Proved reserves
The term "proved reserves" continues to generate both interest and confusion. What does it mean? Is it a useful predictor of future production? How does the US compare with the rest of the world? Changes in proved reserves in the last 20 years (from BP's latest "Statistical Review of World Energy") are revealing.
US proved reserves at yearend 1983 were 35.6 billion bbl. At yearend 2003, they were 30.7 billion bbl, or down 4.9 billion bbl. But in the intervening 20 years, the US produced about 64 billion bbl. So if we "correct" reported yearend 1983 reserves by adding interim production (and surely nothing can be more "proved" than oil actually taken out of the ground) to yearend 2003 numbers, yearend 1983 reserves should have been 94.3 billion bbl, up by a factor of 2.65 from what was actually reported, or a growth rate of 4.9%/year. That's more than three times the growth rate in US oil demand!
Looking at the rest of the world (non-US), we find yearend 1983 reserves were 687 billion bbl; yearend 2003 were 1,117 billion bbl; and interim production was about 421 billion bbl for a growth of 2.24, or 4.0%/year. For gas, the numbers are similar: 2.76 in the US, 2.31 elsewhere.
Taken together, these numbers seem to shatter several of our favorite myths. First, the US is running out of oil: Not so, proved reserves in the US have grown much faster than demand. Second, the US is a poor place to add reserves: Not so, it's better than the rest of the world! Third, OPEC nations have "inflated" reserves to boost production quotas: Not so, they have added less "proved" reserves than in the US, where SEC oversight prevails.
The moral: Don't blindly accept popular myths as factual; always look at the numbers!
Arlie M. Skov
Santa Barbara, Calif.