Opec believed to overstate oil reserves by 70%

[Javaman]

http://www.engineeringnews.co.za/article/opec-believed-to-overstate-oil-reserves-by-70-reserves-depleted-sooner-2012-10-04

Analysts at a New York-based research firm believe that the Organisation of the Petroleum Exporting Countries’ (Opec’s) global oil reserve statements could be inflated by as much as 70%.

Global oil prices are expected to dramatically spike from the end of the decade as a result of depletion, and continue to dramatically rise into the future as a result of oil-producing countries being unable to replace reserves fast enough, research specialist Lux Research analysts told Mining Weekly Online on Thursday.

Researchers said the known oil reserves of Opec members would be depleted much sooner than thought, owing to many of the member countries producing much more oil than what they could sustain over the long term.

Oil, gas and mining analyst Rick Nariani said Opec’s stated reserves skyrocketed from 878-billion barrels to 1.2-trillion barrels throughout the 1980s and 1990s, without any new significant discoveries being made. With cumulative oil production of 449-billion, the true reserves for Opec could be as low as 428.94-billion, which would result in global price shocks by 2020.

more at link...

[Champion Jack]

1. Thanks for posting this

[FBaggins]

2. Why?

Assume the author is correct. What happens if there's a "global price shock"?

Oil exporters get LOTS more money for their oil.

So why would they lie when the effect is to lower prices, increase demand, and deplete their reserves faster?

[GliderGuider]

3. They did it earlier to get higher production quotas from OPEC.

The OPEC quota system allows greater output for countries with greater reserves. so in a time of lower (and stable) prices, higher quotas mean higher income.

People have known about the overstatement for a long time, but it's never been in anyone's interests to acknowledge it officially, because it could destabilize the oil market even more. For example, Wikileaks released cables a year and a half ago regarding the Saudi overstatement: http://thinkprogress.org/climate/2011/02/09/207484/wikileaks-peak-oil-saudi-arabia-reserves-overstated/

[FBaggins]

4. Yep... but that's one OPEC member lying to another OPEC member.

That works if, say, Iran thinks that THEY are running out oil but still want to export more relative to other OPEC nations.

It doesn't work if IRAN thinks that they ALL are running out of oil and the oil they produce ten years from now will sell for twenty times today's price. In that environment I would expect Iran to artificially reduce their reported reserves so that they could shift production into he future.

People have known about the overstatement for a long time

People have speculated about it for some time. They haven't "known" about it. People speculated that we were well past the natural gas peak years ago... and they were dead wrong.

but it's never been in anyone's interests to acknowledge it officially, because it could destabilize the oil market even more.

Again, "destabilize" is a really bad thing if you're a buyer... it isn't a bad thing if you're a seller. I don't think that Venezuela minds one bit when Iran threatens to close the strait of Hormuz... because Venezuela would see oil prices skyrocket.

For example, Wikileaks released cables a year and a half ago

Yep... and that could be either someone backing up the claim of the OP, or it could be an interested party lying about it to jack up oil prices.

[GliderGuider]

5. You pays your money and you takes your choice.

I find it easier to operate from the assumed position that they know they're lying, and that by the time they figured out that the whole thing was going pear-shaped they were in too deep to change their stories.

This saves me the trouble of trying to read the chicken entrails, and it's as good an operating assumption as any. No matter what I believe I still have to pay the price on the pump.