Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
The Easy Oil Is Gone, So Where Do We Look Now?
By Andrew Top
Oil Price, Al-Jazeerah, CCUN, February
In 2008, Canadian economist Jeff Rubin stunned the oil
market with a bold prediction: With the world economy growing at
5 percent a year, oil demand would grow with it, outpacing
supply, thus lifting the oil price from $147 to over $200 a
The former chief economist at CIBC World Markets
was so convinced of his thesis, he wrote a book about it. "Why
the World is About to Get a Whole Lot Smaller" forecast a sea
change in the global economy, all driven by unsustainably high
oil prices, where domestic manufacturing is reinvigorated at the
expense of seaborne trade and people's choices become driven by
the ever-increasing prices of fossil fuels.
In the book,
Rubin dedicates an entire chapter to the changing oil supply
picture, with his main argument being that oil companies "have
their hands between the cushions" looking for new oil, since all
the easily recoverable oil is either gone or continues to be
depleted – at the rate of around 6.7% a year (IEA figures).
"Even if the depletion rate stops rising, we must find nearly 20
million barrels a day of new production over the next five years
simply to keep global production at its current level," Rubin
wrote, adding that the new oil will match the same level of
consumption in 2015, as five years earlier in 2010. In other
words, new oil supplies can't keep up with demand.
course, Rubin at the time was talking about conventional oil –
land-based and undersea oil – as well as unconventional oil
sands. The shale oil "revolution" in the United States that took
off soon after the publication of his book has certainly changed
the supply picture, and the recent collapse in oil prices has
forced Rubin to
eat his words. With U.S. shale oil production soaring from
600,000 barrels a day in 2008 to 3.5 million barrels a day in
2014, the United States over the past few years has flooded the
market with new oil from its shale formations, including the
Eagle Ford in South Texas and the Bakken in North Dakota.
According to the Energy Information Administration (EIA), total
U.S. production (conventional and unconventional) will increase
to 9.3 million barrels a day this year, the most since 1972.
While some observers, including oil giant BP, are now
slowdown in U.S. shale oil production as wells are depleted
at a faster rate, to be replaced by Middle Eastern output that
has lost ground to U.S. shale, the thesis posed by Jeff Rubin in
2008, that the world is running out of oil, seems to have
changed to: Is the world swimming in oil?
continuing climate of abundant oil production,
Oilprice.com sought to find
out where the new oil will be found. The data could be used in a
further analysis to determine whether an oversupplied market
will continue to depress oil prices into the future – or whether
a price correction is likely given a tightening of the market on
the supply side.
According to a
2013 report by Wood Mackenzie, the world holds 1.4 trillion
barrels of oil equivalent oil and gas reserves, with the Middle
East, Latin America, North America and Africa identified as the
key regions for future oil plays.
Of course, many of the
new fields are uneconomic at current prices, so it is
instructive to look at the largest oil fields to see where oil
producers are likely to keep pumping, even though many of these
fields are in decline.
They include Ghawar and Safaniya
in Saudi Arabia, Burgan in Kuwait, and Rumalia and West Qurna-2
These five fields were named the most important by
Oilprice.com in an article last June. Ghawar, the world's
largest field, has an estimated 70 billion barrels of remaining
reserves, more than all but seven other countries, according to
the EIA. In production since the 1950s, it continues to produce
at 5 million barrels a day.
If you noticed the dominance
of the Middle East in this list, you'd be right.
Current estimates have over 80 percent of the world's proven
oil reserves located in OPEC member countries, with Middle
Eastern reserves comprising 65 percent of the OPEC total.
Adding to the Oilprice.com list, Forbes named Majnoon in
Iraq, Khuzestan (also the name of a province) in Iran, Kashagan
in the Caspian Sea, Khurais in Saudi Arabia, the Tupi field
offshore Brazil, Carabobo in Venezuela's Orinoco heavy oil belt,
and the North Slope of Alaska among its
top 10 fields of the future.
