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  • 标题:Trends in U.S. oil exploration, reserves warn of trouble
  • 作者:Omowumi O. Iledare
  • 期刊名称:World Oil Magazine
  • 出版年度:1999
  • 卷号:Feb 1999
  • 出版社:Gulf Publishing Co.

Trends in U.S. oil exploration, reserves warn of trouble

Omowumi O. Iledare

Since the late 1970s, the U.S. has pushed back the "reserve crunch" only marginally, and a continuous production decline appears inevitable. Too many incremental reserve additions come from existing field revisions, while exploratory drilling fails to keep pace

There are two generic views of global petroleum resources and supply. The pessimistic end of the spectrum contends that the question is not whether world oil production will decline, but when the decline will usher in a permanent oil shock era.[1,2] On the optimistic side are those who argue that the world is not running out of oil but running into it.[3,4] This article examines trends in oil exploration productivity and the U.S. oil recoverable reserves market for evidence supporting or rejecting these competing perspectives.

Five-year and 20-year estimates of empirical indicators can be used to measure the performance of the U.S. recoverable oil reserves market, Table 1. These indicators include recoverable reserves appreciation ratio (RRA), reserves-to-production ratio (RPR), reserves replacement ratio (RRR) and ratio of total discoveries to gross reserve additions. They cover periods of distinct changes in crude oil prices in the U.S. for selected petroleum producing areas in the country.

Table 1. U.S. reserves market features

                        1977-1981   1982-1986   1987-1991

Recoverable reserves
  appreciation ratio
(percent growth)
California offshore        3.9         5.2         2.5
Alaska                     4.7         4.1         2.1
Texas onshore              4.7         4.5         2.7
Louisiana onshore          6.2         4.3         2.9
U.S.                       6.7         4.9         2.7
Oklahoma                   7.3         5.5         2.7
New Mexico                 9.1         7.3         4.4
Colorado                   4.1         8.7         5.5
Louisiana offshore        13.0         6.2         5.5
California onshore        39.2         4.8        (2.6)
Texas offshore            28.2         4.0         5.0

Average oil reserves-to-production
  ratio (equivalent years of
  production)
Alaska                    23.7        11.1         9.7
California onshore        13.1        13.7        12.2
California offshore       20.8        19.3        23.5
New Mexico                 8.7         8.2         9.2
Texas onshore              8.9         8.6         9.2
U.S.                      10.0        10.0         9.3
Texas offshore            13.3        28.6         7.2
Colorado                   5.4         5.6         7.9
Oklahoma                   7.0         7.3         6.6
Louisiana offshore         8.4         7.5         6.1

Reserves replacement ratio
  (percent)
New Mexico                60.6       100.3       107.6
Louisiana offshore        87.8        62.5        75.7
California offshore      267.4       231.8         0.0
Colorado                   9.6       117.4       181.3
California onshore        95.7        83.9        83.5
Alaska                    75.3        55.3        78.4
U.S.                      61.8        69.7        68.1
Texas offshore           252.8        25.4        20.0
Texas onshore             37.2        67.3        70.9
Oklahoma                  44.6        56.7        59.1
Louisiana onshore          0.0        44.3        51.2

Discoveries-to-reserve
  additions ratio (percent
  of gross additions from
  discoveries)
Texas offshore            90.1       (****)       50.0
Louisiana onshore        (****)       59.5        33.8
California offshore       49.1        64.1       (****)
Louisiana offshore        54.7        69.1        55.2
Oklahoma                  80.4        64.0        29.8
U.S.                      42.9        38.1        28.9
Texas onshore             44.7        34.6        27.9
New Mexico                32.8        30.4        26.3
Colorado                 (****)       25.1        17.4
Alaska                    12.6        11.6        21.8
California onshore        12.1        19.3         9.0

                                          1992-1996    1977-1996
Recoverable reserves                                   (20 years)
  appreciation ratio
(percent growth)
California offshore                          1.5         0.6
Alaska                                       1.9         5.0
Texas onshore                                1.6         5.1
Louisiana onshore                            2.7         0.2
U.S.                                         2.2         6.6
Oklahoma                                     2.0         7.6
New Mexico                                   2.5        11.4
Colorado                                     1.0        11.4
Louisiana offshore                           6.5        15.2
California onshore                           0.6        15.2
Texas offshore                               6.2        33.8

