Helping America Navigate a New Energy Reality

The Mysterious Case of Big Oil’s Disappearing Barrels

By on 30 Sep 2016 in analysis, notable posts

(Bloomberg) If you ever find yourself at a cocktail party with a bunch of oil executives, one phrase is a guaranteed mood-killer: “reserve replacement.”Not merely awkward to say, it is the industry’s bogeyman. Because in a business chiefly concerned with getting stuff out of the ground, you need to replace that stuff pretty consistently unless you want to, well, eventually run out of stuff.Last year, the stuff-gathering did not go so well. Not replacing your reserves can be due to several things, such as striking out on a big exploration prospect or simply dialing back investment in finding new fields.It can also just be about those fickle little things called prices.One of the things that makes proved reserves proved is a reasonable certainty they can be produced economically. A barrel of oil that costs more to get out of the ground than anyone is likely to pay for it isn’t, from any rational viewpoint, going to be produced. So, depending on the vagaries of the commodity markets, it can disappear from the books, even if it physically still lurks there beneath the ground.

Tags:

Comments are closed.

Top