(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON, April 11 U.S. exploration and production
companies are finding accumulations of crude and condensates
twice as fast as they are producing them, according to
statistics published on Thursday.
Proved reserves of crude stood at 30.5 billion barrels at
the start of 2013.
If condensates are included, proved reserves reached 33.4
billion barrels, the highest since 1976, according to a new
report from the U.S. Energy Information Administration ("U.S.
crude oil and natural gas reserves proved reserves" April 10).
Proved reserves are those which owners believe with
reasonable certainty can be extracted at prevailing prices using
existing technology - where reasonable certainty means a
probability of at least 90 percent.
"Estimates change from year to year as new discoveries are
made, existing fields are more thoroughly appraised, existing
reserves are produced, and prices and technologies change," EIA
"Discoveries include new fields, identification of new
reservoirs in previously discovered fields, and extensions,
which are additions to reserves that result from additional
drilling and exploration in previously discovered reservoirs,"
the agency adds.
Proved reserves jumped almost 11.5 billion barrels (60
percent) in just four years between the end of 2008 and the end
of 2012, even as 8.4 billion barrels were extracted from
existing oil and gas fields in the same period (Chart 1).
Chart 1: U.S. proved reserves of crude oil:
Chart 2: U.S. oil reserves and production:
Chart 3: Internet searches for "peak oil":
Reserve additions are accelerating. Oil and gas companies
discovered an extra 5.4 billion barrels of crude and condensate
in 2012, the largest annual increase since 1970, when 10 billion
barrels of Alaskan crude were added to U.S. proved reserves.
Most discoveries were extensions to existing fields (5.2
billion barrels) rather than wholly new fields (55 million
barrels) or new reservoirs within previously discovered ones
(129 million barrels).
It was still much faster than production. In total, 2.4
billion barrels of crude and condensate were produced in 2012,
according to the EIA, the fastest rate of output since the
1990s. But companies still managed to add new reserves twice as
fast as they produced them.
Reserve additions outstripped production in both 2011 and
2012 for the first time since 2001 and before that 1970 (Chart
The impact of the shale revolution is obvious. Big reserve
increases have coincided precisely with the widespread
application of horizontal drilling and hydraulic fracturing to
The largest additions to proved reserves in 2012 were in
Texas (2.9 billion barrels) and North Dakota (940 million
The two states at the heart of the fracking revolution
accounted for more than 90 percent of all reserve growth across
Texas now accounts for 11.1 billion barrels of proved oil
and condensate reserves, with North Dakota at 3.8 billion
"Proved crude oil reserves in the Eagle Ford tight oil play
in southwest Texas surpassed those in the Bakken Formation in
North Dakota to become the largest tight oil play in the United
States," according to the EIA.
Rising discoveries have banished fears about peaking oil
production. The number of internet searches for "peak oil" and
related terms was highest in August 2005 but had fallen
twenty-fold by January 2014, according to Google Trends (Chart
MADE NOT FOUND
The report also underscores that the volume of reserves
depends on prices, improvements in technology and heavy
investment by the oil industry, and is not just some accident of
"Nobody finds a reserve, just as nobody finds a factory,"
Morris Adelman of the Massachusetts Institute of Technology
wrote in 1995 ("Genie out of the bottle: world oil since 1970").
"Oilmen find fields, out of which they may develop reserves
over a long time," Adelman observed.
Reserve increments are overwhelmingly in old fields. "These
huge new reserves in old fields are no gift of nature. They are
a growth of knowledge paid for by heavy investment," he wrote.
North America's shale revolution and the surge in U.S. oil
reserves is similarly no miracle. It is the result of daring
entrepreneurship by the early shale pioneers and enormous
investment in seismic surveying and drilling appraisal and
production wells by the oil industry.
The revolution is the direct consequence of escalating oil
prices between 2002 and 2012, which created the incentive and
provided the cash flow for a massive and extremely risky
exploration and production programme.
If the key to unlocking oil from shale was the combination
of horizontal drilling and hydraulic fracturing, it would never
have happened without the perseverance of quixotic pioneers like
George Mitchell of Mitchell Energy or an environment of
sustained high prices.
Now the North American oil industry is reaping the rewards
in the form of soaring production, rising reserves and increased
(Editing by Jason Neely)