The downturn may be over, but the oil price crash has left behind potentially long-term consequences for the oil industry. In the wake of the oil price rout that started in 2014, companies slashed expenditures, most notably in their exploration and development budgets—and this lack of investment could have severe ramifications for the oil industry.
In 2016, for a second consecutive year, 68 U.S.-listed oil companies indicated in their annual reports that their combined proved liquids reserves dropped, the EIA said in an analysis on Monday.
The 68 U.S.-listed oil companies—obliged to report proved reserves annually to the SEC—had their global crude oil and other liquids production averaging 24 million barrels per day (bpd) last year, which accounted for around 25 percent of the world’s total.
The proved reserves—the ones that companies believe they can extract from known reservoirs under existing economic and operating conditions—dropped by a net 8.2 billion barrels last year, with the decline “heavily concentrated” in several companies that have slashed proved reserves estimates from Canadian oil sands projects.
Apart from downward revisions, other factors contributing to the decline in proved reserves were relatively low extensions and discoveries, and relatively high production, according to the EIA.
Earlier this year, ExxonMobil slashed its proved reserves of crude oil by 3.3 billion barrels in the biggest annual reserve cut in Exxon’s modern history.