Oil and gas reserves, oil output rise in 1996

Dec. 30, 1996
Despite strong production gains and the absence of major discoveries, worldwide reserves of crude oil and natural gas increased in 1996. Reserves of crude oil rose by 11.4 billion bbl during the year, natural gas by 1l.6 tcf, according to Oil & Gas Journal estimates based on an annual survey of companies, government ministries, and other reporting authorities. The worldwide totals as of Jan. 1, 1997: 1.02 trillion bbl of crude oil and 4.95 quadrillion cu ft of gas.

Despite strong production gains and the absence of major discoveries, worldwide reserves of crude oil and natural gas increased in 1996.

Reserves of crude oil rose by 11.4 billion bbl during the year, natural gas by 1l.6 tcf, according to Oil & Gas Journal estimates based on an annual survey of companies, government ministries, and other reporting authorities.

The worldwide totals as of Jan. 1, 1997: 1.02 trillion bbl of crude oil and 4.95 quadrillion cu ft of gas.

Average worldwide production of crude oil and lease condensate increased by 2.5% from its 1995 level to 63.38 million b/d, according to OGJ estimates.

Reserves trends

Trends are more important than totals in the OGJ reserves figures, which depend on survey responses and apply to quantities subject to wide interpretation even under the strictest parameters of estimation.

The most important reserves trend in the 1990s has been the addition of large volumes through activities other than new-field exploration. While such exploration continues to contribute to reserves, the proportion added by in-fill drilling, new pays in existing fields, and adjustments based on new data about producing reservoirs has been growing.

Oil price volatility of the 1990s has lowered the share of drilling capital available to the high-risk, wildcat drilling needed for discoveries in previously undrilled areas. Companies now prefer to accumulate as much data as possible before drilling and then to drill as efficiently and accurately as they can.

Increasingly, companies use sophisticated geophysical and computer modeling methods to describe the subsurface. Those methods are cheaper than drilling and work best where some geological and production data already are at hand.

The tendency thus has been to concentrate in areas with existing geologic and production data. With the new technologies, companies can identify, drill into, and establish production in zones previously unseen or considered uneconomic. They also can improve drainage of established pays and improve efficiency of enhanced recovery.

Even as new-field discoveries have diminished in number and average size, oil reserves have been able to grow dramatically in and around fields already on production.

For some countries, reserves changes can reflect several years' worth of exploration and production experience. Although OGJ conducts its survey annually, not all reporting authorities assess reserves that frequently. OGJ adjusts prior estimates for production unless there is reason to believe that discoveries offset the declines. In some countries, therefore, there may be no year-to-year reserves changes. When adjustments are made by such countries after several years of silence, they can seem unreasonably large.

And, because governments control most of the world's reserves, some adjustments have political motivations.

Definitions also create confusion. In its survey, OGJ requests data on proved reserves only. Yet the term has a range of definitions throughout the world. OGJ totals include some indefinite share of reserves not proved under the strictest use of the term. Where OGJ can identify reserves counted under definitions significantly different from industry norms, disparaties are noted in footnotes.

Big reserves changes

The biggest oil-reserve increases this year come from two countries whose starting estimates were subject to question within the petroleum industry-Iraq and Iran. Both were among the several members of the Organization of Petroleum Exporting Countries that increased reserves estimates by large margins in the late 1980s.

The Iraqi petroleum ministry has said for several years that its oil reserves total 112 billion bbl or more. This year's OGJ estimate reflects a 12 billion bbl gain to bring the estimate to that level. Iraq only recently began limited export's allowed under an oil-export embargo in effect since its invasion of Kuwait in 1990. The ministry bases its reserves claims on results of exploration.

OGJ increased its estimates for Iranian reserves by 4.8 billion bbl to a total of 93 billion bbl to reflect a level officials describe as "exploitable." The Islamic republic has reported an estimate for "reserves" that is considerably higher than the OGJ figure.

Major questions about Iran are the availability of capital and the degree to which its huge gas reserves will be used to improve rates of oil recovery and production.

Nigeria's reported oil-reserves estimate of 15.5 billion bbl is down 5.3 billion bbl from the previous year. Officials said the new estimate is a net result of discoveries and reevaluation.

Norway's Royal Ministry of Industry and Energy increased its oil-reserves estimate by 2.8 billion bbl to a total of 11.2 billion bbl, citing revisions, improved recovery, and exploration.

Another change of more than 1 billion bbl came in India, which lowered its estimate of oil reserves by 1.5 billion bbl to a total of 4.3 billion bbl.

U.S. reserves

The trend of reserves additions by means other than major new-field discoveries is very evident in the U.S., where remaining known prospects for large oil and gas strikes are off-limits to exploration or technically challenging.

In October, the U.S. Energy Information Administration released an advance summary report indicating that reserves in 1995 increased by 0.8% for natural gas and decreased by only 0.5% for oil. It was the second consecutive increase for gas reserves and the first back-to-back increases in 28 years. The oil-reserves decline was the smallest in 8 years.

For oil, Lower 48 reserves increased for the first time in a decade-by 81 million bbl to a total of 16.7 billion bbl at yearend 1995.

Reserves in the federal offshore increased to 3.09 billion bbl from 2.78 billion bbl the year earlier, offsetting decreases in Texas (to 5.74 billion bbl from 5.85 billion) and Alaska (to 5.58 billion bbl from 5.77 billion).

U.S. gas reserves increased to 165 tcf from 163.8 tcf in 1995 despite a drop to 9.5 tcf from 9.7 tcf in Alaska. Gas reserves increased in Texas (to 36.5 tcf) and all of the Lower 48 (to 155.6 tcf) and in the federal offshore (to 29.2 tcf).

Oil discoveries, at 957 million bbl, were their highest in a decade, yet new-field discoveries accounted for only 114 million bbl of the total. New-reservoir discoveries in old fields added 343 million bbl to reserves, and extensions added 500 million bbl.

Revisions and adjustments, meanwhile, totaled 1.15 billion bbl-59% in Texas, Alaska, and California, the states with the largest oil reserves and major enhanced-recovery projects.

Revisions and adjustments also accounted for a great share of gas-reserve additions-8.3 tcf in 1995. Gas discoveries totaled 10.96 tcf, of which 1.67 tcf was in new fields, 6.84 tcf in extensions, and 2.45 tcf in new reservoirs in old fields.

Production trends

The key oil-production trends of 1996 are continued growth of production from outside OPEC and a slowdown in the decline in output from the Former Soviet Union (FSU).

OGJ estimates average non-OPEC production for 1996 at 37.557 million b/d in 1996, up 2.2% from the year before.

The growth rate compares with gains of 2.8% for OPEC and 2.5% for all the world.

The 804,000 b/d increase in non-OPEC output was one-half or less of what most forecasters expected. The discrepancy resulted mainly from delays in start-up of North Sea fields due on stream this year and from weather problems in several key areas, including the U.S. and Canada.

Further increases in non-OPEC production are likely, extending a trend that has surprised many analysts in recent years. The strong non-OPEC performance results from many of the same technological advances that have allowed reserves to grow despite the dearth of giant discoveries.

Because of strong demand, average OPEC production climbed to an estimated 25.82 million b/d this year from 25.1 million b/d in 1995, as several group members violated quotas to take advantage of elevated crude oil prices. The group quota is 25.033 million b/d.

Production of crude oil and lease condensate in the FSU fell by only 1.1% in 1996 to an estimated 7.044 million b/d.

Russia's output continues to slide. But Kazakhstan, Uzbekistan, Ukraine, and Turkmenistan managed to increase production in 1996, according to data from the International Energy Agency.

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