Average oil reserves-to-production
  ratio (equivalent years of
  production)
Alaska                                      10.1        13.6
California onshore                          13.8        12.9
California offshore                         22.6        19.2
New Mexico                                  11.5        13.2
Texas onshore                               10.5        10.4
U.S.                                         9.9         9.8
Texas offshore                               5.9         9.6
Colorado                                    10.6         8.3
Oklahoma                                     7.6         7.4
Louisiana offshore                           7.2         7.1

Reserves replacement ratio
  (percent)
New Mexico                                  94.2        96.0
Louisiana offshore                         123.6        93.9
California offshore                          8.9        92.8
Colorado                                    31.5        85.6
California onshore                          49.3        83.0
Alaska                                      70.4        71.2
U.S.                                        61.7        68.4
Texas offshore                              69.1        57.7
Texas onshore                               38.8        55.5
Oklahoma                                    53.9        54.3
Louisiana onshore                           60.1        30.5

Discoveries-to-reserve
  additions ratio (percent
  of gross additions from
  discoveries)
Texas offshore                              97.5        97.4
Louisiana onshore                           47.0        91.1
California offshore                         37.1        73.5
Louisiana offshore                          75.9        66.5
Oklahoma                                    30.4        53.0
U.S.                                        46.9        39.4
Texas onshore                               57.9        38.3
New Mexico                                  43.3        33.2
Colorado                                    89.1        32.0
Alaska                                      23.8        19.9
California onshore                           9.3        13.0

(****) Not meaningful

RECOVERABLE RESERVES APPRECIATION RATIO

The RRA ratios reported in Table 1 were calculated by using 1977 as the base year, with each producing area taken as a hypothetical field or reservoir discovered in that year. The RRA for the U.S. from 1977 through 1996 averaged about 6.6% per annum. The ratio varies considerably across producing regions. Recoverable reserves in New Mexico and Colorado grew at an average RRA of 11%. This is the highest rate for all active onshore areas, although recoverable reserves in six of the 10 producing regions grew faster than the U.S. average. Among these are the large offshore regions of Louisiana and Texas.

However, since 1986, the RRA has declined significantly for all U.S. producing areas, except offshore Texas and offshore Louisiana. There, recoverable reserves grew 6.2% and 6.5%, respectively, during the 1992-1996 period. This compares to RRAs of 5.0% and 5.5%, respectively, for the 1987-1991 interval.

The significance of RRAs in terms of current and future U.S. crude oil supplies becomes evident when one looks at the proportion of crude oil reserve inventories resulting from development drilling and improved recovery techniques in old fields.[5,6] This contribution is estimated at 62% for the U.S., overall, during the entire 20 years. For this period, the highest proportion, about 87%, occurred onshore California. Alaska also had a high proportion. Roughly 80% of Alaska's total reserve additions were accounted for by reserve appreciation in old fields.

Future appreciation of reserves, however, is ultimately determined by new field discoveries. The fewer new discoveries that are struck today, the less potential there is for reserve appreciation in the future. Consequently, there will be less potential to push back the U.S. reserve "crunch date."

RESERVES-TO-PRODUCTION RATIO

The reserves-to-production ratio (RPR) generally has been considered a good measure of the "life" of proved oil reserves, relative to a specific point in time, given a constant rate of depletion from that time forward, Table 1. Banks argued that this method of interpreting RPRs, without an adequate concern for the distribution of proved oil reserves, makes no geologic or economic sense.[7] According to Banks, production from a given inventory of reserves at a constant rate, when the RPR is below the "critical" RPR level, is most likely unsustainable. In fact, it may reduce the total estimated recoverable reserves.

Defining the critical RPR for each U.S. producing region is quite complex. However, let one assume that the historic 20-year average ratio is the critical RPR for each producing region. If so, then oil production at an RPR below the critical RPR cannot be sustained at the corresponding historic average output rate in subsequent years, unless substantial reserves are added to the proved inventory.

