What does the New British Petroleum Report Tell Us?
Written by Sig Silber
British Petroleum has just released their 2014 Edition of their Statistical Review of World Energy and it can be found here.
What are the major take away messages?
One very important consideration is the ratio of reserves to production which is essentially the years of production remaining at current prices. Of course one would expect the price to increase as this ratio declines thus increasing the reserves but that is a complex analysis with insufficient information in the BP Statistical Review to make that sort of analysis so we are constrained to work with this “Static” set of information.
First let us look at oil. Notice that South and Central America have more than a 120 year supply whereas the U.S. has somewhat more than a thirty-year supply. We are not talking about the absolute level of reserves but the ratio of reserves to current production. There is potential for South and Central America to increase their level of production.
Natural gas is very interesting. Even with fracking, North America has a very modest of number of years of supply and yet the U.S. seems to be intent on exporting natural gas. It is a big increase over a two-year period and likely to continue to increase but still one wonders about the wisdom of exporting natural gas.
And then there is coal. North America has a 250 year supply but hates this resource. Europe and Eurasia are also well positioned. Despite the environmental issues, it is going to be very difficult for the World to ignore the large coal reserves.
What about Asia? They have the lowest ratio of reserves to production for oil and coal and only are slightly better off than North America with regards to natural gas. Given that Asia is likely to experience more rapid growth than many other areas, this represents a significant constraint.
There may be some value in comparing the 2014 Report with the 2012 Report i.e. the view from two years ago.
|2014 Report||2012 Report|
|As of the End of the Prior Year||Reserves||R/P||Reserves||R/P|
|Oil (Billion Barrels)||1688||53||1653||54|
|Natural Gas (Trillion Cubic Meters)||186||55||208||64|
|Coal (Million Tonnes)||891,531||113||860,938||112|
We can tell from this table that:
- Oil and coal have been replacing reserves at a rate such that the Reserves to Production ratio which means the remaining years of production at current production rates has remained essentially constant.
- Natural gas sufficiency has declined it appears to a restatement of Russia’s natural gas reserves. Some additional explanation on that revision can be found here. The BP estimates for the reserves of Russia and Turkmenistan have been volatile over the past few years possibly because of lack of cooperation in developing these estimates.
Other organizations that produce similar assessments of the World’s Energy situation include oil companies such as ENI and Shell Oil and the U.S. Energy Information Agency (EIA) and the International Energy Agency (IEA). I have not compared the BP data to data from such organizations. I suspect there is a lot of cooperation among the various parties that put together these analyses.
Please note the definition of “reserves” used by BP.
“Proved reserves of oil– Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions.”
That is the definition BP used for oil reserves and their definition for natural gas and coal were similar. What that means is:
- Price changes can increase or decrease reserves
- Improved technologies can increase the reserves
- New discoveries can increase the reserves. Elsewhere there are studies that predict what is left to be discovered.
- Political realities can increase but more frequently decrease reserves.
So reserves is an economic concept unlike the size of the total resource which is a geological concept and the technically recoverable portion of the total resource which is an engineering concept. These three concepts and the quantification that corresponds to each concept has a relationship which is not always as clear as it should be and ofttimes controversial especially when things are changing rapidly.
Thus the BP and similar reports are very useful but not necessarily the only information one needs to consider when assessing energy availability, climate change or anything to do with energy.