U.S. oil reserve gains

For the first time in 10 years, in the world's most thoroughly explored and developed producing country, oil reserves-estimated under a system unusual for its rigor and immunity against political manipulation-increased last year. U.S. reserves of natural gas and natural gas liquids rose, too.

Ten years ago, who would have thought it possible?

Ten years ago, who could have predicted the combined effects on reserves of 3D seismic technology, interactive computer workstations, multidisciplinary teams, horizontal and multilateral drilling, coiled tubing, smart completions, and an ever-expanding catalogue of solutions to the challenges of deep water?

Ten years ago, who would have believed that the U.S. government would ease royalties to encourage drilling on federal leases in water deeper than 200 m-as it did at the end of 1995?

Ten years ago, who doubted that the U.S. petroleum resource had entered such advanced stages of development and depletion that reserves-particularly of conventional crude-could only decline?

EIA report

So much for conventional wisdom. In the advance summary of its annual reserves report, the U.S. Energy Information Administration this month estimated reserves gains last year of 2.4% for crude, 0.4% for dry gas, and 1.9% for NGL. The totals: 22.55 billion bbl of crude, 167.22 tcf of gas, and 7.97 billion bbl of NGL.

"Total discoveries per exploratory oil well were up over 50% in 1997 and over six times the rates of the early 1980s, when oil prices and the drilling boom peaked," EIA observed.

Total discoveries-oil added to reserves through drilling-amounted to 1.233 billion bbl in 1997, up one-third from the year earlier and about twice the average of the previous 10 years. New-field discoveries of oil totaled 637 million bbl, more than twice the 1996 total and five times the prior decade's average.

To no one's surprise, most of the oil additions from new-field discoveries-79%-occurred on federal leases in the Gulf of Mexico, largely in deep water. According to EIA, "well over half" of the gulf's proved reserves now lie in water deeper than 200 m.

Net revisions and adjustments to oil reserves, meanwhile, rose 57% to 1.43 billion bbl-more than half of all additions. The increase reflects, among other things, improved technology for enhanced recovery.

For natural gas, last year's reserves gain was the fourth in a row. The total discoveries figure for gas was the highest in 10 years. A jump in revisions and adjustments in Alaska offset a decline in total reserves for the Lower 48. Reserves of coalbed methane increased faster than those of conventional gas, accounting for 7% of the 1997 total. Gas discoveries per exploratory well rose in 1997 to four times the average rate of the early 1980s.

Last year's reserves gains show what the U.S. petroleum industry can accomplish when it has access to the resource base, incentive to risk capital on exploration and production, and a healthy pool of technical creativity upon which to draw. The new reserves eventually will contribute not only to producer profits but also to U.S. energy supply, employment, and tax revenue.

EIA's report further shows that the U.S. hydrocarbon resource, however mature, will generate wealth for a long time to come. For 1997, EIA estimated indicated crude reserves-oil in known reservoirs that may become recoverable through improved recovery techniques based on existing technology-at 3.2 billion bbl. With discovery rates rising, that figure will grow.

A reminder

Amid the constrictive pressures of a price slump, talk about indicated reserves, the technology to develop them, and prospects for future growth might seem hopeful.

A reminder, therefore, is in order: The knowledge and skill underlying last year's impressive reserves gains developed not in a heyday of oil company profitability but during one of the worst contractions in industry history.