OPEC's Oil Reserve Revisionism


"Eventually, the revisions will have a profound effect on oil markets."

What's with OPEC member's recent oil reserve revisionism? First Venezuela, then Iraq, Iran, and then again by Venezuela in anticipation of further upgrades from Kuwait and Iraq.

Does Saudi Arabia still hold the world's biggest reserves? Not according to Venezuela. Is there more oil in Iraq than Iran, or will Kuwait soon announce it has more than both?

It's a bit puzzling because OPEC members have for decades tried to hide, not broadcast, how much oil they have.

Initially, it just seemed populist rhetoric for internal consumption meant to promise years of wealth. But the competition involves four of the five biggest reserve holders, and Saudi Arabia could be tempted to join in if its geopolitical clout gets diminished.

Venezuela has 297 billion barrels of oil equivalent in reserves, according to Oil Minister Rafael Ramirez, with approximately 220 billion barrels in the Orinoco Belt.

The revision would make Venezuela the world's top reserve holder, more than Saudi Arabia's 265 billion barrels.

The third place is a lot more debatable. Canada has around 175 billion barrels—nearly all in the form of oil sands. Without Canada, Iraq and Iran are competing for third and fourth place. Iraq last October raised its reserves 25% to 143 billion barrels, followed days later by Iran, which raised them slightly to 150B barrels. But Iraq will almost surely continue revising its reserves upward as exploration continues and it's unclear whether Iran will be able to keep up.

How much Kuwait will raise its own 102B barrels reserves in its revision expected by March? Longer term, it will likely remain behind Iraq and Iran in a solid fifth place.

Eventually, the revisions will have a profound effect on oil markets; and though it could be years before they alter oil markets, the motivation remains the key question.

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