What are Oil Reserves
Oil reserves are an estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, oil pools situated in unattainable depths would not be considered part of the nation's reserves. Reserves are calculated based on a proven/probably basis.
BREAKING DOWN Oil Reserves
Saudi Arabia, Kuwait, Iran, Iraq, Venezuela, Russia, Mexico, and Canada have some of the world leading oil reserves. British oil company BP estimates that the world has 1.707 trillion barrels of oil reserves, which would be sufficient to meet 50.6 years of global production at 2016 levels. ENI says the world has 1.66 trillion barrels. Canada has over 150 billion barrels of oil reserves with a significant portion concentrated in the Alberta oil sands. OPEC countries currently hold 71.5% of global proved reserves. If the rate of technological improvement exceeds the rate of extraction, national oil reserves will increase.
Measuring Oil Reserves
One of the leading sources of information about global oil reserves is the BP Statistical Review of World Energy. This publication dates back several decades and is considered a high-quality objective and globally consistent source of data on world energy markets. 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 U.S. Energy Information Agency is a leading authority for more information about U.S. oil reserves dating back to 1900.
Reserve to Production Ratio
One of the critical ratios analysts use to measure the longevity of reserves is the Reserve-to-Production Ratio (R/P), which is a measure of the number of years a reserve base will last at current annual production rates. Companies operating in the oil industry, as well as oil-producing countries, use this measure. This chart from BP reveals two significant trends in global oil reserves. The first and most obvious is the massive increase in South and Central American oil reserves relative to production since 2006 when Brazil made some significant oil finds in their offshore pre-salt basins. BP currently estimates that the region has enough oil reserves to last for 120 years at current production levels.
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 now stand at about 70 years.