The Middle East remains a key source of hydrocarbons, but reserves are growing faster in other regions
Demand for oil and gas shows no sign of abating around the world, despite high prices and efforts to develop alternatives such as renewable energy. From 2000 to 2013, global oil consumption rose from 76.9 million barrels a day (b/d) to 91.3 million b/d, according to the latest statistics from the UKs BP. In 2013 alone, consumption was up by 1.4 million b/d, a 1.4 per cent gain on the year before.
It is a similar story for gas, where consumption climbed from 2.4 trillion cubic metres in 2000 to more than 3.3 trillion cubic metres in 2013. Last year, demand rose 1.4 per cent, or by 36.9 billion cubic metres.
The question for producers and consumers alike is whether supply can keep up with this relentless growth in demand. The answer in recent years has been affirmative as, over the past decade, global reserves of oil and gas have increased faster than production.
One trend that has not changed is reserves growth, said Christof Ruhl, group chief economist at BP, in a speech to the World Petroleum Congress in Moscow in June. Proven oil and gas reserves are up 27 per cent and 19 per cent respectively over the past 10 years alone, despite production growth of 11 per cent and 29 per cent.
Such relatively short timeframes will increase the pressure on governments to diversify their economies
The same trends are evident in the Middle East. It may not have been able to keep pace with global growth rates, given the large new discoveries of shale gas reserves in the US, but the region has still increased its stock of reserves. From 2003 to 2013, proven oil reserves across the Middle East grew from 745.7 billion barrels to 808.5 billion barrels, an increase of 8.4 per cent. All the North African oil producers, except Tunisia, have also managed to book more reserves in that time.
Natural gas reserves have increased even more quickly in the Middle East, rising by 11 per cent, from 72.4 trillion cubic metres in 2003 to 80.3 trillion cubic metres by 2013. However, the main North African gas producers Algeria, Egypt and Libya have failed to boost their reserves to any meaningful extent.
|Proven oil reserves*, 2013|
|Reserves (billion barrels)||Share of global total (%)||R/P ratio 2013 (years)||R/P ratio 2010 (years)|
|R/P ratio=Reserves to production ratio. Source: BP|
While the picture for the region as a whole is broadly positive, some countries are of course in far stronger positions than others. As might be expected, it is the countries with the largest reserves that also have the best reserves-to-production (R/P) ratio a measure of how many years the reserves will last at current rates of production.
For example, Saudi Arabias crude reserves of some 265.9 billion barrels are expected to last more than 63 years at current production rates, easily long enough to keep the present generation in comfortable lifestyles.
A few countries have even higher R/P ratios, but this can often be attributed to political events rather than the extent of their unexploited supplies. Syria, for example, is among the countries with more than 100 years of reserves at current production rates, but the civil war there has almost brought output to a halt. According to the US Energy Information Administration (EIA), the countrys oil production has fallen from an average of more than 400,000 b/d between 2008 and 2010 to less than 25,000 b/d in January this year. A more realistic view on how long its reserves will last can be gleaned from the R/P ratio in 2010 before the civil war began, when BP estimated it at less than 18 years.
There are similar factors at play in Iran, which was estimated by BP to have about 88 years of oil left at the end of 2010. The ratcheting up of sanctions since then means production levels have dropped from 4.3 million b/d in 2011 to 3.4 million b/d last year, according to EIA estimates. As a result, BP now gives Iran an R/P ratio of more than 100 years. If and when Iraq and Libya manage to bring their oil production levels back up to full capacity, they too should see a drop in their R/P ratios, which currently both also stand at more than 100 years.
Many of the GCC countries have seen their R/P ratios fall relatively quickly in recent times. Saudi Arabias ratio dropped from 72.4 years in 2010 to 63.2 years by the end of 2013 a fall of nine years in the space of just three as output was ramped up to make up for lost production elsewhere. Kuwaits has fallen from above 100 years to 89 over that period, while the UAEs has dropped from 94.1 to 73.5 years and Qatars has fallen from 45.2 to 34.4 years. Oman has managed to keep things steadier, with its R/P ratio falling by 1.4 years to an estimated 16 years by the end of 2013.
|Proven natural gas reserves*, 2013|
|Reserves (trillion cubic metres)||Share of global total (%)||R/P ratio 2013 (years)||R/P ratio|
|R/P ratio=Reserves to production ratio. Source: BP|
Elsewhere, however, a few countries have seen their R/P ratio improve. Algeria is the most significant among them, with its ratio growing from 18.5 years to 21.2 between 2010 and 2013. Yemen and Tunisia have managed a similar feat, although their reserves are also relatively small.
Overall, the Middle East is thought to have about 78 years of oil reserves left at the current rate of production, down from 82 years at the end of 2013. Compared with other parts of the world, that is not a bad position to be in. The worlds largest holder of oil reserves, Venezuela, has an R/P ratio of more than 100 years, as does third-placed Canada. However, other major producers such as Russia, the US and Nigeria have between 12 and 44 years left at their current rates of output.
When it comes to gas, the same broad trends are at play. The regions largest holders of gas reserves are Iran and Qatar, with 18.2 per cent and 13.3 per cent respectively of the global total. Only Russia has greater volumes of proven reserves. Despite the expansion of its liquefied natural gas exports over recent years, Qatar still has plentiful volumes to keep it going. BP estimates that both Qatar and Iran can keep producing at their current rates for more than 100 years.
Saudi Arabia is also in a healthy position, with close to 80 years of gas left. The authorities in Riyadh have been pushing for greater use of the resource in the domestic market, thereby freeing up more oil to sell abroad. In 2009, the kingdom was producing 78.5 billion cubic metres of gas, but by 2013, that had risen to 103 billion cubic metres, all of it used in the domestic market. That helps to explain the relatively rapid drop in its estimated R/P ratio, from 95.5 years at the end of 2010 to 79.9 years at the end of 2013.
The UAE, Iraq, Kuwait and Libya are among the countries to have more than 100 years of gas at current production rates. In the case of Libya, the extent to which that might fall once production levels get back up to normal does not look so dramatic as with oil production. In 2010, before the country descended into civil war, it had enough gas to keep going for 98 years.
Overall, the Middle East looks to be in a more secure position with natural gas than with oil. The region as a whole has sufficient gas reserves to keep producing at current levels for more than 100 years. That puts it in a far stronger position than some other major producers. Russias R/P ratio for natural gas, for example, is just 51.7 years, while in the case of the US, it is just 13.6 years.
Within the Middle East and North Africa region, the countries that look the most vulnerable to running out of hydrocarbons include Bahrain. According to BP, the country has about 0.2 trillion cubic metres of proven reserves of natural gas, which are only expected to last 12 more years at current production rates. Its fellow GCC state Oman has enough gas to last just over 30 years and crude for another 16 years of production. Egypt and Tunisia also look vulnerable, with just 15 and 18.7 years worth of oil left in the ground respectively.
Need for diversification
Such relatively short timeframes will only increase the pressure on the governments of these countries to diversify and develop their economies so they are less reliant on oil and gas revenues.
For the world as a whole, the pressure will also continue to find new reserves, while, in the background, efforts continue to develop viable alternatives to oil and gas. While it is true that reserves have increased faster than consumption over recent years, there is bound to come a point when that stops happening.
In the meantime, the world has enough oil to last it just over 53 years and enough natural gas for another 55 years.