Joseph P. Riva Jr.
Congressional Research Service
Library of Congress
Washington, D.C.
The location, production, and transportation of the 60 million bbl of oil consumed in the world each day is of vital importance to relations between nations, as well as to their economic wellbeing.
Oil has frequently been a decisive factor in the determination of foreign policy. The war in the Persian Gulf, while a dramatic example of the critical importance of oil, is just the latest of a long line of oil-influenced diplomatic/military incidents, which may be expected to continue.
Assuming that the world's remaining oil was evenly distributed and demand did not grow, if exploration and development proceeded as efficiently as they have in the U.S., world oil production could be sustained at around current levels to about the middle of the next century. It then would begin a long decline in response to a depleting resource base.
However, the world's remaining oil is very unevenly distributed. It is located primarily in the Eastern Hemisphere, mostly in the Persian Gulf, and much is controlled by the Organization of Petroleum Exporting Countries.
Scientific resource assessments indicate that about half of the world's remaining conventionally recoverable crude oil resource occurs in the Persian Gulf area. In terms of proved reserves (known recoverable oil), the Persian Gulf portion increases to almost two-thirds.
Only 15% of proved oil reserves and 23% of projected remaining recoverable oil is in the Western Hemisphere. Thus, it is unlikely that the demand for oil in this hemisphere could be balanced by oil produced in this hemisphere, as is sometimes suggested for security reasons.
MOST OIL IN LARGE FIELDS
Most oil is found in a few very large fields, but most oil fields are small.
Large fields, due to their great size and anomalous geology, are usually found early in an exploration cycle. The geology of nearly all the world's sedimentary basins is at least partially known.
Geological inference indicates that it is unlikely that any undrilled basin contains as much recoverable oil as is currently produced in 1 year (22 billion bbl).
While it is believed that there is a substantial amount of oil still undiscovered, it is likely to occur in smaller accumulations that are more widely scattered than those found in the past.
As OPEC controls well over half the world's remaining conventional oil, it will be called upon to provide an increasing portion of world oil production and trade.
While the major deposits of unconventional oil (tar sands and oil shales) are located in the Western Hemisphere, such oil is more difficult and expensive to extract and process than conventional oils and must be produced at much slower rates, often with substantial environmental disruption.
Thus, OPEC, with its huge Persian Gulf reserves, has the capacity to underprice unconventional oil production and replace declining conventional non-OPEC production while slowly raising world oil prices. Therefore, it has the capability to continue to control the world oil market.
INTRODUCTION
The importance of oil as a world energy source and as a raw material is difficult to overdramatize.
Growth in energy use during the 20th century is unprecedented, and increasing oil production has been by far the major contributor to that growth. At the same time, the falling price of oil in real terms has helped stimulate parallel growth in economic activity.
A supergiant oil field is a critical economic resource. The industrialized world was developed with the abundant energy from these larger than 5 billion bbl oil fields.
A single well in any one of them can produce more than 10,000 b/d of oil at a trivial cost in money and involving little labor. There are only 38 supergiants, but they originally contained more than half the world's known recoverable oil, and 26 of them (including the largest) are in the Persian Gulf region.
Some 60 million bbl of oil are moved from producer to consumer each day. The location, production, and consumption of the world's oil are of vital importance to relations between nations, as well as to their economic wellbeing.
Frequently oil has been a decisive factor in the determination of foreign policy. The recent war in the Persian Gulf, while a dramatic example of the critical importance of oil, is not the first nor is it likely to be the last oil-influenced diplomatic/military action.
Since World War 11, Middle East tensions have reached the explosion point on numerous occasions, triggering wars, illegal occupations, coups, revolutions, sabotage, terrorism, and oil embargoes. Given that extensive record, it is fortunate that the number of significant world oil price spikes thus far has been limited to four.
THE WORLD'S OIL
Only 38 supergiant oil fields have been found worldwide since oil exploration began in the early 1860s.
More than 40,000 oil fields have been discovered, but more than 90% of them do not significantly impact world oil production. The 38 supergiants contained just over half the oil discovered to date.
Some 300 or so known world class giants contributed another 30%. Each originally contained between 500 million and 5 billion bbl of recoverable oil.
