US Proven Oil Reserves to Production Ratio

Proven developed producing (PDP) oil reserves to production ratio (R/P) is a big deal, an important metric in determining the future hydrocarbon health of America. Few people understand it and even more people dismiss it because they are pretty sure crude oil grows on trees, like goats appear to grow on trees, and America will NEVER run out of oil.

Reserve definitions are confusing to folks; proven undeveloped oil reserves (PUD), stuff that hasn't even been drilled yet, gets combined with proven producing reserves and muddies up the picture. Those folks forget, however, that most of today's proven undeveloped oil reserves is unconventional oil and that stuff will require MORE capital to actually drill and turn into proven developed reserves. The shale oil industry has screwed the pooch on use of other people's money, so there should be a BIG question mark behind proven undeveloped reserve numbers... as in where is the money going to come from to get that stuff out of the ground?

Money trees?

Worse, way too many folks think "technically" recoverable resources (TRR), like shale oil, that might someday be extracted, at some future unknown, much higher oil price, means America is sitting on the Atlantic Ocean of oil and we've got nothing to worry about. That's a really big mistake. That's theoretical.

One cannot use PUD or TRR classified reserves in R/P estimates; PDP reserves is what Americans need to focus on. PDP is the gold standard for America's future hydrocarbon health. A bird in the hand is worth two in the bush, so to speak.

The chart above is by the EIA and at the close of 2017 it estimated America had 42 billion barrels of remaining proven developed reserves to produce. That number went up slightly in 2018, and I predict in 2019, because of shale oil, but in 2020 is getting knocked in the dirt by low oil prices and corresponding reserve impairments, or write downs. Nobody is growing reserves anywhere in America right now, not at $40 oil; trust me.

Using 42G BO and current production rates of 11MM BOPD, after recent shale oil decline, that leaves the United States with a PDP reserve to production ratio of 10 years. Ten years is essentially all the proven oil reserves America has left.

That is providing everyone in America is telling the truth about its reserves. They're not. Shale oil reserves are grossly exaggerated.

The PDP reserves to consumption ratio in the US, at 18.3MM BOPD of crude and condensate, means our country has less than 6.5 years of proven oil left.

In the first half of 2020 America was still averaging 2.6MM BOPD of exports of C+C to foreign countries, according to the EIA, above. All of those exports come from West Texas and the mighty Permian Basin unconventional play, the last hope for America's oil future. The shale oil industry says that provides important jobs (and it does!), reduces the trade deficit (not by much!) and contributes to the rest of the world's energy security (does that really matter?!).

That is all very, very poor policy. We're going to leave no oil for our kids and grandkids to use and a ton of debt, an enormous mortgage on their future, essentially giving the last of America's oil resources away. We're going to wish we had every drop of that oil back, in America, some day very soon.

I have been in the oil business for over 50 years; with a checkbook. I understand well decline, reservoir depletion and I have watched my country run thru the last of its oil resources like it was on a mission of self destruction.

I am conservative Republican who voted for conservative idealisms this last election cycle. If, however, liberal Democrats ban oil exports, for whatever dumb ass reason liberals do everything...I will celebrate.

American oil exports need to stop. Now! Before there is nothing left.