The commonsense effect of high oil prices is reflected in the numbers in these tables. But remember, this is during 2006−2007, when prices were high (~$60−$80), but not the lofty, well-over-$100 prices of this year.
Reserves should have increased in 2005−2007, even if only due to higher prices. Generally speaking, the higher the price, the more that can be spent increasing recovery. However, it is interesting just how little effect high prices have had on “official” proved reserves. Some have not changed for years. There are several reasons for this.
One is that, unless the company is publicly traded like the IOCs, there is little need to spend the time it takes to continually audit the replacement of reserves. In addition to a lack of need, in most cases, NOCs simply do not have the dynamic computer models and personnel needed to do the job-they cannot simply type in a new oil price and use a constantly updated model to calculate the effect on recovery factors, water disposal costs and other lease expenses. Also, for political purposes, it’s better to ignore the annual toll that depletion takes. Finally, the methods and rules governing reserves calculations are anything but uniform. Accordingly, in many cases, reserves should be viewed skeptically, especially the world total.
World Oil does not believe Canadian oil reserves are anywhere near the 175 billion bbl claimed by the government. These are referred to as “established reserves” by government auditors. It is unclear whether they would meet SPE definitions. Canada isn’t bothered by such technicalities, and neither was OGJ, which listed them in its proved reserves tables. Canadians have been delighted ever since.
We believe that the unsolved, deferred-cost issues with oil sands development, including sulfur mountain building, tailings ponds, and the need to deliver at least 350 Tcf of gas to northern Alberta, make such reserves claims closer to probable reserves than to proved. Yet, we remain optimistic that future technologies will be developed to solve these difficult problems. Good examples are bitumen gasification, organo-metallics recovery, and other, more “closed loop” technologies now being implemented by Opti Nexen. As new technologies are proved, we will increase reserves accordingly.
TABLE 1. Estimated proven world reserves,
2007 versus 2006
(Data compiled by World Oil, with aid of governmental agencies, industry associations, oil companies and private sources.) |
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TABLE 2. Forecast of 2008 world driling-comparisons with 2007 and 2006
(Data compiled by World Oil, with assistance from governmental agencies, industry associations, oil companies and private sources.)
Click table to enlarge. |
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TABLE 3. World crude/condensate production and wels actual y
producing-2007 versus 2006
(Data complied by World Oil, with aid of governmental agencies, industry associations, oil companies and private sources.)
Click table to enlarge.
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Drilling shows a hefty increase predicted for 2008. But more than any other country, huge swings in Canadian drilling, both forecast and real, make predicting Canada, even for just a half year, difficult. Two forces pull the forecast in opposite directions. The first is the ongoing battle over Alberta’s new royalty framework, which is still not a completely settled issue. The other is the ever-present need for gas, which is struggling to keep up, and is also essential to growth in the country’s oil sands sector. Producers and government officials disagree on the “break even” gas price by at least $2/Mcf.
The pessimism of a 3,000-plus drop in wells forecast by drillers and producers in February has been reversed. Both the Canadian Association of Oilwell Drilling Contractors and the Petroleum Services Association of Canada have revised their forecasts upward for 2008. CAODC now predicts drilling will hit 18,000 wells in 2008, compared to its original forecast of 13,735. PSAC is less optimistic, forecasting 16,500 wells will be drilled this year, versus its original forecast of 14,500.
By far, the most optimistic is the Alberta provincial forecast, which called for 17,480 wells by year end, which would put Canada’s total wells at more than 22,000 for the year. However, in light of the drilling activity to date, this seems highly unlikely. So we averaged all three forecasts (18,000, 16,500, 22,000) to arrive at the 19,000 wells shown, which is possible if gas prices hold, and if the dollar retains its recent strength.
Not to be outdone is the US, where rigs are running 9% above last year.
Production of crude plus condensate was down about a half percent. There is no doubt that the OECD countries are struggling valiantly, with oil-production-mature countries such as the US maintaining-actually, slightly increasing-production. But despite the efforts of nearly two-thirds of the world’s producing countries to stay the depletion curve, those countries have peaked in production. The new entries into the “peak club”-the 3 million-bopd countries of Norway and Mexico-are now in the steepest part of decline, down 6% and 9% in 2007, respectively.
Nevertheless, the remaining one-third of nations that have not yet peaked offer some hope, because they lay in Africa, Asia and South America-in short, the under-explored emerging world. Russia and the greater FSU could still add production, as could China, and the recent giant discoveries in Brazil all say that the global peak is not necessarily at hand. But there’s no doubt that OPEC, and particularly Saudi Arabia, must bear the brunt of future demand increases. The Kingdom says it has the resources, and is bringing online several projects in the 100,000-900,000-bopd range. The plan is to increase production capacity by 3 million barrels a day within the next four years, but timing is anyone’s guess. Rig counts have nearly tripled in the last five years, and Saudi says it has brought 700,000 bpd online since December 2007, though many doubt these claims.
High prices have severely dampened demand-IEA’s newly revised forecast calls for demand growth over the next five years to be on par with the last 20 years, namely, 1.6% per year. Growth in the emerging countries will be offset by falling demand growth in the OECD countries. This supply growth in the OECD, while modest to flat, takes some of the pressure off “the call on OPEC.”
Combined with soft demand, ethanol, NGLs and a soaring upgrading of the world’s refineries, especially in Russia, are keeping supply balanced with demand. Inventories are normal, although down from their highs of the last few years.
About these statistics. World Oil’s tables are produced with data from a variety of sources, including governmental agencies. Operating companies with drilling programs also contributed to this year’s survey. Our survey is not scientifically randomized, and new environmental and political challenges may emerge at any time. In some cases, a country may not have responded to our surveys, in which case we might use proxies such as rig counts and third-party sources, both public and private. Please note credits and explanations in table footnotes. 
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