Drop in recoverable oil resources could deal major blow to energy security, Rystad says
As energy security concerns continue to grow unabated due to the current geopolitical crisis, Rystad Energy, an energy intelligence group, has predicted that the considerable drop in the total recoverable oil worldwide from last year’s figures represents another threat to global energy security.
Each year Rystad Energy releases its own analysis of the global energy landscape to provide an independent, data-based comparison and evaluation, following the publication of BP’s annual Statistical Review. Therefore, continuing with this trend, Rystad Energy’s 2022 review – illustrating where the remaining recoverable resources of each country stood at the beginning of this year – shows a sizeable drop in recoverable oil resources in what could be perceived as threatening to global energy security.
Based on Rystad Energy analysis, global recoverable oil now totals an estimated 1,572 billion barrels, a drop of almost 9 per cent since last year and 152 billion fewer barrels than 2021’s total. The firm explains that recoverable oil corresponds to the industry term “remaining technically recoverable crude oil and lease condensate,” i.e. expected volumes including fields, discoveries and risked future discoveries.
Rystad Energy points out that the drop in reserves is driven by the 30 billion barrels of oil produced last year, plus a significant reduction in undiscovered resources, to the tune of 120 billion barrels. The U.S. offshore sector has contributed the largest total to that drop, where 20 billion barrels of oil will remain in the ground, largely thanks to leasing bans on federal land, outlines the new analysis.
Furthermore, only about 1,200 billion barrels of the 1,572 billion barrels of technically recoverable oil are likely to be economically viable before 2100 at $50 per barrel. This economically extractable oil would contribute about 0.1˚C of additional global warming by 2050, and somewhat less by 2100 thanks to natural carbon sinks, says Rystad.
Per Magnus Nysveen, Rystad Energy’s head of analysis, remarked: “While the drop in oil availability is positive news for the environment, it may threaten to further destabilise an already precarious energy landscape. Energy security is a matter of redundancy; we need more of everything to meet the growing demand for transport and any action to curb supply will quickly backfire on pump prices worldwide, including large producers such as the U.S. Politicians and investors can find success by targeting energy consumption, encouraging electrification of the transport sector and drastically improving fuel efficiency.”
Keeping the longer-term picture at the forefront, Rystad Energy has updated its estimates for total undiscovered oil from 1 trillion barrels in 2018 to 350 billion barrels in its latest report, due to a rapid collapse in investor appetite for exploration exposure, leading to fewer government leases. This downward revision is good news for carbon compliance but could have negative consequences for global energy security, particularly if electric vehicle adoption falls short of expectations, highlights the energy intelligence provider.
Moreover, the broader climate implications of the total recoverable oil are broadly positive, states Rystad, elaborating that the global warming impact would be +0.25˚C, if all remaining recoverable oil was to be burnt immediately, based on 350 kg of CO2 per barrel and +0.1˚C warming per 220 Gt CO2 emitted.
However, only 35 per cent of carbon emissions from that oil would still be in the atmosphere in 2100, as it takes 80 years for CO2 to be naturally removed from the air, as explained by the energy research firm. In addition, the company says that not all oil is burnt for energy. For example, carbon in plastics is released into the atmosphere only if incinerated.
In light of this, Rystad Energy’s updated report includes revisions for proven reserves, where the firm applied a consistent set of conservative probabilities, as opposed to official reporting by authorities which are considered less consistent. During its research, the energy intelligence provider reveals that it found significant differences this year between OPEC and non-OPEC members in the longevity of proven reserves.
While all OPEC countries have proven reserves that are expected to last over 10 years, ranging from Iraq with just over 10 years to more than 14 years in Saudi Arabia, the research indicates that in non-OPEC member countries, Mexico ranks last among individual countries with fewer than five years of proven reserves, whereas Canada’s reserves are projected to last almost 20 years.
In reference to its report on recoverable oil resources, Rystad states that Saudi Arabia holds onto the top spot with 275 billion barrels, followed by the U.S. with 193 billion barrels, then comes Russia with 137 billion barrels, Canada with 118 billion barrels and Iraq with 105 billion barrels round out the top five.
On the other hand, in South America, which is a fast-growing region for oil discoveries and production, Brazil remains in the first place, with 71 billion barrels of recoverable oil, ten times the volume of proven reserves, but down four billion barrels from last year, as reported by the energy intelligence firm. When it comes to Europe, both the UK and Norway’s recoverable volumes have fallen by one billion barrels and now stand at 10 billion and 17 billion barrels respectively.
Meanwhile, bucking the trend of most countries losing oil resources this year, the U.S. added 8 billion barrels to its discovered resources.