September 2008

Production and reserves lag as world drilling grows

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.

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