hope that helps! Until next time, may the resource be with you. Live long and prospect.

Oil & Gas Investor

The Rystad Energy report is adding its estimate of undiscovered resources to its reserve estimate.

Somehow, they came up with 264 billion barrels of proved, probable, possible and potential reserves (resource potential).

OilReserves2

1P = Proved Reserves (>90% probability),  2P = Proved + Probable (>50% probability),  2PC (3P) = Proved + Probable + Possible (>10% probability),  2PCX = Proved + Probable + Possible + Undiscovered (not reserves)

Publicly traded companies are valued according to their proved reserves (1P).  Probable reserves (2P) can be used for certain accounting measures; however they are not proved reserves. Possible reserves (3P) cannot be used for any accounting measures. Undiscovered resources aren’t reserves.

Most estimates of undiscovered resource potential in the United States (onshore + offshore) are in the range of 400 billion barrels. If you count oil shales (different from shale oil) you can push the number up to 1.4 trillion barrels.  So, Rystad’s 264 billion barrels is actually a conservative estimate of reserves and resource potential.  The US has huge potential for future oil and gas discoveries, probably far greater than Saudi Arabia or Russia. However, those future discoveries aren’t reserves.

I applaud Rystad Energy for trying to draw an “apples to apples” comparison of oil reserves in the U.S. and other rule of law nations to those of countries like Russia, Saudi Arabia and Venezuela.  However, they are blurring the distinction between reserves and resource potential.

While the distinction between reserves and resources may seem like nitpicking, the misuse of the word “reserves” is frequently used by politicians to give the impression that US petroleum “resources” are scarce…

“The United States holds only 2% of the planet’s proven oil reserves,”
— President Barack Obama

According to President Obama, the United States contains only 2 percent of the planet’s proven oil reserves, Of course, he’s right — to a point. In classic fashion, he’s using a technicality to skirt the facts and keep the myth of energy scarcity alive. The reality is that the U.S. has enough recoverable oil for the next 200 years, despite only having 2 percent of the world’s current proven oil reserves.

Proven oil reserves are not all of our oil resources—not even close. In fact, proved reserves represent a tiny portion of our total oil resources. Proven (or proved) oil reserves are reserves that have already been discovered, typically through actual exploration or drilling, and which can be recovered economically. That estimate does not include oil that we know about, yet are unable to access because of regulatory barriers. For example, the billions of barrels of oil in ANWR are not included in our proved oil reserves. So let’s look at the facts.

Currently, the United States has 1,442 billion barrels of technically recoverable oil, but only about 20 billion barrels are considered proven oil reserves.[ii] That is partly because the federal government is denying access to hundreds of millions of acres oil-rich federal lands: the Alaskan National Wildlife Refuge, the Naval Petroleum Reserve-Alaska, federal waters off the Atlantic and Pacific coasts, at least 45 percent of the Gulf of Mexico, the Chukchi and Beaufort Seas, and oil shale on federal lands in Colorado, Utah, and Wyoming, to name a few. In the case of oil shale (an oil composed of kerogen), technology needs to be perfected to make its production viable, but this will not happen until the land is leased. Regrettably, the Department of Interior has stopped a leasing program Congress directed it to undertake.

[…]

IER

“Proved reserves” are just a tiny fraction of the petroleum resources in these United States.  It is primarily an accounting measure used in the valuation of oil companies. Publicly traded US oil companies have to “book” proved reserves according to very strict SEC rules.

Here’s a very simplistic example of proved reserves (1P):

Proved

Schematic cross section of an oil-bearing sandstone trapped on the up-thrown side of a normal fault, up-dip to a dry hole with an oil show (lowest known oil, LKO).

 

Since the well was drilled up-dip to a dry hole with an oil show, the entire volume can be booked as proved because the down-dip well has an oil-water contact.

Here’s a very simplistic example of proved plus probable reserves(2P)

Probable

Schematic cross section of an oil-bearing sandstone up-dip to a wet well with no oil show (highest known water, HKW).

In this scenario, the down-dip well has no oil show, just a wet sandstone. If there is geological or geophysical evidence (e.g. seismic hydrocarbon indicator) demonstrating that the hydrocarbon column extends down-dip, the volume below the lowest known oil can be booked as probable reserves.  Otherwise, it would have to be categorized as possible reserves.

SEC rules & definitions via NSAI

Featured image source.

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113 thoughts on ““US oil reserves surpass those of Saudi Arabia and Russia”… Well, not really.

      • Have you ever vacationed in the lovely island “Isle Beef Hooked”?
        Or have you ever visited there during Christmas for the “Yule Beef Hooked” celebrations?
        I highly recommend it.

    • Yep. True.

      No such thing as “peak oil.” Even when we all sat in lines at gas stations at 4 a.m. in the eighties after those mean ole A-rabs “embargoed” oil to the U.S.. . . and we “found out” how serious things were and that the U.S. was “. . .running out of oil.”

      All lies. Economic propaganda. All designed to shake us down at the gas pump. We (and the world) have fields that have never been pumped.

      Gull Island http://www.rense.com/general82/gull.htm) off the North Slope. . .

