US overtakes Saudi Arabia to have largest recoverable oil reserves

The US has once again overtaken Saudi Arabia to become the world’s largest holder of recoverable oil reserves, thanks to the utilization of previously disused shale and tight oil fields. According to data from research consultancy Rystad Energy, the US now has 310 billion barrels of recoverable oil, while Saudi Arabia has 281 billion.

Hydraulic fracturing, or ‘fracking’ as it is affectionately called in the media, isn’t a new invention. The oil and gas extraction method – which involves pumping water, chemicals, and sand under high pressure to break open pathways in rock holding the oil and gas – was first commercially used in 1949. Over the past decade, the method began to be applied to horizontal wells, opening up previously unreached reserves in the country’s many shale rock formations.

The widespread adoption of fracking in the US has opened up billions of barrel of oil and trillions of cubic feet of natural gas, reshaping the oil market. According to the International Energy Agency, rising prices and demand from Asia will cause the US to increase its output from these reserves. The growth in US oil production is forecasted to cover 80% of new global demand for oil over the next three years – with much of it coming from oil produced via fracking in the West Texas Permian shale formation.

Now, a new report from research consultancy Rystad Energy reveals that the US has again overtaken Saudi Arabia as the world’s largest holder of recoverable oil. Rystad is a Norway-based firm that provides research data, analysis, and consulting services to the global energy industry. According to the Rystad report, the US added close to 50 billion barrels of oil last year, and now holds an estimated 310 billion barrels of recoverable oil – an amount equal to 79 years of US oil output at current levels.

The huge increase in estimated recoverable oil in the US is predictably linked to the doubling of fracking operations in the Permian Basin. According to the firm’s data, Texas now holds more than 100 billion barrels of recoverable oil – 90% coming from shale or other rock formations requiring fracking to extract it.

In contrast to the 47 billion added barrels of recoverable oil in the US, Saudi Arabia only added 4 billion, bringing its total recoverable reserves to 281 billion barrels – good for second place. Third-place Russia added 8 billion barrels bringing its total to 190 billion, while fourth-place Canada added 6 billion barrels, giving it a total of 164 billion barrels of recoverable oil. No country added close to the amount of recoverable oil last year that the US did.

The above estimates for recoverable oil are based on analysis from Rystad that projects the likely production for future discoveries. About 300 billion barrels of shales oil are as yet undiscovered globally, with 78% in non-OPEC countries.

In terms of already discovered oil, Saudi Arabia is well ahead of other countries, with 246 billion barrels of oil – 91 billion more than 155 billion held by the US. Saudi Arabia is also top by the strict definition of commercially proven reserves, with 88 billion barrels. Russia is second with 50 billion, while the US ranks third with 37 billion barrels of commercially proven reserves. The conservative metric estimates 388 billion barrels of oil globally – about 13 years of oil production.

As can be seen above, most of the US’ recoverable reserves take the form of shale/tight oil. Saudi Arabia, on the other hand, has a high degree of easily accessible onshore oil, which can be extracted more cheaply than shale oil. Russia also has mostly traditional onshore oil reserves. However, Russia and Canada both have significant shale oil reserves which are likely to grow in the future, if oil prices remain stable. The Montney and Duvernay shale fields in northern Canada are currently attracting a high degree of interest from energy firms – who are conducting an increasing amount of geological surveys to uncover more reserves. 

As well, it’s apparent from the chart that Canada and Venezuela’s reserves are heavily based on oil sands, which is the most expensive extraction method. The process requires an expensive and energy intensive refining process to separate the bitumen from minerals and sand. Canada is likely shift more production to the less expensive shale fracking process in the coming years.