Interesting tidbit of news.
Red
Thursday May 13, 4:29 pm Eastern Time
US oil reserves fall alarmingly-report
By Andrew Mitchell
LONDON, May 13 (Reuters) - U.S. oil reserves shrank dramatically last year as new finds lagged
far below production levels, a report by a leading analyst said on Thursday.
''For the first time in five years domestic proved oil reserves declined; the net loss was an
alarming 895 million barrels or nearly five percent,'' said Connecticut-based analysts John S.
Herold.
The United States, the world's biggest oil market, each year relies on imports for a growing proportion of its consumption. Foreign oil
now accounts for just over half the country's 6.6 billion barrel yearly demand.
Top U.S. oil firms added just 1.23 billion barrels to their reserve banks in 1998 -- 65 percent less new oil than the previous year and
around a quarter less than the oil they actually produced.
The slide in reserve replacement was steeper still if additions were judged just by actual discoveries, stripping out acquisitions of
existing finds.
''Finding and development oil additions were down an astounding 78 percent to 511 million barrels,'' the report said. ''Drillbit
replacements were pathetic, accounting for only 31 percent of 1998 production.''
The failure to replace reserves meant the cost for any oil that was found went through the roof.
''Reserve replacement costs were up a shocking 68 percent to $8.95 a barrel. Even more disturbing was a near doubling in U.S.
development costs last year to $12.26 per barrel,'' the report said.
Shell Oil (quote from Yahoo! UK & Ireland: SHEL.L) and BP Amoco (quote from Yahoo! UK & Ireland: BPA.L) experienced the largest
downward revisions to domestic oil reserves at 97 million barrels and 90 million barrels, respectively.
Smaller firms like Range Resources(RRC - news), Vintage Petroleum (VPI - news) and Barrett Resources also had to revise their
booked reserve bases down by up to a half, the report said.
Adding to the industry's concern was evidence that companies could find even less this year as budget cuts put in place during last
year's ferocious price slide stifle exploration.
Spending cuts carried out last year were surprisingly moderate, the report said. Average capital expenditure was down around six
percent against 20 percent spending reductions laid down for this year.
Exceptions to the gloomy picture included Exxon (XON - news) which added 111 million barrels to its reserve base and Arco (ARC -
news) which swelled by 72 million barrels.
The Herold study uses proved reserves, the strictest definition which excludes possible reserves from existing finds or future
discoveries.
It surveys the top 50 U.S. exploration and production firms, which account for around half of U.S. oil output and reserves.
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