To meet US demand, supply will continue to be sourced from foreign nations
Far eclipsing the US’s top producing oil fields, the rest of the world’s top 20 oil fields produce at rates greater than 300,000 barrels per day, with 12 of them located in the Middle East. The following lists world’s top 20 oil fields:
| Location | Name | Production volume (Bbls/day) |
|---|---|---|
| Saudi Arabia | Ghawar | 5,000,000 |
| Kuwait | Burgan | 1,200,000 |
| Azerbaijan | Azeri-Chirag-Guneshli | 850,000 |
| Mexico | Ku-Maloob-Zaap | 800,000 |
| Abu Dhabi | Zakum | 750,000 |
| Russia | Samotlor | 750,000 |
| Mexico | Cantarell | 660,000 |
| Russia | Priobskoye | 650,000 |
| Iran | Ahwaz (Bangestan) | 600,000 |
| Saudi Arabia | Shaybah | 500,000 |
| Abu Dhabi | Bu Hasa | 500,000 |
| Qatar | Al Shaheen | 480,000 |
| Kazakhstan | Tengiz | 450,000 |
| Russia | Fedorovo-Surgutskoye | 400,000 |
| Algeria | Hassi Messaoud | 380,000 |
| Saudi Arabia | Abqaiq | 375,000 |
| Venezuela | El Furrial | 370,000 |
| Brazil | Marlim | 350,000 |
| Venezuela | Junin | 320,000 |
| Abu Dhabi | Bab | 320,000 | Source: www.cera.com |
To address the production gap, the US must rely on foreign sources of oil, requiring it to import the bulk of its supply from the following nations (ordered of import volume):
| Nation | Import volume (Bbls/day) |
|---|---|
| Canada | 2.5 MM |
| Saudi Arabia | 1.5 MM |
| Mexico | 1.3 MM |
| Venezuela | 1.2 MM |
| Nigeria | 1.05 MM |
| Russia | 0.5 MM | Source: DOE 2008 Crude Oil Imports |
The number of proved reserves in the United States is much less than the number of proved reserves in countries from where oil is imported. Reserves in the US cannot eliminate the widening gap between US production and US consumption of oil.
In 1998, the supply and demand gap for oil in the US was approximately 11 million barrels per day, with US production at approximately 8 million barrels per day and consumption at 19 million barrels per day. Since then, not only has US production fallen to below 7 million barrels per day, but demand has increased to approximately 20 million barrels per day. Domestic crude oil production is not expected to make up the gap, as can be seen by analyzing reserve volumes. The amount of 1P, 2P, and 3P reserves serves as an indication of the expected oil volumes that are possible to produce, with the most reliable of the three metrics being 1P. 1P, 2P, and 3P reserves are defined as follows:
- 1P, proved reserves – “Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations.” – Society of Petroleum Engineers
- 2P, probably reserves – “Probable reserves are those unproved reserves which analysis of geological and engineering data suggests are more likely than not to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves.” – Society of Petroleum Engineers
- 3P, possible reserves – “Possible reserves are those unproved reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves. In this context, when probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will equal or exceed the sum of estimated proved, plus probable, plus possible reserves.” – Society of Petroleum Engineers
1P reserves are also what give the five largest oil companies their stock market value. The market rewards the companies with the largest 1P reserves by placing the greatest value on those companies. For example, one billion barrels of 1P reserves is considered the monetary equivalent of $20 million dollars in market value. Companies who have high numbers of 1P reserves and high production values are given the highest market ranking. Exxon-Mobil is ranked the highest with around 23 billion barrels of 1P reserves combined with about 4.5 million barrels of oil produced per day and BP is in a close second in market value at around 18 billion barrels of 1P reserves with about 4 million barrels of oil per day.
The value of these reserves is also evident in what companies are willing to pay for their 1P reserves. For example; on average BP spent $28 billion dollars per 1 billion barrels of 1P reserves, Exxon-Mobil spent $16 billion, and Chevron and Shell each spent $14 billion per 1 billion barrels of 1P reserves.
US 1P reserves, at 30.5 billion barrels, are below that of the top countries from which it imports. As a reference, the Middle East’s 1P reserves are 754 billion barrels, and Canada’s 1P reserves are 179.3 billion barrels (of which 150.7 billion barrels derived from Canadian oil sands). This difference shows that domestic production will continue to be heavily supplemented by foreign oil in order to meet oil demand in the US.
Source: 2009 BP Review of World Energy; Yahoo finance; Moneycentral; Oil company annual reports;
