Ownership of the world’s fossil fuel resources is concentrated among a few nations, and state-owned oil and gas companies control most of these resources. The ownership of these energy reserves is detailed in the figure above. Moreover, we only have 50 years of proven oil and gas reserves left (see below) while 50 percent and 70 percent of the world’s oil and gas reserves are (respectively) in fact unproven guesstimates. This includes shale resources. The prospects for new oil and gas discoveries are not as bright as the promises made by the oil and gas industry might lead one to believe.
A Minority of Nations Control the World’s Oil and Gas Reserves
Ownership of the world’s fossil fuel resources is concentrated among a few nations, and state-owned oil and gas companies control most of these resources.[iv] Figure A above highlights that twelve nations hold three-quarters of the world’s fossil fuel energy reserves. Another group of 23 nations holds a further one-fifth of the world’s energy resources. This means the majority of nations (160+) hold only 4 percent of fossil fuel reserves. Figure B highlights a deception in the reporting of fossil fuel reserve data without backdating volume revisions to the original wildcat discovery. This market data deception creates a straight-line in cumulative reserve growth, similar to that depicted in Figure B above. This lack of backdating revisions means we miss the plateau that is occurring in the reserve growth rate.[i] [ii],[iii]
The world is dependent upon OPEC nations, Canada, Venezuela, Australia, and a small group of exporting nations from among the other major holders of reserves for much of its oil, gas, and coal needs. For example, just 20 nations supply 90-plus percent of the world’s oil and gas exports, while just five nations supply more than half of those exports.[v] Collectively this means that a minority of nations holds the majority of energy reserves, and an even smaller minority exports the lion’s share of the world’s fossil fuel supplies. This dependence on a minority of exporters will create vulnerabilities for fuel importers when a crisis arises.
Global Fossil Fuel Reserve Revisions Mean 50–70 Percent Are Unproven Guesstimates
The immutable laws of physics limit the maximum level of technical recoverability from a reservoir or field, to less than 50 percent for oil and 80 percent for gas.[vi],[vii] Once peak production has been reached, or approximately half a reservoir’s technically recoverable oil resources have been extracted, then production declines in a well understood manner.[viii],[ix]
Oil recovery happens in phases, and costs increase as technology is deployed. Primary oil recovery extracts the initial 10–30 percent, with secondary recovery methods permitting extraction levels of up to 30–50 percent. Most wells have already used secondary recovery methods for extraction (i.e., gas and water injection), but fewer have employed tertiary or enhanced oil recovery methods, due to complexity and cost.[x],[xi]
Technically recoverable resources represent the volumes of oil and gas that can be extracted with current technology and know-how. Proven reserves are a smaller subset of technically recoverable reserves with a greater than 90 percent certainty of being extracted. Unproven reserves are technically recoverable but are assigned either a 50 percent (probable) or 10 percent (possible) prospect of recovery, to reflect risk and uncertainty.[xii]
From the time production begins, reserve growth typically increases between 1.3- and 4.6-fold over the first 25 years.[xiii] These recoverable volume increases come from new well additions within a reservoir, increases in the field area, and new reservoir discoveries within the field, as well as the use of enhanced recovery techniques. Revisions to reserve estimates are a frequent occurrence.[xiv],[xv],[xvi],[xvii],[xviii]
With knowledge of the above, it becomes clear that all reserve estimates are subject to uncertainty. Governments, which own the majority of reserves, can have a significant influence on market perceptions about global reserves, while not being subject, as oil and gas companies are, to stock exchange reporting rules.[xix]
One such example of government influence on the market perception of reserve abundance occurred in 2013, when the US Energy Information Agency team increased its technically recoverable global reserve forecasts significantly by 11 percent and 47 percent for oil and gas resources, respectively, only two years after their 2011 forecast of reserves. These significant upward revisions reflected changes to the Energy Information Agency predictions of world unconventional energy resources i.e., shale oil and gas.
These revisions mean that one-third of the Energy Information Agency’s world gas and one-tenth of its world oil resource projections are for shale resources. These revisions also mean that between 50 percent and 70 percent of total conventional and unconventional oil and gas projections are classified as unproven (i.e., guesstimates).[xx] With such a high percentage being unproven, caution is required concerning the Energy Information Agency’s optimism.
It is also important to understand the forecasting methodologies and assumptions that are used. The 2013 revisions concerning oil and gas reserves were based on predictions involving the application of historic US shale oil and gas recovery rates to foreign petroliferous basins with similar geophysical characteristics. These revisions assumed the same operating context internationally as in the USA.[xxi]
In 2015, the U.S. Geological Survey attempted to manage market and public perceptions of the status of global energy reserves by significantly revising upwards its global estimates for conventional oil and gas reserves. These revisions were based on new prediction methodologies, assumptions about new technology deployment, and a supposedly greater understanding of reservoirs using desk-based research methods.[xxii] In other words, these were subjective assessments leading to significant upgrades of estimated reserves, which however lacked any physical validation of the reserves.
