Energy Reserves—Oil, Gas, Coal, and Uranium

Congress requires the U.S. Department of Energy to prepare estimates of the quantities of crude oil, natural gas, coal, and uranium that exist in the earth and can be used as fuel. These estimates, which include deposits in the United States and in other parts of the world, are considered essential to the development, implementation, and evaluation of national energy policies. The estimates are also important because these resources are nonrenewable, which means they can be used up—they are formed much more slowly than it takes to consume them.

The focus of the estimates is recoverable reserves. Proved reserves are deposits of fuel in known locations that, based on the geological and engineering data, can be recovered using existing technology. Drilling or mining for these fuels makes sense, given current economic conditions. By contrast, undiscovered recoverable resources are quantities of fuel that are thought to exist in favorable geologic settings. It would be feasible to retrieve these resources using existing technology, although it might not be feasible under current economic conditions.

Crude Oil

The Energy Information Administration (EIA) indicates in U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves: 2006 Annual Report (November 2007, http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/current/pdf/arr.pdf) that U.S. proved reserves of crude oil have declined over the decades. In the late 1970s proved reserves of crude oil were high, at about 30 billion barrels from 1977 to 1980. During the 1980s, proved reserves of oil averaged around 27 to 28 billion barrels. The decline continued through the 1990s and into the 2000s. On December 31, 2006, crude oil reserves totaled 20.9 billion barrels.

Together, Texas (4.9 billion barrels), Alaska (3.9 billion barrels), California (3.9 billion barrels), and offshore areas in the Gulf of Mexico (3.7 billion barrels) accounted for 74% of U.S. proved reserves in 2006. (See Figure 7.1.) According to the EIA, all these regions reported a decrease in proved reserves from 2005 to 2006.

Proved reserves of crude oil rose in 1970 with the inclusion of Alaska’s North Slope oil fields. However, as the oil has been extracted, the reserves have steadily declined. In U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 1996 Annual Report (November 1997, ftp://ftp.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/historical/1996/pdf/021696.pdf), the EIA notes that in 1995 Alaska’s proved reserves totaled 5.6 billion barrels of crude oil. By 2006 the state had only 3.9 billion barrels. (See Figure 7.1.) The EIA explains that proved reserves of crude oil fell by 292 million barrels in Alaska from 2005 through 2006. The Gulf of Mexico federal offshore areas had nearly 3.7 billion barrels of proved reserves in 2006, down 387 million barrels from 2005.

Natural Gas

Figure 7.2 shows the distribution of U.S. proved reserves of dry natural gas in 2006, which totaled 211.1 trillion cubic feet (Tcf; 5.9 trillion cubic m), an increase of 6.7 billion cubic feet (189.7 billion cubic m) from 2005. The United States also had 8.5 billion barrels of natural gas liquids proved reserves, a 4% increase from the volume reported in 2005.

Undiscovered Recoverable Oil and Gas Resources

Other resources are believed to exist based on past geological experience, although they are not yet proved. The EIA estimates in U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2006 Annual Report that 130.2 billion barrels of crude oil, 724.8 Tcf (20.5 trillion cubic m) of dry natural gas, and 7.7 billion barrels of natural gas liquids remain undiscovered in the United States.

Looking for Oil and Gas

Finding oil and gas usually takes two steps. First, geological and geophysical exploration identifies areas where oil and gas are most likely to be found. Much of this exploration is seismic, using shock waves to determine the formations below the surface of the earth. Different rock formations transmit shock waves at different velocities, so they help determine if the geological features most often associated with oil and gas accumulations are present. After the seismic testing has been completed—and if it has been successful—exploratory wells are drilled to determine if oil or gas is present.

Drilling activity has declined dramatically since 1981, when 92,090 exploratory wells were drilled. (See Table 7.1.) Nearly 70% of them found oil (43,887) and gas (20,250) deposits. In 2007 only 53,558 were attempted, but 88.5% were successful (oil, 14,477, and gas, 32,910). This number of wells drilled was up, however, from an all-time low of 18,939 in 1999.