There are, in addition, about 1,000 oil fields that range in size from 50 million to 500 million bbl. These accounted for about 15% the world's known oil. Therefore, less than 5% of the world's oil fields originally contained over 95% of the world's total known recoverable oil.
Although most of the world's oil is contained in a few large fields and most fields are small, the large fields, because of their great size and anomalous geology, are usually discovered early in an exploration cycle.
Current geological understanding can distinguish between geologically favorable and unfavorable conditions for oil formation and accumulation, so that only a relatively few exploratory wells may be necessary to indicate whether a sedimentary basin is likely to contain a significant amount of oil.
If giant fields exist, most of the oil in a newly explored basin may be found by the first few hundred exploratory wells.
Since the geology of virtually all of the world's sedimentary basins is at least partially known, geological inference indicates that it is unlikely that any undeveloped region will be found to contain more recoverable oil than is currently produced in one year, 22 billion bbl.
MOST ENDOWED COUNTRIES
The countries that produce all but a tiny fraction of the world's oil are listed (Table 1) in the order of their projected ultimate recovery (OGJ, Dec. 31, 1990, p. 41).
Probable reserve additions are comprised of estimated field growth and undiscovered recoverable resources, volumes that were derived from 1990 U.S. Geological Survey estimates.'
Proved reserves plus probable reserve additions equals the amount of recoverable oil thought to remain in a country.
Three countries-Saudi Arabia, the Soviet Union, and the U.S.-each contained an estimated original recoverable oil endowment in excess of 200 billion bbl.
The leading oil country, Saudi Arabia, is thought to still contain more than 300 billion bbl. It leads the world with 260 billion bbl of proved reserves, the volume of recoverable oil in known fields, plus some 42 billion bbl of additional oil that is expected ultimately to be added to its proved reserves through extensions to known fields and new field discoveries.
Current Saudi oil production ranks third in the world, but the volume is relatively small compared to the huge proved reserves. The Saudi reserves/production ratio (R/P)is 112/1.
U.S., SOVIET RESERVES
The U.S., in contrast, is pumping a much higher fraction of its reserves, an R/P ratio of 11/1, and has produced more oil than any other country, 158 billion bbl.
More than 60% of the total U.S. oil endowment has been produced and consumed.
The U.S., while third in original oil endowment (total oil), ranks only seventh in remaining recoverable oil due to its huge cumulative production. Also, the U.S. is the only one of the top 18 countries in Table 1 that is not an important oil exporter.
The Soviet Union is the world's leading oil producing country, but is producing at the rapid R/P rate of 14/1. It is thought to contain good prospects, however, with the potential to add some 124 billion bbl to proved reserves through extensions of known fields and new field discoveries.
However, its remaining store of oil is more than 100 billion bbl less than that of Saudi Arabia.
OTHER COUNTRIES
Six countries contained an estimated original endowment of recoverable oil of 100-200 billion bbl, and the top five are important oil exporters and OPEC members.
Iraq and Kuwait have proved reserves of around 100 billion bbl each, while in Mexico and Iran there are substantial prospects for reserve additions. The remaining countries listed in Table 1 originally contained between 5 billion bbl and 100 billion bbl of recoverable oil and also include some OPEC members.
It is interesting to note that Ecuador, with an original oil endowment estimated at only 6.1 billion bbl, is an oil exporter and a member of OPEC. Qatar, also in OPEC, originally contained an estimated 9 billion bbl of recoverable oil.
The U.K., which led in the development of North Sea oil, originally contained an estimated 27.1 billion bbl of oil and is producing at a very high rate of withdrawal.
Other countries rapidly withdrawing their reserves are Canada, Australia, Peru, and Trinidad.
REMAINING OIL LISTED
The proved reserves and estimated remaining recoverable oil by region, group, or individual country, are shown as a percentage of the world total (Table 2).
Remaining oil includes estimates of undiscovered oil and oil field growth in addition to proved reserves.
Note that the percentages do not add to 1 00%, as some countries are in more than one grouping.
Table 2 shows that the world's remaining recoverable conventional oil is located primarily in the Eastern Hemisphere, mostly in the Persian Gulf, and is controlled by OPEC.
This is particularly true of proved reserves, the oil in known fields the recoverable volumes of which have been estimated by geological and engineering means.
