Background Discussion

In many countries the petroleum resources belong to the national government, as do the associated archives on the resources. In those countries only the national government can issue an authoritative estimate of the remaining national petroleum reserves. In the USA there is an enormous number of petroleum fields and wells, and the ownership of the petroleum resources is very dispersed. Virtually only the US government, through the US Geological Survey (USGS organization), has the information and the motivation needed to issue an authoritative estimate of the remaining US petroleum reserves.

There are significant incentives and pressures to make these authoritative estimates of the remaining petroleum reserves on the optimistic rather than on the conservative side. From a political and psychological point of view it is generally better to be as optimistic as possible, but there are also quite immediate financial incentives for optimism. The petroleum reserves often serve as loan collateral, and an optimistic estimate can allow one to "qualify" for a larger loan with no questions asked by the bank. OPEC assigns its member nations a production quota, since if they all produced at their production capacity the price of petroleum would collapse. Within OPEC, the petroleum reserves serve to determine the allowable production quota, so that optimism on the estimation of the reserves can lead to an immediate increase in petroleum exports and income for the country which reports such optimism.

It can be difficult to question or to scrutinize the estimates made by a national government. For one national government to question the estimates on the petroleum reserves made by another national government would indeed be a serious "international incident," particularly if such a challenge were made in a public and official report. Such a challenge can not be made lightly, no matter how false the numbers might be. This is not the case for an estimation of reserves by a private company. In the USA the SEC (Securities and Exchange Commission) has very specific rules on what a private company can and cannot claim as petroleum reserves, designed to protect both lenders and investors. It is a serious crime for a private company to break these SEC rules, to use inflated collateral for a bank loan, or to list inflated assets in an investment prospectus.

Now Here is Something to Explain

With this background discussion serving as a context, this Table gives an historical overview of the reported national estimates on the remaining reserves by selected oil producing countries.

This Table shows the record of the reported reserves of the principal producing countries. The anomalous increases are obvious. The 1983 increase by Iraq looks suspect, but the 50% increase by Kuwait was certainly not supported by new discovery. In 1987 Venezuela brought in 20 Gb of heavy oil that should be treated as unconventional, which had the effect of increasing its OPEC quota. That in turn prompted huge retaliatory increases in Iran, Iraq, Abu Dhabi, Dubai, and several other countries, followed two years later by Saudi Arabia itself, with an increase of over 50%! Mexico has confessed to exaggerating its reserves, again by the unwarranted admittance of unconventional oil from the Chicontapek Field. [This was discussed in "Mexico Lied About Proven Oil Reserves, Report Says," in the Los Angeles Times, December 10, 1991, pg D2, referencing an article, "The Lies of Pemex" in Mexico's weekly magazine, Proceso, December 9, 1991, indicating "political reserves" of Mexico of the order of 30 Gb.] Soviet reserves were also manipulated for political reasons in the central planning of the Communists. Lastly are the suspected reserves in countries that report the same number year after year, simply by not updating their studies, in some cases because the results would be politically unpalatable. Twenty-five countries reported unchanged numbers in 1994.

updated 1997 February 11