Extensions of existing fields continues to push reserves higher

The Energy Information Administration (EIA) announced today that 2014 was the fourth-highest year on record for crude oil reserves as the United States added 3.4 billion barrels of crude oil and lease condensate to its proved reserves. U.S. total crude oil and lease condensate reserves at year-end 2014 now stand at 39.9 billion barrels, an increase of 9.3% over year-end 2013 reserves. The increases to the U.S. crude reserves is the first time since 1972 that the country’s reserves have exceeded 39 billion barrels, according to the EIA.

EIA Crude Production Imports and Reserves

The majority of the increases came from Texas in 2014, with the state reporting 2.1 billion barrels of increased proved reserves, about 62% of the total increases. North Dakota reported the second largest increase in proved reserves, with 0.4 billion barrels of crude oil and lease condensate added to its total.

The increase in Texas was driven by development of tight oil plays like the Wolfcamp and Bone Spring in the Permian Basin and the Eagle Ford Shale play. North Dakota’s build was primarily from crude oil and lease condensate from the Bakken tight oil play in the Williston Basin.

New Mexico and Colorado had the third and fourth largest builds, respectively. New Mexico benefitted from development of the Permian Basin, although not to the same degree as Texas, while Colorado’s increased reserves came from both vertical and horizontal drilling in the Niobrara/Codell tight oil play in the Denver Basin.

EIA Reserves Builds 2010 to 2014

Most of the increases to crude oil and lease condensate reserves came from the extension of already discovered fields, the EIA said in its report today. At the end of 2014, tight oil plays accounted for 33% of all U.S. crude oil and lease condensate proved reserves, with 95% of U.S. tight oil proved reserves in 2014 coming from just six plays (the Williston, Western Gulf, Permian, Denver-Julesberg, Appalachian, and Fort Worth). The Bakken/Three Forks play in the Williston Basin retained its rank as the largest tight oil play in the United States in 2014.

EIA Crude Reserves Increases by Type 2014

Natural gas reserves set new record

The U.S. also added new natural gas reserves in 2014, setting a new record of 388 trillion cubic feet. The proved reserves additions of natural gas were highest in Pennsylvania, where operators added a net 10.4 trillion cubic feet of natural gas proved reserves in the state’s portion of the Marcellus Shale play. The total increase in natural gas reserves in 2014 amounted to 34.8 Tcf, about 10% more than in 2013.

EIA Natural Gas Production Imports and Reserves 2014

At the state level, operators in Pennsylvania reported the largest net increase in natural gas proved reserves in 2014 (10.4 Tcf), driven by continued development of the Marcellus Shale gas play, allowing it to surpass Texas as the state with the largest reserves of natural gas. Texas added the secondhighest volume of natural gas proved reserves (8.0 Tcf), followed by West Virginia (7.9 Tcf). Oklahoma added the fourth-largest volume of new natural gas proved reserves (5.4 Tcf), and Ohio had the fifth-largest increase, adding almost 4 Tcf of natural gas proved reserves in 2014

West Virginia added enough Marcellus natural gas proved reserves in 2014 to surpass Wyoming and Colorado to become the fourth-largest natural gas reserves state.

EIA Natural Gas Reserves Top 5

Reserves growth streak expected to end in 2015

Even as crude reserves hit a 42-year high, and natural gas reserves climb to their highest levels recorded, the EIA does not believe the trend of adding reserves will continue. Proved reserves are price sensitive, and the EIA expects that lower oil and gas prices brought on by OPEC’s Thanksgiving Day 2014 decision will push proved reserves lower in year-end 2015.

Oil and gas companies have to face the effects of lower prices on their reserves this year as well.

“Reserve replacements have not been as big of a deal over the past ten years, because companies were drilling wells with very high rates of return,” Scott Rees, chairman and CEO of Netherland, Sewell & Associates, Inc. (NSAI) told to Oil & Gas 360®. “Companies could make a few mistakes, and spend 10% to 20% of their budget on wells that didn’t make any money, because the returns on their other stuff was so good they were still seeing good reserve replacements and F&D costs.”

Just how large of an effect reserves would have on companies depended on how long management teams anticipated prices stay low, Rees said.

Legal Notice