When BP first formed an alliance with Rosneft in 1998 to develop the Sakhalin fields in the Pacific Ocean, the UK oil giant estimated Russia's oil reserves at 56 billion barrels.
When BP agreed its share-swap with the Moscow-based energy group last weekend, the estimate was 75 billion barrels, and development of Rosneft's licences inside the Arctic Circle could increase production enormously.
Such advances undermine the pessimists' predictions that the world's oil will imminently run out. In 1956, when the concept of "peak oil" – the point at which production starts falling – was formulated, US output was expected to fall from the late 1960s. But new discoveries have constantly pushed that date back. BP was estimating world oil reserves at 1 trillion barrels 20 years ago: now, despite record consumption, the estimate is 1.333 trillion.
In the developed world at least, energy consumption has flattened and may already have started a permanent decline. Demand fell by 1.1 per cent in 2009, although that may have had as much to do with short-term recession as with long-term efficiencies and changes in usage.
Francis Osborne, an analyst at energy consultants Wood Mackenzie, believes that demand has now bounced back and is heading for new records. "Just three years from the onset of the great recession, global oil demand has recovered to the pre-recession peak seen in 2007," he says.
But there are changes both for the producers and consumers of oil. While the 34 developed nations in the Organisation of Economic Co-operation and Development (OECD) have reduced usage by almost four million barrels a day since 2007, the emerging states are vastly increasing their demand. China's consumption rose by 8.7 per cent last year.
"The impact of the recession on oil demand in the OECD and emerging markets could not be more stark," says Osborne. "The global market is diverging as never before. Emerging markets account for 85 per cent of the recovery in demand, and in 2011 and 2012 we expect 80 per cent of the increase in global demand to come from these markets.
"By 2012, we expect OECD demand to still be more than 5 per cent below pre-recession levels, while demand in the emerging markets will by 6.5 million barrels a day higher."
Even with Western economies picking up, BP expects that disparity to continue. It revealed projections last week that it normally reserves for internal use but which show OECD energy demand rising at just 0.3 per cent a year over the next two decades – and consumption per head falling – with domestic users and service businesses accounting for all that growth while manufacturing and transport usage falls. However, other countries' consumption will increase by 2.6 per cent annually, says BP, meaning that emerging markets will use 68 per cent more power in 2030 than today.
That extra demand puts pressure on the world's reserves of oil, natural gas and coal. BP reckons that the 1.333 trillion barrels of known oil reserves are sufficient to last for just over 45 years – though time estimates vary greatly. Saudi Arabia has sufficient supplies to meet its needs for 66 years and Iraq has enough for 142 years, while the US would run out by 2018 if it did not import.
Oxford University's Smith School of Enterprise and the Environment, headed by the Government's former chief scientific adviser, Sir David King, has published a paper saying the world's ability to meet future oil demand is at a tipping point. The true level of reserves is only 850 billion to 900 billion barrels, meaning the age of cheap oil is over.
Commenting on that paper, Jörg Friedrichs, a fellow at the school, avoids saying whether peak oil has been reached but warns that the effects are potentially disruptive.
"Oil is a finite resource," he says. "It will run out at some point. Reactions would differ in different parts of the world. Increasing conflict over scarce energy would undermine the foundations of the worldwide social, economic and political normalisation processes that have been observed over the past few centuries."
Friedrichs suggests the US and China may resort to military action, using their might to secure access to oil, while oil-producing countries could use their enhanced wealth to subsidise their own citizens.
"Exxon and Shell would lose further ground to state-controlled exporting countries such as Saudi Arabia's Aramco or Nigeria's NNPC," he says. "Even oil importing countries would increasingly rely on state-controlled companies such as China's CNPC. In the event of peak oil, it seems reasonable to expect a redistribution of power and wealth from oil importers to oil exporters and from private to state-controlled companies."
Bob Dudley, BP's chief executive, conceded that last week after signing his own deal with Rosneft, which is 85 per cent owned by the Kremlin. He said rivals such as Shell, ExxonMobil and Chevron will need to change their own models by forming links with state-backed oil businesses.
BP followed its 1998 link with Rosneft with an agreement four years ago to undertake scientific research together in the Russian Arctic. The US Geological Survey estimated two years ago that the whole Arctic, including Greenland and the Barents Sea, has 90 billion barrels of undiscovered oil and 44 billion equivalent barrels of gas; BP's new deal provides access to 125,000sq km in the South Kara Sea, an area with the size and prospects of the total North Sea fields.
Russia is already the world's top oil and gas producer: its equivalent of 18 million barrels of oil a day now exceeds America's 17 million and is far ahead of Saudi Arabia's 11 million. But while the extent of its reserves is constantly being revised upward, so too are those of many other countries.
In 1980, BP estimated Nigeria's reserves at 16.7 billion barrels; now it says they are 36.2 billion. During that time, estimates of Libya's reserves have been increased from 20 billion to 44 billion, Venezuela's from under 20 billion to almost 100 billion and Iraq's from 30 billion to 115 billion. New discoveries are running at 15 billion to 20 billion barrels a year, meeting at least half the global consumption.
Drilling off the Falklands could provide a new supply and Cuba may have up to 20 billion barrels, while some estimates suggest America's outer continental shelf could provide the equivalent of 100 billion barrels of oil and gas. Despite BP's disaster in the Gulf of Mexico last year, companies such as Shell are still drilling there to tap reserves 3km below sea level. The Canadian oil sands are estimated to hold a trillion barrels too and US oil shales have as much.
Iraq, where Shell is developing the Majnoon field, will account for a fifth of global supply growth over the next 20 years, says BP, with capacity potentially reaching 12 million barrels a day by 2020.
Oil is nevertheless in long-term decline, being replaced as an energy source by natural gas and, in the short-term – thanks to Indian and Chinese demand –by coal. By 2030, the world will be consuming those fuels in equal quantity, says BP, but after that gas will be most important – and Russia, with 24 per cent of production, currently dominates that market.
From next year, Shell will produce more gas than oil, and last year it added 5 per cent to world liquid natural gas capacity with its own Sakhalin II project in partnership with Russia's state-controlled Gazprom.
The day the world's energy sources run dry is thus being pushed even further away, despite Mr Osborne at Wood Mackenzie forecasting that demand will rise this year from 86.7 million barrels a day to 88.1 million and reach 90 million in 2012. BP's Bob Dudley concedes: "OECD demand likely peaked in 2005 and consumption is expected to decline by just over four million barrels a day. Growth comes exclusively from rapidly growing non-OECD economies."
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