FYI Oil Resource Chart

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Hannah Ritchie from By the Numbers <hannah...@substack.com>  Unsubscribe	12:21 AM (17 hours ago)		You can't react with an emoji to a group Reply More
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	Forwarded this email? Subscribe here for more Five(ish) charts that give some context to Venezuelan oil It has the world's largest reserves, produces comparatively little, and has a type of oil that the US needs. HANNAH RITCHIE JAN 5   READ IN APP   Over the weekend, the United States bombed Venezuela, and captured its president Nicolás Maduro. There has been a lot of speculation about the legality, true motive and implications going forward. Oil has been a central part of the discussion. I wanted to get a quick overview of what the global picture looks like. So here are five(ish) simple charts that give some context on the history of oil in Venezuela, and why the United States — which is, by far, the world’s largest producer itself — would care so much.¹ 1) Venezuela has the world’s largest oil reserves While we often think about the Middle East when it comes to large oil stocks, it’s Venezuela that has the largest proved reserves in the world. The chart below shows the ten countries with the largest proved oil reserves. These are deposits that are deemed economically feasible to extract under current market conditions. This number can change as new reserves are found, or become economic. Venezuela has about as much oil as Iran and Iraq combined. Its current proved reserves are more than four times larger than the USA’s.² This data comes from the Energy Institute’s Statistical Review of World Energy. 2) Venezuela produces relatively little oil Despite having a lot of oil, Venezuela doesn’t produce much compared to its own reserves and other large producers. Here are those same countries (not necessarily the top ten producers, although the US is the world’s largest). Venezuela is bottom of the list. It produces less than 5% of the US’s output, despite having far more available. 3) Venezuela has an extremely large reserves-to-production ratio Combining these two metrics gives us the “reserves-to-production ratio” (R/P). It tells us how many years a country’s proved reserves would last if production stayed constant and no new reserves became economically viable. Those are big ifs. Because reserves and production can change a lot, this is not a prediction of when a country will “run out of oil”. Since Venezuela has huge proved reserves and produces comparatively little oil, its R/P ratio is very large. In 2020 — a low point for oil production — the Energy Institute had it at over 1500 years. This figure is very sensitive to production: if output were higher, the ratio would fall proportionally (for example, doubling production would halve the R/P ratio). So don’t focus too much on the exact number; the point is that it is big. That contrasts sharply with the 11 years for the United States. Again, this does not mean the US will run out of oil in 11 years: its proved reserves fluctuate a lot as prices, technology, and investment change. The contrast is stark: Venezuela has a massive proved reserves base that is not being translated into production, while the US is very active in production and continually replenishes its proved reserves through new drilling and development. 4) Venezuela produces much less oil than it did in the past Venezuela’s oil production hasn’t always been so low. It was more than three times higher than it is today in the early 1970s, the late 1990s, and the early 2000s. You can see this in the chart. Venezuela’s output comes from its state-owned oil company’s (PDVSA) operated fields and joint ventures with foreign partners (such as Chevron). In these joint ventures, PDVSA typically owns at least 60%. Production dropped off rapidly post-2014, when oil prices were very low (which hurt a lot because oil was a large part of the economy). Chronic underinvestment in infrastructure and mismanagement throttled supply. Economic sanctions (including from the US) and limited access to foreign investment throttled export markets and financial support. Nicolás Maduro, Venezuela’s now-captured President, first came to power in 2013. Most of this recent decline in oil output has largely occurred during his presidency. Just for perspective, this is the difference in oil production between Venezuela and the US. While output in Venezuela has declined in the last decade, the US has been at or close to record highs in recent years. 5) Much of US crude oil production is light, while many refineries still rely on heavier crude oil All oil products are not equal. You can get very different products, and in particular, different densities, ranging from “heavy” oil (which is very viscous) to “light” oil (which is much less so). Oil extraction in the US has become increasingly “light”, particularly since the shale revolution (which produces light products). The issue is that many of its refineries are designed to process heavy oil, and it would be expensive to completely retrofit them. That means the US still imports a lot of oil (mostly heavy oil), despite producing vast amounts domestically. It imports heavy crude oil from countries like Canada and Mexico, and exports lighter crude and refined products. You can see this in the chart below: it produces vast amounts of petroleum domestically, but still exports and imports a lot. This wouldn’t make sense if these were the same products, but they’re quite different. Where does Venezuela come in? Well, a lot of its oil reserves are the “heavy” kind, which the US doesn’t produce a lot of domestically. Venezuela is one potential source of heavy barrels compatible with US refineries. Source: US Energy Information Administration In summary Venezuela has the largest oil reserves in the world. It has far more than the United States. Today, it produces very little. Far less than the United States. That means it has a large amount of proved reserves that are not being translated into production. Historically, it produced a lot more, and in principle, could do much more again. However, the timeline for this is uncertain; it could take up to a decade for production to return to previous levels, even with substantial investment. Venezuela has exactly the type of oil (“heavy oil”) that the US lacks and needs. So its interest is not only about the quantity, but about the type. Pledge your support 1 Note that here I'm looking at oil purely through the lens of supply, demand and resources. I'm not looking at the climate implications. To stay anywhere close to global climate targets, most of these reserves will need to stay in the ground. 2 Again, this is based on proved reserves, and this value for the US can move around a lot from year to year. By the Numbers is free today. 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