The price of a barrel of West Texas Intermediate (WTI) crude oil has fallen from more than $100 a barrel in late June to less than $60 a barrel. While the broad outline of the reason for the drop is simple — supply is outstripping demand — the devil, as always, is in the details.
Demand is dropping largely because global economic growth has slowed. The emerging economies of Brazil, Russia, India and China have faltered or gone into reverse. The developed economies of Europe are teetering on the edge of another recession, and U.S. economic growth, though better, is erratic. Add to this lower demand for transportation fuel as automakers build more fuel-efficient vehicles.
On the supply side, North American shale oil has dramatically changed the picture. U.S. crude oil production is at a 40-year high and shows little sign of slowing down. OPEC has said it will not cut production as it fights to keep market share, and Russia needs to produce and sell as much oil as it can to keep its economy from collapsing. Thus, no cut in supply, at least not yet.
That potential supply is filled by global proved oil reserves that totaled 1.635 trillion barrels in January 2013. At the current global consumption rate of about 90 million barrels a day, those global reserves will last about 50 years.
Of the top 10 countries holding portions of those reserves, only Canada does not have a national oil company, and the nine that do control 1.23 trillion of the world’s total proved reserves. That is about 75% of the world’s proved reserves that are off-limits to private oil companies.
By comparison, the portion of the world’s total proved reserves owned by the 10 largest oil companies is about 75.23 billion barrels, or 4.6%.
The world’s largest oil companies are in something of a bind. Most made investment decisions several years ago that did not take into account the impact that shale oil would play. In 2009, North Dakota produced just 218,000 barrels of crude a day. Today it produces more than a million barrels a day.
The big oil companies had begun making investments in large and costly offshore oil and gas projects and in Canada’s oil sands, because that is where the best opportunities appeared to be. Horizontal drilling and hydraulic fracturing (fracking) had not yet proven their effectiveness. As a result, none of the top 10 companies is much of a factor in the North American shale bonanza.
The massive costs of many of these huge offshore and oil sands projects were justified by an assumption that oil would sell for more than $90 a barrel. Until June that was still true. Now, however, the situation is different, and Big Oil may run into some cost problems. Still, they do have one big positive — their proved reserves.
Even the largest unconventional producer in the United States, Continental Resources Inc. (NYSE: CLR), claims less than a tenth the proved reserves of the largest of the Big Oil companies. If they must, the top companies can just leave the oil in the ground until the price rises. Many smaller shale producers may have to sell or even file for bankruptcy if prices fall below $50 a barrel.
What follows is a look at the top 10 oil companies in the world based on proved reserves. Proved reserves, by definition, are those that have a “reasonable certainty” of being extracted at current economics. That certainty is often quantified as 90%. Of course, the proved reserves total will rise and fall with new discoveries, production and, obviously, market price. If it is economically feasible to pump a barrel at $90, it may not be economically feasible at $50, for example.
The companies in our list are all at least partially publicly traded on a U.S. exchange, even though a couple are controlled by their country’s governments. Company data were gathered from S&P Capital IQ. Reserves and production figures do not include natural gas or non-oil liquids.
Here are the top 10 oil companies in the world based on proved reserves of oil.