Major Crude Oil Reserves, 2000-2018

Major Crude Oil Reserves, 2000-2018 (Thousand Million Barrels)

Source: US Energy Information Agency, International Energy Annual Report.

The geographical imbalance in oil reserves is similar to the one of production. On a long-term perspective, OPEC account for the bulk of oil reserves. Saudi Arabia alone had about 25% of all the world’s oil reserves until recently, but changes in the evaluation of oil reserves has tremendously increased the share of Venezuelan and Canadian reserves. Mainly due to an increase in oil prices and improved extraction technologies, Canadian tar sands have become economically recoverable, thus to be counted as official reserves. Questions remains about to what extent these reserves are economically recoverable and if a cost effective way is set, this will go a long way to extend the availability of petroleum on global markets. Furthermore, it may take a long time at the current consumption level for OPEC to run out of oil reserves. The United States has also experienced in recent years a substantial increase in its reserves due to the inclusion of shale oil. No European country, except Norway, has significant oil reserves.

There is however some controversy concerning the true extent of oil reserves, especially in the Middle East. OPEC countries may have vastly overstated their reserves, mainly because production quotas are based upon estimated reserves. This means that the larger its reserves, the more an OPEC country can export oil. Kuwait is a good example of this issue as it reported a gradual decline of its reserves in the early 1980s. This was expected since the Kuwaiti oil industry can be considered as mature. However, in 1985 the country reported a 50% increase in its reserves without any new discovery, a strategy solely designed to increase its export quotas. Kuwait was not alone in the process of increasing its reserves for quota reasons. In 1988, Dubai, Iran and Iraq all significantly increased their reported reserves for the same reasons. Even Saudi Arabia followed and reported a massive increase in its reserves in 1990. However, as the world demand gradually increased quota issues became of less relevance.

There are concerns about the high level of concentration of reserves in Saudi Arabia and the “creative accounting” estimates of oil reserves. 95% of the Saudi oil comes from six major field discovered between 1940 and 1967. The Ghawar field alone produces 60% of this total. It was discovered in 1948 and put into production in 1951. By 2009, it produced 5 million barrels per day, but large amounts of water needs to be injected to maintain the output of the field. As such, this field is likely to be at the end of its production cycle and its output may decline substantially in the coming years.