In 2008, Canadian economist Jeff Rubin stunned the oil market with a bold
prediction: With the world economy growing at 5 percent a year, oil demand
would grow with it, outpacing supply, thus lifting the oil price from $147
to over $200 a barrel.
The former chief economist at CIBC World Markets was so convinced of his thesis,
he wrote a book about it. "Why the World is About to Get a Whole Lot Smaller" forecast
a sea change in the global economy, all driven by unsustainably high oil prices,
where domestic manufacturing is reinvigorated at the expense of seaborne trade
and people's choices become driven by the ever-increasing prices of fossil
fuels.
In the book, Rubin dedicates an entire chapter to the changing oil supply
picture, with his main argument being that oil companies "have their hands
between the cushions" looking for new oil, since all the easily recoverable
oil is either gone or continues to be depleted - at the rate of around 6.7%
a year (IEA figures). "Even if the depletion rate stops rising, we must find
nearly 20 million barrels a day of new production over the next five years
simply to keep global production at its current level," Rubin wrote, adding
that the new oil will match the same level of consumption in 2015, as five
years earlier in 2010. In other words, new oil supplies can't keep up with
demand.
Of course, Rubin at the time was talking about conventional oil - land-based
and undersea oil - as well as unconventional oil sands. The shale oil "revolution" in
the United States that took off soon after the publication of his book has
certainly changed the supply picture, and the recent collapse in oil prices
has forced Rubin to eat
his words. With U.S. shale oil production soaring from 600,000 barrels
a day in 2008 to 3.5 million barrels a day in 2014, the United States over
the past few years has flooded the market with new oil from its shale formations,
including the Eagle Ford in South Texas and the Bakken in North Dakota. According
to the Energy Information Administration (EIA), total U.S. production (conventional
and unconventional) will increase to 9.3 million barrels a day this year, the
most since 1972.
While some observers, including oil giant BP, are now predicting a slowdown in
U.S. shale oil production as wells are depleted at a faster rate, to be replaced
by Middle Eastern output that has lost ground to U.S. shale, the thesis posed
by Jeff Rubin in 2008, that the world is running out of oil, seems to have
changed to: Is the world swimming in oil?
In this continuing climate of abundant oil production, Oilprice.com sought
to find out where the new oil will be found. The data could be used in a further
analysis to determine whether an oversupplied market will continue to depress
oil prices into the future - or whether a price correction is likely given
a tightening of the market on the supply side.
According to a 2013
report by Wood Mackenzie, the world holds 1.4 trillion barrels of oil
equivalent oil and gas reserves, with the Middle East, Latin America, North
America and Africa identified as the key regions for future oil plays.
Of course, many of the new fields are uneconomic at current prices, so it
is instructive to look at the largest oil fields to see where oil producers
are likely to keep pumping, even though many of these fields are in decline.
They include Ghawar and Safaniya in Saudi Arabia, Burgan in Kuwait, and Rumalia
and West Qurna-2 in Iraq. These
five fields were named the most important by Oilprice.com in an article
last June. Ghawar, the world's largest field, has an estimated 70 billion barrels
of remaining reserves, more than all but seven other countries, according to
the EIA. In production since the 1950s, it continues to produce at 5 million
barrels a day.
If you noticed the dominance of the Middle East in this list, you'd be right. Current
estimates have over 80 percent of the world's proven oil reserves located
in OPEC member countries, with Middle Eastern reserves comprising 65 percent
of the OPEC total.
Adding to the Oilprice.com list, Forbes named Majnoon in Iraq, Khuzestan (also
the name of a province) in Iran, Kashagan in the Caspian Sea, Khurais in Saudi
Arabia, the Tupi field offshore Brazil, Carabobo in Venezuela's Orinoco heavy
oil belt, and the North Slope of Alaska among its top
10 fields of the future.