Since only 15% of known world oil reserves and 23% of projected remaining recoverable oil are located in the Western Hemisphere, it is unlikely that its oil demand could be balanced by oil produced within the hemisphere, as is sometimes suggested for security reasons.
The Soviet Union is projected to contain substantial oil prospects, thus its estimated remaining oil is a significantly higher percentage of the world total than its proved reserves.
The U.S., Mexico, China, and particularly OECD Europe contain a very modest portion of the world's remaining oil and proved oil reserves.
FUTURE WORLD OIL PRODUCTION
It appears that the world originally contained around 2,215 billion bbl of recoverable oil, some 29% of which has already been produced and consumed.
To determine the length of time that the world can continue to produce oil at about its current level of 22 billion bbl/year (1% per year of its original recoverable oil endowment), the U.S. may be used as a model.
It is a large country that contains a diverse geological environment for oil generation and accumulation, with over 40 major sedimentary basins representing most of the geologic basin types.
Oil exploration and development technology have evolved in the U.S. for more than 100 years. It is the country in the most advanced stage of oil development with more wells drilled and oil produced than anywhere else.
In the long U.S. experience, an average of about 0.8% of the total original recoverable oil has been added to proved reserves each year. The current reserves/production (R/P) ratio is 11/1.
Since the reserves in the U.S. are generally being produced at maximum rates, an 11/1 ratio would appear as an efficient average on a worldwide basis.
DISTRIBUTION UNEVEN
If the remaining 1,755 billion bbl of recoverable world oil were evenly distributed and exploration and development proceeded at the pace achieved in the U.S. (an average of 0.8% of the total oil endowment added to proved reserves each year, with the highest efficient rate of production at an 11/1 R/P ratio), world oil production could be sustained at around its current level for some 65 years.
Then, after about the middle of the next century, a declining resource base would force production down.
However, since the world's remaining oil is very unevenly distributed, future oil production must be projected on a country-by-country basis. This may be illustrated by calculating the number of years into the future that a country may be able to sustain current (1 990) production by using the same U.S. model of reserve additions.
The results of such projects are shown (Table 3), with the countries in each category listed in order of increasing time of sustainable production. The countries with the shortest term for probable sustained production all have high rates of production, shown by low R/P ratios.
Increased production in any of these countries, if even possible, will be marginal. The other countries, with higher R/P ratios, can elect to increase current oil production by lifting their proved reserves at faster rates. This will, of course, require additional investments in field wells and production facilities and will reduce the length of time into the future that production levels can be sustained.
U.S. A SHORT TERM PRODUCER
It is interesting to note that the U.S. is the leading member in the short-term sustained production category.
In the U.S., crude oil production peaked in 1970 at about 3.33 billion bbl and then began to fall. The slow decline continued until 1977.
It then leveled off because of greatly increased drilling coupled with high production rates (R/P ratios of 9/1), fluctuating around 3 billion bbl/year to 1986. In 1986, world oil prices sharply decreased causing a domestic drilling decline that was mirrored in reduced domestic production, down 20% from 1985 to 2.45 billion bbl in 1990.
The production decline is expected to continue. Its extent will depend primarily on exploration and development success in the key frontier regions of Alaska and the outer continental shelves, since future production from the older mature onshore oil regions mostly will be a function of drilling density in known fields and enhanced oil recovery oil operations, both of which are dependent on world oil price and technological development.
Low world oil prices, coupled with a mature and depleting domestic resource base, have accelerated production declines. Declining production, and an increase in domestic demand for crude oil since 1985, have resulted in increasing imports which now supply nearly half of demand.
EXPORTERS TO THE U.S.
OPEC members provide more than half of this imported oil and the next two members in the short-term sustained production category are Canada and the U.K.
In 1990, the U.S. imported large amounts of crude oil from these two countries. Due to projected future production declines, however, they cannot be expected to be long-term suppliers.
Likewise, Trinidad and Colombia shipped substantial volumes of crude oil to the U.S. in 1990 and may be expected to experience increasing difficulties in doing so in the future. Norway, another important exporter of crude oil to the U.S., is estimated to be unable to sustain current production past the end of the century.
The countries with the long-term production potential and the potential to significantly increase current production are, with a few exceptions, grouped in the Persian Gulf. It is to this region that the U.S. and the world must turn for oil in the future.
