Oil reserves are an estimate of how much oil can ultimately be recovered. This broad definition is also called oil in place. It includes undiscovered or “yet to find” reserves. It’s based on the probability of finding reserves in certain geological areas. It also assumes new types of technology will make it economically feasible to extract the oil.

Don’t believe it when someone says the world will run out of oil on a certain date. Instead, oil will become too expensive to use long before it runs out.

A more precise definition is discovered oil reserves. There are three categories. These are based on how likely it is the oil can be recovered using current technology.

  1. Proven Reserves – There is a greater than 90 percent chance that the oil will be recovered.
  2. Probable Reserves – The chance of actually getting the oil out is greater than 50 percent.
  3. Possible Reserves – The likelihood of recovering the oil is significant, but less than 50 percent.

Keep in mind that part of an oil field’s probable and possible reserves get converted into proved reserves over time. These discovered reserves are just a small part of the oil in place. It’s just not technically feasible to get most of the oil out in any given field.

Proven Reserves

Of the three categories, the most commonly used is proven oil reserves. That’s where analysis of geological and engineering data demonstrates with reasonable certainty to be recoverable from known reservoirs. Only the oil that is commercially viable under current economic conditions is counted. If oil prices rise or new technology makes costs lower, then more fields become viable.

Reasonable certainty means that either actual production or conclusive testing has occurred. The testing includes drilling. If not, then the site must be adjacent and similar to areas that have been drilled. The size of the field is determined by the edges where the oil contacts adjacent gas or water formations.

Oil is not counted as proven if engineers are uncertain whether it can be recovered under current economic conditions, or if it’s in completely untested areas. Some engineers also don’t count oil locked up in shale, coal, or gilsonite.

World Reserves

In January 2017, there were 1.665 trillion barrels of oil in the world. That’s enough to last another 50 years since the world uses 90.5 million barrels per day. Only proven reserves are counted in the total world reserves. This number changes only slightly every year.

Largest Reserves in 2017

The world’s largest proven reserves are in just a few geologically unique areas. Reserves are the graveyards of prehistoric plants and tiny marine organisms. Their remains settled at the bottoms of ancient oceans and lakes 300 million to 400 million years ago. Layers of sediment covered them, increasing the pressure and temperature. That changed the chemical composition into oil.

We are using up this oil faster than Nature is creating new reserves. This amount is finite, which is why people refer to oil as a non-renewable resource.

Most of the big fields in the proved oil reserves are in the Middle East, Venezuela, and Russia. These countries have no incentive to produce accurate estimates. The market price of fossil fuels is driven more by production capacity versus demand than by reserves. This capacity depends on investment decisions made by a small number of decision-makers in Saudi Arabia, Kuwait, Venezuela, and Russia.

Here’s the number of barrels of proven oil reserves for the top 20 countries:

  1. Venezuela – 300.9 billion.
  2. Saudi Arabia – 266.5 billion.
  3. Canada, which includes shale oil – 169.7 billion.
  4. Iran – 158.4 billion.
  5. Iraq – 142.5 billion.
  6. Kuwait – 101.5 billion.
  7. United Arab Emirates – 97.8 billion.
  8. Russia – 80 billion.
  9. Libya – 48.4 billion.
  10. Nigeria – 37.1 billion.
  11. United States – 36.5 billion, which is up significantly from 20.68 billion in 2013.
  12. Kazakhstan – 30 billion.
  13. China – 25.6 billion. In ranking, it replaced Qatar in 2017.
  14. Qatar – 25.2 billion.
  15. Brazil – 13.0 billion.
  16. Algeria – 12.2 billion.
    1. geria – 12.2 billion.
    1. Angola – 8.3 billion.
    2. Ecuador – 8.3 billion.
    3. Mexico – 7.6 billion., down from 10.07 billion barrels in 2014.
    4. Azerbaijan – 7 billion.

    The list alone doesn’t give the whole story, because of the relationships between the countries. Most of them produce more than they use, so they export to importers or those that use more than they produce.

    To increase their negotiating power, some of the oil exporters have banded together to manage world supply and influence prices. Although this is an illegal monopoly in most countries, it is perfectly legal in international law. The exporters have done so to keep the price of oil fairly high. Since oil is a non-renewable resource, these exporters have nothing left to sell when it’s gone. For this reason, they want to get the highest profit possible while it lasts. They can only do this if they collude rather than compete.

    The Organization of Petroleum Exporting Countries formed in 1960. The 12 OPEC members hold 80 percent of the world’s proven reserves. The biggest importers are the United States, the European Union, and China.

    U.S. Reserves

    The U.S. Energy Information Administration reported 35.2 billion barrels of reserves. The largest reserves are in Texas, North Dakota, the Gulf of Mexico Federal Offshore, Alaska, and California. After years of stagnation, U.S. reserves are now growing again thanks to higher oil prices that make new technologies cost-effective. Horizontal drilling and hydraulic fracturing can extract oil from shale and other “tight” formations or those with very low permeability. Texas and North Dakota accounted for 90 percent of the total growth.

    Also, the United States maintains the world’s largest strategic petroleum reserve. It holds 727 million barrels. It’s used to keep the economy running smoothly when there’s a crisis or shortage. Since it is not open for production, it’s not included as part of the U.S. proven reserves.

    The United States has 3 trillion barrels trapped in the Green River shale oil formation in Colorado. It costs $40-$80 a barrel to recover it, making it barely worth it even when oil is $100 a barrel. Extraction could also deplete the water table and damage the environment. But, if technology continues to improve and prices rise, it would be feasible to produce 100,000 barrels a day for 30 years.

    Oil Sands

    Oil sands reserves are located in Canada, Venezuela, Russia, and the United States. Most of it, which total about 166 billion barrels, is in Alberta, Canada. The United States imported 1.236 billion barrels from these fields in 2014.

    Oil sands are sand mixed with a thick substance called bitumen. The bitumen must be heated before it can be used as oil. Two tons of sand must be mined, using three barrels of water, to get one barrel of oil. The process is controversial because it uses a lot of energy and water and leaves a scar on the environment that can be seen from space. So miners are required to restore the area to its original condition after mining. (Source: Interview with Gavin Longmuir, a consultant with International Petroleum Consultants Association, Inc.

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