The Oil Reserves Quandary

Global crude oil production increased continuously from the 1900s through the 1980s when demand dropped significantly – 10 million barrels a day – during the last major world recession. It took 20+ years for demand to return to its previous trend (see the violet dots in Fig. 1) – from 60 million barrels a day in 1980 to 71 million barrels in 2004. Unfortunately, thereafter production capacity has remained flat to the present. What has happened? Over a span of 30 years world crude oil production has only increased by 11 million b/d, a large part of which came from the 10 million b/d shut-in during the 1980 recession. In the interim new oil discoveries have diminished from an annual average of 10 billion barrels in the 1990s to 6 billion barrels in this millennium; meanwhile we have been producing 22–26 billion barrels a year over both decades. In a nutshell, reserves have been significantly depleted consequently affecting production capacity.

During the current world recession demand is expected to drop 3 million b/d. In comparison with the 10 million b/d plunge of the 1980s, this rather modest drop would suggest that we should come out of this recession much sooner than was imagined. As the economy picks up, however, we will progressively revert to the previous supply/demand imbalance trend. According to our production capacity model, global crude oil production will decline to 70 million b/d by 2020 and to 63 million b/d by 2030. Meanwhile, the EIA estimates liquids demand to be 113 million b/d by 2030 with crude oil accounting for 80 million b/d.

What can be done to mitigate the slump in new discoveries and increase reserves? The obvious course is implementing EOR which now accounts for a mere 3% of global oil production. EOR has always been at an economic disadvantage vis-à-vis finding new reserves, but evidently those days are gone. We have discovered over the last 100 years, 9 trillion barrels of light (greater that 25 API) oils of which 90% are still in the ground (see Table). Just a one percentage point increase in the average recovery factor (now 22% worldwide) would generate 90 billion barrels a year of EOR reserves. This is 15 times the 6 billion we are discovering now! At what cost? Roughly, the EOR capex would be equivalent to the current global E&P capex, about $400 billion. Tax incentives tied to incremental increases in recovery factor which can easily be monitored is the way to go.

Global Oil Resources Discovered & Produced
(trillion barrels)
Light Oils (>25 API)


Medium/Heavy (11-25 API)


Xtra Heavy (<11 API)





Light/Medium Oils


Still in the ground   90 %
Recovery Factor    
World avg.   22%
Technically Attainable   >66
US avg.   39
--Prudhoe Bay   47
North Sea avg.   46
--Statfjord   66 without EOR

Our model focuses on crude oil, predicting its production capacity over the long-term – well beyond 2030 – in function of reserves which are the foundation of production capacity; production capacity represents the maximum supply achievable. Demand/supply can be less but if it is more than production capacity then we have a problem. Future production capacity is projected both globally and for the Big Three producers: Russia (9.4million b/d), Saudi Arabia (9.2 million b/d) and the US (5.0 million b/d) which together provide one-third of the world’s crude oil output. The model makes similar projections for natural gas. Overall it offers a novel risk perspective on oil and gas outputs.

For more of Dr Rafael Sandrea’s work on global oil and gas resources see: An In-Depth View of Future World Oil & Gas Supply - A Quantitative Model which is available online through

Click here for Dr. Sandrea's full bio.


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