What are oil reserves?
Oil reserves are an estimate of the amount of crude oil located in a particular economic region. Oil reserves must be able to be extracted under current technological constraints. For example, oil deposits located in inaccessible depths would not be considered part of the country’s reserves. Reserves are calculated on a proven / probable basis.
Key points to remember
- Oil reserves are the amount of crude oil in a country or region that can be reasonably extracted.
- The top three countries in the world in terms of oil reserves are Venezuela, Saudi Arabia and Canada.
- BP estimates that there are 1.73 trillion barrels of oil reserves in the world.
- Almost 80% of the world’s oil reserves are found in the Organization of the Petroleum Exporting Countries.
Understanding oil reserves
Venezuela, Saudi Arabia and Canada have some of the world’s major oil reserves. The British oil company BP Plc (BP) estimates that the world has 1.73 trillion barrels of oil reserves, which would be enough to reach 50 years of world production at 2020 levels.
According to BP’s 2019 Statistical Review of World Energy report, Venezuela is the top country in terms of oil reserves, with 300.3 billion barrels. Saudi Arabia is just behind with 297.7 billion and Canada is third with 167.8 billion. Meanwhile, the United States is in the top ten with 61.2 billion barrels, which places it in 9th place. Here are the 10 largest oil reserves in the world by country:
|The world’s largest oil reserves by country|
|Rank||Country||Oil reserves (billion barrels)|
|8||United Arab Emirates||97.6|
The Organization of the Petroleum Exporting Countries (OPEC) claims that the world has 1.5 trillion barrels. It estimates that OPEC countries hold 79.4% of the world’s reserves, which includes seven of the world’s 10 largest oil reserves – Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates and Libya .
BP Statistical Review of World Energy is one of the main sources of data and information on the energy market, which dates back several decades. Another source is the World Oil Review provided by the Italian oil company ENI SpA. Similar to BP’s statistical review, the ENI publication provides details on the world’s oil reserves. The U.S. EIA is a leading authority on more information on U.S. oil reserves dating back to 1900.
Requirements for oil reserves
One of the critical ratios that analysts use to measure the longevity of reserves is the reserve / production ratio (R / P), which is a measure of the number of years that a reserve base will last at current annual production rates. Companies operating in the petroleum industry, as well as petroleum producing countries, use this measure. This BP graph reveals two important trends in global oil reserves.
World reserves / production (R / P) ratios by year
The first and most obvious is the massive increase in oil reserves in South and Central America relative to production since 2006, when Brazil made significant discoveries of oil in their pre- offshore salt. BP currently estimates that the South and Central America region has enough oil reserves to last 136 years at current production levels.
Other important data is the persistent downward trend in Middle East oil reserves relative to production. In the 1980s, the countries of the Middle East had R / P ratios similar to those enjoyed by South and Central America today. Over the past 30 years, this ratio has steadily deteriorated as production rates increase and reserves become more difficult to find. Production reserves for the Middle East now stand at around 80 years.
A similar, but not as pronounced, trend of downward R / P is occurring in the United States, which has aggressively increased production in recent years. The R / P for the United States is around 30 years.