Millions of years of geological formations, tectonic plate shifting, compression, and geothermal “cooking” has created thousands of petroleum deposits around the world in various formations called basins. Within these basins are oil reservoirs, some of which yield a few hundred barrels, while others supply entire nations for decades. While many countries have found some amount of underground hydrocarbons within their borders, a few nations have come out on top of the geologic lottery. Here are the ten lucky nations with the largest proven oil reserves as of 2010:
Sidenote: since any nation could theoretically claim any volume of oil reserves, proven reserves are the standard benchmark used to measure country reserves. To qualify as proven, reserves must meet four criteria:
- It must be recoverable with technology that currently exists – this makes sense, given that you can’t deploy technology that hasn’t been invented yet.
- It must be commercially viable – although this seems like a subjective term (which it is), the common standard is that there must be “reasonable certainty” (another subjective term), which is around 90% certainty that the hydrocarbons can be recovered under current economic and political conditions. Note, that it does not specify that the projects must be profitable, merely commercially viable.
- It must have been discovered through one or more exploratory wells – this also makes sense, since exploratory wells would confirm the hydrocarbon discovery.
- It must still be in the ground – anything currently not in the ground would fall under a country’s supply, which could be extracted from its own reserves, but could also be purchased, imported, etc.
264.6 billion barrels
The original founder of OPEC and the most prolific and controversial oil producer, the Kingdom holds over 20% of the world’s global oil reserves. To a large deal, oil prices are greatly determined by what oil traders think Saudi reserves and production really are. Production is tightly managed by the Royal Family and the national oil company, Saudi Aramco, which is also the world’s most valuable company. Saudi crude is primarily “light and sweet”, which is traditionally the most valued oil product, since it has very low sulfur content and contains disproportionately high quantities of key components used in gasoline.
To watch: Reserve numbers.
Saudi Arabia is one of the few producing nations that do not allow an independent audit of its oil reserves. Longstanding controversy around production capacity and actual reserves has been recently fueled by Wikileaks documents that allege wildly overblown stated reserves. Even official government numbers vary widely and although it is accepted that the Ghawar Field is the largest conventional oil field in the world, field performance and production level numbers are carefully guarded secrets and only senior officials truly know how much oil remains.
Canada
175.2 billion barrels
Canada’s jump to become the world’s second largest holder of global oil reserves is largely owed to the relatively recent commercialization and production of the oil sands situated in Western Canada. Extremely viscous, and mixed with sand and clay, the oil sands bitumen can be extracted through surface mining, or a steam assisted drilling process called SAGD. The only Western democracy and the only country without a state-owned national oil company on the list, Canada’s role in the global energy supply will continue to increase as international companies seek producing nations with high levels of political and social stability.
To watch: Political battles.
Controversy around the environmental impacts of oil sands production has instigated protests at global forums, largely symbolic company boycotts of Canadian oil sands products and proposed reactionary U.S. legislation to restrict imports. An important litmus test of the U.S. government’s stance on the oil sands will be the impending approval of the Keystone XL pipeline, intended to transport oil from Alberta to the Gulf Coast.
Iran
137.6 billion barrels
Iran holds over 11% of the world’s oil reserves and production is dominated by the National Iranian Oil Company, the second largest oil company in the world behind Saudi Arabia’s Aramco. Iranian attempts at nuclear proliferation have triggered widespread sanctions by the U.S., Canada, Australia and Japan, making doing business with Iran severely limited. Increasing UN pressure to implement broader sanctions could further hurt the Iranian oil and gas industry, however, demand from China, Russia and Africa will likely replace any lost customers in the West.
To watch: China
Iran is the third largest supplier of Chinese oil and growing energy demand in China has helped bolster Iranian growth and investment. Should China respond to international pressure, however, and shift its position on the Iranian nuclear program and search for alternate oil suppliers, Iranian government coffers could take a large, destructive hit.
Iraq
115 billion barrels
An improved security situation and the recent formation of the democratically elected Parliament after an extended election dispute is giving cause for optimism for the oil and gas industry in Iraq. A new oil minister is welcoming foreign investment into the country and several bid rounds for service contracts in 2011, coupled with increasing production from megafields such as Rumaila, should help bolster both the industry and the country’s economic recovery.
To watch: Kurdistan
An ongoing dispute between the Kurdistan Regional Government (KRG) and Baghdad over production sharing agreements in 2009, led the Iraqi government to declare any contracts signed with the KRG illegal and prevented the region from exporting oil because of non-payment of contracts. A recent deal in January 2011 agreeing to begin oil exports from Kurdistan demonstrates a softening position in Baghdad and could be the first step towards the development of a strong industry in the area.
Kuwait
104 billion barrels
Largely in part to the Burgan Field, the second largest field in the world (producing 1.7 million barrels per day), the tiny nation of Kuwait accounts for 10% of the world’s global oil reserves. The industry is tightly controlled by the Kuwaiti government and the ruling Emir. Consistent oil production, coupled with an educated population and monopolistic control on oil revenues, has made Kuwait one of the wealthiest nations in the world, measured on a per capita basis. Although there are lingering environmental effects from the burning of oil fields during the 1991 Gulf War, the industry and accompanying infrastructure has largely recovered from the conflict.
