Released on January 28, 2009
(Next Release on February 4, 2009)

Crude Oil Proved Reserves Changes, 2007

The rapid fall in crude oil proved reserves that began in 1970 has moderated over the past decade, and crude oil proved reserves actually rose by 345 million barrels (2 percent) in 2007, the latest year for which information is available. Proved reserves are the estimated quantity of crude oil that can be produced with reasonable certainty from known reservoirs under current economic and operating conditions.

What did 2007’s growth in crude oil proved reserves consist of? At the beginning of 2007, U.S. proved reserves of crude oil stood at 20.97 billion barrels. During the year, U.S. producers added 2.04 billion barrels of new proved reserves, while producing 1.69 billion barrels, leading to the net increase of 345 million barrels. About 40 percent of the reserve additions were discoveries – either from new reservoirs and fields or from extending the known boundaries of old fields. Almost all of the remaining proved reserves additions in 2007 (1.20 billion barrels of crude oil) came from more intensive development of known producing fields (net revisions). (The figure below, “Crude Oil Proved Reserves Changes, 2007” appeared originally, with a fuller explanation, in the Advance Summary: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2007 Annual Report.)

Crude Oil Proved Reserves Changes, 2007

Where did the net increase in proved reserves come from? In any given year, the national change in proved reserves includes net gains in some States and declines in others. In 2007, three oil producing States (Alaska, Texas, and North Dakota) accounted for the majority of new crude oil reserves for the year, a combined 605 million barrels of net reserves additions. Eight other States showed relatively small increases, while 13 States and the Gulf of Mexico reported declines.

Alaska reported a net increase of 284 million barrels of proved oil reserves in 2007 (7 percent over the 2006 reserves level). The majority of these reserves additions were revisions, that is, a reassessment of previously known resources. Alaska also had the largest volume of new field discoveries in the Nation in 2007. One example of new development in Alaska is the Nikaitchuq Field. The operator, Eni Energy, reported that it planned to drill approximately 80 wells, 32 from onshore locations and the remaining 48 from an artificial offshore island. The wells may produce as much as 40,000 barrels per day. (Eni Press Release, April 11, 2007)

Texas reported a net increase of 251 million barrels of crude oil proved reserves in 2007 (5 percent above the 2006 reserves level). As in Alaska, the majority of the proved reserves additions in Texas came from revisions. But 30 percent of total Texas reserves additions (183 million barrels out of 601 million barrels) came from new discoveries in already known fields, known as extensions. This was the largest volume of extensions in the Nation and primarily occurred in west Texas. An important addition in Texas occurred in the Seminole Field. In May 2007, Amerada Hess, operator of the field, announced plans to invest about $300 million to expand its CO2 enhanced oil recovery project in this large mature field. A difficult-to-produce resource, termed a Residual Oil Zone (ROZ), lies directly underneath the field’s main pay zone and contains nearly one billion barrels of estimated technically recoverable resources. However, the chemistry of the oil within the ROZ prevents it from moving without additional treatment. Amerada Hess planned to deepen 47 production wells into the ROZ, and then convert 29 wells from production to carbon dioxide injection; the injected carbon dioxide would then mobilize the otherwise trapped oil and increase recovery. (Excerpted from Seminole Sentinel, May 20, 2007)

North Dakota is a relatively new major player in the U.S. oil industry. In 2007, it reported the Nation’s third largest net increase in proved crude oil reserves in 2007 - 70 million barrels (17 percent over its 2006 total). These increases come largely from the unconventional Bakken Formation, a deep, predominantly shale formation which produces light, sweet crude oil when fractured. One example of success in North Dakota was reported by operator EOG Resources, Inc. (EOG). EOG reported successful drilling that increased its net estimated reserves in the Bakken from 60 million to approximately 80 million barrels of oil. (EOG Letter to Stockholders, Annual Report 2007)

What's next? EIA publishes information on proved reserves at year-end. It takes about 12 months to collect the data, resolve anomalies, and develop our report, so the latest data we have are from 2007. They do not reflect the market fluctuations of 2008, when oil prices ranged from a high of about $150 per barrel and then fell to about $40 per barrel. EIA will kick off the process for 2008 reserves data next month by distributing its 2008 proved reserves data survey forms to over 1,400 U.S. well operators.

Residential Heating Oil Prices Drop, Propane Prices Rise
Residential heating oil prices decreased for the second week in a row during the period ending January 26, 2009. The average residential heating oil price fell 2.1 cents per gallon last week to reach 240.0 cents per gallon, showing a drop of 91.6 cents per gallon compared to this same time last year. Wholesale heating oil prices backed off by 2.8 cents per gallon to reach 157.0 cents per gallon, which was a decrease of 102.7 cents per gallon compared to the same period last year.

The average residential propane price moved higher for the second consecutive week, rising 1.1 cents to reach 232.3 cents per gallon. This was a decrease of 23.9 cents from the 256.2 cents per gallon average for this same time last year. Wholesale propane prices shed a mere 0.3 cent per gallon, coasting from 90.5 cents down to 90.2 cents per gallon. This was a decrease of 64.4 cents from the January 28, 2008 price of 154.6 cents per gallon.

The national average price of diesel fuel slipped 2.8 cents to reach 226.8 cents per gallon. Prices dropped in all areas of the country; on a regional basis, the East Coast price had the steepest decline, dropping 3.3 cents to 234.4 cents per gallon. The price in the Midwest declined 3.2 cents to 223.2 cents per gallon. The average price in the Gulf Coast slipped 2.5 cents, to 220.2 cents per gallon; 101.6 cents lower than a year ago and the lowest among the major regions. The price in the Rocky Mountains slid just six-tenths of a cent to 224.3 cents per gallon. On the West Coast, the price dipped 1.9 cents to 231.9 cents per gallon. The average price in California also dropped, falling 2.3 cents to 229.6 cents per gallon.

Propane Inventories Continue Much Lower
Primary supplies of propane continued their sharp descent last week, falling by 3.1 millions barrels to an estimated 47.5 million barrels as of January 23, 2009. Nevertheless, propane inventories remain more than 5 million barrels ahead of the same period last year despite the recent surge of winter storms across a wide swath of the country. The Midwest led regional declines with 1.5 million barrels last week, while the Gulf Coast reported the next largest drop with a 1.2 million-barrel decline. The East Coast and the combined Rocky Mountain regions showed similar declines of 0.2 million barrels during this same time. Propylene non-fuel use inventories remained relatively unchanged last week, although its share to total propane/propylene inventories moved up to 7.8 percent from the prior week’s 7.3 percent share.

Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.