Oil Reserves: Definition, Categories, World's Largest

camels in front of oil reserves
The Middle East contains the most proven oil reserves. Photo: Credit: Jochen Tack/Getty Images

Definition: Oil reserves are an estimate of how much oil can ultimately be recovered. This broad definition is also called oil in place. It includes undiscovered or "yet to find" reserves. It's based on the probability of finding reserves in certain geological areas. It also assumes new types of technology will make it economically feasible to extract the oil. 

Don't believe it when someone says the world will run out of oil on a certain date.

Instead, oil will become too expensive to use long before it runs out.

A more precise definition is discovered oil reserves. There are three categories. These are based on how likely it is the oil can be recovered using current technology.

  1. Proven Reserves - There is a greater than 90% chance that the oil will be recovered.
  2. Probable Reserves - The chance of actually getting the oil out is greater than 50%.
  3. Possible Reserves - The likelihood of recovering the oil is significant, but less than 50%.

Keep in mind that part of an oil field's probable and possible reserves get converted into proved reserves over time. These discovered reserves are just a small part of the oil in place. It's just not technically feasible to get most of the oil out in any given field. (Source: BP, Oil Reserve Definitions)

Proven Reserves

Of the three categories, the most commonly used is proven oil reserves. That's where analysis of geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs.

Only the oil that is commercially viable under current economic conditions is counted. That's because, if oil prices rise or new technology makes costs lower, then more fields become viable.

Reasonable certainty means that either actual production or conclusive testing has occurred. The testing includes drilling, or must be adjacent and similar to areas that have been drilled.

The size of the field is determined by the edges where the oil contacts adjacent gas or water formations.

Oil is not counted as proven if engineers are uncertain whether it can be recovered under current economic conditions or it's in completely untested areas. Some engineers also don't count oil locked up in shale, coal or gilsonite. (Source: OPEC)

World Reserves

There are 1.642 trillion barrels of oil in the world as of January 2014. That's enough to last another 50 years since the world uses 90.5 million barrels per day. Only proven reserves are counted in the total world reserves. Therefore, this number changes slightly every year, thanks to changes in oil reserves. (Source: CIA World Factbook, Oil Proved Reserves)

Largest Reserves (2014)

The world's largest proven reserves are in just a few geologically unique areas. That's because reserves are the graveyards of prehistoric plants and tiny marine organisms. Their remains settled at the bottoms of ancient oceans and lakes 300-400 million years ago. Layers of sediment covered them, increasing the pressure and temperature. That changed the chemical composition into oil.

We are using up this oil faster than Nature is creating new reserves.

 This amount is finite, which is why people refer to oil as a non-renewable resource. 

Most of the big fields in the proved oil reserves are in the Middle East, Venezuela, and Russia. These countries have no incentive to produce accurate estimates. The market price of fossil fuels is driven more by production capacity vs. demand than by reserves. This capacity depends on investment decisions made by a small number of decision-makers in Saudi Arabia, Kuwait, Venezuela, and Russia.

Here's the number of barrels of proven oil reserves for the top 20 countries:

  1. Venezuela - 297.7 billion.
  2. Saudi Arabia - 268.4 billion.
  3. Canada (includes shale oil) - 173.2 billion.
  4. Iran - 157.3 billion.
  5. Iraq - 140.3 billion.
  6. Kuwait - 104 billion.
  7. United Arab Emirates - 97.8 billion.
  8. Russia - 80 billion.
  9. Libya - 48.47 billion.
  1. Nigeria - 37.14 billion.
  2. United States - 30.53 billion (up significantly from 20.68 billion in 2013).
  3. Kazakhstan - 30 billion.
  4. Qatar - 25.24 billion.
  5. China - 18.1 billion.
  6. Brazil - 13.22 billion.
  7. Algeria - 12.2 billion.
  8. Mexico - 10.07 billion.
  9. Angola - 9.06 billion.
  10. Ecuador - 8.24 billion.
  11. Azerbaijan - 7 billion. (Source: CIA World Factbook, Oil Proved Reserves, January 2013)

The list alone doesn't give the whole story, because of the relationships between the countries. Most of them produce more than they use, so they export to those that use more than they produce (importers).