PERSIAN GULF OIL
The founding of the oil industry in the Persian Gulf region dates to 1908, when oil was first discovered in Southwest Iran.
Iranian oil facilities and production were rapidly expanded during and after World War I as the British bought controlling interest in the Anglo-Persian Oil Co.
Output fell sharply in the early years of World War 11 because of military constraints on supply routes to the U.K., but recovery began in 1943 with the reopening of the routes.
However, after the war political difficulties arose between the company (renamed Anglo-iranian Oil Co.) and the Iranian government.
The differences centered on Iranian dissatisfaction with the financial terms of the petroleum concession and the monopoly position of the oil company and its close association with the British government. The subsequent breakdown in relations between the Iranian government and the oil company led to the nationalization of the oil industry in 1951.2
Following nationalization, Iranian oil production declined drastically.
A compromise was not reached until 1954, when an agreement was signed between the Iranian government and a group of international oil companies for exploitation and marketing rights to Iranian oil, but the National Iranian Oil Co. retained sole ownership rights of all fixed assets of the Iranian oil industry.
In 1973, Iran effectively took charge of its oil industry and, under joint arrangements with overseas oil companies, generally continued the expansion of production.
Increased oil output was made possible by a succession of discoveries of large oil fields, including the supergiants Agha Jari, Gachsaran, Marun, Ahwaz, and Rag-i-Safid.
The Khomeini revolution and war with Iraq resulted in a precipitous drop in Iranian oil production, but postwar production has been increasing and was increased again following the Iraqi invasion of Kuwait.
AFTER WORLD WAR II
Little oil development was possible in the gulf region during World War II, and at its conclusion only seven fields were in production, although 14 more fields had been discovered. The known fields were in Iran, Iraq, Qatar, Kuwait, and Saudi Arabia.
It was by then evident that the region would become a major petroleum producer when adequate outlets became available. The expansion of postwar production was driven by the rapid increase in world oil demand.
With the nationalization of Iranian oil in the early 1950s and the resulting decline in Iranian production, Kuwait became the region's leading oil producer. This was due to the rapid development of supergiant Burgan field.
Discovered in 1938, Burgan is the world's second largest oil field, originally containing some 75 billion bbl of recoverable oil.3
Kuwait held its position as the region's leading oil producer until 1965.
Saudi Arabia rose to prominence as an oil rich state later than most others in the gulf region. It has since, however, achieved pre-eminence as the world's largest storehouse of oil.
RISE OF SAUDI ARABIA
In an atmosphere of competition between the established British oil companies (in Iran, Iraq, and Kuwait) and the incoming American oil companies, Saudi Arabia granted a concession to the Arabian American Oil Co. (Aramco) in 1933.
Later exploration produced the first discovery in 1935, but commercial oil accumulations were not located until 1938. Export levels were at first quite modest.
The discovery that transformed the oil fortunes of Saudi Arabia was of Ghawar field in 1948. Although it was originally thought to be several separate smaller fields, it proved to be the world's largest supergiant with 86 billion bbl of recoverable oil.
Another important discovery was Safaniya in the Persian Gulf. It is the fourth largest oil field in the world (31 billion bbl) and the world's largest offshore field.
Other Saudi Arabian supergiants include Berri, Manifa, Abu Sa'fah, Qatif, Shaybah, Abqaiq, Zuluf, Marjan, and Khurais .4
A national oil company was established in Saudi Arabia in 1956 to supervise the exploration and production of petroleum resources outside the Aramco concession. Since that time, oil production became increasingly governed by the state-owned oil company, Petromin,
In 1988, a new national oil company, Saudi Arabian Oil Co., was chartered to assume the managerial and operational responsibilities that had been carried on by Aramco on behalf of the Saudi government.
The new entity, wholly owned by the government, is also known as "Saudi Aramco."
IRAQ-KUWAIT CONFLICT
Since invasion of Kuwait, the unsettled Persian Gulf situation and resulting initial world oil price spike resulted in a decline in world oil demand.
Reduced demand caused oil prices to quickly fall, and at times there even have been crude oil surpluses.
Saudi Arabia's Saudi Aramco has engaged in a concerted effort to reactivate shut-in wells, pipelines, pump stations, and gas-oil separators and also to modify some refineries to process different mixtures of crudes.