      (see Lindsey Williams’s book The Energy Non-Energy Crisis http://www.reformation.org/energy-non-crisis.html )

      The huge fields in Montana and the Dakotas (http://www.wnd.com/?pageId=61488 ). . .

      Green River Basin (http://www.oilshalegas.com/greenriveroilshale.html) in Colorado

      . . . the recent boom in the South-to-Central Texas’ Eagle Ford Shale http://oilshalegas.com/eaglefordshale.html . . . ANWAR.

      And no one is quite sure what BP drilled into in the Gulf. Only that wellhead pressures were unlike any they’d ever seen.

      Oil companies—who control Arab oil—know exactly where these and other fields are around the world, and the estimated oil in them.

      The Russians have proffered that oil reproduces itself from earth pressures and heat. Called A-biotic oil. They’ve deduced this from the ultra-deep land wells they’ve drilled. Been a few technical papers written. Little publicity, etc. Russia even offered to help during BP’s—What? Me worry?—blasphemous blowout. BP declined, polluted the Gulf of Mexico, skipped town, and were drug kicking and screaming back into the courts in Louisiana—a state in which the mob is the cleanest organization known to exist —where they met their equals.

      Anyone notice how quickly the First Gulf War ended when the Middle East’s oil ‘arrangements’ were threatened? Or how long the others have drawn out once things settled back towards “normal?”

      Buckminster Fuller’s quote: “You never change things by fighting the existing reality. To change something [you have to] build a new model that makes [money, sense] and the existing model obsolete . . .”

      Did you notice how the hydrogen energy breakthrough a few years ago was banished from the MSM propaganda outlets? Did you know this breakthrough gets ZERO DOLLARS at the fed’s trough? That dump-truck loads of tax dollars pass right by it enroute for wind and solar graveyards?

      The energy industry knows about hydrogen and world oil deposits. They ‘police’ themselves, have come to tacit agreements, wink, nods, etc.

      Did I mention that steam cars worked just fine when all this started? That their patents were bought up by the oil companies? That 99% of the world’s transportation now sits on the fossil fuel platform? Nuclear, water, and alternate energy aside, that 75% (+) of the world’s energy platform sits on the same platform?

      That America has an unlimited supply of coal sitting beneath its dirt, too?

      Any takedown of these platforms has nothing to do with coal, oil, gas, CO2, greenhouse gases/footprints or any other caca de toro.

      • Did you notice how the hydrogen energy breakthrough

        NOT a source of energy, but an energy transport means or mechanism. Unless they are bringing in hydrogen ‘mined’ from the sun (a joke).

      • Did I mention that steam cars worked just fine when all this started? That their patents were bought up by the oil companies?

        And, as we all know: C onspiracy theories are the favored tools of the weak minded.

        If you have any patents in mind, we can look them up nowadays and see to whom (which corporations or companies) they were last transferred or assigned …

        Google patent and trademark search tool:
        https://www.google.com/?tbm=pts

        .

      • That’s a lot of sketchy conspiracy nonsense, but I would pay to see you drive around in a steam car.

      • Actually a steam car would be perfectly workable. Most of our power plants use steam as a means of converting heat energy to work. The main reason we don’t use it for cars now is that steam is a high pressure system and those don’t respond well to the crashes that cars get into on occasion.

        Wrusssr’s problem is that ‘Steam’ doesn’t produce energy, it just converts it. Like with his Hydrogen rant, you still need some other source of energy to power it. In both cases that could be coal, natural gas, nuclear, even ‘renewables’. Or it can come from Oil.

        Which means his whole conspiracy theory about the oil companies working to block ‘Hydrogen’ or ‘Steam’ is stupid. Would the also be blocking ‘Electricity’? Just because the internal combustion engine is the most common way of turning potential energy into work in cars doesn’t mean it’s the only way.

      • Speaking of Steam Powered Cars

        I’ll take one
        One of these too

        to bad they won’t be produced. They were supposed to be under $30k

      • If you think that BP was allowed to accept or decline offers of help from Russia you are clueless. As for your claims of BP “skipping town”, that is a bald-faced lie….same as your claim that they were “drug kicking and screaming back into the courts in Louisiana”. The rest of your, gosh, “statements” with regards to hydrogen, energy industry collusion and steam cars only label you as a conspiracy theorist. Retired BP Onshore Employee

      • Thank you Wendy,

        I couldn’t have replied to that manifestly ignorant comment without an extensive reliance on profanity.

  1. Wasn’t it during the Clinton administration that the United States went from reporting probable reserves to proven reserves?

  2. According to wiki , Saudi Arabia only began oil exploration in the 1930’s. Presumably before that, it had no reserves.

  3. What I find objectionable is US money funneled to Canada to create environmental pressure groups like Tides to prevent Canadian Oil from coming to market. This has the effect of increasing oil prices in the US, while at the same time increasing US reliance on middle east oil.