In 1981 oil companies had 3,970 rotary rigs in operation. (See Figure 7.3.) By 2007 only 1,768 were operating, but this number was up from a low of 625 in 1999. According to the EIA, in Annual Energy Review 2007 (June 2008, http://www.eia.doe.gov/aer/pdf/aer.pdf), of the 1,768 rotary rigs in operation in 2007, 297 rigs drilled for oil and 1,466 drilled for natural gas. There were 1,695 onshore rigs and 72 offshore rigs. The average depth of exploratory and development wells has steadily increased, from 3,635 feet (1,108 m) in 1949 to 6,401 feet (1,951 m) in 2007. (See Table 7.1.) Gas wells (averaging 6,927 feet [2,111 m] in 2007) are typically deeper than oil wells (averaging 5,532 feet [1,686 m] in 2007).

The Cost to Drill

In 2006 the average cost of drilling an oil or gas well was about $1.8 million in real dollars (i.e., adjusted for inflation), or about $324 per foot. (See Table 7.2.) Historically, it has cost more to drill a gas well than an oil well because gas wells are deeper. In 2006, however, the cost of drilling an average gas well ($1.9 million) was lower than the cost of drilling an oil well ($2.2 million) because the average cost per foot of drilling an oil well (about $402) was higher than that of drilling a foot of gas well (about $348). Even though drilling costs have fluctuated over the years, it costs considerably more to drill a well today than it did in the 1960s and 1970s, not only because of inflation but also because all wells must now be drilled deeper.

The estimated expenditures on exploration for, and development of, oil and gas fields around the world by major U.S. companies peaked at $76.8 billion in 2000, which was a huge increase from each of the fifteen previous years. (See Table 7.3.) In 1984 the companies spent $65.3 billion, another high point. By 2006, however, expenditures had skyrocketed, with U.S. energy companies spending $157.1 billion on oil and gas exploration around the world; in the United States alone these companies spent $98 billion.

Drilling in the Arctic National Wildlife Refuge

Controversy has developed over opening part of the Arctic National Wildlife Refuge (ANWR) in Alaska to oil exploration. Oil fields in Prudhoe Bay, directly west of the refuge, supply about 60% of Alaska’s oil and 20% of the country’s domestic oil, although production is dropping steadily as the oil is extracted. In 1980 Congress passed the Alaska National Interest Lands Conservation Act, which set aside approximately 104 million acres (42.1 million hectares) for parks and wilderness areas, including 19 million acres (7.7 million hectares) for the wildlife refuge. The conservation act did not, however, include the coastal plain.

The U.S. Department of the Interior, in Arctic National Wildlife Refuge, Alaska, Coastal Plain Resource Assessment: Report and Recommendation to the Congress of the United States and Final Legislative Environmental Impact Statement (1987), recommended that the 1.5-million-acre (607,000-hectare) coastal plain be opened for exploration and extraction. It estimated that 3.2 billion barrels of recoverable oil exist in the area. It also predicted a 46% chance of recovering the oil, a high figure by industry standards. Vast quantities of natural gas are also likely to be found in the area.

Alaskan corporations supported the proposal because they wanted to share in the proceeds. Environmentalists strongly opposed the plan because of potential damage to the habitats and migration patterns of wildlife such as caribou, polar and grizzly bears, musk ox, wolves, arctic foxes, and millions of nesting birds.

The Department of the Interior did state that oil exploration could have a major effect on the migratory caribou herds, which number about 180,000 animals. Even though environmentalists estimated that 20% to 40% of the animals would be threatened, Department of Interior officials predicted the caribou would change their migratory habits.

If the coastal plain were opened to drilling and major oil reserves were found, oil companies could operate there for several decades. Debate over opening the region to oil drilling has continued for decades. In the press release “President Bush Discusses Energy” (June 18, 2008, http://www.whitehouse.gov/news/releases/2008/06/20080618.html), the White House notes that in June 2008 President George W. Bush (1946–) moved the debate forward by urging exploration in the ANWR with the goal of expanding U.S. production of oil.

