Iraqi & Iranian reserves… mine’s bigger than yours
So, overnight, the world has another 29 billion barrels of oil after Iraq decided to upgrade its proven reserves from 114 billion to 143 billion barrels based on new evaluations of West Qurna and Zubair fields in the south. That’s pretty much an entire year of global demand right there.
Although the details are a bit sketchy, few people doubt the oil is there – and there is more to come in the case of Iraq. The question is more: how are we left in the position of having to plan on information of this level in something so vital as how long we can keep industrial capitalism running in its present form?
The late and engaging Matt Simmons once suggested the USA impose a $20 tax on every barrel of oil coming from countries which refused to allow third party verification of their reserves according to the same standards the SEC forces US oil companies to use in quoting their reserves in official reports. His rationale was… at the end of six months we’d either know the truth about what proven reserves really were… or have one hell of a fund to increase the strategic reserve.
You don’t have to be a Peak Oiler to find that idea attractive. One of the leading features of the history of the industry over the last 10 years has been the decline of non-OPEC production faster than expected cum anticipated cum hoped, leaving energy security in any but outlier scenarios more rather than less reliant on the core Middle Eastern producers. And yet what do we know about Saudi, Kuwaiti, Iranian, Abu Dhabi and Iraqi proven reserve levels other than they show a suspicious degree of step-level jerkiness compared to most producing countries, staying static for years on end despite high levels of ongoing production only to jump in huge bounds all at once, seemingly in reaction to each other and the OPEC quota system.
Consider that a country’s likely yield affects the attractiveness of individual plays for oil companies, and that energy, composed largely of hydrocarbons today, is as fundamental to our current economic system as money. The global finance industry may have been in breach of capitalisation and reserve rules that it set itself through instruments such as the BIS, but at least those rules existed! In many jurisdictions it is even a criminal offence to knowingly mistake assets and monetary reserve levels.
Imagine all hydrocarbons were subject worldwide to verification of all the different categories of reserves – P1, P2 and P3. Not only would economic planning be better, and we would probably achieve more economic growth, with its development potential, for less carbon emissions… it would also be a more stable place. For sure, countries with challenging energy needs might still be adversaries in resource diplomacy but at least better planning, including better contingency planning, could take place. Producers would also probably be better off since more complete information would create better price stability, and that in turn would make planning easier and give more real value to each petrodollar.
As so often in the past, it is hard to avoid the impression that there is a political dimension to what should be a purely technical question. Iraq’s new figures, no doubt to be dutifully folded into world summaries of such agencies as the EIA, the IEA and the World Bank, take Iraq just past Iran’s stated reserves . And, what do you know, it only took Iran a week to, miraculously, make more discoveries of its own.