The Top Story Of The Century? -- US Holds More Oil Reserves Than Saudi Arabia, Russia -- First Time; And, The Gap Will Widen Over Time -- Peak Oil? What Peak Oil? -- July 5, 2016

Updates

July 7, 2016: Bloomberg's "take" on the story that US' crude oil recoverable reserves now exceed both Saudi Arabia and Russia. Some data points from that article:

• the Middle East's share of global oil production is at its highest level for about four decades
• US shale output has pushed prominent OPEC members such as Saudi Arabia to re-evaluate the wisdom of holding barrels int he ground to support prices
• top ten US producers account for less than one-third of the country's output
• Mideast production still remains very, very important but the "oil world has moved on"

Original Post 

Note: no one has noted that the gap will widen between the United States and Saudi Arabia/Russia over time -- that may be an even bigger story. I haven't seen the original study but if this study was based on analysis over the last three years, it should be noted that many of the US shale fields were taken out of play starting in late 2014 due to the Saudi Surge. These fields will eventually come back into play. None of Saudi's fields (and probably true also for Russia) were taken off-line; in fact, Saudi did what it could to maximize production. 

This story was first reported in Financial Times.

At CNBC:

The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world's biggest exporting nations, according to a new study.

Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia's 212bn and Russia's 256bn in reserves.

The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.

From the Financial Times:

Recoverable reserves — those barrels that are technologically and economically feasible to extract — are analysed by the energy industry to determine company valuations and the long-term health of an oil-producing nation’s economy. 

“There is little potential for future surprises in many other countries, but in the US there is,” said Per Magnus Nysveen, analyst at Rystad Energy, noting recent discoveries in the Permian Basin in Texas and New Mexico, which is the nation’s most prolific oil producing area. “Three years ago the US was behind Russia, Canada and Saudi Arabia.”

The analysts then point out how inexpensive it is to produce oil in the Mideast, but fail to note how the Mideast states value their oil when drawing up their annual national budgets.

By doing so -- pointing out how inexpensive it is to produce oil in the Mideast, the analysts set up the likelihood that the gap between the US and the Mideast should continue to widen. Look at the definition of "recoverable reserves" again. It is based on whether the oil is "technologically and economically feasible" to extract. Over time, based on that definition, US recoverable reserves will increase significantly and at a faster pace than the Mideast.

How big is this story? It was posted by Financial Times 23 hours ago. A google search for that headline: "US oil reserves surpass those of Saudi Arabia and Russia" produced 342,000 hits in less than 0.50 seconds. Yeah, a pretty big story.

Peak oil? What peak oil?

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Saudi Arabia Reserves? How Big?
John Kemp Weighs In

Reuters reports:

The kingdom has proven reserves of 266 billion barrels according to government estimates submitted to the Organization of the Petroleum Exporting Countries (“Annual Statistical Bulletin”, OPEC, 2015).

If these numbers are correct, Saudi Arabia’s reserves will last for another 70 years at the average production rate of 10.2 million barrels per day reported for 2015.

But there is widespread scepticism about the official estimates, which were abruptly raised without explanation from 170 billion barrels in 1987 to 260 billion in 198.

Official reserves have remained constant every year since then at 260-265 billion barrels, even as the country has consumed or exported another 94 billion barrels.

If the government data is accurate, the kingdom has managed the remarkable feat of exactly replacing each produced barrel with new discoveries or increased estimates of the amount recoverable from existing fields.

But most of the country’s giant and super-giant oil fields were discovered between 1936 and 1970 and no comparable discoveries have been made since then.

OOIP: In the 1970s, there was broad agreement that the OOIP of Saudi Arabia’s discovered oil fields was around 530 billion barrels.

P1: Proved reserves, the most conservative and prudent measure, are those which are estimated to exist, and are technically and economically recoverable, with a probability of at least 90 percent.

P2: Probable reserves are those estimated to exist and be commercially recoverable with a probability of at least 50 percent.

P3: Possible reserves, the most speculative and optimistic measure, are estimated to exist and be commercially recoverable with a probability of at least 10 percent.

In the late 1970s, Aramco put proven reserves at around 110 billion barrels, while the more speculative categories of probable and possible reserves were put at 178 billion barrels and 248 billion barrels respectively.

Saudi Arabia began reporting to OPEC that its “proved” reserves stood at around 168-170 billion barrels of crude oil.

The Saudi figure was much higher than the 110 billion barrels of proved reserves reported by the Aramco partners a few years before.

But it was very close to the figure for possible reserves that the Aramco partners had reported to the U.S. Senate.

That raised the question if the Saudis had chosen to increase their reported reserve base by reporting probable reserves as proved reserves.

In 1988/89, the proved reserve figure jumped again to 260 billion barrels despite no major new discoveries.

Rystad Energy, a respected consultancy, puts Saudi Arabia’s proved reserves at 70 billion barrels, and its proved and probable reserves at 120 billion barrels.