    Yes, some US oil producers and railway operators are making out like bandits. Making billions of $$ that they would not otherwise make. All paid for by the US consumer. None of which would be possible without US politicians bought and paid for by billions of $$ in politician contributions. As Will Rogers observed:

    “America has the best politicians money can buy”

    But at the same time the US is pouring billions of $$ and tens of thousands of lives into fighting a global terrorism war that is largely a result of US meddling in the middle east for the last 50 years, driven by the US reliance on middle east oil. 911 and the twin towers. Oil brought those buildings down as sure a day follows night.

    If you want to see real damages, look at what the dependence on middle east oil has cost the US. Trillions of dollars in debt and thousands of lives lost. Compare that to the 1 in a million odds of ever being killed by a pipeline, a pipeline that makes money for the taxpayer, rather than costing money. A novel concept for politicians that can only think of ways to increase taxes and send send sons and daughters off to war.

    • It really is sad the way some people insist on believing that everything bad in the world was caused by the US.
      Muslims have been killing each other and non-muslims for over 1400 years. They didn’t need US “meddling” to give them the idea.

      • Nor did the US put the oil in the ground in the middle east. The resource would have been discovered and sold to someone, making the House of Saud incredibly rich.
        Some buildings, somewhere, would have come down.

      • No. Invasion of Iraq was legal, voted for by the Senate to include Kerry and H.R. Clinton, in pursuance of the policy of regime change announced by W.J. Clinton. Iraq had not been keeping the terms of the armistice which ended the previous war, and sanctions were breaking down, so something had to be done. Iraq had not turned over their Nuclear program, among other violations.

        After Saddam Hussein was captured, Gadaffi turned over Iraq’s nuclear program which had been safety hidden in Libya, in violation of the armistice.

      • It might not have been a wise decision and a lot of mistakes were made after the mission was accomplished. However, it was 100% lawful.

    • increasing US reliance on middle east oil.

      LAST I knew, very little of our oil came form SA. When did this change? Otherwise, this seems a common misconception …

      • “Saudi Arabia accounts for 11% ”

        But, BUT, if you take into consideration export of oil, or refined oil products (including products of oil), do we have a net import or net export ‘surplus’?

        Does this include any oil importation to Hawaii which is then used for power generation?

      • The US imports about 9.4 million bbl/d of crude oil and exports about 4.7 million bbl/d of refined products.

        Petroleum products shipped from the mainland USA to Hawaii aren’t counted as exports.

      • David, various web resources indicate Hawaii imports ME oil, as well as some from Alaska … the question remains, what kind of quantities of oil does Hawaii import form the ME.

        Hawaii has two refineries, so it is not imperative that refined products be ‘imported’ from the mainland.

      • Still not yielding much in the way of ‘numbers’, and a brief review via Google had yielded the info you posted so far …

        BTW, it appears a larger percentage of the oil imported by Hawaii is used for transportation (including Jet fuel) and not electricity generation. I think I mentioned previously the two refineries as well – are you really reading these posts?

      • I’m just not understanding what your point is. The oil that Hawaii imports from the Middle East and other nations is part of our gross national total of imported oil. It is not a separate category because Hawaii is a State.

        The oil that Hawaii imports from Alaska is neither counted as part of a gross national total imported or exported oil. It is not a separate category because Alaska and Hawaii are both States.

        The 9.40 million bbl/d of imported oil includes the oil delivered to Oahu from foreign countries. It does not include the oil delivered to Oahu from Alaska or any of the other 48 States. Nor is the oil shipped from Alaska to Oahu counted as part of our 4.7 million bbl/d of exported oil and petroleum products.

    • A statement made in this article is important in light of ferdberple’s comment. The statement about reporting by the US and other rule of law nations brought a huge chuckle. Since when has the US been a “rule of law nation?” Can’t prove it by its activities over the last 50 years, that’s for sure. And reference to fairytales such as buildings coming down because of oil in the middle east need not be showcased. There is no doubt that billions of dollars have been spent in meddling in the middle east, the question really is was any of it spent fighting terrorism or creating it?

  4. I agree with your assessment of the report. The authors play fast and loose with the term “reserves”, when they should be talking about “resources”. I suspect that the undiscovered resource potential of Russia and the middle east are understated relative to the North American basis. That number is all arm waving, at any rate.

    Just one comment on your last example. The 2010 “modernization of oil and gas reporting” by the SEC allows for the use of “Reliable Technology”, for the booking of proved reserves. Now, in many cases, the seismic DHI (direct hydrocarbon indicator) may be used for proved reserves IF that technology has “been field tested and has demonstrated consistency and repeatability in the formation being evaluated or an analogous formation”. Another way (which I’ve used, post rules change) is to use the pressure gradients established from formation tests (e.g. MDT or RFT) in both the oil leg and water legs to establish the contact location.

      • Good point. I overlooked that you did qualify this as “simplistic”. The SEC “Reliable Technology” issue has actually been on my mind recently relating to a project on which I’m currently working, so I had to jump in with both feet.

      • Most of the DHI’s I’ve drilled in the Gulf of Mexico have been one-well fields or one well in each fault compartment. It’s kind of difficult to demonstrate the sort of history that the SEC would require for our auditors to allow us to book proved reserves to the down-dip termination of the amplitude. Although production data will usually pretty quickly tell us if we can push for an upward revision.