An attempt to produce in any region at the historic average rate will lead to a significant decline in recoverable reserves. Thus, judging from the events of the last five years, the historic output rates in the more prolific producing regions--onshore and offshore Louisiana, Alaska and offshore Texas--no longer can be sustained. The reserve markets in these areas have become relatively tighter than before.

None of the prolific producing areas has up to 10 equivalent years of production left at the 20-year historic annual output rate. Thus, to maintain 10 equivalent years of production, substantial new reserves must be added through exploratory and development drilling, as well as via improved production technologies.

RESERVES REPLACEMENT RATIO

According to most petroleum industry analysts, reserve replacement ratio (RRR)--the ratio of reserve additions to production--also demonstrates the success rate at which the E&P industry can delay the reserves "crunch date" or postpone the period of imminent exhaustion of petroleum resources in a given region. It is also a reflection of the state of E&P activity. Specifically, it is a good measure of a company's commitment to remain active in a producing area.

It has been suggested that, as a matter of policy, companies should pursue drilling and production strategies (and investment plans) to facilitate additions to petroleum reserve inventories, at least equal to annual production.[8] It also can be inferred that producing states should have incentives in place to promote replacement of a very significant proportion (if not all) of produced reserves as a matter of petroleum policy and strategy.

The U.S. crude RRR for the 20-year period from 1977 through 1996 is estimated to be about 70%, Table 1. However, no producing state or area replaced its entire production with new reserves during this period. Although the overall U.S. crude oil RRR from 1992 through 1996 was a rather anemic 62%, several producing regions did replace a more substantial proportion of their produced reserves during this late period.

The 1992-1996 RRR onshore Louisiana is nearly twice the 20-year historic average. Two other areas with higher-than-historical RRRs during the period are offshore Louisiana, at 123% compared to an historic 94%, and offshore Texas, with a nearly 70% rate compared to an historic 58%.

Smith and Robinson suggested that technical progress is a possible reason for this turnaround in the offshore areas.[9] New Mexico, Alaska and Oklahoma replaced produced reserves at rates of 54%, 70% and 94%, respectively, during the 1992-1996 interval. Areas with significantly lower-than-expected replacement rates after the 1986 price crash are onshore and offshore California, Colorado and onshore Texas. Offshore California, the RRR dropped precipitously from a relatively high 94% to a low of less than 10%. This was a consequence of policy changes, not geology or economics. Colorado also dropped significantly, from an expected RRR of about 80%, to less than 50% during the most recent five years.

DISCOVERIES/RESERVE ADDITIONS RATIO

The proportion of reserve additions generated by discovery of oil reserves from new fields, extensions of old fields and/or finding new reservoirs in old fields is called the discoveries/reserve additions ratio (DRR). It is calculated as the ratio of total discoveries (the sum of new field discoveries, extensions and new reservoir discoveries from old fields) divided by gross reserve additions (total discoveries plus revisions of previously estimated proved reserves).

As of Dec. 31, 1996, the 20-year DRR for the U.S. was about 40%, Table 1. Thus, revisions of initially estimated recoverable reserves constitute about 60% of gross reserve additions during the period.

New oil discoveries accounted for more than 50% of gross reserve additions over the 20-year period offshore and onshore Louisiana, offshore Texas, offshore California and in Oklahoma. Four producing areas had better ratios during the most recent period (1992-1996) than during their 20-year historic averages. Texas offshore areas have the highest discovery ratio of the 1992-1996 interval, at nearly 98%. This means that only about 2% of gross additions to proved reserve inventories were due to revisions. Other areas that have ratios higher than 50% during the most recent five years are offshore Louisiana and onshore Texas, at 76% and 58%, respectively. Overall ratio for the entire U.S. was 47% for the 1992-1996 period.

The recent trend for this indicator is positive across various producing areas and in the U.S. as a whole. This trend offers some potential for growth in recoverable reserves, particularly now that the oil exploration process has changed a great deal with the emergence of new seismic and computer technologies. Drilling prospects have become easier to identify, and deposits in hidden formations are also easier to detect. New technology has impacted U.S. drilling results significantly--dramatic changes in productivity measures are evident in nearly every producing state or area.

Some direct measures of petroleum productivity in exploration drilling for selected U.S. producing areas are presented in Table 2. These include wildcat success ratio, exploratory ratio, finding rate of exploration and average exploration cost.