To watch: Disputes over foreign investment
Dwindling production from some mature fields, as well as the need for technology transfer for heavy oil and gas production have caused some officials, particularly the Emir, to court foreign investment in the industry. Many parliamentarians wish to block all foreign investment in the sector, maintain complete state control, and are particularly irked by the proposal to allow foreign companies to book Kuwaiti reserves. This dispute between the ruling Emir and his allies, and the Kuwait Parliament will need to be resolved in order for the country to fully exploit its resources.
United Arab Emirates
98.8 billion barrels
The seven states, or emirates, which comprise the UAE, were united after the discovery of oil in the 1960s. The bulk of the reserves, over 92 billion barrels, are concentrated in Abu Dhabi, which has led other emirates, in particular, Dubai, to diversify its economy into financial services, construction and tourism. Starting relatively late into energy production compared to its neighbors, the industry has helped the Emirates shift from an under-developed desert inhabited by nomads, pearl divers and fisherman into one of the highest per capita incomes in the world in just a few short decades. The UAE is also the only Gulf oil producer to retain foreign partners on a production sharing basis, allowing foreign IOCs to own up to 40% of the energy sector.
To watch: Dubai’s recovery
Dubai was hit particularly hard by the economic crisis, with its economy plunging over 5% in 2009, massive construction projects going bankrupt and Dubai World registering debts of over $60 billion dollars. Given the Emirates liquid assets, estimated to be over $800 billion, sovereign default is highly unlikely; however, by forcing Dubai to restructure its debt and re-evaluate its economic structure, it may help Dubai move toward a more sustainable macroeconomic balance.
Venezuela
97.7 billion barrels
Re-nationalization of foreign assets under President Chavez has led to a decline in the production of the prolific oil and gas reserves in Venezuela. An ongoing dispute with Western oil companies and the appropriation of billions of dollars of assets has stagnated much-needed foreign investment in the country. PDVSA, the state-owned oil company, fired 19,000 of its employees in 2002, replacing them with workers loyal to the regime, and the company lost many of its skilled employees to neighboring Colombia. Company revenues have been used to fund expensive social programs, and therefore, investment in exploration for new reserves and increasing production has gone underfunded.
To watch: A counter-Bolivarian revolution
Swept into power by a populist revolution in 1999, many Venezuelans have become disenchanted with the Chavez regime and its authoritarian tactics. Opposition movements have been gaining momentum after recent referendums to eliminate presidential term limits and increase executive branch power, and a potential counter-revolution to oust Chavez could be in the cards over the coming years.
Russia
74.2 billion barrels
After a brief flirtation with industry privatization in the post-communist era, Russia has entered an era of re-nationalization of energy. While private companies, such as Lukoil, remain technically independent from the government, many company and industry decisions are still heavily influenced by government influence. The sheer size of the country and underinvestment by foreign companies means that there are likely many more significant oil and gas discoveries to be made, however, IOCs continue to be wary of government intervention in the industry.
To watch: Yukos outcome
Once Russia’s largest oil company, Yukos was effectively shit down by the Kremlin in 2006 amid alleged unpaid tax claims of $27 billion dollars. Yukos’ CEO and Chairmian, Mikhail Khodorkvosky, was jailed and many allege that his political opposition to then-President Putin remains the real reason he remains imprisoned. Should the government pardon Khodorvosky, it would reveal, not only a changing position of lessened government intervention into business, but openness to genuine political opposition.
Libya
47 billion barrels
The longest serving ruler of all current world leaders, Colonel Muammar Gaddaffi, oversees Africa’s largest oil reserves. Current reserves could be drastically underestimated as much of Libya remains unexplored due to decades of international sanctions and disputes with international oil companies. Libya’s high oil revenues and small population have blessed the country with one of the highest GDPs per capita in Africa and have helped Libya avoid the widespread poverty found in most of the region. Currently battling dwindling production from mature fields, however, Libya will need to increase investment in research and exploration to replenish its reserves.
To watch: the post-Gaddafi era
Having ruled Libya unopposed for 41 years, and now approaching 70 years old without a succession plan, the fate of the country remains uncertain once Gaddafi steps down. A genuine democratic political transition could usher in a new era of investment into Libya’s oil and gas industry, while his replacement by another military strongman could reverse the recent opening of the economy to foreign companies.
Nigeria
37.5 billion barrels
Africa’s most populous country is also one of the continent’s largest oil producers, with prolific onshore and offshore oil and gas deposits. Oil production, however, has been a mixed blessing for the nation. Although it has brought in much needed foreign investment and capital, problems with corruption, civil unrest in the Niger Delta, oil theft (also known as “bunkering”) and environmental issues have presented serious challenges to the industry. Sound management of these issues, and continued political stability to the nascent democratic system will be necessary to ensure the continuing success of the industry in Nigeria.
To watch: the Petroleum Industry Bill
The government is currently deliberating the contents of a wide-reaching energy bill which would cover issues ranging from domestic gas management to fiscal terms for oil production. Several widely differing versions of the bill have been released and international companies are watching closely to see whether the final version of the bill, also known as the PIB, will present punitive fiscal terms that could stymie investment in the sector.