  5. To David Middleton:

    Thank you for correcting what was an obviously inaccurate (and irresponsible) report.

    Those of us involved with these things know that The Fourth Estate (especially people like CNBC, NPR, the N.Y. Times, the WaPo and Bloomberg) aren’t noted for the accuracy of their facts and reporting.

    • I wouldn’t call it “irresponsible”… just careless or undisciplined in the use of the word “reserves.” I think they made a good effort to compare oil resources on a level playing field.

      • It is “irresponsible” because of the huge numbers of people who will do nothing more than read a headline or hear an excerpt and will incorporate that sound byte into their belief system.

        As a career “buy-side” securities analyst, I always tried to be very careful about what I wrote or said for the simple reason that (despite evidence to the contrary) someone might be paying attention.

      • In everyday life, it is ok to be casual with words. The car was red, maroon, fire engine red…meh same thing. We get used to collapsing categories for simplicity. But in technical fields it makes a huge difference. In climate change, the use of “it is warming” is taken to mean “the sky is falling” when these are not the same thing at all.

      • @Craig Loehle,

        “Ice age” ranks second on my pet peeves list, right after “reserves.”

  6. The amount of oil we can extract in the future will depend on prices, technology, and timing. Most of the oil shown in that Rystad table requires prices higher than $80 per barrel. A lot of the USA resources they listed will require $100 to $200 per barrel.

    Then there’s the timing issue. Some of that oil requires a very long time to extract. I’ve come to the conclusion that most of these worldwide estimates are pretty soft numbers because there’s no single reliable data base and interpretation methodology.

    I’ve looked at this topic for many years, while working in oil exploration (I concluded oil exploration was a losing business over 20 years ago, it was better to focus on known oil accumulations even if we had to develop technology to squeeze the oil out of the rocks).

      • F. L. mentions “timing.”

        Nearly 157 years ago – August 28, 1859 – oil was lifted out of Drake’s Well in a rolled and plugged eave’s spouting lowered on cord. Then it was poured into a washtub. [31 miles from where I was raised.]

        An uncle drilled in western Pennsylvania (McKean County) in the 1940s-50s.

        I’m looking forward to the next 157 years.

    • Wind and solar can be used to synthesize plastics and motor fuels? Or create ‘tar’ and asphalt for paving?

      Who knew …

      • I suppose they could be used to power petrochemical plants on windy and/or sunny days.

        On the flip side, it would be kind of difficult to build wind and solar farms without paved roads… ;)

  7. Keep in mind that “Reserves” are an economic concept as much as a geological one – as you point out, if it can’t be sold at a profit, it ain’t reserves. And also keep in mind that those oil fields in Saudi Arabia were originally discovered by American geologists working for American companies. So there.

    • If greens weren’t proclaiming imminent doom, Malthus would be rolling over in his grave.

      • Inorganically sourced (abiotic) oil is not impossible. There’s just no evidence that any significant volume of oil has ever formed through such processes.

  8. One of the reasons there have been so many “peak oil” claims is that if a company has enough proven reserves to pump for a while, they are not going to spend money drilling to find more oil. The proven reserves are typically only enough to last for 5-15 years of pumping, and during that time they drill to find the next batch. So it always looks like we are running out of oil because of the (justifiably) conservative way proven reserves are booked.

    • “Peak oil” does exist. The Hubbert equation works. Oil production will broadly peak when we have consumed about half of the resource.

      The problem for Peak Oilers is that the volume of the resource is huge and has always been underestimated.

      • The Hubbert ‘Equation’ is bull. There is know way to predict a peek before it arrives and even after you’ve started a decline it is fully possible to reverse and start climbing again if technology or economics change. As has already happened in the US.

        Granted, there MUST be a limit to how much oil we will be able to recover, simply because ANY resource is finite*. Be we don’t and can’t know how much that amount is. And so far every prediction made has been laughably low. It’s highly likely in my opinion that, like so many other resources, oil will ‘peek’ when we find a better way to do the things we used it for.

        *with the possible exception of human stupidity.

    • There have been many misunderstandings about peak oil. It is neither based on proven, nor proven plus probable, reserves. Nor is it based on fuzzy future resource discoveries, although those can be estimates by basin in aggregate using creaming curves (and globally, about 75% of all oil resource to be discovered already has been). Peak oil relates to the quality of technically recoverable (at any price with existing technology) reserves. TRR. It is the annual rate of extraction. For many geophysical reasons, these rates fall with time in existing conventional TRR. And for additional geophysical reasons, these rates are lower in unconventional reserves (API<10, porosity <5%, permeability <1 darcie). Global conventional oil production peaked about 2007. Even with shale (tight) oil and canadian bitumen plus venezuelan tar sands, total conventional plus unconventional will peak somewhere around 2025. Thereafter a long slow decline in annual production. This can be calculated using either the logistics(Hubbert) or gamma (more realistic long tail, very similar to logistics up to peak) functions, or by using a probit tranform (as Deffeyes of Princeton and Rutledge of CalTech prefer).

