A drop in crude prices that rendered reserves in Canada's oil sands regions unprofitable put a large dent in global proved reserves, the U.S. Energy Information Administration reported.
The proved reserves of 68 publicly traded oil companies reviewed by the EIA showed a net reduction of 8.2 billion barrels of oil and liquid petroleum products, to just over 100 billion barrels. Reserves hit a peak of almost 120 billion barrels in 2014. The reductions came as companies slashed spending after world oil prices tumbled by more than half from 2014 and drillers produced 8.9 billion barrels in 2016, the EIA said in a June 12 bulletin on its website. It was the second straight year of reserve declines.
The decrease reflected change in status of a number of reserves booked in Canada's oil sands. In order to be classified as proved, companies must be able to economically produce the oil at existing prices. High extraction costs in the oil sands resulted in U.S. giant Exxon Mobil Corp. removing 3.5 billion barrels of reserves from its books while ConocoPhillips took off more than 1 billion barrels of bitumen, or extra-heavy crude extracted from oil sands deposits.
In total, just under 8 billion barrels of Canadian oil sands crude was debooked, while Latin America, which also has substantial heavy crude reserves, had the second-biggest reserves decline, at just over 1 billion barrels, the EIA said.
"Extensions [more resources at existing fields] and discoveries [resources at new fields] represent newly found quantities of oil and totaled 4.9 billion barrels across the 68 companies in 2016," EIA analysts led by Industry Economist Jeff Barron said in the posting. "Following the crude oil price decline beginning in mid-2014, companies significantly reduced capital expenditures, especially in their exploration and development budgets. Instead, they focused on extracting additional oil from reserves developed in previous years."
The trend to lower reserves is unlikely to be reversed in 2017 as exploration expenditures remain lower than they were in 2016, the EIA said. The report noted that while the 45 reviewed companies that produce less than 250,000 bbl/d raised spending year over year by an aggregate of $2.6 billion in the first quarter, 22 of their larger counterparts reduced capital expenditures by a cumulative $10.8 billion.
So far in 2017, ConocoPhillips and Royal Dutch Shell plc have sold most of their Canadian oil sands assets.