For Third Year Straight, Oil Majors' Reserves Slip Below Replacement Rate

[hatrack]

HOUSTON (AP)--The world's major oil companies replaced reserves at levels below 100% for the third straight year in 2006, while costs to find and produce the key asset continued to rise, a new analysis shows. Reserve replacements last year, excluding acquisitions and divestitures, were 91%, slightly below the 92% replaced in 2005, according to a report released Thursday by investment bank Bear Stearns & Co.

At the same time, the companies' search and development costs rose to $13.63 per barrel of oil equivalent, up 28% from 2005, the report said.

Reserve replacements represent the ratio of reserves found over production for a given period. Analysts typically say a company's reserves replacement should average more than 100% over a three- to five-year period to indicate growth. "The major oils continue to record reserves in large blocks, but with less frequency," the report said. "The timing of these bookings causes swings in reserve-replacement performance."

Jeff Tillery, an analyst with Pickering Energy Partners in Houston, said declining reserves could have some effect on rising gasoline prices, particularly as worldwide demand grows. But he said companies such as Exxon Mobil Corp. (XOM), Royal Dutch Shell PLC (RDSA) and other majors produce a small portion of the world's oil and gas compared with government-controlled national oil companies.

EDIT

http://www.smartmoney.com/bn/on/index.cfm?story=on-20070621-000971-1640

[Deja Q]

1. They make their own profits. n/t

[Warren Stupidity]

2. Nothing to see here.. move along. nt.