      • Hubbert’s logistical function depends on total recoverable resource (past production + current reserves + future discoveries). His prediction for U.S. peak oil production was wrong because he grossly underestimated the total recoverable resource.

        Hubbert estimated the total recoverable resource to be between 150 and 200 billion bbl. Total production has already exceeded 215 billion bbl.

        Total Production (1900-2015): 214 billion bbl (EIA)
        Proved Reserves (2014): 40 billion bbl (EIA)
        Probable Reserves: ?
        Possible Reserves ?
        Undiscovered Technically Recoverable Resource: 130 to 1,400 billion bbl

        The total recoverable resource is probably well over 400 billion bbl and could be as high as 1.4 trillion bbl. US peak oil could occur anytime form now up until we have produced about 800 billion bbl

      • David Middleton July 6, 2016 at 9:28 am says;

        His prediction for U.S. peak oil production was wrong because he grossly underestimated the total recoverable resource.

        Well, that builds confidence in his formula,…….. ( sarc, although I hope it came across without the sarc tag)

  9. Canadian PROVED reserves are over 170 billion bbls. Oil in place is over 1.7 TRILLION bbls. A few years ago the proved reserves were less than a billion bbls. The difference is technology.

    Right now, I know where there is 3 times the oil we have consumed to date. Because most reservoirs only produce 25% of oil in place. If the price is high enough, we will get the oil.

    I expect Peak Oil, not because of production limits, but because of declining demand.

    • The differences are technology and product prices. If oil stays below $70/bbl for a prolonged period of time, Canadian proved reserves will decline.

      • By prolonged, it would have to be decades of low prices, and even then it would be production, not reserves, that decline.

        Most heavy oil is profitable at 70/bbl or less. Some as low as 10.

        Even with these prolonged low prices, heavy oil is projected to increase production through 2020.

        It would sure help if they could get a pipeline or three, though.

      • Proved reserves are affected by prices. They can go up and down simply through price movement.

        An oil resource describes the total amount of oil in place, most of which typically can’t be technically or economically recovered. For example, it is estimated that the Bakken Shale centered under North Dakota may contain several hundred billion barrels of oil (the resource). However, what is technically and economically recoverable in the Bakken may be less than 10 billion barrels.

        The portion that is technically AND economically recoverable is the proved reserve. Because of the requirement that the oil be economically recoverable, proved reserves are a function of oil prices and available technology.

        Thus, as oil prices rise, oil resources that may have been discovered decades ago can be shifted into the category of proved reserves. Venezuela provides a perfect case study of this phenomenon. Venezuela has an enormous heavy oil resource in the Orinoco region of the country. But this oil is very expensive to extract. In 2003, Venezuela’s proved oil reserves were only 77 billion barrels. At that time Saudi Arabia’s reserves were tops in the world at 263 billion barrels.

        After the past decade saw oil prices rise to above $100/barrel, more of Venezuela’s heavy oil resource became economic to produce. Thus, by 2013 Venezuela’s proved reserves were estimated to be tops in the world — 289 billion barrels. Saudi Arabia has now slipped to second with 266 billion barrels.

        But that economic argument cuts both ways. Oil and gas resources that became proved reserves as prices rose will be declassified as proved reserves should lower prices render them uneconomical to produce. This is often the reason that companies have to write down proved reserves. It’s not that a company believed there was oil or gas and found out later that there wasn’t (although that of course also happens), it’s generally because a period of depressed prices has rendered those proved reserves to be no longer economical.

        http://oilprice.com/Energy/Crude-Oil/The-Link-Between-Oil-Reserves-And-Oil-Prices.html

      • If oil stays below $70/bbl for an indefinite amount of time, someone will probably invent a way to get it all eventually.

  10. Crude exports look to be up – article back in June:

    “US Oil Exports EXPLODE: Increase 7-Fold In 3 Months”
    http://dailycaller.com/2016/06/10/us-oil-exports-explode-increase-7-fold-in-3-months/

    U.S. companies sent eight million barrels of oil to Japan, Italy and even Curacao in March. That’s way up from the 1.2 million barrels of oil exported in January, the month after President Barack Obama signed a budget bill that included an end to the 40-year-old ban on oil exports.

    Article published just today (Wed.):

    U.S. crude oil exports hit record 662,000 bpd in May: Census Bureau
    http://www.reuters.com/article/us-usa-oil-exports-idUSKCN0ZM1E5

    U.S. crude oil exports rose to a record 662,000 barrels per day in May from 591,000 bpd in April, foreign trade data from the U.S. Census Bureau showed on Wednesday.

    Canada accounted for the most U.S. crude exports at 308,000 bpd, followed by the Netherlands at 110,000 bpd and Curacao at 67,000 bpd. Other prominent destinations were Britain at 36,000 bpd, Japan at 29,000 bpd and Italy at 23,000 bpd

      • I don’t suppose that it occurs to Dave Middleton that PARTS of the country are net importers while others are net EXPORTERS, because of proximity to large markets (like our NE w/New York), with the net exporters existing because of the presence of pipeline terminals and refineries such as found in Louisiana and Texas.