Table 2. U.S. resource development indicators

                           1977-1981   1982-1986   1987-1991

Wildcat drilling success rate (percent)
New Mexico                   33.3        27.8        21.5
Oklahoma                     29.6        20.4        18.3
Texas onshore                19.3        16.3        19.3
U.S.                         17.3        15.8        14.4
Colorado                     17.3        17.8        12.8
Louisiana onshore            10.3         9.5        10.0
Alaska                       13.1        14.3        13.6
California onshore            8.0        10.8        13.5
Texas offshore                5.9        10.5        12.4
Louisiana offshore            0.1         4.2         9.2
California offshore           0.0         0.0         7.7

Exploratory ratio (percent of total drilling)
Texas offshore               52.5        53.8        46.8
Colorado                     40.0        33.6        26.7
Louisiana offshore           21.5        23.9        25.8
California onshore           36.7        21.7        18.6
Texas onshore                28.5        24.0        21.2
U.S.                         25.9        22.7        22.0
Louisiana onshore            28.0        20.0        13.7
New Mexico                   14.5        16.0        13.3
California offshore          23.6        15.0        13.9
Oklahoma                     10.0         8.1         9.5
Alaska                       18.2         3.4         4.4

Oil exploration productivity, bbl/ft
Alaska                      4,023       9,086      29,089
Louisiana offshore            942       3,610      12,886
Texas offshore              2,164       1,128         457
California onshore            257         595         847
New Mexico                    350         275         437
Louisiana onshore             333         263         467
Oklahoma                      373         394         387
U.S.                          283         232         355
Texas onshore                 192         187         358
Colorado                      194         154         205
California offshore            57          47         113

Exploration cost per ft, 1982 dollars
Colorado                       49          55          28
Texas onshore                  62          51          42
Oklahoma                       68          60          43
New Mexico                     79          69          54
U.S.                           77          70          57
Louisiana onshore              89          76          60
California onshore             97          97          73
Louisiana offshore            283         298         203
California offshore           320         374         405
Alaska                        451         317         241
Texas offshore                356         418         225

                                     1992-1998   1977-1998

Wildcat drilling success rate (percent)          (20 years)
New Mexico                              43.3        30.1
Oklahoma                                27.0        23.3
Texas onshore                           34.0        21.9
U.S.                                    22.8        17.5
Colorado                                15.9        15.9
Louisiana onshore                       15.5        11.7
Alaska                                   7.0        11.4
California onshore                      10.7        10.5
Texas offshore                          10.6         9.9
Louisiana offshore                       7.5         5.0
California offshore                      ...         1.4

Exploratory ratio (percent of total drilling)
Texas offshore                          38.8        49.6
Colorado                                13.8        29.0
Louisiana offshore                      20.8        23.5
California onshore                      16.6        23.4
Texas onshore                           14.5        22.1
U.S.                                    16.1        21.7
Louisiana onshore                        9.1        17.8
New Mexico                              10.7        13.7
California offshore                      0.0        13.2
Oklahoma                                11.6         9.9
Alaska                                   6.6         7.3

Oil exploration productivity, bbl/ft
Alaska                                 8,058      15,771
Louisiana offshore                    13,630      10,768
Texas offshore                         8,769       3,560
California onshore                     1,833       2,198
New Mexico                               678         494
Louisiana onshore                      1,609         434
Oklahoma                                 280         433
U.S.                                     693         376
Texas onshore                            432         341
Colorado                                 300         254
California offshore                      241         200

Exploration cost per ft, 1982 dollars
Colorado                                  41          34
Texas onshore                             42          48
Oklahoma                                  42          51
New Mexico                                50          62
U.S.                                      59          65
Louisiana onshore                         75          76
California onshore                        70          83
Louisiana offshore                       242         261
California offshore                      166         297
Alaska                                   196         297
Texas offshore                           236         305

WILDCAT SUCCESS RATIO FOR OIL WELLS

The wildcat success rate within the context of this article is the percentage of wildcat wells drilled that successfully find new oil fields, regardless of field size. The average success rate for the U.S. from 1977 to 1996 is estimated at 18%, Table 2. In other words, it is expected that, on average, for every five wildcat wells drilled between 1977 and 1996, one will discover a new oil field.

