6 Oil and gas reserves

6.3 The global picture

The global occurrence of petroleum is very patchy and there are sound geological reasons for this. The most significant is the distribution of continental and oceanic crust, because source rocks, the prerequisite for any petroleum system, are confined to continental crust, including continental shelves. Elsewhere, and mainly concealed beneath the world's great oceans, vast areas of oceanic crust have no source rocks and therefore no petroleum potential. Similarly, igneous and most metamorphic rocks cannot source and rarely host petroleum, so areas where they predominate, such as Scandinavia and the Canadian Shield, are poor in petroleum resources.

In contrast, petroleum-rich countries generally have one of the following two features:

  1. Particularly prolific petroleum basins within their borders. The top five countries in terms of their share of proved world oil reserves (as at end 2004) are: Saudi Arabia 22.1%, Iran 11.1%, Iraq 9.7%, Kuwait 8.3% and the United Arab Emirates 8.2%.
  2. Large continental or continental shelf areas, which are statistically more likely to contain sedimentary basins with the key ingredients for petroleum. For example, the five largest countries in the world (by area) contain the following share of total proven world oil reserves (as at end 2004): Russian Federation 6.1%, Canada 1.4%, China 1.4%, United States 2.5% and Brazil 0.9%.

There are specific features of the geology of the Middle East that make it so richly endowed with petroleum. The region contains several world-class source rocks ranging in age from Palaeozoic to Tertiary, with very thick reservoirs and seals above them, in enormous, low-relief anticlines. In addition, most of its reserves were easily discovered because of the simplicity and sheer size of the traps.

6.3.1 World oil statistics

According to BP's Statistical Review of World Energy, which is generally taken as a reliable source, world proved crude oil reserves at end 2004 were estimated at 1188.6 billion barrels or 161.6 billion toe (1 barrel is equivalent to 0.136 toe). Figure 17 and Table 6 show the breakdown of this total by region. Note that Europe and Eurasia, Africa, and South and Central America each have about 10% of world reserves, but they are overwhelmed by the Middle East which has 61.7%.

Figure 17: Proved world oil reserves by region at the end of 2004 in billions of tonnes of oil equivalent (109 toe).

Table 6: Proved oil reserves (at the end of 2004, in billions of toe).

Region Reserves/109 toe Share/% R/P ratio/years
Middle East 99.8 61.7 82
Europe and Eurasia 18.9 11.7 22
Africa 15.3 9.4 33
South and Central America 13.8 8.5 41
North America 8.3 5.1 12
South Asia and Pacific 5.6 3.5 14
Global total 161.6 100.0 40

One useful measure of assessing reserves is the reserves-to-production (R/P) ratio. If the reserves remaining at the end of any year are divided by the production in that year, the R/P ratio is the length of time that those remaining reserves would last if production were to continue at that level. The world oil R/P ratio rose sharply during the 1980s because significant new discoveries in the Middle East outpaced the steady growth in world production. Since reaching a peak of 43.7 years in 1989 it has hovered around the 40-year mark. Whilst this figure conceals some strong regional differences (see Table 6), it supports the notion that reserves are sufficient to bridge the gap between current demand and a transfer to alternative energy sources in the future.

World oil consumption continued to rise inexorably, and reached 80 million barrels per day during 2004. Growth was a global phenomenon, with consumption in all regions rising above the 10-year average on the back of a strong world economy. In particular, Chinese oil consumption rose by just under 16%. The Middle East accounted for 41% of world crude oil exports in 2004 (about 21% of Middle East production is consumed there). The USA accounted for about 26% of global imports, and 19% of US imports were from the Middle East (Canada, South and Central America accounted for 27%). European imports accounted for 22% of global oil trading (26% of Europe's oil imports came from the Middle East, and 50% from the former Soviet Union and North Africa). The other major industrialised part of the world, SE Asia, received 78% of its imports from the Middle East. It is quite clear why the Middle East is an area of such great political concern, and that it will remain so for a long time.

Box 5: Petroleum and units of measurement

The petroleum industry has a somewhat lax attitude towards standardisation of units. Whereas scientists have adopted the SI system universally, relics of the past prevail amongst oil-industry production engineers and statisticians. As you will know, crude oil is still sold by the barrel; a unit of volume that was defined by US coopers in the 19th century as 42 US gallons. Unfortunately, the US gallon differs from the Imperial gallon formerly used in the UK (1 barrel = 35 Imperial gallons). In SI units a barrel has a volume of about 0.16 m3. Since the density of oil varies from 0.79 to 0.97 t m−3, with an average around 0.84 t m−3, expressing oil in terms of mass is rather vague. We use the average density in converting reserves quoted in barrels into tonnes of oil equivalent (toe).

Natural gas might seem an easier material as regards units, and the unit used most commonly is the cubic metre (usually in multiples of a trillion or 1012 m3), although in the US cubic feet are still commonly used. The problem arises when the energy content of natural gas, and those of other energy resources, are needed for comparison with that of oil. It is common practice to convert volumes into toe, and many global statistics use the toe. Again there is imprecision, as different oils have different energy contents (in joules, J) and so too do different ‘varieties’ of other fossil fuels, including natural gas. It would be convenient to compare every kind of energy source in terms of the fundamental unit of energy, the joule. You will appreciate that is not possible in the case of fossil fuels, so we stick with toe for oil, and m3 for natural gas, but retain barrels of crude oil in places, because we hear of the changing price of oil in terms of barrels on such a regular basis.

6.3.2 World gas statistics

At the end of 2004, world proved gas reserves were estimated at 179.53 trillion cubic metres (179.53 × 1012 m3). Figure 18 and Table 7 show the distribution of this total by region and it is notable that the Middle East, and Europe and Eurasia are far more equitable in terms of gas reserves than for oil. Together they account for 76.3% of the world reserves.

Table 7: Proved gas reserves by region (at the end of 2004).

Region Reserves/1012 m3 Share/% R/P ratio/years
Middle East 72.83 40.6 >100
Europe and Eurasia 64.02 35.7 61
South Asia and Pacific 14.21 7.9 44
Africa 14.06 7.8 97
North America 7.32 4.1 10
South and Central America 7.10 4.0 55
Global total 179.53 100.0 67

Figure 18: Proved gas reserves by region at end 2004. Volumes in trillion cubic metres (1012 m3).

The world gas R/P ratio has risen over the last 20 years despite a 75% increase in gas production. This is because the 1990s was a particularly successful decade for gas discoveries in Russia and the Middle East and these cumulative reserves have outpaced production. With the exception of North America, all regions are well endowed with natural gas and have R/P ratios sufficient for several decades.

World gas consumption rose by 3.3% in 2004 to reach 2.69 × 1012 m3. Growth was robust outside North America where consumption stagnated in the face of high prices and industrial restructuring. That said, North America still accounted for 29% of world gas consumption, outstripped only by Europe and Eurasia (41%).

The largest exporters of gas by pipeline were the Russian Federation and Norway, mainly to countries such as Germany, Italy, France and Turkey that have a particularly strong dependency on imported gas. The North American market was sustained by the net import of 93 billion m3 of gas from Canada to the USA. The principal movement of liquified natural gas (LNG) was in the South Asia and Pacific region where Japan and South Korea imported 60% of total world LNG, principally from Indonesia, Malaysia and the Middle East.