Coal

The EIA estimates that on January 1, 2007, the United States had 491.1 billion short tons (445.5 billion t) in coal reserves. (A short ton is 2,000 pounds [907 k].) (See Table 7.4.) About 42% of this coal, 208.6 billion short tons (189.2 billion t), is underground bituminous coal. Montana (119.3 billion short tons [108.2 billion t]), Illinois (104.4 billion short tons [94.7 billion t]), and Wyoming (63.3 billion short tons [57.4 billion t]) have the largest reserves of all types of coal.

Besides untapped coal reserves, large stockpiles of coal are maintained by coal producers, distributors, and major consumers (such as electric utility companies and industrial plants) to compensate for possible interruptions in supply. Even though there is little seasonal change in demand for coal, supply can be affected by factors such as miners’ strikes and bad weather. In Annual Energy Review 2007, the EIA states that coal stockpiles totaled 189.4 million short tons (171.8 million t) in 2007. Electric utilities held about 80% of this coal, whereas coal producers and distributors stocked 16%. The industrial sector stockpiled the remainder.

Uranium

The United States has enough uranium to fuel existing nuclear reactors for more than forty years, so exploration for new reserves has been reduced. The EIA indicates in Annual Energy Review 2007 that in 2003 uranium reserves totaled 1.4 billion pounds (635 million kg) of uranium oxide, mostly in Wyoming and New Mexico. In “Number of Uranium Mills and Plants Producing Uranium Concentrate” (August 5, 2008, http://www.eia.doe.gov/cneaf/nuclear/dupr/qupd_tbl2.pdf), the EIA notes that the number of uranium mills producing uranium concentrate dropped from eleven at the end of 1997 to two at the end of 2003, but then rose to six at the end of 2007.

International Reserves

Crude Oil

Estimated world crude oil reserves totaled between 1.1 trillion and 1.3 trillion barrels as of January 1, 2007, with most of it located in the Middle East. (See Table 7.5, which provides two different sets of estimates—one from Penn-Well’s Oil & Gas Journal and one from Gulf Publishing Company’s World Oil.) Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates, Canada, Venezuela, and Russia had the largest reserves. The United States had 21 billion barrels of reserves, or about 1.7% of the world’s total oil reserves.

Even though countries with large proved reserves have fewer incentives to find new fields, companies from many nations have turned their attention to areas where production has been limited or nonexistent, such as Azerbaijan, Kazakhstan, and other areas around the Caspian Sea; the northeastern Greenland Shelf; the Niger and Congo delta areas in Africa; and off Suriname in South America.

Natural Gas

Depending on the estimate, Russia had between 1,680 and 1,688.8 Tcf (47.6 and 47.8 trillion cubic m) and the Middle East had between 2,566 and 2,555.1 Tcf (72.7 and 72.4 trillion cubic m) of natural gas reserves on January 1, 2007. (See Table 7.5.) Russia has the largest natural gas reserves in the world, and Iran and Qatar possess the largest natural gas reserves in the Middle East. Large reserves (more than 100 Tcf [2.8 trillion cubic m]) are also located in Saudi Arabia, the United Arab Emirates, the United States, Nigeria, Algeria, Venezuela, and Iraq.

Coal

The EIA reports in Annual Energy Review 2007 that worldwide recoverable reserves of coal were estimated at

930.4 billion short tons (844.1 billion t) in 2005. The three countries with the most plentiful coal reserves in 2005 were the United States (264 billion short tons [239.5 billion t]), Russia (173 billion short tons [157 billion t]), and China (126 billion short tons [114.3 billion t]). (See Figure 7.4.)

Uranium

In “Supply of Uranium” (June 2008, http://www.world-nuclear.org/info/inf75.html?terms=uranium+reserves), the World Nuclear Association notes that the countries with the largest known recoverable reserves of uranium as of 2007 were Australia, Kazakhstan, Russia, South Africa, Canada, the United States, Brazil, Namibia, Niger, Ukraine, Jordan, and Uzbekistan. Australia had 1.2 million metric tons (1.3 million short tons), or 23% of the world total, and Kazakhstan had 817,000 metric tons (901,000 short tons, or 15%). The United States possessed 6% of the total world reserves of uranium, which were estimated at 342,000 metric tons (377,000 short tons).