Experts remind us that over the long term, government forecasts have a tendency to overestimate reserves, and that reserves may not be adjusted downward despite years of production.[xxiii]
When Will We Run Out of Fossil Fuels?
By dividing the 2013 Energy Information Agency’s proven global oil, natural gas, and coal reserves by 2013 levels of production, without assuming any growth or a switch to a colder climate (thus accelerating energy demand), we’ve got 50 years of proven oil and gas reserves, and 130 years of coal reserves left.[xxiv],[xxv],[xxvi],[xxvii],[xxviii]
By including the more speculative unproven reserves,[xxix] not included in the Energy Information Agency’s reserve data,[xxx] while assuming a 50 percent certainty of recovery for those unproven reserves, then the reserve timelines can be extended from 50 to 75 years for oil and from 50 years to 117 years for natural gas. These extended reserve timelines do not factor in any population or economic growth, rendering these estimates “optimistic” to say the least.
The Nuclear Energy Agency and the International Atomic Energy Agency indicate that nuclear fuel reserve timelines are similar to that of coal, meaning that coal and nuclear fuels will run out at about the same time in the 22nd century.[xxxi]
With peak oil arguably behind us,[xxxii] with existing “reserves” comprised, to a great extent, of unproven resources, and with discoveries of new reserves declining, we need to be very cautious in thinking that there’s plenty of oil and gas still out there to be discovered. Clearly, supplier nations will simply not run out of energy resources overnight, but its prospect, when realized, will become a major economic force (i.e., oil price increases) for change in the future supply of energy.[xxxiii]
Investing in expensive oil exploration in difficult terrain (i.e., offshore, in the Arctic, deep in the earth), with exploration infrastructure facing more extreme weather (e.g., hurricanes), by an industry that is arguably trying to mask its decline phase, creates a less attractive context for long-term investment. Such a difficult context for oil and gas investment makes renewable energy investments more attractive, and undermines the promise inherent in the inflated, unproven estimates of oil and gas reserves.
[i] Data (for Figures 8.1.A and B): Oil, gas, and coal data was obtained from the Energy Information Administration from their International Energy Statistics data portal. This graphic utilizes the following data files. Natural gas https://bit.ly/2LC6GBo, Crude Oil https://bit.ly/2IWeEaP, Coal data https://bit.ly/2L6pk3w. Standard fuel units of energy (barrels, cubic feet, and short tons) were converted to British thermal units (Btu) using conversion factors obtained from, https://www.eia.gov/energyexplained/index.php?page=about_btu.
[ii] R.G. Miller, S.R. Sorrell, 2014, “The future of oil supply.” Philosophical Transactions of the Royal Society A 372: 20130179. http://dx.doi.org/10.1098/rsta.2013.0179.
[iii] Kjell Aleklett and Colin J. Campbell, “The peak and decline of world oil and gas production.” Minerals and Energy-Raw Materials Report 18.1 (2003): 5-20. (See the figure on page 6).
[iv] International Energy Forum. The IOCs And The NOCs In The Modern Energy Context. https://www.ief.org/news/the-iocs-and-the-nocs-in-the-modern-energy-context.
[v] Data: Energy Information Administration. Exports of Crude Oil including Lease Condensate. International Energy Statistics data portal. Based on 2016 data. Petroleum, https://bit.ly/2xfMwHM. Exports of Dry Natural Gas, https://bit.ly/2NhW6nK. Data accessed 16 September 2018.
[vi] The US Geological Survey reviewed oil recovery factors for USA oil and gas reservoirs, before applying this to their international oil and gas reserve forecasts (outside the USA). The mean modal recovery was 45% across 67 reservoirs. https://pubs.usgs.gov/sir/2015/5091/sir20155091.pdf.
[vii] Kjell Aleklett and Colin J. Campbell, “The peak and decline of world oil and gas production.” Minerals and Energy-Raw Materials Report 18.1 (2003): 5-20.
[viii] Ian Chapman, 2014, “The end of Peak Oil? Why this topic is still relevant despite recent denials.” Energy Policy, 64 . 93-101. http://insight.cumbria.ac.uk/id/eprint/1708/.
[ix] Kjell Aleklett and Colin J. Campbell, “The peak and decline of world oil and gas production.” Minerals and Energy-Raw Materials Report 18.1 (2003): 5-20.
[x] M. Höök, 2014, “Depletion rate analysis of fields and regions: a methodological foundation.” Fuel, Volume 121, 1 April 2014, 95–108. http://dx.doi.org/10.1016/j.fuel.2013.12.024.
[xi] Mahendra K. Verma, “The Reality of Reserve Growth. Reservoir Management.” U.S. Geological Survey. GEO ExPro October 2007 35.