        Did it occur to David?

        BTW, the ban has been lifted for how many months now? Just since like December or so of last year …

      • So the US imports a lot of crude and exports a lot of refined products.

        Sounds like good work for a technology advanced nation to be in.

      • Generally speaking, it’s better to import raw materials (crude oil) and export manufactured goods (refined products) than it is to export raw materials and import manufactured goods.

    • Interstate commerce is not accounted for as imports and exports.

      Crude oil shipped from North Dakota to Texas for refining and then sold as gasoline in New York is neither imported nor exported.

      Crude oil shipped from Saudi Arabia to Texas for refining is imported oil.

      Gasoline transported from Texas to Mexico is exported refined product.

      Crude oil transported from North Dakota to Canada is exported oil.

      Crude oil shipped from Indonesia to Hawaii is imported oil.

      Crude oil shipped from Alaska to Hawaii is not imported oil.

      In the week of June 24, 2016, the US imported 7.555 million bbl/d of crude oil and exported 598,000 bbl/d. Net imports were 6.957 million bbl/d.

      https://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

      The US does not produce enough crude oil to be a net exporter. We produce about 7 million bbl/d less than we consume. The lifting of the export ban won’t turn us into a net exporter of crude oil. It just allows the market to operate better.

      • Dave is really still not getting several underlying points that I’d like examined, such as, just HOW MUCH in the way of PRODUCTS and finished goods do we export in the way of different materials and manufactured goods which involved PETROLEUM as source stock, e.g. plastics and fertilizer, and even produce (corn, wheat etc.) which require fertilizer.

        The second point being (AND he’s catching on by his post above) is that oil is *fungible*, it can be pretty much bought and sold where convenient (when transportation is a factor). So, it can be bought and sold in different parts of the country depending on production, price and delivery/transport capabilities and costs.

      • One thing is certain, if the largest consumer of oil began exporting it in greater quantity, the price of oil would drop even further.

      • Good fracking grief… I posted the refined products import-export graph just a few comments ago.

        Here it is again…

        We are only a net exporter of Refined Products (Blue = Imports)

        This is a good thing. However, it is totally irrelevant to our oil reserves.

  11. It is clear from these expositions that the outlook for Mankind’s energy needs are satisfactory and sanguine. Long before Oil in massive quantities for primary energy, is exhausted, Fusion will be available, despite delays and under-funding. Much of waht ITER set out to prove has been accomplished in smaller experiments worldwide in the interim. On the order of of 20-30 years we will have it, while Oil looks sufficient for a few hundred years at the minimum. Oil will always be available for pharmaceuticals and polymers which are insensitive to prices under thousands of dollars per barrel.

    Clean, inexhaustible Fusion will make possible de-salinazation of the oceans where needed, and power for a complex advanced civilization for the entire world will be assured.

    We have but to declare victory over Pollution since all but a mere half dozen of the 2500 counties in the USA now report Clean Air Compliance. Even those half dozen uncompliant counties, are much closer to cleanliness than they used to be, and are well on the road to Compliance

    Fears of CAGW and resource exhaustion have proved grossly exaggerated. So has fears of Over-population. Biological extinction fears are shown to be grossly exaggerated as well.

    • Fusion has been 20-30 years away since I was a child.
      I am no longer a child, but it is still 20-30 years away.
      Just because it would be great, and we can imagine that we can make it work, is no guarantee that we can make it work.
      Everyone will be very happy on the day we can get cheap, safe and reliable power from fusion, but thinking we have nothing to worry about because in a few decades all our energy problems will be solved is foolhardy

      • A friend of mine worked professionally in fusion research for 6 years. He said he realised it was about 50 years away and wanted to do something with his life that was more productive so he became a first class solar energy expert and has more than 10 patents on low cost solar heating for swimming pools.

        In 50 years there will be far more to work with both theoretically and materials. Once that is done ‘the energy problem’ will have been permanently solved and people can go about fighting over other things like ego and academic standing.

  12. The mining/minerals industry deals with the reserve vs resource issue as well. SEC definitions are very clear and the terms are not interchangeable, although frequently reported as such. Investors and buyers beware.

  13. 40 years ago someone smarter than myself told me that “as long as there is no collapse in technology, such as occurred at the end of the Roman Empire, we will never run out of oil. The only unknown is when oil will become too expensive for any particular purpose.”

    I believe that concept is as applicable today as it was then. With new methods of discovery and extraction, for the foreseeable future we are more likely to be restricted in our use of oil by politics than by supply.

  14. You cannot see oil in seismic surveys, only the rock strata. There is so much noise from reflections that I never saw an oil-water interface in one profile at Unocal. You look for traps to stop the upward migration of oil. You prove there is oil by drilling, not by looking at seismic profiles. A drill core at a stratum and its extent is then proven reserves. A profile does not show things like illite clay content that thwarts rock stratum permeability, so not all oil can be extracted. Composition of rocks is not indicated by seismic profiling.

    • We use Direct and Indirect Hydrocarbon Indicators all of the time. They are particularly useful in the Gulf of Mexico.