Fortune places the
Orinoco belt in Venezuela among its
six largest untapped fields, at an eye-watering 513 billion
barrels of recoverable crude. In comparison the Chicontapec
Basin in Mexico, also on the list, is a Lilliputian at 10
billion barrels. Others include the Santos and Campos Basins in
offshore Brazil, at 123 billion barrels, the Supergiant field in
the southwest desert of Iraq, at between 45 and 100 billion
barrels, and the Jubilee Field in Ghana, estimated to contain
1.8 billion barrels of recoverable crude.
oil sands should of course also be included in the matrix of
future oil supply. Despite the difficulty and higher-cost,
compared to conventional sources, of stripping the bitumen from
the oil sands and processing it into heavy oil, the vastness of
the reserves contained in the sands of northern Alberta cannot
According to the Alberta government the oil sands has proven
reserves of about 168 billion barrels, the third largest proven
crude oil reserve in the world, after Saudi Arabia and
Venezuela. Canadian oil sands production is forecasted to grow
from about 2 million barrels per day to 3.7 million barrels per
day by 2020 and 5.2 million barrels per day by 2030, according
to Alberta Energy.
Many have pointed to the Arctic as
the answer to the depletion of existing oil and gas fields. The
region, which crosses Russia, Alaska, Norway and Greenland, is
estimated to hold 166 billion barrels of oil equivalent, more
oil and gas than Iran and enough to meet the world's entire
consumption of crude oil for five years, reported The Daily
Drilling down a bit further, the US
Geological Survey estimates that over 87% of the Arctic's oil
and gas resources are located in seven Arctic basin provinces:
Arctic Alaska Basin, East Barents Basin, East Greenland Basin,
West Greenland East Canada Basin, East Greenland Rift Basin,
West Siberian Basin and the Yenisey-Khatang Basin.
Prudhoe Bay field in Alaska, which has been pumping oil since
1977, is the largest oil field in North America, at about 25
billion barrels. Around 16 percent of the Arctic's undiscovered
oil and gas is located on land, with the remaining potential
either locked in continental shelves or underwater at depths
over 500 meters.
Of the seven basins outlined by the
USGS, the most abundant is Arctic Alaska, at 29.36 billion
barrels of crude oil, followed by the Amerasia Basin, at 9.72
billon, and the East Greenland Rift Basin at 8.90 billion,
according to Geology.com.
Among the oil majors
eyeing the Arctic prize, Shell has been drilling off the coast
of Alaska for decades, Statoil is active in the Norwegian
Arctic, and ExxonMobil is exploring with Russia's Rosneft in the
Russian far north. Last year Rosneft/ ExxonMobil discovered a
field that could hold up to 730 million barrels of oil, but for
the time being, exploration looks thin. With low oil prices,
most oil companies are reining in capital costs, and exploration
expenditures are a high-priority line item. Statoil and Chevron
put their Arctic plans on ice, and the ExxonMobil
partnership with Rosneft could be in trouble due to Western
sanctions against Russia. Shell is currently the only company
sinking any capital into the Arctic, with the Anglo-Dutch firm
announcing at the end of January that it plans to
proceed with a $1-billion Arctic drilling this summer.
And what of the shale oil reserves that have propelled the
United States to becoming close to energy-independent and
threaten to knock Saudi Arabia off its pedestal as the world's
top oil producer? In 2013, the EIA conducted the first-ever U.S.
analysis of global shale oil reserves. It estimated
"technically recoverable" (as opposed to economically
recoverable) shale oil resources of 345 billion barrels in 42
countries, the equivalent of 10 percent of global crude oil
supplies – and enough to cover over a decade of oil consumption.
According to the EIA, Russia and the United States have
the largest shale oil resources, at a respective 75 billion
barrels and 58 billion barrels, followed by China,
Argentina and Libya. The other countries on the top 10 list
of countries with technically recoverable shale include
Australia, Venezuela, Mexico, Pakistan and Canada.
EIA report also shows a marked increase in the number of
prospective shale deposits globally compared to an earlier 2011
report. That report listed 32 countries with shale versus 41 in
2013, 48 basins versus 95, and half the number of formations, at
69 in 2011 versus 137 in 2013.
By Andrew Topf of
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