Source: US Energy Information Agency, International Energy Annual Report.
Changes in Major Crude Oil Reserves, 2001-2006
The geographical imbalance in oil reserves is similar to the one
of production. On a long-term perspective, OPEC account for the bulk
of oil reserves. Saudi Arabia alone had about 25% of all the world's
oil reserves until recently, but a recent changes in the evaluation
of oil reserves has tremendously increased the share of Canadian reserves.
Mainly due to an increase in oil prices and improved extraction technologies,
Canadian tar sands have become economically recoverable, thus to be
counted as official reserves. Under such circumstances, Canadian oil
reserves surged from 5.6 billion barrels in 2001 to 173 billion barrels
in 2006. Questions remains about to what extent these reserves are economically
recoverable and if a cost effective way is set, this will go a long
way to extend the availability of petroleum on global markets. Furthermore,
it may take a long time at the current consumption level for OPEC to
run out of oil reserves. The United States, in spite of important reserves,
have only about 10 years of oil reserves considering their reserve-to-production
ratio. No European country, except Norway, has significant oil reserves.
It is thus likely that reliance on sources outside developed countries
will increase over the next decade.
There is however some controversy concerning the true extent of oil
reserves, especially in the Middle East. OPEC countries may have vastly
overstated their reserves, mainly because production quotas are based
upon estimated reserves. This means that the larger its reserves, the
more an OPEC country can export oil. Kuwait is a good example of this
issue as it reported a gradual decline of its reserves in the early
1980s. This was expected since the Kuwaiti oil industry can be considered
as mature. However, in 1985 the country reported a 50% increase in its
reserves without any new discovery, a strategy solely designed to increase
its export quotas. Kuwait was not alone in the process of increasing
its reserves for quota reasons. In 1988, Dubai, Iran and Iraq all significantly
increased their reported reserves for the same reasons. Even Saudi Arabia
followed and reported a massive increase in its reserves in 1990. However,
as the world demand gradually increased quota issues became of less
relevance. As the above figure underline, existing reserves of many
oil producing countries has substantially increased between 2001 and
2006 (e.g. Iran, UAE, Venezuela) in spite of no significant discovery
of oil fields.
There are serious concerns about the high level of concentration
of reserves in Saudi Arabia and the "creative accounting" estimates
of oil reserves. 95% of the Saudi oil comes from six major field discovered
between 1940 and 1967. The Ghawar field alone produces 60% of this total.
It was discovered in 1948 and put into production in 1951. By 2004,
it produced 4.5 million barrels per day, but large amounts of water
needs to be injected to maintain the output of the field. As such, this
field is likely to be at the end of its production cycle and its output
may decline substantially in the next few years. If this is the case,
oil exports from Saudi Arabia may start the decline while the world
was expecting it to provide for the expected additional demand. The
outcome would be a serious oil shock.