Oil Reserves: Definition, Calculation, Statistics, and Examples

What Are Oil Reserves?

Oil reserves are an estimate of the amount of crude oil located in a particular economic region with the potential of being extracted. Reserves are calculated based on a proven probable basis and oil pools situated in unattainable depths are not considered part of a nation's reserves.

Understanding Oil Reserves

In its 2021 report, oil industry leader BP Plc estimates that there are 1.73 trillion barrels of oil reserves in the world. According to the British company's Statistical Review of World Energy report, Venezuela leads with 303.8 billion barrels in reserve. Saudi Arabia is second with 297.5 billion, Canada ranks third with 168.1 billion, and the U.S. ninth with 68.8 billion barrels.

Source: BP, plc.

The Organization of the Petroleum Exporting Countries (OPEC), however, concludes that 1.25 trillion barrels exist globally. The cartel estimates that 80.4% of global reserves are held by its members, including Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, and Libya.

Calculating 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. The Energy Information Administration (EIA) calculates U.S. oil reserves with information dating back to 1900.

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

Source: BP, plc.

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 more than 150 years at current production levels.

The volume of oil reserves does not necessarily translate into production figures. For example, Venezuela's share of the overall oil production market has collapsed in recent years due to internal strife. According to the 2021 BP Statistical Review of World Energy, the South American nation accounted for just 0.6% of overall production volumes, despite having the world's largest oil reserves.

A downtrend also exists in Middle Eastern oil reserves relative to production. In the 1990s, Middle Eastern countries had R/P ratios of 100 years. Over the last 30 years, this ratio has fallen until the last several years while production rates fluctuate and reserves become harder to find. Reserves-to-production for the Middle East now stands at approximately 80 years.

A similar trend of a downward sloping R/P is happening in North America, which has aggressively increased production over the last several years. The reserve for North America is estimated at 30 years.

The Bottom Line

Oil reserves are an estimate of the amount of crude oil located in a particular economic region with the potential of being extracted. The oil industry estimates that there are 1.73 trillion barrels of oil reserves in the world. In the United States, the Strategic Petroleum Reserve (SPR) is an emergency supply of crude oil that can be used to offset a severe oil supply shortage.