Friday, December 26, 2014

Oil Reserves and Venezuela

From anonymous:

"Regarding your comment on the 25th saying the NYT statement on Venezuela having the world's largest proved reserves. It actually can be a correct statement. It's one of those fuzzy things that depends on how you define the term. The BP Statistical Review of World Energy (an annual publication that is considered an industry standard) does in fact list Venezuela as the largest reserve holder. You can download the data from the following page, the spreadsheet workbook having full details (see the "Oil - Proved reserves history" tab):

You'll notice that between 2007 and 2009, the Venezuelan reserves have a huge jump up, to the point of surpassing Saudi Arabia who are generally stated to have the largest reserves.  In those years, Venezuela re-defined what is known as their "unconventional" heavy oil reserves as if they were the conventional reserves Saudi uses. The unconventional reserves are this nasty heavy stuff that takes huge amounts of energy and capital equipment investment to extract. Unlike conventional reserves, they take a long time to develop and generally come in projects which - while very long lived compared to conventional production - produce comparatively small amounts for the medium term compared to the same investment into developing conventional.  For this reason, they are generally placed in a separate category. Canada has similar massive unconventional reserves which they have slowly but steadily built up high cost production from over time. Venezuela has struggled to build up production.

So basically, if you count the heavy unconventionals, yes Venezuela does have the largest currently proved reserves. The BP statistical review does count them, just as it counts Canadian unconventionals, but many do not.  If you don't count them, then Saudi has the most. In terms of what those reserves mean to geopolitical and market power, counting Saudi as the highest is definitely correct.

There are even more complicating factors one could get into as well (whether they are viable to be developed at current prices, undiscovered but highly likely to exist reserves in places like Iraq, etc.), but that is a simple answer."