[duke3522]

At this time most of the major players in the oil markets have motivation to overstate reserves. At one time OPEC assigned quotas based on members current reserves. Causing many OPEC members to overstate their reserves so they could pump more oil. And, to support stock prices, major oil companies need to replace consumed oil with new reserves. But how much longer will overstating oil assets be a good idea?

As the price and economic importance of oil continue to rise, a point will soon be reached where new considerations may cause major oil producers, especially national oil companies, to begin understating, or actually hiding, new production and reserves.

There are many reasons oil producers may want to understate production and reserves. First, and most obvious, is that if TSHTF the less oil others think you have the less likely they are to try and take your oil. Second, pumping $150 oil is much better than pumping $70 oil. Third, understated reserves means less pressure from oil hungry countries to pump as much oil as possible. Fourth, and least likely, a countries government is actually looking to the future and realizes that their population might need that oil fifty years from now.

An example would be that a oil producing country decides to secretly cut back production to make current reserves last longer. Hiding the intentional cut in production in the depletion numbers. Or a small producer makes a new find that, if properly developed to maximum production, would produce 2mbd for the next 30 years. But TPTB in said country instead decide to only allow 250kbd be produced so there will be oil for the future population of their nation. Of course there will be great internal and external pressure to pump this reserve.

These external and internal pressures will make reducing/hiding new production and reserves very difficult. Pressure from those within the oil producing countries who stand to become mega-wealthy from the production of the oil, and pressure from those that want to use the oil revenues to fund social reforms. Pressure from oil starved allies who may come begging for enough crude to get their population through a cold winter. Pressure from enemies who threaten to do great harm if their thirst for oil is not placated.

In the coming years, as oil continues to grow in price and importance, the life of oil producing nations is going to change. No longer will the mega-wealthy lifestyle be easily obtained by drilling a few holes and waiting on the cash to role in. Soon nations will count their wealth by how many barrels of crude they have in their SPR. And producing nations will have to tread lightly if they do not want to find themselves ’Liberated’ from their oil.

[ClubOfRomeII]

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In the coming years, as oil continues to grow in price and importance, the life of oil producing nations is going to change.

[paoniapbud]

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In the coming years, as oil continues to grow in price and importance, the life of oil producing nations is going to change.

[MrBill]

Most of the world's remaining proven reserves are controlled by governments via their national oil companies, who may or may not publish any public accounts of reserves. Much of the analysis is therefore done by proxy. How many wells drilled for example. But it is all very imprecise.

So far NOCs have resisted any attempt for independent audits of production as might be expected at a publicly quoted oil company. Already some countries like Kuwait have had to revise their estimates of their reserves downward. And some fear that if oil is extracted too quickly from other fields that it might cause them to collapse further reducing the amount that can be extracted with known technology.

If you have noticed Venezuela for example have stopped reporting any information from its US operations to the SEC or other regulators and are selling their Citgo refineries in the USA At the same time as in Venezuela PDVSA's revenue is flowing directly to Chavez's government, bypassing the central bank that used to make revenues somewhat transparent. Therefore, we have no idea how much oil PDVSA is pumping or where it is selling that oil?

It is all designed to make the entire extraction process and laundering of the proceeds that much less transparent, so that Chavez and his cronies can do with the money what they want and no one from outside can say, 'hey, I thought production was 3 mbpd, but according to the central bank reserves, only 1.5 mbpd was sold, so either there is 1.5 mbpd missing or PDVSA pumped 3 mbpd and the proceeds from 1.5 mbpd is missing from their accounts?'

For similar games played with NOCs and the revenues from oil see Chad, Nigeria, Sudan, etc. who take loans from the World Bank, but refuse to say where their oil revenues are being spent. It is called corruption!

[peripato]

$this->bbcode_second_pass_quote('paoniapbud', 'H')mmm. As reserves are understated prices will rise. They are in the driver's seat, not us!

[MrBill]

$this->bbcode_second_pass_quote('', 'F')or similar games played with NOCs and the revenues from oil see Chad, Nigeria, Sudan, etc. who take loans from the World Bank, but refuse to say where their oil revenues are being spent. It is called corruption!
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