Where is it?

The Middle East dominates proven reserves of oil, specifically oil that has
been discovered and is considered economic to produce at today s prices, cost
structure and technology. The Middle East currently has almost two-thirds of the
1.15 trillion barrels of the world s proven reserves (BP Statistical Review),
which is why the region has disproportionate geopolitical importance.

The distribution of proven reserves is only a rough approximation of how oil is

distributed around the world. For example, the deep waters of the Gulf of
Mexico and offshore West Africa have only been added to the proven reserves
list relatively recently, as technology to develop their oil has become availabl
e.
In addition, countries that are open to private industry tend to be underreprese
nted,
because commercial incentives encourage companies to hold only
as many reserves as they can develop and bring to market within a reasonable
timeframe.
-----Who produces it?
Saudi Arabia (9.8 million barrels/day (mb/d) in 2003), Russia (8.5) and the US (
7.5).
Between them, they produce over a third
of the world s crude oil, condensate and natural gas liquids. The rest of the
world s production is widely dispersed among more than 60 countries, none of
which accounts for more than 5% of the total.
------Who uses it?
The three large consuming regions
North America, Europe and AsiaPacific are all net importers. All the other regions are net exporters.
------------------------Product trends
The growth in oil demand has been biased toward the higher-quality, harder-toref
ine
products. Light distillates (gasoline and
naphtha) and middle distillates (diesel, jet fuel, heating oil and kerosene) now
account for two-thirds of world oil demand. Each has a market share that is at l
east
double that of residual fuel oil.
-------------------USes of Oil:
Transportation, power generation, and heating ,feedstock for the petrochemical i
ndustry.
------------------------------------------Costs
Upstream performance measures:
- Finding & Development costs - rose 31% and have continued to rise since, as re
serves added fall and finding and development expenditure increases
- Production costs - Production costs comprise staff costs, on-site energy costs
, rental of capital equipment and consumables

- Reserve replacements - fell steadily as a result of improved technologies and

lower royalties -company s ability to replace production with new finds,
upward revisions to earlier reserves estimates (once a field is in production),
or
acquisitions
- Technical costs Finding and development, production and technical costs are all currently rising
.
This is partly due to dwindling production from mature fields, which increases t
he capex and opex necessary to maintain
production from ageing facilities.
Additionally, as fields mature, companies intensify the search for new reserves,
which are becoming scarcer.
Finally, raw materials such as steel (which is used extensively by oil companies
)
are rising in cost as the dollar (the default currency of oil company revenues)
is
falling. These effects act to further squeeze margins.
Fortunately for the oil companies, the significant rise in oil and gas prices ha
s
outweighed these cost pressures
----------------