      Oil, gas and brine water-bearing sandstones have significantly different interval velocities and average densities. This creates seismic anomalies (bright spots, DHI’s). P-waves and S-waves exhibit different travel paths through gas- and liquid-filled rocks, enabling us to employ amplitude variations with offset (AVO) to identify hydrocarbons in rocks that do not exhibit DHI’s.

      Acoustic inversion processing has been employed since the 1980’s to characterize lithology from seismic data.

      While the effectiveness of seismic stratigraphy and hydrocarbon detection is heavily reliant on well control for calibration, it works extremely well in many basins.

  15. Blah…blah..blah…blah BLAH. The Bakken was discovered in 1957. Experts at that time completely discounted it, because there was NO KNOWN WAY to recover. The same technology used to do the Bakken, and one that is “economical” in the 60 to 80$ per barrel range, can do the Marcellas, the Devonian, and the Colorado “shale”. Information I obtain from Aldee Berglove (R.I.P.), who ran the “Minnesota/Ohio Oil Company”, back in the mid-80’s indicated that the Devonian alone could probably provide all our petroleum needs for 300 years. Of course at that time, it was all STRAIGHT DOWN strings,
    and local fracturing (within a hundred feet of the string) only. (Mr. Berglove’s company was primarily a “tax dodge” for people with large amounts of money, who needed to have some “write off” investments, which…although appearing to yield no significant income..or “break even”..when combined with the tax laws, would become “useful” to people in those income categories. Aldee, himself, felt that the “totality” of the shale oil would NEVER BE USEFUL. I’m sure if he could be resurrected now, he’d be DELIGHTED to
    know about “modern” recovery methods.

    • The ability to precisely drill horizontal well didn’t exist in 1957.

      As important as fracking is to plays like the Bakken, the ability to precisely steer horiontal wells parallel to bedding planes is far more important.

  16. The US hasn’t even started drilling on the East Coast. Most drilling on the West Coast has been stopped, but not for lack of oil. Haiti is floating on oil.

    • We might have. Or we might be 100 years away from peak oil. There is simply no way to know until we know how much oil remains to be recovered.

      • Appreciate the posts form those more knowledgeable…
        Can I ask, what about viewing ‘reserves’ in terms of energy returned on energy invested (EROEI)?
        I seem to remember reading that over the last 100 years it has gone from something like 100:1 when oil just came “a-bubblin up” to less than 10:1 now. Is this about right and if so, what is the feeling about when it gets close to 1:1?

      • EROEI is an absolutely meaningless acronym.

        It doesn’t matter how much energy it takes to extract, refine and transport fossil fuels. EROEI (Energy Returned on Energy Invested) is even dopier than AGW. I don’t spend energy to fill my tank. I don’t give energy back to the gas & electric companies in exchange for them being nice enough to heat and light my home. My company doesn’t drill for oil & gas to make energy.

        I spend money to fill my tank. My company drills wells for oil & gas to make money. My gas & electric bills are paid for with money. My pay check, ExxonMobil & Shell credit card statements and checks to the gas & electric companies aren’t denominated in joules, kilowatts or btu – They are denominated in $.

        I don’t give a rat’s @$$ if 1 barrel of amoeba farts uses less energy to produce than 1 barrel of crude oil… Because the barrel of amoeba farts costs $1,100 and can’t be produced in sufficient quantities to be waiting for me at the Exxon or Shell station when I need it.

        If oil companies (or any businesses) used EROEI to guide their investment decisions, they would go out of business (unless the gov’t was footing the bill).

        Oil, natural gas and coal are concentrated biofuels. They represent thousands to millions of years of condensed solar energy.

      • What I meant was that if it takes more energy to extract deeper, more remote reserves, so that eventually an oil company needs to expend1000J of energy to extract 999, why would they bother?

    • Because they make money.

      Most, if not all, of the energy invested in drilling and producing oil & gas comes from oil, gas & coal. It’s a physical impossibility for the EROEI to be negative and the prospect to make money… particularly since the energy expenditures are a small fraction of the cost.

      No oil company is in the business of producing more energy than they consume… The laws of thermodynamics kind of make it difficult to do, even if that was a legitimate business concern. They are in the business of returning a profit to their owners. All businesses are in the business of returning a profit to their owners.

      • Most US E & P, unfortunately, has not been returning a profit to the owners thereof, since the fourth quarter of 2014. I, unfortunately, can attest to that from personal experience.

        It seems to me that leaving costs to produce the oil out of the analysis is never a good idea. I have reviewed enough payout statements from US LTO wells to determine that. To me, the activity in US LTO currently is motivated by things other than wells that will payout in a reasonable period of time. Right now, the motivations for current activity are for such matters as Wall Street (falling production is a no no for a public company’s share price) to hold undeveloped acreage, to meet production targets for management bonuses, etc.

        It would appear, if EIA data is accurate, that US production is rapidly falling. However, that does not necessarily mean prices will go higher anytime soon. We are in the midst of a commodity bust akin to the late 1980s – 1990s, it appears.

      • Oil companies with strong balance sheets and adequate liquidity take advantage of the bust cycles as growth opportunities.

