Updates
Later, 6:27 p.m. CT: in the comments I mention that the price of oil is an existential issue for Saudi Arabia. A reader responded:
Just as Saudi, Kuwait, Russia and several other regimes rely upon oil revenue for political/social ends, other countries are in the same boat with natgas. The countries include Russia, Qatar, Algeria, Malaysia.All these countries tie their pricing to various oil indexes (say, 12% of Brent, for illustrative purposes).The completely disconnected - from global markets - pricing at Henry Hub gives US producers a HUGE economic edge when competing now in global markets.
Regional hub pricing has just emerged with JKM, TTF, and NBP to provide free market parameters vis a vis supply/demand in Asia, Europe, indeed, everywhere.Independent (read, non-government-owned) companies are upending these long established paradigms at blinding speed.
Original Post
Link here.
According to the Energy Information Administration (EIA), U.S. proved reserves of crude oil and lease condensate increased to 47.1 billion barrels in 2018—a 12 percent increase compared with the previous record set at year-end 2017 of 42 billion barrels. U.S. proved reserves of natural gas increased to 504.5 trillion cubic feet—a 9 percent increase compared with the record level set in 2017 of 464.4 trillion cubic feet.When I first started blogging, I never understood why "proved reserves" would b contingent upon price.
Proved reserves are oil and natural gas quantities that geological and engineering data find with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions. Reserves estimates change from year to year as new discoveries are made, existing fields are appraised, reserves are produced, prices and costs change, and technologies develop.
Memo to self: note to Art Berman.
And more:
U.S. proved reserves of oil and natural gas have increased despite record production of these fuels in 2018. U.S. crude oil and lease condensate production increased 17 percent in 2018 to an average of 10.96 million barrels per day—1.6 million barrels per day more than in 2017.
U.S. natural gas production increased 12 percent in 2018 to 89.9 billion cubic feet per day—10 billion cubic feet per day more than in 2017.
The largest net increase in oil and natural gas proved reserves in 2018 was in Texas, totaling 2.3 billion barrels of crude oil and lease condensate proved reserves and 22.9 trillion cubic feet of natural gas proved reserves. The major share of that increase was located in the Wolfcamp and Bone Spring shale plays in the Permian Basin.
The next largest net gains in crude oil and lease condensate proved reserves in 2018 were in New Mexico and North Dakota. New Mexico’s crude oil and lease condensate proved reserves increased by 750 million barrels and North Dakota’s increased by 422 million barrels in 2018.It's my understanding that Saudi Arabia's proved reserves has/have not changed in decades.
1. It will be interesting if reserves drop for 2019 (calculated and released near end of 2020, so will be a while until we know). Prices were about $57 in 2019 versus $65 in 2018. Not sure if this is enough to affect things or not.
ReplyDelete2. It is impressive that 2018 reserves were so much higher than 2014, despite dropping price from ~$100 to ~$65. In addition, the volume produced.
3. But it is clear from 2016, that if prices drop enough (40s), that reserves are reduced.
4. The Saudi thing always enrages the peak oilers but they are silly ducks. You can look at the US and we have produced more reserves than we had in the 70s also. SA is no different. Technology and exploration/development work there as well. It's called "reserve growth".
5. If anything the Saudis probably have more oil than they admit (makes sense economically, especially with their wasteful power burn behavior). They just try to prop the price up by not flooding the market (except occasionally when they get pissed off).
6. In addition, a very good reserves audit was run, by two different top-tier auditors and they found ~270 B barrels. The peakers were demanding that back in the day. But after it happened, they don't want to recognize the results. Then again, they are boneheads and biased.
Years ago I talked about Saudi Arabia, enough to help me understand their issues. After following it for quite some time, my world view remains unchanged: Saudi Arabia can't survive on $60 Brent oil. It's questionable whether they can survive on $70 Brent oil. There's a reason Prince Salman monetized the kingdom's reserves, albeit a very small piece of it.
DeleteYes, I would expect growth to slow and it's even possible proved reserves will drop a year from now. But now that I understand how they "estimate" proved reserves -- something I did not understand before I started blogging -- I realize it's another set of goal posts that can easily be moved.
DeleteBottom line for me: the US is not going to run short of accessible, affordable, reliable energy for a long, long time. Unless St Greta, of course, convinces the US to shut in the oil and natural gas sector once and for all.
You rarely see it, but I like it when companies show their price-dependent reserves. I.e. this is what we have at 50, this at 60, etc.
ReplyDeleteSee it more often shown on the gas side. Then again, gascos tend to be more transparent and numerical. E.g. they will give you the exact equation for their type curves. Oil companies just do pretty pictures, with almost no scale.
You may be correct; I don't know. As I've said many, many times on the blog, I don't understand natural gas. And I barely understand oil. LOL.
DeleteEIA shows ND reserves in 18 were still slightly below 14. Some recovery from the abyss of 16. But still less than during the boom.
ReplyDeletehttps://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCRR01SND_1&f=A
Some years ago I learned that "proved reserves" were contingent on the price of oil. That spoke volumes about that metric. I wonder what the proved reserves of North Dakota would be if oil went to $20, or if oil went to $100.
DeleteBottom line: lots of work left to be done in the Bakken. The US won't run out of inexpensive, accessible, and reliable energy for a long, long time .