This Week in Petroleum

Release date: June 20, 2018  |  Next release date: June 27, 2018

Oil company proved reserves additions in 2017 were most since 2013 while expenditures were about half

In 2017, a group of the world’s largest publicly traded oil and natural gas producers added more hydrocarbons to their resource base than in any year since 2013, according to the annual reports of 83 exploration and production companies. Collectively, these companies added a net 8.2 billion barrels of oil equivalent (BOE) to their proved reserves during 2017, which totaled 277 billion BOE at the end of the year. Exploration and development (E&D) spending in 2017 increased 11% from 2016 levels, but remained 47% lower than 2013 levels.

Of the 83 companies, 18 held more than 80% of the 277 billion BOE in proved reserves at the end of 2017. While many of these companies have global operations, some are national oil companies with reserves concentrated in their home countries including Russia, China, and Brazil. Proved reserves change from year to year because of revisions to existing reserves, extensions and discoveries of new resources, purchases and sales of proved reserves, and production. Figure 1 illustrates the 83 companies’ combined proved reserves changes during 2017.

Figure 1. Regional proved reserves

Organic additions to proved reserves, or reserves added through improved recovery and extensions and discoveries, are linked directly with capital expenditures in E&D. Proved reserves acquired through purchases do not represent E&D capital investment, but rather reflect transfers of assets between companies. Revisions to proved reserves are usually more significantly influenced by changes in crude oil and natural gas prices than by E&D investment.

Of the 17.7 billion BOE in organic proved reserves added in 2017, slightly less than half (8.5 billion BOE) were in the United States, while Russia, Central Asia, and the Asia-Pacific region accounted for 24% (4.3 billion BOE). Canada (which includes oil sands and synthetic crude oil), Latin America, and the Middle East and Africa regions each added more than 1.1 billion BOE. Regionally, Europe accounted for the fewest organically added proved reserves for the sixth consecutive year, adding 0.3 billion BOE of proved reserves in 2017, 2% of the world total (Figure 2).

Figure 2. Regional organic  proved reserves

Global E&D spending by region was similarly distributed. Of the $285 billion companies spent on E&D in 2017, 33% ($95 billion) was in the United States, with the Russia, Central Asia, and Asia-Pacific region accounting for 30% ($85 billion) and all other regions each accounting for 10% or less. Changes in nominal year-over-year E&D spending varied across regions, increasing by 36% in the United States and by 15% each in Canada and the Russia, Central Asia, and Asia-Pacific region. Spending declined by 24% in Europe, 16% in the Middle East and Africa, and 15% in Latin America (Figure 3). Because significant cost deflation has occurred in the oil and natural gas industry since 2014, nominal spending values in different years may not be directly comparable.

Figure 3. Regional exploration and production

Because of a disparity between the timing of companies’ capital expenditures and the formal reporting of changes to their proved reserves, standard practice is to average the results over several years. Analyzed this way, E&D costs declined significantly on a per BOE basis from the 2012–2014 average to the 2015–2017 average (Figure 4). Three-year average E&D capital expenditures per BOE of organic proved reserves additions decreased in all regions except Latin America. On an annual basis, 2017 represented the lowest E&D capital expenditures per additional BOE to proved reserves during the 2012–2017 period at $16.12/BOE.

Figure 4. Finding costs for 83 publicly traded

First quarter 2018 capital expenditures for this set of companies were 16% higher than the first quarter of 2017, suggesting that many of these companies have increased their E&D budgets, which will likely contribute to further organic proved reserves additions in 2018.

U.S. average regular gasoline and diesel prices decrease

The U.S. average regular gasoline retail price decreased 3 cents from last week to $2.88 per gallon on June 18, 2018, up 56 cents from the same time last year. Gulf Coast and East Coast prices each decreased over four cents to $2.65 per gallon and $2.80, respectively, Midwest prices decreased nearly three cents to $2.79 per gallon, West Coast prices decreased nearly two cents to $3.43 per gallon, and Rocky Mountain prices decreased over one penny to $2.98.

The U.S. average diesel fuel price decreased over 2 cents from last week to $3.24 per gallon on June 18, 2018, 76 cents higher than a year ago. Midwest prices declined nearly three cents to $3.17 per gallon, East Coast and Gulf Coast prices each declined over two cents to $3.24 per gallon and $3.02 per gallon, respectively, West Coast prices declined nearly two cents to $3.75 per gallon, and Rocky Mountain prices decreased less than one cent to $3.34 per gallon.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 3.2 million barrels last week to 54.1 million barrels as of June 15, 2018, 9.5 million barrels (14.9%) lower than the five-year average inventory level for this same time of year. Midwest, Gulf Coast, East Coast, and Rocky Mountain/West Coast inventories increased by 1.2 million barrels, 1.1 million barrels, 0.7 million barrels, and 0.2 million barrels, respectively. Propylene non-fuel-use inventories represented 5.0% of total propane/propylene inventories.

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Retail prices (dollars per gallon)

Conventional Regular Gasoline Prices Graph. On-Highway Diesel Fuel Prices Graph.
  Retail prices Change from last
  06/18/18 Week Year
Gasoline 2.879 -0.032 0.561
Diesel 3.244 -0.022 0.755

Futures prices (dollars per gallon*)

Crude Oil Futures Price Graph. RBOB Regular Gasoline Futures Price Graph. Heating Oil Futures Price Graph.
  Futures prices Change from last
  06/15/18 Week Year
Crude oil 65.06 -0.68 20.32
Gasoline 2.023 -0.092 0.568
Heating oil 2.087 -0.077 0.660
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

U.S. Crude Oil Stocks Graph. U.S. Distillate Stocks Graph. U.S. Gasoline Stocks Graph. U.S. Propane Stocks Graph.
  Stocks Change from last
  06/15/18 Week Year
Crude oil 426.5 -5.9 -82.6
Gasoline 240.0 3.3 -1.8
Distillate 117.4 2.7 -35.1
Propane 54.079 3.234 -0.454