The immediate target is a production potential of 8.5 million b/d, and there are indications that the expansion will be continued with crude oil production facilities enlarged to an eventual 10 million b/d capacity.
After a period of British rule, the United Arab Emirates was formed in 1971 by seven emirates (Abu Dhabi, Dubai, Sharjah, Ajman, FUjairah, Ras al Khaimah, and Umm al-Qaiwain) then known as the Trucial States.
It is a loose federation that allows for joint policies for defense, foreign relations, and development with each member keeping its own internal government headed by its own ruler. Abu Dhabi is the largest emirate and contains by the far the most oil.
Oil exploration was carried out by international oil companies in various combinations. The first discovery, made in 1954, was supergiant Bab oil field.
Onshore, in the 1960s, two more super-giants were discovered, Bu Hasa and Asab. There also has been considerable success in offshore exploration, with the discovery of the supergiants Umm Shaif and Zakum.
IRAQ'S OIL FIELDS
Iraq also was under a British mandate, but it was terminated in 1932 when Iraq was admitted into the League of Nations. The resulting monarchy was overthrown in a coup by the Ba'ath Socialist Party in 1963.
The search for oil in Iraq began later and was pursued at a slower pace than in Iran. Early exploration and development was carried by consortiums of international companies.
Supergiant Kirkuk field was discovered in 1925 near gas seeps famous as "eternal fires." In 1953 another supergiant, Rumaila, the fifth largest oil field in the world, was discovered about 35 miles north of the Iraq-Kuwait border. Subsequent drilling extended the field into Kuwait.
Before the recent invasion, Iraq claimed that Kuwait's "excessive" pumping, to increase its oil production above its OPEC quota, was draining oil from the portion of Rumaila under Iraq.
Between 1972 and 1976 Iraq's oil industry was nationalized and put under the control of the Ministry of Petroleum, which reported only to the Revolutionary Command Council.
Iraq National Petroleum Co. was attached to the Ministry of Petroleum and assumed responsibility for operation of the oil fields, exploration, and marketing.
PERSIAN GULF GEOLOGY
The large Arabian-Iranian downwarp sedimentary basin contains by far the richest petroleum province in the world.
Underlying this basin is a deep basement of Precambrian rocks that outcrops on the Western Arabian and Central Iranian plateaus.
During the Paleozoic and Mesozoic eras, there was slow and intermittent subsidence as a shallow sea transgressed the region. The resulting deposits, a thick sequence of continental sediments (sandstones and shales) and shallow marine sediments (sandstones, shales, limestones, and evaporites), form a wide shelf that dips gently east and northeast.
The elimination of this ancient seaway began at the end of the Mesozoic with an uplift that climaxed in late Tertiary time with the folding of the sediments in the deeper parts of the basin to form the Zagros, Taurus, and Oman mountains.
LOCATION OF MAJOR FIELDS
Many major oil fields occur along these trends, including Ghawar, Abqaiq, Qatif, Burgan, and some fields off Iran.
To the northeast in Iran, there are a series of overthrust faults and the mountain ranges that are tightly folded and faulted.
The oil fields of Iran and Iraq tend to be elongated in a northwest-southeast orientation in contrast to the fields to the south in Kuwait and Saudi Arabia, which are broader and usually oriented north-south.
The oil and gas fields vary in their structural and stratigraphic character according to their position in the basin. The Permian reservoirs are located in the south-central part of the region and extend into the Zagros Mountains. They are in the Permian Khuff formation, a carbonate interbedded with evaporates that ranges up to 2,000 ft in thickness. Source rocks for the Khuff are underlying Ordovician-Silurian shales.
SAUDI DISCOVERIES
New gas and light oil accumulations were discovered by Saudi Aramco in 1989 about 50 miles southeast of Riyadh near ad-Dilam.
The oil and the overlying gas and condensate are low in sulfur. The oil, in a test of the discovery well, flowed at a restricted rate of 4,300 b/d. It is contained in Mississippian to Permian age Unayza sandstones that occur immediately under the Khuff carbonates.
