Despite spending hundreds of billions of dollars looking for more oil in 2008, replacement rates fell for the first time in four years according to an analysis by IHS Herold.
International oil and gas companies increased exploration spending by 21% in 2008 to $492 billion, but worldwide oil and gas reserves were .4% lower by year end. There was a 4.4 billion barrel decline in oil reserves.
This isn’t a singular event, either. Over the past three years reserves have been flat:
IHS (via FT Energy Source): Over the last three years, investment of more than $750 billion in development capital has resulted in no change in crude oil reserves and production. Recent deepwater discoveries provide hope that future results may be better, but meaningful output from those new projects will be more than five years into the future. Aside from OPEC curtailments, the world has virtually no excess capacity to meet demand growth that could result from synchronous economic expansions. Crude markets could tighten appreciably in a few years time, but current prices seem to be prematurely high.
IHS conducted its analysis by looking at filings submitted to the SEC and similar agencies. So this doesn’t count every company out there–Saudi’s Aramco is missing–but there’s plenty of biggies including Pemex and Petrobras. Here’s a bullet point wrap up of the findings from IHS:
- Prices & Revenues – Worldwide revenues increased by $293 billion, implying an average realised price of $61.91 per barrel, a 30 per cent increase from 2007.
- Cash Flow & Capital Spending – Cash flow per boe increased 35 per cent to $29.66 per barrel. For the second consecutive year, cash flow exceeded investment.
- Exploration & Development – Development spending increased 23 per cent, accounting for 63 per cent of total investment, about the same 2007. Exploration spending increased 21 per cent and has doubled since 2005 total.
- Mergers & Acquisitions – Proved acquisition spending dropped 30 per cent to $44 billion as the M&A collapsed in the last five months of 2008, particularly in North America. Competition for unconventional resources was up sharply, led by the US region, with global spending for unproved acquisitions more than doubling to $62 billion.
- Production & Reserves – Oil reserves declined nearly 3 per cent, primarily due to a 5.2 billion barrel decline in revisions due to the steep drop in commodity prices. Natural gas reserves grew at the 3 per cent rate of the past five years, but production accelerated nearly 5 per cent to 44.2 Tcf.
- Reserve Replacement – Reserve replacement and finding and development costs surge 70 per cent and 66 per cent to $23.44/boe and $35.50/boe, respectively, due to a sharp drop-off in positive reserve revisions. Reserve additions, both from all sources and via the drill-bit, were down over 20 per cent.
- Profits – Net income per boe rose 24 per cent to $16.07/boe, but margins were lower for the fourth consecutive year.
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