[xii] US Energy Information Administration. “Oil and natural gas resource categories reflect varying degrees of certainty.” https://www.eia.gov/todayinenergy/detail.php?id=17151. (See the annotated diagram and descriptions for further explanation).
[xiii] Mahendra K. Verma, “The Reality of Reserve Growth. Reservoir Management.” U.S. Geological Survey. GEO ExPro October 2007 35.
[xiv] T.A. Cook, 2013, “Reserve growth of oil and gas fields—Investigations and applications.” U.S. Geological Survey Scientific Investigations Report 2013–5063, 29 p., http://pubs.usgs.gov/sir/2013/5063/.
[xv] https://energy.usgs.gov/OilGas/AssessmentsData/WorldPetroleumAssessment.aspx#3882215-overview. https://pubs.usgs.gov/sir/2015/5091/sir20155091.pdf .
[xvi] David F. Morehouse, “The Intricate Puzzle of Oil and Gas “Reserves Growth.” Energy Information Administration. Natural Gas Monthly July 1997. http://large.stanford.edu/courses/2014/ph240/liegl1/docs/morehouse.pdf.
[xvii] Mahendra K. Verma, “The Reality of Reserve Growth. Reservoir Management.” U.S. Geological Survey. GEO ExPro October 2007 35.
[xviii] T.R. Klett et al., 2015, U.S. “Geological Survey assessment of reserve growth outside of the United States.” U.S. Geological Survey Scientific Investigations Report 2015–5091,13 p., http://dx.doi.org/10.3133/sir20155091.
[xix] Kjell Aleklett and Colin J. Campbell, “The peak and decline of world oil and gas production.” Minerals and Energy-Raw Materials Report 18.1 (2003): 5-20.
[xx] U.S. Energy Information Administration. “Technically Recoverable Shale Oil and Shale Gas Resources.” An Assessment of 137 Shale Formations in 41 Countries Outside the United States. June 2013. [See Table 2, page 3. See pages 15-19, Methodology].
[xxi] U.S. Energy Information Administration. “Technically Recoverable Shale Oil and Shale Gas Resources.” An Assessment of 137 Shale Formations in 41 Countries Outside the United States. June 2013. [See pages 15-19, Methodology].
[xxii] See endnote 79.
[xxiii] Kjell Aleklett and Colin J. Campbell, “The peak and decline of world oil and gas production.” Minerals and Energy-Raw Materials Report 18.1 (2003): 5-20.
[xxiv] Data: Energy Information Administration data was obtained from: International Energy Statistics. These calculations utilized the following data files. Natural gas https://bit.ly/2LC6GBo, Crude Oil https://bit.ly/2IWeEaP, Coal data https://bit.ly/2L6pk3w. [Comment: These reserve timeline estimates were calculated by dividing the 2013 Energy Information Agency’s proven global oil, natural gas, and coal reserves by the 2013 levels of production. This calculation tells us there are 50 years of proven oil and gas, and 130 years of coal reserves left. These reserve timeline estimates do not assume any population or economic growth, or a switch to a cold climate regime, which would accelerate energy demand and reduce timelines.].
[xxv] See endnote 78.
[xxvi] See endnote 75.
[xxvii] See endnote 76.
[xxviii] Ian Chapman, 2014, “The end of Peak Oil? Why this topic is still relevant despite recent denials.” Energy Policy, 64 . 93-101. http://insight.cumbria.ac.uk/id/eprint/1708/
[xxix] U.S. Energy Information Administration. Technically Recoverable Shale Oil and Shale Gas Resources. An Assessment of 137 Shale Formations in 41 Countries Outside the United States. June 2013. [See Table 2, page 3 for this data].
[xxx] Data: Oil, gas, and coal data was obtained from the Energy Information Administration from their International Energy Statistics data portal. This graphic utilizes the following data files: Natural gas https://bit.ly/2LC6GBo, Crude Oil https://bit.ly/2IWeEaP, Coal data https://bit.ly/2L6pk3w. Standard fuel units of energy (barrels, cubic feet, and short tons) were converted to British thermal units (Btu) using conversion factors obtained from, https://www.eia.gov/energyexplained/index.php?page=about_btu.
[xxxi] “Uranium 2016: Resources, Production and Demand.” NEA No. 7301, OECD 2016. A Joint Report by the Nuclear Energy Agency and the International Atomic Energy Agency.
[xxxii] Kjell Aleklett et al., “The Peak of the Oil Age: Analyzing the World Oil Production Reference Scenario in World Energy Outlook 2008.” Energy Policy, Volume 38, no. 3, Elsevier Ltd, 2010, 1398–1414, doi:10.1016/j.enpol.2009.11.021.
[xxxiii] Kjell Aleklett et al., “The Peak of the Oil Age: Analyzing the World Oil Production Reference Scenario in World Energy Outlook 2008.” Energy Policy, Volume 38, no. 3, Elsevier Ltd, 2010, 1398–1414, doi:10.1016/j.enpol.2009.11.021.
