The World Needs 390 Billion Barrels of New Oil Production by 2035

Photo credit: Anadarko.

Production from legacy oil wells is declining each year. At the same time, demand from emerging markets is rising rapidly. When those two things collide, it leaves a production gap of 390 billion barrels of oil that energy companies need to make up between now and 2035.

Just to put that number into some perspective, current U.S. proven oil reserves, which are 12th in the world, were just 29 billion at last count. That means the world's oil companies have a lot of work to do if they want to add enough production to both offset declines while meeting growing demand. The following slide shows our current conundrum.

Source: Chevron Investor Presentation (link opens a PDF).

The good news is that at last count, the world had nearly 1.5 trillion barrels of proven oil reserves, with the likelihood that even more oil will be discovered in the future. That means there's plenty of oil to meet the world's demand. The problem is getting those reserves into production. That's because, as the preceding slide suggests, new oil production will come from increasing complex resources and will require $7 trillion to $10 trillion in additional investments. The bottom line is that oil companies will need to invest heavily to find and unlock all that oil to meet the world's future needs.

One company leading the way to provide a solution to this challenge is Chevron (NYSE: CVX  ) . The oil company is investing heavily to grow its current production by 25% by 2017. That's truly remarkable growth for a company of its size. It currently has 50 projects starting up between now and 2017 where it's investing at least $250 million. Among these are major projects in the Gulf of Mexico starting up over the next few years, as well as longer-term developments in the promising Vaca Muerta shale of Argentina. Chevron really is very well positioned to help to world meet its demand for oil. 

Another company with big plans to fuel the globe's thirst for oil is Brazil's Petrobras (NYSE: PBR  ) . The company's current plan has it spending $236.7 billion through 2017. Incidentally, that's about the current size of Chevron's entire equity market capitalization. While only $147.5 billion of that capital will be spent on exploration and production, we're still talking about a whole lot of money being spent in an effort to grow its oil production. If all goes according to plan, the company should be able to double its production by 2020.

Sticking with the international theme, Norway's Statoil (NYSE: STO  ) is another company focused on meeting the world's oil needs. The company has made nine recent high-impact discoveries, which will drive future production growth. In fact, last year it discovered the third largest volume of oil and gas among its peer group. With the billions it spends each year on exploration, it sees the potential for another 20 high-impact wells by 2015.

Finally, one oil exploration company that doesn't get a whole lot of credit is Anadarko (NYSE: APC  ) , which was right behind Statoil in terms of volumes discovered last year. It's repeating that success this year, having announced three major discoveries in the Gulf of Mexico. The company sees these projects driving 5%-7% annual oil and liquids production growth through 2020, with future upside if it discovers more oil than expected.

Finding and producing the 390 billion barrels to fill the globe's demand will keep oil companies busy. The good news is that the resource is there. Oil producers just need to invest a lot of capital to get it. That should prove to be a very profitable as long as oil prices stay over $100 per barrel, which is a pretty sure bet. 

The key to these discoveries is high oil prices
Natural decline, growing demand, and high capital costs mean that the days of $100 oil are here to stay. What it also means is that those investors that are positioned to profit from of $100 oil should do very well over the coming years. To help investors get rich by being positioned to profit off rising oil prices, our top analysts prepared a free report that reveals three stocks that are bound to soar as oil prices climb higher. To discover the identities of these stocks instantly, access your free report by clicking here now.


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  • Report this Comment On September 22, 2013, at 3:11 PM, luckyagain wrote:

    All the more reason for the US to push forward the use EV and hybrid cars. Every EV and hybrid cuts future oil consumption. It is impossible to totally forgo using oil to power our vehicles but cutting consumption as much is possible allow oil reserves to go further and will limit price increases in the future.

  • Report this Comment On September 22, 2013, at 6:08 PM, tigerade wrote:

    If you think that America should stay dependent on oil for the next 20 years, then you truly are a glutton for punishment. Oil has a future for sure, but it's a future that's very ugly for the consumer, unless high prices are your thing. Developing countries are going to soak up a bulk of the oil demand so high prices are here to stay. The U.S. should be doing everything possible to get off the stuff.

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