New oil finds

By Daniel O'Sullivan & Martin Li, 18 February 2010

The rising oil price and the return of risk appetite pushed many oil shares higher during 2009. With sector conditions remaining benign, identifying the real stars of 2010 could prove more challenging, although with exciting exploration campaigns under way or about to start around the world, this year's winners are likely to be those most successful with the drillbit.

BP statistics show that the world has vast proved energy reserves of 1.3 trillion barrels of oil and 185 trillion cubic metres of natural gas. At current rates of usage, that's equivalent to over 40 years' usage of oil and over 60 years' usage of gas – even if we never find another barrel of either.

With such reserves to fall back on, one might question why oil and gas exploration is even necessary, particularly with the growing (albeit from a low base) contribution from renewable sources. The answer has two parts. First, usage will almost certainly not remain at current levels.

Second, an often-quoted industry mantra is that "the easy oil has been found", or at least the easy oil still accessible to western explorers has been found. BP statistics show that 86 per cent of global proved reserves lie under the control of Opec (Organization of Petroleum Exporting Countries) and Former Soviet Union countries. With a flourishing global oil services industry to provide technical extraction expertise where necessary, these countries no longer need to call in western major oil firms to help them develop their fields. If they do call in western majors, it's now more likely to be on contracts to increase production.

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