However, the rate varies significantly across various producing regions and with time. For example, the average success rate for the 1977-1996 period among producing states or areas varies between a high of 30% in New Mexico and a low of less than 2% offshore California. Offshore Texas and offshore Louisiana also had success rates of only 9.9% and 5.0%, respectively.

Surprisingly, wildcat success rates were lower in the U.S. offshore areas during a period of rapidly rising crude oil prices (1977-1982) than they were during a period of falling prices (1982-1986). The opposite was the case in onshore regions. Similar patterns were observed between the two five-year periods (1987-1991 and 1992-1996) after the collapse of world oil prices. Wildcat success rates in most offshore producing areas were significantly higher during the latter period than in the interval immediately following 1986.

EXPLORATORY RATIO

Exploratory effort, or ratio, measures the proportion of total drilling effort--footage drilled or number of wells drilled--required to discover new fields, find new reservoirs in old fields or delineate old reservoirs. On average, about one in every five wells drilled in the U.S. from 1977 to 1996 was an exploratory well. This ratio varies across different producing areas.

Exploratory effort over the period was highest offshore Texas, where nearly one in every two wells drilled during the period was exploratory, Table 2. In comparison, less than one in every four wells drilled offshore Louisiana was exploratory. The trend for this indicator is declining all across producing areas of the U.S., with the exception of Oklahoma. In fact, only one of 10 wells was exploratory, on average, from 1977 to 1996. However, it is quite plausible that the declining trend in this ratio may be due to technical progress.

EXPLORATION FINDING RATE

The ratio of the amount of reserve additions to the level of exploratory drilling activity, sometimes referred to as the finding rate or exploration productivity, is a good indicator of upstream efficiency, because it measures reserve additions per unit of drilling effort. The finding rate for oil in the U.S. tripled after the 1986 price crash, compared to what it was before, Table 2. With the exception of Alaska and Oklahoma, oil finding rates rose significantly between these two periods across all producing regions, and performed better than the historic overall value.

For example, the expected productivity value--20-year aggregate productivity--for New Mexico was 494 bbl/ft, compared to 678 bbl/ft for oil discovered between 1992 and 1996. Similarly, productivity onshore Texas in the five-year period ending in 1996 was 432 bbl/ft, compared to a 20-year average of 341 bbl/ft.

The estimated productivity level offshore Louisiana for the most recent five years was 13,630 bbl/ft, compared to the 20-year value of 10,768 bbl/ft. A plausible explanation for this apparent increase in productivity since 1986, and especially from 1990 to 1996, is that technical progress has been so well-distributed in the industry as to make the finding and developing of larger deposits more effective.[10] However, this hypothesis is highly conjectural.[11-13]

AVERAGE COST OF OIL EXPLORATION

Subsequent to the dramatic fall in crude oil prices during 1986, American oil and gas producers made fundamental changes to the way they did business, in order to remain profitable. Apart from the quick, sudden reduction in industry employment and the shift in focus from domestic to international investments, new technologies were developed. These were used in attempts to lower the cost of exploration and exploitation of petroleum resources worldwide and, particularly, in the U.S. Estimated, weighted, average per-foot costs for drilling and equipping oil wells in 1982 constant dollars are shown in Table 2.

It is evident that drilling costs are significantly higher for offshore operations. It is also evident that after 1986, the average cost of drilling an exploratory oil well declined significantly in nearly all of the producing regions. Onshore Louisiana, however, the decline in average cost was very marginal, with a decline rate of less than 3% between 1982 and 1986, as well as in the 1987-1991 period.

On the aggregate, exploration cost per ft in the U.S. declined about 16% over the 20-year period. The implication of this declining trend is a likely resurgence in drilling effort--exploration and development--and the potential changes in proved reserves inventory that normally come with increased exploratory drilling. Positive changes in proved reserves are usually the primary driving force underlying sustainable crude oil supply outlook and recoverable reserve growth.

CONCLUSIONS

During the past 20 years, the U.S. has only marginally pushed back the "reserve crunch," according to data reviewed in this article. Less than 70% of reserves produced in the U.S. were replaced over the last 20 years. Further, less than 40% of new reserve additions from 1977 to 1996 resulted from discovery of new oil fields, extension of old oil fields, and/or finding new oil reservoirs in old fields. Potential future growth in recoverable reserves will be affected by this trend, because fewer new discoveries will lead to lower recoverable reserve appreciation rates.

