World oil reserves used up faster than they're being found

[peejay 327]

World oil reserves used up faster than they're being found

As development costs rise, decline could affect prices, analysis finds

By JOHN PORRETTO

Associated Press

The world's major oil companies replaced reserves at levels below 100 percent for the third straight year in 2006, even as costs to find and produce the key asset continued to rise, a new analysis shows.

Reserve replacements last year, excluding acquisitions and divestitures, were 91 percent, below the 92 percent replaced in 2005, according to a report released last week by the investment bank Bear Stearns & Co.

At the same time, the companies' finding and development costs rose to $13.63 per barrel of oil equivalent, the report said, a 28 percent rise from 2005.

Analysts typically say an oil company's reserves replacement should average more than 100 percent over a three- to five-year period to indicate growth.

"The major oils continue to record reserves in large blocks, but with less frequency," the report said. "The timings of these bookings causes swings in reserve-replacement performance."

Jeff Tillery, an analyst with Pickering Energy Partners in Houston, said falling reserves could have some effect on rising gasoline prices, particularly as world demand grows.

But, he noted, companies such as Irving-based Exxon Mobil Corp., Royal Dutch Shell and other majors produce a small portion of the world's oil and natural gas compared with government-controlled national oil companies.

The Bear Stearns report also noted that oil and natural gas production by the majors rose 4 percent last year from a year earlier. That number was lifted in part by acquisitions such as ConocoPhillips' $35.6 billion purchase of Burlington Resources, and Occidental Petroleum Corp.'s $3.8 billion takeover of Vintage Petroleum.

The report said finding and development costs continue to be influenced by the need to extract oil from more technically challenging areas, such as deeper waters and rugged terrain.

"Inflationary pressures stemming from a tight market for deep-water rigs, labor and materials also took a toll," Bear Stearns said.

Looking ahead, the investment bank said it expects reserve bookings to "remain lumpy" in 2007, and for replacements among the major oil companies to remain mixed. Over a period of five to 10 years, Bear Stearns said replacement-booking levels are likely to be in the 100 to 110 percent range.

"In other words, we have confidence that the exploration efforts being undertaken now will pay off in the near future," the report said.

Of some of the world's major integrated oil companies, Bear Stearns noted:

• BP was a top performer in 2006, and its project pipeline appears solid, as new developments in Angola and the Gulf of Mexico progress.

• Chevron Corp. has not fully replaced reserves since 2003, but showed improvement last year based on reserve additions in the U.S., Bangladesh, Kazak-hstan and elsewhere.

• Exxon Mobil should replace full production in 2007 with bookings from major projects in Angola, Nigeria, Qatar, Norway and Australia.

• Royal Dutch Shell has a portfolio of projects that could add meaningful reserves in coming years.

• Excluding acquisitions, Houston-based ConocoPhillips has a 10-year average reserves replacement of 95 percent, and reserve additions could lift replacements to 100 percent for 2007.

http://www.chron.com/disp/story.mpl/headli...iz/4914315.html

[Jamie76 0]

People have been speculating on when peak oil will occur since the first oil was found in Pennsylvania. the problem is that we really won't know when we reach the peak until afterwards on our way down the slope.

[eric&gen 0]

Blame it on the SUV owners for sucking up the reserves lol.

[Jamie76 0]

I think we are either at peak or slightly past. Again though, you really can't tell until it happens and by that time it is too late. With all the new vehicles that will be hitting the roads in China and India, I can't see our supplies remaining sustainable. Our reserve cushion is already so thin, any major disruption is going to cause huge spikes in petrolueum prices. Hubert was quite accurate with predicting peak oil in the US. His prediction for world peak was supposed to occur in 2000 I believe. It's possible the "miss" was do to unforeseen blips along the way...the one that is always pointed is the economic collapse that hit Asia in and around this time.