U.S. moves up to No. 1 in global oil reserves
July 06--The United States has overtaken industry giants Saudi Arabia and Russia in recoverable oil reserves, a new international study says.
The U.S. is sitting on 264 billion barrels, 8 billion barrels more than Russia and 52 billion more than Saudi Arabia, the dominant member of the Organization of the Petroleum Exporting Countries (OPEC), according to the report, released Monday, by Rystad Energy, a respected oil and gas consulting firm based in Oslo, Norway.
Three years ago, the U.S. was behind Russia, Saudi Arabia and Canada in Rystad's estimates of recoverable oil -- barrels that are technologically and economically feasible to extract.
"It is an encouraging study," said Saeed Irani, president of Irani Engineering, a Sacramento-based company that is one of the state's leaders in oil field operations. "It shows that even though our economy is so vast and diverse, oil is still going to play a big part in it."
The big jump for the U.S. is largely due to technological advancements such as hydraulic fracturing and horizontal drilling that squeeze oil and gas from shale formations.
Shale from places such as the Bakken formation in North Dakota and the Permian Basin in Texas starting in the mid-2000s have helped reverse a long-term trend of flattening oil production in the U.S.
"Oil doesn't have a very good reputation like you see in the high-tech industry," Irani said. "We do not talk about it in the same glowing terms that we talk about the Internet and cell phones ... But there is a quiet revolution going on."
Poring over data from more than 60,000 oil fields across the globe, the Rystad Energy study reported overall global reserves of 2.1 trillion barrels and said more than half of the remaining reserves in the U.S. are in unconventional shale oil.
By itself, Texas holds more than 60 billion barrels of shale oil, rivaling the entire nation of Mexico, which has 72 billion barrels of oil, putting Mexico in ninth place in the Rystad report.
Those are big numbers but oil experts say the figures should be looked at with a critical eye.
"It's not like a hard number," said James D. Hamilton, an economics professor at UC San Diego who has written numerous papers on oil markets. "It's a function of economics."
In other words, at what price are recoverable reserves really worth exploiting?
Although oil prices have recovered from hitting a low of $27 a barrel in February, the price for West Texas Intermediate -- the benchmark price for domestic crude -- fell nearly 5 percent amid global market jitters Tuesday to $46.60 a barrel.
That's a far cry of the $100 a barrel mark oil enjoyed in June 2014.
"I don't think much of (the reserves are) going to be produced if the price were to stay below $50," Hamilton said. "But if it goes back to $100, there's quite a bit of oil that can be produced for a number of years from the United States."
The protracted slump in the global price of oil has led to a slew of bankruptcies in the U.S. among some producers. From the start of 2015 through early May of this year, 130 North American oil and gas producers and service companies have gone broke.
But at the same time, the hard times have forced companies to find more efficient and less expensive ways to do business.
"Break-even costs are much lower today than they were two years ago," said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University. "When oil is at $100 (a barrel) you can afford to be wasteful. But when oil is at $50, you really have to be careful about costs."
Some oil industry analysts predict companies will be able to make as much money with oil at the $75-a-barrel-range as they were when it was at $100 a barrel.
"I think that's quite possible, but we're a long way from $75 a barrel today," Hamilton said.
In addition, "recoverable reserves" is a more expansive definition than "proved reserves," a conservative measure that refers to oil that can be extracted with a probability of at least 90 percent.
When it comes to proved reserves, Rystad Energy estimates the U.S. finishes fourth in the world, behind Saudi Arabia, Russia and Iran. It should be noted, though, that calculating reserves can often be difficult to determine for many countries, who consider such information to be state secrets.
Although California has fast earned a reputation as the leader among U.S. states for renewable energy production, it has also long been among the nation's biggest oil producers.
According to the U.S Energy Information Administration, California's crude oil production is the third-largest in the country, trailing only Texas and North Dakota and finishing ahead of Alaska.
But the shale revolution has largely passed California by.
Irani said that's largely due to regulations on hydraulic fracturing that are stricter than most states and challenges to advanced drilling techniques in the Monterey Shale formation in the Central Valley.
"Even though (the Monterey formation) produces oil, it (also) produces a lot of water," Irani said. "And especially at these prices, nobody is attempting to do anything creative in Monterey now and with the regulations in place it's hard to see that they're going to do anything about it in the near future."
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