Future Oil Resources and Oil Company Strategies: The Clash between Geologists and Economists and What It Means for the Industry
Jerome Davis Introduction: How Much Oil-A Recurrent Problem? The 2004 issue of the authoritative BP Statistical Review of World Energy gives a thumbnail indication of the issues involved in this chapter. Firstly, it notes a division between economists and geologist as to the extent of oil resources. Referring to the concept of ultimate recoverable resources (URR), the estimate of ‘the total amount of oil that will ever be recovered and produced. (Ibid)’, it notes:
Whilst some consider URR to be fixed by geology and the laws of physics, in practice estimates of URR continue to be increased as knowledge grows, technology advances, and economics change. Economists often deny the validity of the concept of ultimately recoverable reserves as they consider that the recoverability of resources depends on changing and unpredictable economics and evolving technologies (Ibid). Clearly any discussion of much oil (and natural gas) takes place in a ‘house di-
vided.’ Furthermore, the Statistical Review, perhaps the most cited recorder of global
oil reserves states that ‘nobody knows or can know how much oil exists under the earth’s surface or how much it will be possible to produce in the future.’ Yet if this is the case why is it that perhaps the most vitriolic debate in the oil world today is focussed on the question of ‘how much?’ BP approaches this question indirectly in its discussion of reserves replacement, the replacing of utilized resources by the finding and development of new reserves:
[Global] proved oil reserves at the end of 2003 are estimated to have been 1147.7 billion barrels. That represented an increase of around 12% over the end-1993 figure of 1023.6 billionn barrels, despite a cumulative production of almost 264 billion barrels during the intervening years, ie. reserves replacement amounted to almost 400 billion barrels between end-1993 and end-2003 (Ibid).