Fortune places the Orinoco belt in Venezuela among its six
largest untapped fields, at an eye-watering 513 billion barrels of recoverable
crude. In comparison the Chicontapec Basin in Mexico, also on the list, is
a Lilliputian at 10 billion barrels. Others include the Santos and Campos
Basins in offshore Brazil, at 123 billion barrels, the Supergiant field in
the southwest desert of Iraq, at between 45 and 100 billion barrels, and
the Jubilee Field in Ghana, estimated to contain 1.8 billion barrels of recoverable
crude.
The Canadian oil sands should of course also be included in the matrix of
future oil supply. Despite the difficulty and higher-cost, compared to conventional
sources, of stripping the bitumen from the oil sands and processing it into
heavy oil, the vastness of the reserves contained in the sands of northern
Alberta cannot be underestimated. According
to the Alberta government the oil sands has proven reserves of about 168
billion barrels, the third largest proven crude oil reserve in the world, after
Saudi Arabia and Venezuela. Canadian oil sands production is forecasted to
grow from about 2 million barrels per day to 3.7 million barrels per day by
2020 and 5.2 million barrels per day by 2030, according to Alberta Energy.
Many have pointed to the Arctic as the answer to the depletion of existing
oil and gas fields. The region, which crosses Russia, Alaska, Norway and Greenland,
is estimated to hold 166 billion barrels of oil equivalent, more oil and gas
than Iran and enough to meet the world's entire consumption of crude oil for
five years, reported The Daily Telegraph.
Drilling down a bit further, the US Geological Survey estimates that over
87% of the Arctic's oil and gas resources are located in seven Arctic basin
provinces: Arctic Alaska Basin, East Barents Basin, East Greenland Basin, West
Greenland East Canada Basin, East Greenland Rift Basin, West Siberian Basin
and the Yenisey-Khatang Basin.
The Prudhoe Bay field in Alaska, which has been pumping oil since 1977, is
the largest oil field in North America, at about 25 billion barrels. Around
16 percent of the Arctic's undiscovered oil and gas is located on land, with
the remaining potential either locked in continental shelves or underwater
at depths over 500 meters.
Of the seven basins outlined by the USGS, the most abundant is Arctic Alaska,
at 29.36 billion barrels of crude oil, followed by the Amerasia Basin, at 9.72
billon, and the East Greenland Rift Basin at 8.90 billion, according
to Geology.com.
Among the oil majors eyeing the Arctic prize, Shell has been drilling off
the coast of Alaska for decades, Statoil is active in the Norwegian Arctic,
and ExxonMobil is exploring with Russia's Rosneft in the Russian far north.
Last year Rosneft/ ExxonMobil discovered a field that could hold up to 730
million barrels of oil, but for the time being, exploration looks thin. With
low oil prices, most oil companies are reining in capital costs, and exploration
expenditures are a high-priority line item. Statoil and Chevron have both put
their Arctic plans on ice, and the ExxonMobil partnership with Rosneft
could be in trouble due to Western sanctions against Russia. Shell is currently
the only company sinking any capital into the Arctic, with the Anglo-Dutch
firm announcing at the end of January that it plans to proceed
with a $1-billion Arctic drilling this summer.
And what of the shale oil reserves that have propelled the United States to
becoming close to energy-independent and threaten to knock Saudi Arabia off
its pedestal as the world's top oil producer? In 2013, the EIA conducted the
first-ever U.S. analysis
of global shale oil reserves. It estimated "technically recoverable" (as
opposed to economically recoverable) shale oil resources of 345 billion barrels
in 42 countries, the equivalent of 10 percent of global crude oil supplies
- and enough to cover over a decade of oil consumption.
According to the EIA, Russia and the United States have the largest shale
oil resources, at a respective 75 billion barrels and 58 billion barrels, followed
by China, Argentina and
Libya. The other countries on the top 10 list of countries with technically
recoverable shale include Australia, Venezuela, Mexico, Pakistan and Canada.
The EIA report also shows a marked increase in the number of prospective shale
deposits globally compared to an earlier 2011 report. That report listed 32
countries with shale versus 41 in 2013, 48 basins versus 95, and half the number
of formations, at 69 in 2011 versus 137 in 2013.
