The proven oil and gas reserves of ‘Big Oil’ are falling at an alarming rate, as produced volumes are not being fully replaced with new discoveries, research from Rystad Energy shows.
The proven oil and gas reserves of ‘Big Oil’ are falling at an alarming rate, as produced volumes are not being fully replaced with new discoveries, research from Rystad Energy shows.
Big Oil lost 15% of its stock levels in the ground last year, with remaining reserves set to run out in less than 15 years – unless the group makes more commercial discoveries, and fast.
The task is becoming more and more challenging as investments in exploration shrink and success rates slump. The declining proven reserves could create serious challenges for Big Oil (ExxonMobil, BP, Shell, Chevron, Total and Eni) to maintain stable production levels in coming years. This would in turn cause revenue to dwindle and pose a major threat to the financing of the group’s energy transition plans.
Big Oil’s proven reserves dropped by 13 billion barrels of oil equivalent (boe) in 2020 as the companies took large impairment charges. Meanwhile, the industry’s global first-quarter discovered volumes totalled 1.2 billion boe, the lowest in seven years, as high-ranked prospects failed to deliver and successful wildcats only yielded modest-sized finds.
‘The ability of Big Oil to generate future revenues will continue to depend on the volume of oil and gas the companies have at their disposal to sell. If reserves are not high enough to sustain production levels companies will find it difficult to fund expensive energy transition projects, resulting in a slowdown of their clean energy plans,’ says Parul Chopra, vice president of upstream research at Rystad Energy.
ExxonMobil’s proven reserves shrank by 7 billion boe in 2020, or 30%, from 2019 levels. This was mainly due to reductions in Canadian oil sands and US shale gas properties. Also, ExxonMobil’s proven gas reserves dropped last year by 9 trillion cubic feet, mostly in the US.
Shell’s proven reserves fell by 20% to 9 billion boe last year. Liquid reserves accounted for one-third of total reductions and were mostly down to US and South American projects, and a lack of new discoveries elsewhere. Gas reserves accounted for two-thirds of the reductions, led by a 600 million boe revision in Australian projects.
Chevron also suffered reserve losses due to impairments, despite the addition of around 2 billion boe of proven reserves to its inventory through the acquisition of Noble Energy. Similarly, BP’s total proven reserves dropped from 19 billion boe in 2019 to 18 billion boe in 2020, mainly due to the sale of existing assets and a lack of major new discoveries. Total and Eni, however, have been able to avoid any reduction in proven reserves over the past decade.
Over the past five years, the six majors have replaced only 45% of their production through reserves from new discoveries. ExxonMobil fared better than its peers, adding more than 70% of the produced reserves thanks to 9 billion boe of discovered volumes in the offshore Stabroek Block in Guyana.
Total also enjoyed significant exploration success last year in the Guyana-Suriname basin, while Eni did well thanks to success in Africa. Chevron and Shell, on the other hand, have struggled to register new discovered volumes. Chevron managed to replace only 15% of its produced volumes from 2016 through 2020, while Shell replaced 27%.
