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EIA reports largest U.S. oil reserves drop in 50 years 1998 falling crude prices led to drop of almost 60 percent in rigs drilling for oil during the year, followed by decline in wells Petroleum News Alaska
The U.S. Department of Energy’s Energy Information Administration said Nov. 24 that U.S. proved reserves of crude oil fell 7 percent in 1998, the largest percentage decline in over 50 years.
The EIA’s 1998 annual report, “Advance Summary: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves,” notes that crude oil prices, which began a decline in 1997, plunged by December 1998 to levels last seen in 1935 after adjusting for inflation. Falling crude prices led to a drop of almost 60 percent in rigs drilling for oil during 1998, followed by a decline in the number of new and producing oil wells, which was followed by the drop in oil reserves. Only 24 percent of 1998 oil production was replaced by proved reserve additions.
Natural gas down as well It was a down year for natural gas as well, the EIA said, with U.S. dry natural gas reserves declining by 2 percent in 1998. This decline broke a four-year string of annual increases and offset two-thirds of the gain from the prior 4 years. Natural gas reserve additions in 1998 replaced only 83 percent of gas production.
The United States depends on oil and gas for over 60 percent of its energy consumption, the agency noted, and declining oil production and reserves increase our dependence on foreign oil supplies.
EIA and industry analysts forecast significant increases in natural gas demand for both economic and environmental reasons during the next 20 years, along with increases in U.S. natural gas production and proved reserves to meet the demand. Estimates of the overall U.S. natural gas resource base, which includes undiscovered gas and unproved gas reserves, are clearly large enough to support future growth in domestic supplies, the EIA said. However, the 1998 decline in natural gas proved reserves demonstrates that the oil and gas industry faces economic and technical challenges in meeting the forecasts of increasing demand.
Some Alaska projects delayed The EIA said crude oil reserve additions would have been even smaller in the absence of a few large, long-term development projects that were continued by their operators in the face of low oil prices. Large revisions in some of California’s old and heavy oil fields helped that state’s reserves to increase.
Some proved reserves become uneconomic and unproved with lower prices. The annual average domestic price for crude oil declined 37 percent, from $17.23 per barrel in 1997 to $10.88 per barrel in 1998. Low prices imply poor economics for oil producers and poor economics leads to low drilling levels. Only twice over the last 100 years have fewer oil wells been drilled. Despite a small drop in natural gas prices, gas well drilling increased.
During 1998, even large offshore and Alaska North Slope projects were delayed or cancelled. The low prices were much tougher on smaller and marginal oil well operators as thousands of wells were shut in because they could not meet their direct operating costs, much less turn a profit. As a result, oil production and proved reserves dropped sharply in most Lower 48 areas. Texas’ proved reserves fell 13 percent in 1998, which for the first time in a decade placed Texas second to Alaska in oil reserves.
On a more positive note for oil production and reserves, U.S. crude oil prices at the wellhead began increasing in March 1999, reached $20 per barrel in September, and continue to rise. But oil drilling has not yet rebounded. Nevertheless, higher oil prices in December 1999 will bring back some of the oil reserves that became uneconomic in 1998.
Proved reserves of natural gas also down For both of the two leading U.S. producing areas, Texas and the Gulf of Mexico federal offshore, proved reserves of natural gas were down in 1998. Small increases in the deepwater Gulf did not offset the persistent decline of proved gas reserves on the shallow Gulf shelf.
Reserves and production of gas from unconventional sources like coalbed methane continued to grow in 1998, despite the decline in reserves and production of conventional natural gas. Coalbed methane reserves accounted for 7 percent of 1998’s proved gas reserves.
Although the number of gas wells increased, the amount of discoveries per exploratory gas well was down 32 percent in 1998.
Alaska crude proved reserves down 2.1 percent
Alaska proved crude reserves were down 2.1 percent, from 5.161 billion barrels Dec. 31, 1997, to 5.052 billion barrels Dec. 31, 1998.
Proved reserves for the Lower 48 dropped 8.1 percent, from 17.385 billion barrels Dec. 31, 1997, to 15.982 billion barrels Dec. 31, 1998.
All U.S. proved reserves of crude dropped 6.7 percent, from 22.546 billion barrels Dec. 31, 1997, to 21.034 billion barrels Dec. 31, 1998. u
Editor’s Note:EIA reports are available on the Internet at http://www.eia.doe.gov/
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