TORONTO (miningweekly.com) – Analysts at a New York-based research firm believe that the Organisation of the Petroleum Exporting Countries’ (Opec’s) global oil reserve statements could be inflated by as much as 70%.
Global oil prices are expected to dramatically spike from the end of the decade as a result of depletion, and continue to dramatically rise into the future as a result of oil-producing countries being unable to replace reserves fast enough, research specialist Lux Research analysts told Mining Weekly Online on Thursday.
Researchers said the known oil reserves of Opec members would be depleted much sooner than thought, owing to many of the member countries producing much more oil than what they could sustain over the long term.
Oil, gas and mining analyst Rick Nariani said Opec’s stated reserves skyrocketed from 878-billion barrels to 1.2-trillion barrels throughout the 1980s and 1990s, without any new significant discoveries being made. With cumulative oil production of 449-billion, the true reserves for Opec could be as low as 428.94-billion, which would result in global price shocks by 2020.
He explained certain Opec members were deliberately increasing their stated oil reserves to flout Opec regulations, which allowed oil-producing countries to only produce oil at a rate calculated as a certain percentage of its total reserves.
“We now know that the numbers are significantly inflated. The model we have built from available data shows that Opec reserve statements could be overstated by as much as 70%,” Nariani said.
Nariani, who is co-authoring a report, ‘The Race to Replace Reserves’, which is due for publication during the next couple of weeks, told Mining Weekly Online that the official figures did not add up. He said that given certain new discoveries of oil, such as in Venezuela and certain technological advances which allow for previously uneconomical known deposits to be exploited, many Opec countries continued to increase their oil reserves, without announcing any new discoveries, and, all that while producing significant amounts of oil.
Nariani and report co-author Brent Giles believe global oil reserves would be depleted much sooner than thought.
Global stated recoverable oil reserves, including conventional and unconventional sources, total 1.65-trillion barrels, or 54 years of supply. If one adjusted the remaining oil reserves for population growth and nominal increases to per capita consumption rates, oil shortages could occur 18 years earlier than that, the analysts said.
That means global oil shortages within 36 years. For example, Saudi Arabia had already admitted to oil reserves declining by 8% a year since 2004, the analysts said.
However, Giles held that global oil consumption, driven higher by the increasing wealth of developing Asian and African countries, would overtake production by 2020, resulting in significant price instability.
He pointed to the need for global production to significantly increase by 2035 to meet demand, and this would need significant new reserves coming on line.
“In order for the oil companies to meet future oil demand, they would have to replace current reserves at a rate of 5.4% a year. This would allow for a supply of oil for about another 90 years,” Giles said.
On its website, Opec said its "member countries have made significant additions to their oil reserves in recent years, for example, by adopting best practices in the industry, realising intensive explorations and enhancing recoveries".
The organisation held its proven oil reserves currently stood at "well above 1.19-trillion barrels".
The researchers said technology would be critical to unlocking potential from resource reserves, such as the 4.6-trillion barrels of oil shale deposits found in American soil. New techniques and technological applications would play an increasingly critical role in discovering new reserves.
Under these technological advances counted advanced materials for drilling equipment, fluids and additives at high pressure and temperature, targeted delivery and the controlled release of chemicals and materials, alternative fracturing techniques, enhanced recovery and beneficiation, advanced proppants, down-hole and reservoir sensors and brine and nonconventional mining systems.
The discovery of shale gas had also transformed the fossil fuel industry, with many oil-dependent applications being able to switch to cleaner and cheaper natural gas.
“There is today a lot more natural gas than previously thought. This is a good fuel source with abundant supply for still a very long time,” Nariani said.
The analysts said new technology would lead the way to also make it economical to produce from previously uneconomical reserves.
Further, Giles pointed out that the demand for oil could also be significantly reduced, particularly within the transport industry where the advent of clean technology is only now starting to materialise.