Source rocks are though to be Silurian shales. Exploratory wells in five other localities of the same region also have discovered commercial light oil accumulations .5
These discoveries (and the region itself) have great petroleum potential but are unlikely to be one huge field as was Ghawar because they appear to be on different structural trends. More confirmation drilling is needed before the sizes of the fields can accurately be determined.
The Jurassic reservoirs occur mainly in the broad, gentle structures that may be associated with salt-related or basement-related uplifts at depth. These reservoirs are located in a large area in northeast Saudi Arabia, the U.A.E., and Kuwait.
JURASSIC ARAB OIL
Most Middle East oil production is from the Arab formation of Late Jurassic age.
It is composed of carbonates interbedded with anhydrites. The sequence is capped with the Hith anhydrite, which averages 500 ft in thickness and provides an extensive seal that has prevented further upward migration of the oil generated in Jurassic source rocks .6
The largest oil accumulation occurs in the lowest zone of the Arab formation (the Arab D reservoir). At Saudi Arabia's Ghawar field it is approximately 140 miles long in a north-south direction and covers about 875 sq miles.
The reservoir reaches a maximum thickness of 1,300 ft. Per-well production averages about 12,000 b/d of oil.
CRETACEOUS, TERTIARY ZONES
Lower and Middle Cretaceous carbonate reservoirs occur in southeastern Saudi Arabia, the U.A.E., and Oman. The reservoirs are up to 3,000 ft in thickness.
The traps are associated with salt movement. Field sizes, modest by Middle East standards, are limited by trap size. In Kuwait, however, highly permeable Lower and Middle Cretaceous sandstones interbedded with shales form the reserves of supergiant Burgan field.
The trap is a north-south trending elliptical dome with an area of 135 sq miles. Such Lower and Middle Cretaceous sandstone reservoirs are also found to the south in the Neutral Zone (between Kuwait and Saudi Arabia) and into Saudi Arabia.
In Iraq and Iran reservoirs of Tertiary age are associated with the Zagros folded mountains. In Iraq supergiant Kirkuk field is in a large anticline whose main reservoir is a Late Eocene to Oligocene reef. The overlying salt and anhydrite beds form an adequate but imperfect seal since there are oil and gas seeps in the southern part of the field.
Paralleling the Zagros mountain belt in Iran is a series of long, asymmetrical folds with a northwest-southeast orientation that contrasts with the north-south trends of the Arabian shelf structures.
ASMARI ZONE IN IRAN
The major reservoir in nearly all of the Iranian oil fields is the Asmari formation, a reef-type limestone of Oligocene-Early Miocene age.
It is overlain by evaporates that provide generally efficient seals, though petroleum seeps are common throughout the region.
The Asmari limestones grade to continental sandstones to the west that contain oil in some fields. The source rocks are Cretaceous and possibly Jurassic shales, the oil having migrated vertically through fractures to the Asmari formation.
There are two structural trends offshore in the Persian Gulf, the geologically younger trend parallel the northwest-southeast axes of the onshore Tertiary fields, while the older trend parallels the north-south axes of the Arabian Mesozoic fields.
The reservoirs are the Tertiary Asmari and the Middle Cretaceous Sarvak limestones, while further south production is from Lower Cretaceous and Jurassic Arab zone reservoirs.
REFERENCES
- Masters, C.D., D.H. Root, and E.D. Attanasi, World Oil & Gas Resources, Future Production Realities, Annual Review of Energy, December 1990, pp. 23-51.
- McLachlan, Keith, Oil in the Persian Gulf Area, The Persian Gulf States, Johns Hopkins University Press, Baltimore and London, 1980, P. 199.
- Riva, Joseph P. Jr., World Petroleum Resources and Reserves, Westview Press, Boulder, Colo., 1983, p. 321.
- Riva, Joseph P. Jr., World Petroleum Resources and Reserves, Westview Press, Boulder, Colo., 1983, p. 322.
- Beydoun, Z.R., Middle East Hydrocarbon Reserves Enhancement, 1975-1990, Journal of Petroleum Geology, Supplement 1, January 1991, pp. II-IV.
- Ayres, M.G., M. Bilal, R.W. Jones, L.W. Slentz, M. Tartir, and A.0. Wilson, Hydrocarbon Habitat in Main Producing Areas, Saudi Arabia, AAPG Bull., January 1982, p. 3.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
