Jane's: World oil crisis looms

[Sliverofhope]

21 April 2004 - The oil industry has been gripped by scandal since Royal Dutch/Shell twice this year downgraded its proven oil reserves by 20 per cent, or nearly 4bn barrels. Shell may not be alone.

Other companies and even governments have hyped up the estimates of how much oil they have, which is a vital factor in measuring their economic health. If exaggeration proves to be widespread, it would have an immense impact on the Middle East, whose economic weight is almost totally dependent on oil and natural gas.

Geologists and analysts have been saying for some time that estimates of global oil reserves may be dangerously exaggerated. If you take oil prices currently at around US$37 a barrel, the highest for nearly 15 years, US petrol prices at record levels and you add terrorist attacks and diminishing supplies, you have a recipe for inflation and economic slowdown. The question of reserves becomes a much more important factor.

Earlier this month, The New York Times reported that internal documents and other data indicated that Shell had over estimated its proven oil reserves in Oman by as much as 40 per cent. But that seems to have been done because everyone hoped that the latest drilling techniques would reach more deposits than in the past and merit upgrading the estimates of reserves.

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