With data showing the availability of proven reserves for only 14 years of current production, Rystad Energy, an energy market intelligence group, has pointed out that in a scenario where oil demand is on the rise, supply may struggle even with high prices, but if the energy transition gets a boost, demand could fall.
Illustration; Source: Rystad Energy
Based on Rystad Energyโs latest research, the global amount of discovered, recoverable oil resources has grown by 5 billion barrels over the past year, despite 30 billion barrels produced globally in 2024, driven primarily by the delineation of upside potential in Argentinaโs Vaca Muerta play and the Permian Delaware basin in Texas and New Mexico.
With global recoverable oil resources, including estimates for undiscovered fields, stabilized at approximately 1.5 trillion barrels, the energy market intelligence player highlights that the most significant revision over the last ten years has been in yet-to-find resources, where its projection has been reduced by 456 billion barrels.
This is said to be the result of a steep decline in frontier exploration, unsuccessful shale developments outside the Americas, and a doubling in offshore costs over the past five years. Currently, Rystad Energyโs expectations indicate reserve replacements from new conventional oil projects to be less than 30% of production over the next five years, while exploration would replace only about 10%.
Per Magnus Nysveen, Chief Analyst of Rystad Energy, elaborated: โFull extraction of these oil resources will require oil prices stabilizing at higher levels and further estimate increases will require new technologies to lower production costs.
โOver the next decades, the capital needed will likely not be available to meet continuously increasing oil demand, service prices could skyrocket, and there will likely be limited appetite for innovations to sustain such high emissions from oil.โ
With a total of 1,572 billion barrels of crude oil produced historically from 1900 through 2024, the firm underscores that the worldโs proven oil reserves equal only 14 years of production. With this in mind, Rystad elaborates that future global oil demand increases, as forecast by OPEC, will likely lead to supply struggling to meet demand, even at attractive, high prices for producers.
In a scenario where the energy transition keeps gaining ground, the company emphasizes that future oil demand is expected to fall, particularly with the greater electrification of transport vehicles, such as in China.
As a result, if oil demand rises over the next few decades, Rystad believes that global recoverable resources will not offer the supply needed to meet it. This will then create a constrained economic environment that would not be able to compete with less capital-intensive energy sources.
Taking this into account, the firm does not expect oil demand to continue to grow steeply toward 2050, with the companyโs analysis concluding that the worst-case warming scenarios evaluated by the Intergovernmental Panel on Climate Change (IPCC) will not materialize.
Artem Abramov, Deputy Head of Analysis at Rystad Energy, noted: โIn a world with flat or growing demand after 2030, another oil super-cycle would be needed. This scenario would require a substantial increase in frontier exploration and drilling success as well as accelerated deployment of secondary recovery and full-scale development of non-core shale plays in North America and globally.โ
Rystad Energyโs highest scenario with a 2.5ยฐC rise in temperature envisions a limit to future CO2 emissions from fossil fuels of 2,000 gigatons of carbon dioxide (GtCO2). While 900 Gt of these will come from coal, 600 Gt will be from oil, and 500 Gt from natural gas and natural gas liquids (NGLs), which is 500 Gt less CO2 than the IPCCโs mid-scenario that brings 2.8ยฐC of warming.
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