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 Proved reserves of crude stood at 30.5 billion barrels at the start
of 2013.
If condensates are included, proved reserves reached 33.4 billion
barrels, the highest since 1976, according to a new report from the
U.S. Energy Information Administration ("U.S. crude oil and natural
gas reserves proved reserves" April 10).
Proved reserves are those which owners believe with reasonable
certainty can be extracted at prevailing prices using existing
technology — where reasonable certainty means a probability of at
least 90 percent.
"Estimates change from year to year as new discoveries are made,
existing fields are more thoroughly appraised, existing reserves are
produced, and prices and technologies change," EIA explains.
"Discoveries include new fields, identification of new reservoirs in
previously discovered fields, and extensions, which are additions to
reserves that result from additional drilling and exploration in
previously discovered reservoirs," the agency adds.
Proved reserves jumped almost 11.5 billion barrels (60 percent) in
just four years between the end of 2008 and the end of 2012, even as
8.4 billion barrels were extracted from existing oil and gas fields
in the same period.
Reserve additions are accelerating. Oil and gas companies discovered
an extra 5.4 billion barrels of crude and condensate in 2012, the
largest annual increase since 1970, when 10 billion barrels of
Alaskan crude were added to U.S. proved reserves.
Most discoveries were extensions to existing fields (5.2 billion
barrels) rather than wholly new fields (55 million barrels) or new
reservoirs within previously discovered ones (129 million barrels).
It was still much faster than production. In total, 2.4 billion
barrels of crude and condensate were produced in 2012, according to
the EIA, the fastest rate of output since the 1990s. But companies
still managed to add new reserves twice as fast as they produced
them.
Reserve additions outstripped production in both 2011 and 2012 for
the first time since 2001 and before that 1970.
TRUE REVOLUTION
The impact of the shale revolution is obvious. Big reserve increases
have coincided precisely with the widespread application of
horizontal drilling and hydraulic fracturing to shale formations.
The largest additions to proved reserves in 2012 were in Texas (2.9
billion barrels) and North Dakota (940 million barrels).
The two states at the heart of the fracking revolution accounted for
more than 90 percent of all reserve growth across the country.
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Texas now accounts for 11.1 billion barrels of proved oil and
condensate reserves, with North Dakota at 3.8 billion barrels.
"Proved crude oil reserves in the Eagle Ford tight oil play in
southwest Texas surpassed those in the Bakken Formation in North
Dakota to become the largest tight oil play in the United States,"
according to the EIA.
Rising discoveries have banished fears about peaking oil production.
The number of internet searches for "peak oil" and related terms was
highest in August 2005 but had fallen twenty-fold by January 2014,
according to Google Trends.
MADE NOT FOUND
The report also underscores that the volume of reserves depends on
prices, improvements in technology and heavy investment by the oil
industry, and is not just some accident of nature.
"Nobody finds a reserve, just as nobody finds a factory," Morris
Adelman of the Massachusetts Institute of Technology wrote in 1995
("Genie out of the bottle: world oil since 1970").
"Oilmen find fields, out of which they may develop reserves over a
long time," Adelman observed.
Reserve increments are overwhelmingly in old fields. "These huge new
reserves in old fields are no gift of nature. They are a growth of
knowledge paid for by heavy investment," he wrote.
North America's shale revolution and the surge in U.S. oil reserves
is similarly no miracle. It is the result of daring entrepreneurship
by the early shale pioneers and enormous investment in seismic
surveying and drilling appraisal and production wells by the oil
industry.
The revolution is the direct consequence of escalating oil prices
between 2002 and 2012, which created the incentive and provided the
cash flow for a massive and extremely risky exploration and
production program.
If the key to unlocking oil from shale was the combination of
horizontal drilling and hydraulic fracturing, it would never have
happened without the perseverance of quixotic pioneers like George
Mitchell of Mitchell Energy or an environment of sustained high
prices.
Now the North American oil industry is reaping the rewards in the
form of soaring production, rising reserves and increased energy
security.
(Editing by Jason Neely)
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