The proportion of recoverable reserves produced since 1977 in the more prolific oil-producing states of Louisiana, Oklahoma and Texas was estimated at 80%, 78% and 71%, respectively. The U.S., on average, produced oil over the last two decades at an estimated 9.9 equivalence in years of oil output at the 20-year average production rate. This implies that a continuous decline in U.S. production rate is inevitable over the long run, technical progress not withstanding. Production at the historic rate, when the critical ratio is about 10 equivalence in years of production, is unattainable unless a substantial amount of new reserves are added.

Of course, this does not imply that the global oil pessimists are right, and the optimists are wrong. The data reviewed only pertains to the outlook for the U.S., not the world.[14] Technical progress seems to be stretching domestic oil supplies in the U.S. much farther than was expected two decades ago, even though the eventual decline in reserves and production is inevitable. Much of the technology responsible for this is likely to yield bigger payoffs in less-mature producing areas.

ACKNOWLEDGMENT

The authors acknowledge the excellent assistance provided by Dmitry Mesyanzhinov and Richard Pincomb, and the help provided by Barbara Kavanaugh, our librarian, in obtaining the data needed for this article. The primary sources of information used in this article are the U.S. DOE/EIA data on U.S. crude oil, natural gas and NGL reserves, and API's Quarterly Completion Report, 1977-1996. This article is based on a paper presented at the U.S. Association for Energy Economics (USAEE) 19th North American Conference in Albuquerque, New Mexico, Oct. 19-21, 1998.

LITERATURE CITED

[1] Campbell, C. J., The Coming Oil Crisis, Multi-Science Publishing Co. & Petroconsultants S.A., Essex, England, 1997.

[2] Kerr, R. A., "The next oil crisis looms large--and perhaps close," Scientific American, Vol. 281, 5380, pp. 1128-1131.

[3] 0dell, E, "World oil resources, reserves and production," The Energy Journal, Special Issue, 1994, pp. 89 114.

[4] Adelman, M. A., and M. C. Lynch, (1997). "Fixed view of resource limits creates undue pessimism," Oil and Gas Journal, April 7, 1997, pp. 56-60.

[5] US. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, Energy Information Administration, U.S. Department of Energy, DOE/EIA-0216, Washington, D.C., 1997.

[6] Quarterly Completion Report, several issues, American Petroleum Institute, Washington, D.C.

[7] Banks, F. E., "An outlook on the supply of oil," IAEE News Letter, Winter 1998, pp. 18.

[8] Brashear, J. E, A. B. Becker, M. L. Godec and E M. Crawford, "U.S. reserves replacement-I: Why aren't more U.S. companies replacing oil and gas reserves," OGJ, March 3, 1998, pp. 85-89.

[9] Smith, N. J., and G. H. Robinson, "Technology pushes reserves `crunch' date back in time," OGJ, April 7, 1997, pp. 41-50.

[10] Iledare, O. O., and A. G. Pulsipher, "Technology, depletion, economics, and the response of petroleum drilling productivity in onshore Louisiana," Proceedings of the 17th U.S.A.E.E. North American Conference, Oct. 29, 1996, Boston.

[11] Cleveland, C. J., and R. K. Kaufmann, "Natural gas in the U.S.: How far can technology stretch the resource base," The Energy Journal, Vol. 18 (2), 1997, pp. 89-108.

[12] Bohi, D. R., "Changing productivity of petroleum exploration and development in the U.S.," Resources for the Future discussion paper, Washington, D.C., January 1997.

[13] Ivanhoe, L. F., "Future world oil supplies: There is a finite limit," World Oil, October 1995, pp. 77-88.

[14] Iledare, O. O., and A. G. Pulsipher, "The state of petroleum resources and supply: Some international comparison," Proceedings of the 21st International Association for Energy Economics (IAEE) International Conference, Quebec City, Canada, May 13-16, 1998.

Omowumi O. Iledare and Allan G. Pulsipher, Center for Energy Studies, Louisiana State University, Baton Rouge

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