Climate action: Global reserves drop by 9%

Sopuruchi Onwuka

Total recoverable oil worldwide has indicated a peak, dropping by 9.0 percent from last year and threatening global energy security at a time price jumps associated with falling supplies trigger inflationary jumps across economies.

According to Rystad Energy’s 2022 review, an independent and data-based analysis of the global energy landscape, the world has suffered a sizeable drop in recoverable oil resources in the past one year, posting fears that underinvestment inflicted on the industry by climate action is beginning to deliver grim impacts.

Rystad Energy analysis which is available to The Oracle Today showed that global recoverable oil now totals an estimated 1,572 billion barrels, a drop of almost 9% since last year and 152 billion fewer barrels than 2021’s total.

Recoverable oil corresponds to the industry term “remaining technically recoverable crude oil and lease condensate.” These hydrocarbon liquids include expected volumes from fields, discoveries and risked future discoveries.

Rystad said the drop in reserves resulted from depletion from production, low discoveries to replace produced volumes and lack of access to exploration rights.

According to the firm which provides critical advisory notes for investors, the fall in reserves is driven by the 30 billion barrels of oil produced last year, plus a significant reduction in undiscovered resources, to the tune of 120 billion barrels.

The US offshore sector, Rystad said, has contributed the largest total to that drop, where 20 billion barrels of oil will remain in the ground, largely due to leasing bans on federal land.

Of the 1,572 billion barrels of technically recoverable oil, only about 1,200 billion barrels are likely to be economically viable before 2100 at $50 per barrel.

Counting the carbon footprint expected from the global reserves against templates set by the United Nations; Framework Convention on Climate Change (UNFCCC), Rystad projected that the economically extractable oil would contribute about 0.1˚C of additional global warming by 2050, and a little less by 2100 due to expected absorption capacity of the earth’s natural carbon sinks.

The analysts reported that the drop in global hydrocarbon liquids reserves represents the raging battle between climate activists on the one hand, and economists and petroleum industry players on the other hand.

Head of analysis at Rystad Energy, Per Magnus Nysveen, remarked that the declining reserves figures would improve prospects of meeting climate targets while hurting the global economy.

Rystad noted in the reports that the broader climate implications of the total recoverable oil are broadly positive. If all remaining recoverable oil was to be burnt immediately, the global warming impact would be +0.25˚C, based on 350 kg of CO2 per barrel and +0.1˚C warming per 220 Gt CO2 emitted.

“However, only 35% of carbon emissions from that oil would still be in the atmosphere in 2100, as it takes 80 years for CO2 to be naturally removed from the air. Also, not all oil is burnt for energy; for example, carbon in plastics is released into the atmosphere only if incinerated,” the company explained in the report.

“While the drop in oil availability is positive news for the environment, it may threaten to further destabilize an already precarious energy landscape. Energy security is a matter of redundancy; we need more of everything to meet the growing demand for transport and any action to curb supply will quickly backfire on pump prices worldwide, including large producers such as the US. Politicians and investors can find success by targeting energy consumption, encouraging electrification of the transport sector and drastically improving fuel efficiency.”

Rystad Energy stated that it has updated its longer-term estimates for total undiscovered oil from 1.0 trillion barrels in 2018 to 350 billion barrels in the latest report due to a rapid collapse in investor appetite for exploration exposure, leading to fewer government leases.

“This downward revision is good news for carbon compliance but could have negative consequences for global energy security, particularly if electric vehicle adoption falls short of expectations,” the firm said.

Rystad Energy’s updated report includes revisions for proven reserves. The firm said it found significant differences between OPEC and non-OPEC members in the longevity of proven reserves.

“All OPEC countries have proven reserves that are expected to last over 10 years, ranging from Iraq with just over 10 years to more than 14 years in Saudi Arabia. In non-OPEC member countries, Mexico ranks last among individual countries with fewer than five years of proven reserves, whereas Canada’s reserves are projected to last almost 20 years,” Rystad stated in the report.

Referring to the report on recoverable oil resources, it ranked Saudi Arabia on the top spot with 275 billion barrels, followed by the US with 193 billion barrels.

Russia has 137 billion barrels, Canada holds 118 billion barrels and Iraq has 105 billion barrels round out the top five.

“In South America – a fast-growing region for oil discoveries and production – Brazil remains in first place, with 71 billion barrels of recoverable oil, ten times the volume of proven reserves, but down four billion barrels from last year.

“In Europe, both the UK and Norway’s recoverable volumes have fallen by one billion barrels and now stand at 10 billion and 17 billion barrels respectively.

“Bucking the trend of most countries losing oil resources this year, the US added 8 billion barrels to its discovered resources,” Rystad showed.