U.S. Oil Production Trends
Research for Online Investors

Energy Information Agency

07/24/09

The general rule is that oil production from mature areas, particularly regions that have been heavily exploited, decline over time. Consequently, global oil production growth depends on large oil projects, generally in “new” areas including deepwater offshore, or in previously inaccessible areas. Few oil producing regions are more mature than the United States, with cumulative production of about 198 billion barrels and, as of the end of 2007, only a little over 21 billion barrels of proved reserves. In general, a quick review of U.S. reserves trends over the past 5 years shows a lot of evidence of a fairly mature production environment.

Between 2003 and 2007, oil reserve additions in the United States totaled a little over 7.4 billion barrels. Production, however, totaled almost 8.8 billion barrels, so net reserves declined by almost 1.4 billion barrels over that period. On average, net reserves for the United States as a whole declined by 1.2 percent per year, though they actually rose by 1.6 percent from 2006 to 2007. The higher recent prices may have been a factor in the rise.

The most significant declines in reserves for the five-year period were in Federal waters offshore in the Lower-48 States. Oil reserve additions in the Federal offshore Lower-48 totaled a little over 1.2 billion barrels, but production totaled over 2.3 billion barrels, so net reserves declined by 1.1 billion barrels over that period, representing about four-fifths of the decline. On average, net reserves for the Federal offshore Lower-48 declined by almost 5 percent per year.

On and offshore Alaskan production also declined over the five-year period. Alaskan oil reserve additions totaled almost one billion barrels, but production totaled over 1.5 billion barrels, so net reserves declined by a half a billion barrels over that period. On average, net Alaskan oil reserves declined by 2.2 percent per year over the 5-year period, though interestingly, reserves actually increased by 7.3 percent in 2007.

The strongest U.S. oil reserves performance during the five year period ending in 2007 came from the onshore Lower-48. During that period, oil reserve additions in the Lower-48 (excluding Federal offshore) totaled a little over 5.2 billion barrels. Production totaled about 5 billion barrels, so net reserves increased slightly. On average over that period, net reserves for the lower 48 increased by 0.4 percent per year, though they rose by almost 2 percent over the 5-year period. A larger increase of a little over 6 percent was seen in 2005.

The nature of the oil production industry in the onshore Lower-48 has changed over time, shifting to smaller wells and smaller operators. Today’s production comes from more than 500,000 wells operated by more than 13,000 companies. Exploration in the Lower-48 no longer focuses on the search for large fields of, say, 100 million barrels. A five million or even a one million barrel oil discovery is enough to justify the investment. Many of these small discoveries have occurred within large, previously established oil fields. Improvements in infill drilling and recovery technologies in known oil plays have added both reserves and production.

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