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Immense remaining oil reserves and the challenge of reducing consumption

Antoine Le Solleuz
Director of Studies at the École des Mines de Nancy
Olivier Gantois
Executive Chairman of Ufip Energies and Mobilities
Key takeaways
  • Oil, a major contributor to the greenhouse effect, now accounts for 32% of the global energy mix.
  • The global economic recovery following the pandemic has increased demand for oil worldwide.
  • But there will be no “peak oil”: we have more oil reserves than we need, at 150-160 Gt at its lowest.
  • Oil has certain advantages and will continue to be used unless governments take restrictive measures.
  • There are several ways to reduce GHG emissions, such as energy sobriety or the development of renewable energies.

Tak­ing into account the most con­ser­v­a­tive esti­mates, the known and quan­ti­fied vol­umes of hydro­car­bon reserves remain­ing on Earth today cor­re­spond to the total amount we have con­sumed since the begin­ning of the oil era (i.e. the end of the 19th Cen­tu­ry). This is equiv­a­lent to 150–160 Gt1 oil equiv­a­lent. These quan­ti­ties are four times high­er if we con­sid­er the stocks that have not yet been pre­cise­ly quan­ti­fied (600 Gt), although some of these resources may be dif­fi­cult to exploit for geo­log­i­cal, eco­nom­ic, or geopo­lit­i­cal rea­sons. Accord­ing to a new report2 , the world’s fos­sil fuel reserves con­tain the equiv­a­lent of 3,500 bil­lion tonnes of green­house gas­es (GHGs). These gas­es, if released, would jeop­ar­dise inter­na­tion­al cli­mate tar­gets3 .

The inven­to­ry, which con­tains data on more than 50,000 sites in near­ly 90 coun­tries, is used to pro­vide the infor­ma­tion need­ed to man­age the phase-out of fos­sil fuels. In par­tic­u­lar, it shows that the US and Rus­sia each hold enough reserves to blow the entire glob­al car­bon bud­get, even if all oth­er coun­tries stopped pro­duc­tion imme­di­ate­ly. It also finds that the world’s most pow­er­ful source of emis­sions is in the Ghawar oil field in Sau­di Arabia.

Peak oil will not happen

“We grew up with the idea of peak oil, think­ing that there would be an inevitable short­age by 2010–2020,” explains Antoine Le Solleuz. “This notion no longer exists, because oil com­pa­nies have invest­ed so much in hydro­car­bon explo­ration that they dis­cov­er new deposits every year. We are now in a sit­u­a­tion where pos­si­ble oil reserves exceed consumption.”

We are now in a sit­u­a­tion where pos­si­ble oil reserves exceed consumption.

“The notion of peak oil results from the notion of oil reserves,” adds Olivi­er Gan­tois. “What is announced as oil reserves at any giv­en time are the vol­umes of oil that have been iden­ti­fied and that we know how to pro­duce with today’s tech­nolo­gies and at today’s prices. The price of a bar­rel is $85, but if we have a part of the reserves that costs $100/barrel to pro­duce, we don’t count it as reserves because it is not eco­nom­ic. This means that if tomor­row we have the same quan­ti­ties of hydro­car­bons, but the price of a bar­rel ris­es to $120 bar­rel (as was the case last July), these vol­umes can then be count­ed as part of the reserves.”

These sources of oil are clas­si­fied as con­ven­tion­al or uncon­ven­tion­al. In con­ven­tion­al sources, the oil in the bedrock migrates to a per­me­able reser­voir, from which it can then be extract­ed rel­a­tive­ly easily.

Uncon­ven­tion­al sources are dif­fer­ent in that the reserve is either con­tained in a vir­tu­al­ly imper­me­able reser­voir or in the bedrock itself, from which it must be extract­ed – which is tech­ni­cal­ly more dif­fi­cult. The dis­cov­ery of uncon­ven­tion­al deposits, the best known of which is shale gas, has quadru­pled in recent years com­pared to the begin­ning of the cen­tu­ry, and these sources have even become the norm in some coun­tries. Indeed, they have enabled coun­tries such as the Unit­ed States to become ener­gy inde­pen­dent, allow­ing them to dis­en­gage from the con­flicts in the Mid­dle East. 

In addi­tion to the US, uncon­ven­tion­al deposits have also been dis­cov­ered in Cana­da, France, the UK, Poland, Rus­sia, and Alge­ria, to name a few. France has decid­ed not to exploit these deposits, unlike oth­er Euro­pean coun­tries. It should be not­ed that non-con­ven­tion­al deposits involve the use of tech­niques such as hydraulic frac­tur­ing, which is cur­rent­ly pro­hib­it­ed by law4 .

The danger of incorrect estimates

“There are pos­si­ble reserves (90% uncer­tain­ty), prob­a­ble reserves (50% uncer­tain­ty) and proven reserves (10% uncer­tain­ty),” says Antoine Le Solleuz. “Venezuela, for exam­ple, is still con­sid­ered to have the largest esti­mat­ed reserves, although this can­not be con­firmed by oth­er coun­tries as the esti­mates are pub­lished by the Venezue­lan author­i­ties them­selves. There are also coun­tries that are self-suf­fi­cient and have refused to involve large pri­vate ener­gy com­pa­nies such as BP, Shell, Total and Exxon. This allows them to esti­mate their own reserves, which also frees them from the stock mar­ket and oth­er eco­nom­ic sys­tems. This is the case in Sau­di Ara­bia, for exam­ple, where only the nation­al com­pa­ny, Sau­di Aram­co, is allowed to operate.”

