Major Oil Companies Report Low Reserve Replacement Ratios

March 16, 2005

The latest annual reports from the world's major international petroleum companies indicate that the companies struggled to find enough new petroleum reserves in 2004 to replace the oil they produced. One measure of oil company performance is the "reserves replacement ratio" (RRR), the ratio of new reserves to oil produced, which ideally should be greater than 100 percent. In 2004, however, using reporting rules set by the Securities and Exchange Commission (SEC), ConocoPhillips reported an RRR of 65 percent (excluding sales and acquisitions), BP reported an RRR of 89 percent, and ExxonMobil reported an RRR of 83 percent. ChevronTexaco did not explicitly state its RRR, but its net proved reserves of crude oil, condensate, and natural gas liquids (not counting sales or purchases, but including affiliated companies) decreased by 5 percent (449 million barrels) in 2004. All the companies noted that the SEC requires the use of year-end prices, which they believe distorted the reserves reporting, and noted that the net reserve changes in recent years are not necessarily indicative of future trends. ConocoPhilips and ChevronTexaco also noted that the SEC does not consider Canadian oil sands as proved reserves. See the press releases from ConocoPhilips and ExxonMobil, page 5 of BP's "Fourth quarter and full year 2004 results" (PDF 137 KB), and pages FS-63 to FS-65 of ChevronTexaco's 10-K (annual report) filing to the SEC. Download Acrobat Reader.

A report released on March 14th by DOE's Energy Information Administration (EIA) examines the performance profiles of the major U.S. energy companies for 2003. The report finds that the companies added more oil and natural gas reserves in 2003 than they extracted through production, achieving an RRR of 104 percent, up from 96 percent in 2002 but considerably below the replacement levels achieved in 2000 and 2001. See the EIA report.