OPEC's reserves reflect politics--and a lot of oil

Bob Tippee
Editor

Jockeying seems to have resumed in the Organization of Petroleum Exporting Countries over reserves estimates, reviving questions about what these numbers mean—and what they do not.

When it apportions production restraint, OPEC often calibrates country quotas to reserves. The practice encourages members to inflate reserves estimates.

Quotas didn’t matter much during 2002-08, when the market needed nearly all the crude oil OPEC countries could produce. Then recession socked oil demand, and OPEC responded with unprecedented production restraint. Although quota discipline has relaxed, prices of $70-80/bbl keep members happy.

But OPEC now has spare production capacity of 5-6 million b/d, most of it in Saudi Arabia, and a slug of new supply is in view.

The source happens to be an OPEC member with no quota: Iraq. Unless the country lapses back into widespread violence, Iraq’s production will zoom in the next few years as projects under development by international companies begin coming on stream.

Other OPEC members then will want the country to resubmit to a quota. And they’ll have to make room.

Iraq this month lifted its reserves estimate to 143 billion bbl from 115 billion bbl. Within days, Iran raised its estimate to 150 billion bbl from 138 billion bbl. Now there are reports that Kuwait will hike its estimate by 12 billion bbl to more than 113 billion bbl.

Political? Inevitably.

But the increases start from estimates that, based on recent production rates, reflect very large reserves lives: Kuwait 168 years, Iraq 136 years, and Iran 99 years. Reserves lives indicate development relative to potential.

So what if, as some say, 30% of the OPEC reserves total is “political” and therefore suspect?

With reserves estimates, before the latest increases, discounted by that factor, reserves lives become Kuwait 117 years, Iraq 95 years, and Iran 69 years—more than double or triple normal investment planning horizons.

That means the main constraint on future supply from these countries still isn’t geology. It’s the capacity and will to invest.

(Online Oct. 22, 2010; author’s e-mail: bobt@ogjonline.com)

Related Articles

Can ersatz meat ease climate heat on fossil energy?

12/12/2014

Human food from animals might represent a stronger lever for climate-change mitigation than was indicated by a study reported here last week.

Study: To cool climate, eat less meat, milk

12/05/2014

Meeting stated goals for Earth’s climate requires not only using pricey energy but also spurning animal protein.

OPEC was destined not to cut output in Vienna meeting

11/26/2014 The Organization of Petroleum Exporting Countries was destined not to cut production to defend the price of crude at its ministerial meeting Nov. 2...

EPA will set RFS requirements for this year next year

11/21/2014

How bad does regulation of the Renewable Fuel Standard have to become before the US Congress ends a program broken beyond repair?

Why rush to okay Keystone XL now? Politics, of course

11/14/2014 From outside the US, a sudden rush to approve the Keystone XL pipeline must be puzzling. Isn’t this the project not acted upon for 6 years and coun...

Saudis have reasons better than shale to let prices fall

11/07/2014 Only by overlooking important forces in markets and politics can anyone assert that Saudi Arabia is letting crude prices fall mainly to extinguish ...

Business mood dark as questions hover over UK offshore

10/31/2014

Falling oil prices, rising costs, and looming political questions darken the business mood about the UK offshore.

Europe hikes stakes in costly quest for climate leadership

10/24/2014 “No player in the world is as ambitious as the [European Union],” declared European Commission President Jose Manuel Barroso after the EU extended ...

EPA sets energy booby traps for the US economy

10/17/2014

The US Environmental Protection Agency is setting booby traps for the economy as the last half term of the Obama presidency lumbers into view.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected