Oil Discoveries Up...Still Not Enough

Although new oilfields are discovered every year, it is unfortunately a fact that the number of large oilfield discoveries has been in a multi-decades long decline (see Oil 101 for a fuller description of discoveries and reserves).

The few larger discoveries over the past ten years with potentially economically recoverable oil of 3 to 10 billion barrels (Gb) have been warmly greeted, but are insufficient in the grander picture.

To put everything in perspective with these large numbers, bear in mind that there are around 30 Gb of oil consumed each year worldwide and this number grows by 1-2% per year. So, in order to stand still, oil companies around the world have to discover at least 30 Gb of oil each year.

Discoveries of approximately 3-5 Gb of potentially economically recoverable oil off the US Gulf Coast in 2008, 5-10 Gb off Brazil in 2006, 9 Gb in the Caspian Sea off Kazakhstan in 2000, and 6-8 Gb in Iran in 1999 and 2003 were among the largest over the past ten years. There were of course other smaller discoveries in addition to revisions to the sizes of fields previously discovered. 

Two newspapers are giving somewhat different perspectives on the long term decline in discovery rates.

The New York Times today states that despite insufficient new oilfield discoveries, one oil industry consulting group believes that higher prices are making up the difference by allowing for reserve expansion in oilfields which are already in production:

"New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000....oil companies have found more oil than they produced for the last two years through a combination of exploration and field expansions." (NYTimes)

Meanwhile, the Financial Times (FT table of some major recent discoveries here) states that while the ability to workover fields as a result of higher oil prices has improved recovery rates, it doesn't change the growing deficit between the lack of discoveries and demand:

"Game-changers locally, the finds do not alter things globally. They are much smaller than the supergiants of the last century, still producing at dwindling rates today ....while the industry is getting better at finding and producing oil – seismic surveys are more accurate and recovery rates higher – these are often incremental improvements rather than technological leaps. The world is still heading for an oil crunch.." (Financial Times)