Technology, oil reserve depletion and the myth of the reserves-to-production ratio

In the aftermath of the 1973 oil crisis, a multiplication of ideas and the development of novel concepts have opened the way to an entirely new oil universe made up of spectacular innovations and technological challenges, such as 3D seismic surveying, horizontal drilling, submersible platforms, offshore drilling at greater depths and enhanced recovery systems, to name but a few. Because of these advances, the global oil demand‐supply picture has undergone a transformation beyond recognition. Between 1973 and 1997, the world's proven oil reserves have grown from 579 billion barrels to 1,037 bn b at the end of 1997, despite the consumption of 571 bn b during the same period. Yet, despite these great strides, technology cannot breathe new life into commercially depleted reserves, nor can it create new reserves where none exist. This paper argues that “conventional” oil will soon be approaching the last phase of its cycle, probably by 2040. It also discusses the concept of the reserves‐to‐production ratio and its shortcomings as a measure of the length‐of‐life of global oil reserves. The paper concludes that rising global oil demand and declining reserve discovery rates could lead to a radical increase in the price of oil in the near future and that chronic shortages could be predicted to develop from 2010 onwards.