World's oil resources to take 280 billion barrel hit from COVID cutbacks: study

London — The world's potential oil resources have been cut by over 280 billion barrels as a result of exploration budgets being slashed in response to the COVID-19 pandemic, according to Norwegian energy consultancy Rystad Energy.

Total global expected remaining recoverable oil resources currently stand at around 1.9 trillion barrels, a fall of 282 billion barrels, or 13% on year-ago estimates, Rystad said June 18.

With oil producers slashing billions of dollars in upstream spending following the oil price collapse earlier this year over COVD-19, future discoveries in remote, high-cost exploration plays outside the Middle East will be hit hardest, Rystad believes.

"Non-OPEC countries account for the lion's share of 'lost' recoverable resources with more than 260 billion barrels of undiscovered oil now more likely to be left untouched, especially in remote exploratory areas," said Rystad Energy's Head of Analysis, Per Magnus Nysveen.

In the US, lower upstream activity in shale acreage, less drilling in the Gulf of Mexico, and a reduced number of licensing rounds on the Atlantic West Coast means almost 50 billion barrels of recoverable oil will not be found, Rystad believes.

High cost, unconventional heavy oil resources in Canada and Venezuela will see their future recovery cut by 14 billion and 21 billion barrels respectively while Mexico will suffer from less deepwater and shale drilling.

Supply crunch

In Russia, Rystad said it sees more potential Arctic offshore oil being left in the ground due to lower spending coming sooner, reducing oil resources by 31 billion barrels.

Global oil and gas operators have cut 2020 capex by a combined $106 billion (-28%), according to S&P Global Platts Analytics, with the spending curbs set to depress oil supply estimates well into the new decade.

The spending and activity slump during the downturn will likely remove about 6 million b/d from global production forecasts for 2025, Rystad believes, setting the stage for a supply deficit of around 5 million b/d that year.

Rystad's baseline oil resources estimates use a broader definition of reserves than those from BP's widely referred to estimates of proven oil reserves.

BP estimated on June 17 that the world's total proven oil reserves stood at 1.73 trillion barrels at the end of 2019, little changed from 2018, based on recoverable oil from discovered fields under current economic conditions.

Rystad's oil resources figures include proven and probable reserves as well as contingent reserves from unsanctioned projects and prospective recoverable resources.