How­ev­er, a country’s esti­mates can be “incor­rect” – inten­tion­al­ly or unin­ten­tion­al­ly – which can cre­ate insta­bil­i­ties in the stock mar­kets because oth­er coun­tries can­not com­pare them­selves and thus set a real­is­tic price. To gain the con­fi­dence of investors, major oil com­pa­nies pub­lish their own esti­mates: if they under- or over­es­ti­mate their reserves, they suf­fer direct con­se­quences on the finan­cial markets.

BP and Shell, for exam­ple, faced scan­dals of over­es­ti­mat­ing their proven reserves in con­ven­tion­al reser­voirs. As a result, the finan­cial mar­kets lost con­fi­dence in these com­pa­nies. How­ev­er, this finan­cial and sci­en­tif­ic con­fi­dence is essen­tial, as it is the key to sus­tain­ing finan­cial invest­ments in explo­ration and pro­duc­tion. These invest­ments are becom­ing increas­ing­ly impor­tant over time, using more and more sophis­ti­cat­ed geo­phys­i­cal tech­niques, more and more com­plex wells, in more and more extreme geo­log­i­cal contexts. 

“We can­not (and should not) answer the ques­tion of reserves in terms of num­ber of years if we con­tin­ue to con­sume at the same rate as today,” main­tains Antoine Le Solleuz. “Because the more we invest, the more we find. And the oil com­pa­nies con­tin­ue to invest.”

Our cur­rent econ­o­my is heav­i­ly depen­dent on it, but oil is a major con­trib­u­tor to green­house gas emis­sions. Today, it accounts for 32% of the glob­al ener­gy mix5. To meet the com­mit­ments of the Paris Agree­ment and reduce GHG emis­sions by 45% by 2030 (com­pared to 2010 lev­els), we need to grad­u­al­ly reduce our use of oil in favour of decar­bonised energy.

Regulation is needed

France aims to estab­lish a sus­tain­able ener­gy mod­el, thanks to the 2015 Ener­gy Tran­si­tion Act6 and an invest­ment of more than five bil­lion euros per year in renew­able ener­gies, by diver­si­fy­ing the ener­gy mix: fos­sil fuels should be reduced by 30% by 2030 (com­pared to 2012). The ener­gy-cli­mate law of 8th  Novem­ber 2019 has even set a new, even more ambi­tious tar­get of 40%. 

Oth­er mea­sures affect pro­duc­tion, and France has adopt­ed two laws con­cern­ing the exploita­tion of hydro­car­bons. The first one bans out­right the explo­ration and exploita­tion of non-con­ven­tion­al hydro­car­bon mines by hydraulic frac­tur­ing. The sec­ond puts an end to the explo­ration and exploita­tion of hydro­car­bons by 2040.

Con­sumers will con­tin­ue to use oil if restric­tive mea­sures are not put in place by the government.

The glob­al eco­nom­ic recov­ery fol­low­ing the Covid-19 pan­dem­ic is increas­ing the lev­el of demand for oil, which had fall­en sig­nif­i­cant­ly dur­ing the peri­od when restric­tions were put in place to con­tain the spread of the virus. Demand has almost returned to its pre-cri­sis lev­el (100 mil­lion bar­rels per day), which is reflect­ed in the price of Brent crude oil today.

The growth in demand must be con­trolled to con­trol GHG emis­sions, accord­ing to the IEA which pub­lished a report in June 20217. The mea­sures advo­cat­ed in the report include the intro­duc­tion of a new ener­gy mod­el based on renew­able ener­gy and nuclear power.

“The prob­lem that we are fac­ing today is that oil and oil prod­ucts have many advan­tages,” explains Olivi­er Gan­tois. “They are con­cen­trat­ed forms of ener­gy, so they are easy to trans­port and store. Con­sumers will there­fore con­tin­ue to use oil and pos­si­bly even more of it if restric­tive mea­sures are not put in place by pub­lic authorities.”

The EU has decid­ed to ban the sale of inter­nal com­bus­tion engine vehi­cles from 2035.

An exam­ple: a few weeks ago, the EU decid­ed to ban the sale of inter­nal com­bus­tion engine vehi­cles, those using liq­uid fuels, from 2035. Only deci­sions like this will reduce the use of liq­uid fuel for road trans­port. How­ev­er, it will take some time to see the effects of this mea­sure: in France, we have about 45 mil­lion vehi­cles on the road, and new vehi­cles account for only 2 mil­lion per year.

“As we like to put it, there are five main ways to reduce GHG emis­sions: Not con­sum­ing ener­gy (com­mon­ly referred to as ener­gy sobri­ety); using ener­gy more effi­cient­ly; devel­op­ing renew­able ener­gies that do not emit GHGs; decar­bon­is­ing liq­uid ener­gies (pro­duc­ing them from waste, or bio­mass); the cir­cu­lar econ­o­my – i.e. reusing every­thing that can be reused (plas­tics that we use direct­ly, car­bon emis­sions that we recov­er to make syn­thet­ic fuels…). Each of these five dynam­ics will lead to a reduc­tion in oil con­sump­tion and thus in GHG emis­sions into the atmosphere.”

Isabelle Dumé
1Gt : giga tonne 

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