Public company oil and natural gas proved reserves declined in 2022 after some companies left Russia

Oil and natural gas proved reserves held by 187 publicly traded exploration and production (E&P) companies declined by 5.6 billion barrels of oil equivalent (BOE) in 2022 following Russia’s full-scale invasion of Ukraine, according to the companies’ annual financial reports (Figure 1). While proved reserve additions for the companies were close to the 10-year (2012–2021) average, some large oil companies, including bp and TotalEnergies, divested from Russia. Those divestments, categorized as sales in the data, resulted in decreased proved reserves for these E&P companies. Total exploration and development (E&D) costs incurred by the companies increased by 10% in 2022 from 2021, remaining 22% below the pre-pandemic five-year (2015–19) average.

We analyzed the published financial reports of 187 domestic and international companies provided to the U.S. Securities and Exchange Commission and collected by Evaluate Energy. Our conclusions are not representative of the entire global E&P sector because we do not include private companies that do not publish financial reports. We estimate the 187 companies in this analysis accounted for about 50% of total non-OPEC petroleum liquids production in 2022.

The top 20 companies accounted for 68% of the 231 billion BOE in proved oil and natural gas reserves held at the end of 2022. Although many of these companies have global operations, some are state-affiliated national oil companies with reserves and operations concentrated in their home countries, including Mexico, China, and Brazil. Companies revise assessments of their proved reserves of crude oil and natural gas because of revisions to existing reserves from changes in prices; extensions and discoveries of new resources; purchases and sales of proved reserves; and production.

Organic additions to proved reserves come from improved recovery and extensions and discoveries that can be linked to E&D expenditures. Proved reserves acquired through purchases and sales represent transfers of assets between companies (including companies outside this group) and are not reflected in E&D expenditures because these transfers do not create new reserves. Revisions to proved reserves can be highly influenced by changes in crude oil and natural gas prices and are less directly influenced by E&D investment. In this analysis, we focus on organic additions to proved reserves and the costs incurred to acquire them to explore how these companies used their resources to develop new proved reserves. We define organic proved reserves additions as those that come from improved recovery and extensions and discoveries. We define organic proved reserves additions costs incurred to be exploration costs, development costs, and unproved reserves acquisitions.

Proved reserves held by these companies declined in 2022 because of larger-than-usual sales caused by Western companies leaving Russia. Proved reserve sales of 12.0 billion BOE in 2022 were more than double the 10-year average of 4.6 billion BOE (Figure 2). Organic proved reserves additions of 16.2 billion BOE and purchases of 8.2 billion BOE were not enough to cover increased sales and normal production for the year. These results suggest proved reserves for these companies would have increased in 2022 if not for Western companies choosing to divest from Russia assets. Positive revisions reflect increases in crude oil and natural gas prices in 2022.

Costs incurred for organic proved reserves additions in 2022 increased 10% year-over-year to $245 billion (Figure 3). Broken down by regional spending, 37% ($91 billion) was spent by the companies in the United States; 22% ($53 billion) in the Russia, Central Asia, and Asia Pacific region; and 15% ($36 billion) in Latin America. Year-over-year changes in costs incurred varied across regions, increasing by 44% in Latin America, 32% in Canada, and 29% in the Middle East and Africa. Although overall costs incurred by the companies in their U.S. operations decreased by 3% year-over-year, development costs increased by 54% in 2022 due to supply chain constraints and cost inflation. Similar increases were seen for development costs in Canada (42%) and Latin America (39%). Purchases of unproved reserves by the companies declined to the lowest level in the 2013–22 period, which helped to offset higher development spending. Costs incurred in Europe declined to their lowest level in the last 10 years at 4% ($10.4 billion) of total E&D spending.

E&D costs incurred can be compared with oil and natural gas reserve additions to determine finding costs. Finding costs indicate the expenditures made to add a single BOE of proved reserves. We define finding costs as E&D costs incurred (including costs to acquire unproved reserves) per BOE of organic proved reserves additions. To assess regional finding costs, we averaged the results from these companies over several years because the timing of expenditures and the formal reporting of changes to proved reserves can differ. Three-year average finding costs decreased in most regions on a per BOE basis from 2020 to 2022 compared with the period from 2017 to 2019, and they declined in all regions compared with the period from 2014 to 2016 (Figure 4). Average finding costs for operations in Europe increased compared with the 2017–19 period. Another way to look at finding costs is with a world average weighted by reserve size. The 2022 world weighted average suggests finding costs for these companies increased 14% on average from 2021 to $15.08/BOE.

For further analysis of global trends, see our annual Financial Review. In December, we will issue our annual U.S. crude oil and natural gas proved reserves report. This report provides a more detailed analysis on proved reserves located in the United States and includes a larger sample of U.S. producers (publicly traded and privately owned).

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.