ANNEX 7.A:
FOSSIL FUELS

This annex expands on selected topics presented in Chapter 7. It is not intended as a stand-alone discussion.

Fossil Fuel Supply
World Oil and Gas Reserves and Resources

The United States has some 13 percent of the world’s petroleum resource base, but only about 2 percent of global reserves. Converting resources to reserves requires new technology, with associated increases in production costs. Thus one factor that will determine whether this country can expect to exploit its resources in a significant way is whether it can convert them to reserves less expensively than can be done elsewhere in the world.

Data on the costs and technologies involved are largely unobtainable, in no small part because almost all of the world’s petroleum resources and reserves are in the hands of national oil companies. However, the limited amount of available data suggests that the U.S. resource base is relatively high cost. For example, the ratio of proved reserves to annual production in the United States is 11.9, while for the world as a whole the ratio is 40.5 (British Petroleum, 2006). In other words, the rest of the world can maintain its current production of conventional crude oil from known reserves some four times longer than the United States can. This suggests that developing the U.S. resource base is a less economically competitive proposition than is continuing to produce from large reserves elsewhere.

Table 7.A.1 breaks down the resource base and reserve-to-production ratios by region. It shows that better than 65 percent of the world’s conventional crude oil resources are concentrated in the Middle East, in non-OECD Europe (mostly in the Russian Federation), and in Central/South America (primarily Venezuela). It is in these three regions that the reserve-to-production ratio is largest. Although the estimates in Table 7.A.1 are very approximate both in magnitude and in regional distribution, it seems reasonable to draw the conclusion that the U.S. resource base is harder to develop than most of the crude oil elsewhere in the world.1

1

Moreover, in these three regions the recoverable reserves are 25–50 percent of the resource base. This may suggest that applying new technology to convert resources to reserves in these regions is less challenging than in the United States. However, national oil companies, along with their national governments to varying degrees, determine the rates at which new reserves can



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