What Are Oil Reserves?

Oil reserves are an estimate of the amount of crude oil located in a particular economic region. To qualify, oil reserves must have the potential of being extracted under current technological constraints. Reserves are calculated based on a proven/probable basis, meaning oil pools situated in unattainable depths, for example, would not be considered part of a nation's reserves.

Key Takeaways

  • Oil reserves are the amount of crude oil a country or region has that can be reasonably extracted. 
  • The top three countries in the world by oil reserves are Venezuela, Saudi Arabia, and Canada. 
  • BP estimates show there are likely more than 1.73 trillion barrels of oil reserves in the world.
  • Nearly 80% of the world’s oil reserves are in the Organization of the Petroleum Exporting Countries (OPEC).

Understanding Oil Reserves

BP Plc estimated that the world had 1.73 trillion barrels of oil reserves as of 2018, which would be sufficient to meet 50 years of global production at 2018 levels. According to the British oil company's 2019 Statistical Review of World Energy report, Venezuela is the leading country in terms of oil reserves, coming in at 300.3 billion barrels. Saudi Arabia is a close second with 297.7 billion, Canada is third with 167.8 billion, and the U.S. ninth with 61.2 billion barrels.

Here are the world’s top 10 largest oil reserves by country as of 2018:

The World's Largest Oil Reserves By Country
Rank Country Oil Reserves (in billions of barrels)
1 Venezuela 300.3
2 Saudi Arabia 297.7
3 Canada 167.8
4 Iran 155.6
5 Iraq 147.2
6 Russia 106.2
7 Kuwait 101.5
8 United Arab Emirates 97.6
9 United States 61.2
10 Libya 48.4
Source: BP

The Organization of the Petroleum Exporting Countries (OPEC), meanwhile, says the world has 1.5 trillion barrels. The cartel estimates that 79.4% of global reserves are held by its members, which includes seven of the world’s top 10 largest oil reserve countries—Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, and Libya. 

OPEC Largest World Oil Reserves
OPEC.

Recording Oil Reserves

BP’s Statistical Review of World Energy is one of the leading sources of energy market data and information, dating back several decades. Another source is the World Oil Review supplied by the Italian oil company ENI SpA.

Similar to BP's statistical review, ENI's publication provides details about global oil reserves. Meanwhile, the Energy Information Administration (EIA) is a leading authority for U.S. oil reserves with information dating back to 1900.

Special Considerations

One of the critical ratios analysts use to measure the longevity of reserves is the reserve-to production ratio (R/P). The R/P estimates the number of years a reserve base will last at current annual production rates and is used by companies operating in the oil industry, as well as oil-producing countries.

This chart from BP reveals two significant trends in global oil reserves. 

World's Reserves-to-Production (R/P) Ratios by Year

World's Reserve-to-Production Ratios
Source: BP.

First and most obvious, it illustrates the massive increase in South and Central American oil reserves relative to production since 2006—when Brazil made some significant oil finds in its offshore pre-salt basins. BP currently estimates that the South and Central America region has enough oil reserves to last for 136 years at current production levels.

However, the volume of oil reserves does not necessarily translate into production figures. For example, Venezuela's share of the overall oil production market has crashed in recent years due to internal strife. According to the 2019 BP Statistical Review of World Energy, the South American nation accounted for just 1.6% of overall production volumes, despite having the world's largest oil reserves.

The other important data is the persistent downtrend in Middle Eastern oil reserves relative to production. In the 1980s, Middle Eastern countries had R/P ratios similar to what South and Central America enjoy today. Over the last 30 years, this ratio has consistently deteriorated as production rates increase and reserves become harder to find. Reserves-to-production for the Middle East now stands at roughly 80 years. 

A similar, yet not as pronounced, trend of a downward sloping R/P is happening in the U.S., which has aggressively increased production over the last several years. The R/P for the U.S. is roughly 30 years.