To increase their negotiating power, some of the oil exporters have banded together to manage world supply and influence prices. Although this is an illegal monopoly in most countries, it is perfectly legal in international law. The exporters have done so to keep the price of oil fairly high. Since oil is a non-renewable resource, when it's gone these exporters have nothing left to sell. Therefore, they want to get the highest profit possible while it lasts. They can only do this if they collude, rather than compete.

That's why the Organization of Petroleum Exporting Countries (OPEC) formed in 1960. The 12 OPEC members hold 80% of the world's proven reserves. The biggest importers are the United States, the European Union, and China. (Source: OPEC FAQ)

U.S. Reserves

The U.S. Energy Information Administration reports a slightly higher figure for proven reserves - 35.6 billion barrels as of 2013. During the year, 5.5 billion barrels were discovered.

The largest reserves are in Texas, North Dakota, the Gulf of Mexico Federal Offshore, Alaska, and California. After years of stagnation, U.S. reserves are now growing again thanks to higher oil prices that make new technologies cost-effective. Horizontal drilling and hydraulic fracturing can extract oil from shale and other "tight" (very low permeability) formations. Texas and North Dakota accounted for 90% of the total growth. (Source: EIA, Proved Crude Oil Reserves)

Also, the U.S. maintains the world's largest strategic petroleum reserve. It holds 727 million barrels. It's used to keep the economy running smoothly when there's a crisis or shortage. Since it is not open for production, it's not included as part of the U.S. proven reserves. 

Shale Oil Reserves

The United States has 3 trillion barrels trapped in the Green River shale oil formation in Colorado. It costs $40-$80 a barrel to recover it, making it barely worth it even when oil is $100 a barrel. Extraction could also deplete the water table and damage the environment. However, if technology continues to improve and prices rise, it would be feasible to produce 100,000 barrels a day for 30 years. (Source: ABC News, American Oil Find Hold More Oil Than OPEC, November 13, 2012)

There are 15.4 billion barrels in the Monterey Shale formation near Bakersfield, California. There are also smaller shale oil deposits in North Dakota and Texas. However, these use fracking to get the oil out, which is opposed by environmental groups. (Source: NYT, Vast Oil Reserve May Now Be Within Reach, February 4, 2013)

Oil Sands

Oil sands reserves are located in Canada, Venezuela, Russia and the United States. However, most of it (166 billion barrels) is in Alberta, Canada. The U.S. imported 1.236 billion barrels from these fields in 2014. (Source: U.S. Imports from Canada, U.S. EIA)

Oil sands are sand mixed with a thick substance called bitumen. The bitumen must be heated before it can be used as oil. Two tons of sand must be mined, using three barrels of water, to get one barrel of oil. The process is controversial because is uses a lot of energy and water, and leaves a scar on the environment that can be seen from space. However, miners are required to restore the area to its original condition after mining. (Source: Alberta Canada Oil Sands; Fuel Chemistry Division)

The Economics of Oil Reserves

Keep in mind that no one can know for a fact how much oil is hidden below the earth's surface. Any number you see is a professional calculation based on geological engineering surveys. As oil prices go up, technology lowers costs, and more exploration is done, it becomes financially feasible to get more oil out. For that reason, any oil reserve projection is a moving target. That is known as "reserves growth."

Estimating oil reserves is an inexact science. For example, estimates of U.S. proved oil reserves have remained unchanged, at around 20 billion barrels, since 1948. That is despite a production level of 2 billion barrels each year.

Paradoxically, if the price of oil rises and those few decision-makers become convinced that oil in the ground appreciates faster than any other investment, they have an incentive NOT to increase production capacity. But, if they become convinced that new technologies will shortly replace oil, they then have an incentive to increase oil production while it still has some value, even if the price of oil is already falling. Perceptions of future technological advances could have a tremendous impact on the oil market. (Source: Interview with Gavin Longmuir, a consultant with International Petroleum Consultants Association, Inc. He has over 25 years experience as a petroleum engineer in the global oil industry, specializing in the development of future oil fields, economic evaluations of exploration opportunities and assessment of new technologies. His Ph.D. is from the University of Strathclyde, Scotland.) Article updated October 22, 2015.