        US production won’t recover until prices recover enough to support more drilling. The shortfall of capital investment will lead to a supply deficit. If I knew exactly when that will occur, I wouldn’t have to work for a living.

        http://www.energypost.eu/oil-prices-going-will-continue/

        This has nothing to do with EROIE, Peak Oil or any other esoteric notion. This is basic resource economics.

  17. Thank you Dave for bringing all your expertise to this forum. I am particularly pleased that we got this far without a lecture on Russian abiotic yada yada. (all the Russians I have worked with are looking for thermally mature biotic source rocks just like the rest of us.)

    My first week in the ol’biz, a geologist told me “don’t ever believe we found all the oil.” Forty years later, I finally understand what he was telling me. Back in the peak oil hysteria, I said over and over that a sustained high price would warp the curves beyond recognition. I could not say exactly where the production would come from, just that is would.

    I would be surprised if the US resource exceeds Russia and Saudi. I base that on stories from my wife, who has seen more Saudi core than anyone I know of, and a review I did of Russian source rocks. At any rate, we are a long way from running out. The best models will be those which treat future potential with improved technology as infinite. It is not, of course, but then the stone age didn’t end for lack of stones…

    • We had a couple of mentions of abiotic oil. Inorganically sourced oil is certainly possible; there’s just no evidence for any significant accumulations of it. Even if oil did form inorganic sources, it wouldn’t really matter. “Oil is where you find it.” We find it mostly in sedimentary rocks where it has accumulated in structural and/or stratigraphic traps.

      Peak oil is a real mathematical function. If the Rystad Energy is correct and the sum total of proved, probable, possible reserves (3P) and resource potential is 264 billion bbl, we’ll hit peak oil in about 7 years. If 3P plus resource potential is 1.4 trillion barrels, we won’t hit peak oil until 2194.

      I don’t know when we will reach peak oil or if we may have already passed it, because it has no bearing on how I do my job,

      Your Stone Age analogy is very appropriate. When I criticize the economics of utility scale solar power, I am often accused of giving up on a technology. The issue is trying to deploy a technology that is not even close to being economically viable. Thomas Edison funded the construction of his Menlo Park research laboratory with the proceeds from the sale of his repeating telegraph invention in 1877. By 1879 he had developed the first commercially practical electric light bulb. In 1882 he opened the first commercial power plant to power electric light bulbs. It was immediately profitable.

      Bureaucrats aren’t funding the development of new technology when they mandate and subsidize solar power plants. They are funding the uneconomic build out of utility scale infrastructure because they think they see a future need for solar power.

      Imagine if the government had mandated and subsidized the manufacturing of a home version of the UNIVAC I in 1957 because some prescient bureaucrats foresaw a future market for home computers. The misallocation of capital would have been horrendous.

      With energy, it’s even worse. Electricity is a cost. When bureaucrats mandate that “x” percentage of electricity be generates by so-called renewable sources, they are mandating higher energy costs – they are destroying wealth. Government subsidies don’t make the electricity cheaper; they just shift the costs from consumers to taxpayers. When government subsidizes the build out of utility scale solar power plants, they are subsidizing more expensive and less available electricity – they are destroying wealth.

      When the free market is allowed to work, people like Thomas Edison, Bill Gates and Steve Jobs create wealth.

      The problem isn’t teething problems with a new technology. The problem is a mentally challenged government crowbarring the economic equivalent of a 1957 home version of the UNIVAC I into an economy with no real market for a prohibitively expensive home version of the UNIVAC I.

      Some day in the future coal, gasoline, natural gas, nuclear fission and just about every other power generation source will be replaced by something that delivers more value to the economy… Real value… Measured in $$$. Not phony value like “social cost of carbon,” EROEI or x case of asthma averted. That day is not here yet.

      Man did not leave the Stone Age because of a stone shortage. Man did not advance from the Chalcolithic to the Bronze Age because brilliant government bureaucrats forced copper-smiths to purchase bronze credits. Man left the Stone Age because he figured out ways to derive more value from his work using metals rather than rocks.

      • David do you place any credence on the view that “with the price of oil below $X there is not the return to justify the investment in exploration and above, the economy can’t afford it”?

    • I place a lot of credence in that fact. Our capital budget has reflected that fact for the past 2 years.

      The industry- wide lack of capital spending will eventually lead to higher prices and increased capital spending.

      • No. On an inflation adjusted basis, oil normally trades in a range of $40-$80/bbl. The fundamental nature of commodity price cycles is that of oscillating booms and busts. Prices drive spending. Spending drives supply. Supply and demand drive prices.

  18. Wall Street’s ‘Hot Air Reserves’ certainly outstrip those of Russia and Saudi Arabia combined……

  19. “The analysis of 60,000 fields worldwide,.. shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year,”

    We’ll run out of oil in 70 years. Then we shift to compressed natural gas to run our vehicles. Then to coal via FT process to get synthetic diesel. In 300 years we’re out of fossil fuels. Then we use cow shit, used cooking oil, pork fat and garbage to run our vehicles.

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