Reserves vs Resources – The end of fossil fuels?

Do you remember headlines predicting the imminent end of fossil fuels?

Years later, the end of fossil fuels is still being predicted. We are half way through 2020 and there is still no end in sight for fossil fuels^[1]. Without question, fossil fuels are finite, but why are accurate forecasts so hard to come by? And what does this mean for renewable energy?

Many of the world’s economies both large and small will remain heavily dependent on fossil energy resources. Today, about 45% more oil, gas and coal are consumed than 20 years ago. Furthermore, 80% of the world’s primary energy consumption is currently met by fossil resources.

At first glance, this suggests that fossil fuels will continue to have a strong influence on the energy market in the future. Given humanity’s ever-increasing primary energy needs, we have to ask ourselves how long energy reserves and resources will last. In other words, can the global energy supply from fossil fuels meet growing demand, or is a shortage on the horizon as stocks are exhausted?

At second glance, fears related to climate change have led to a shift in many societies’ thinking, which in turn is leading to noticeable growth in alternative energy systems. However, even a total switch to renewable energy resources cannot be achieved overnight. Many industries, such as transport, are dependent on the high energy density of fossil fuels. A practical substitute using renewable energies has not been satisfactorily provided. Therefore, fossil energy sources will continue to play a major role in the coming decades, and an analysis of the resource and reserve stocks is inevitable.

In classifying fossil energy resources, a crucial difference exists between reserves and resources. Worldwide, countless deposits of fossil energy sources can be found. These vary in terms of quality or ease of extraction. Therefore, a classification system is needed to derive a realistic picture of the total deposits.

Fossil energy resources are defined as those deposits that are demonstrably known, but that cannot be extracted with current technology or that can be made usable only with enormous financial outlay. The term, therefore, indicates the theoretical potential of known raw material deposits.

Fossil energy reserves, by contrast, are deposits of raw materials that are known to exist and that can be exploited economically with current technology. This indicator is used mainly to make forecasts about the range of fossil energy reserves and represents the technical potential.

A crucial task of the fossil fuel industry is to convert resources into reserves through technological developments; this process correlates strongly with raw material prices. High energy prices allow for new technologies to be developed to increase the reserves.

The total potential of fossil energy resources describes the energy potential of all fossil resource deposits worldwide. The calculated total potential amounts to 552,523 EJ (Exajoule = 1E18 Joule), which corresponds to 13,196,785 Mtoe. Figures of this magnitude are difficult to imagine, but offer a first impression of the world’s enormous resource deposits. In 2015, for example, 521.1 EJ of energy raw materials were extracted. If one were to use that figure to calculate a theoretical potential by comparing resources with this annual production snapshot, one obtains a theoretical resource potential of about 1000 years. Of course, this is not an indicator with much relevance because resources and reserves must be distinguished, and differences between various energy sources must also be considered. After all, not every energy resource can be used for every purpose^[2].

Figure 1 shows that coal has by far the most abundant resource deposits, followed by natural gas and oil. Uranium occupies fourth place with roughly 2% of energy resources^[3].

If we look at the reserve deposits worldwide (Figure 2), we see that these are significantly smaller than the resources at around 38,443 EJ. The figure also better reflects the current primary energy situation. Although coal remains far ahead with a share of more than 50%, oil is more prominently represented among the reserves with a 25% share, in comparison to resources. Natural gas also plays a more significant role here, while uranium remains in last place with a 2% share.

The calculated value of the global reserves provides information about the actual raw material deposits that can be mined economically today. By calculating the technical potential as seen in this context, then one obtains a remaining lifespan of fossil fuels of about 74 years. Here, too, this figure is not conclusive, either, as no distinction between the types of raw materials has been made.

As a result, to more accurately break down when each type of fuel is likely to run out of reserves and resources, you need to investigate each fossil fuel in detail.

Oil – Reserves

To find out how long the established reserves will last, one has to divide the total amount of reserves estimated at a specific year by the total production during that same year. In such a calculation for the year 2016, one obtains (under stable conditions) a technical potential of about 50 years.

Oil – Resources

By their very nature, oil resources have a greater potential than reserves, since these raw material deposits need only be recorded and proven. In this statistic, it can be seen that, in contrast to reserves, North America is now clearly in first place as ‘fracking’ technology is a substantial part of recovering oil resources. The Middle East has comparatively low reserves due to its easily accessible conventional oil fields.

The total capacity of crude oil is 6146 tmb (thousand million barrels) worldwide, which is a multiple of the reserves. If one calculates the theoretical potential, one obtains a remaining duration of about 180 years.

The total capacity of crude oil is 6146 tmb (thousand million barrels) worldwide, which is a multiple of the reserves. If one calculates the theoretical potential, one obtains a remaining duration of about 180 years.

Coal – Reserves

Figure 5 shows the current global reserve situation as of 2016. The reserves are calculated at 1,139bt (billion tonnes) and represent the largest reserves of all fossil energy sources. In comparison to the reserves for crude oil, it is easy to see that the key players in developing this raw material are different. The Middle East plays no a role in coal reserves, as its stocks are listed below 1% of the total capacity. However, the Asian region is coming to the fore, accounting for around 47% of global reserves. North America and Europe/Eurasia also have abundant coal reserves.

Assuming 1,139 bt of coal reserves and an annual production of 7.2 bt of coal, the calculation of the reserve-to-production ratio results in a remaining lifetime of 143 years.

Coal – Resources

Figure 6 shows the global coal resources and paints an impressive picture. With 23,013 bt of coal resources, this figure is more difficult to interpret. Around 39% of these resource deposits are located in Asia, 37% in North America and 23% in Europe/Eurasia. Therefore, the Middle East, South and Central America and Africa do not play a role in global resource deposits. Ahead of all countries is Australia as the leading net coal export country^[4].

The calculation of the theoretical potential of coal resources is more surprising. At 23,013 bt coal resources and 7.2 bt annual coal consumption, the resource-to-production ratio gives a remaining lifespan of 3196 years.

Gas – Reserves

Natural gas reserves indicates a global potential of 186.6 tcm (trillion cubic metres). This is distributed with around 43% in the Middle East and is a function of the often common occurrence of oil and gas. Furthermore, Europe/Eurasia is represented mainly by Russia with 30% of the reserves closely followed by Australia, the United States and Canada. All other countries play a more or less minor role.

Calculation of the reserve-to-production ratio gives a residual life of 52.5 years for natural gas reserves with a capacity of 186.6 tcm of natural gas and annual production of 3.5 tcm.

Gas – Resources

The distribution of resources looks somewhat different compared to the distribution of reserves. The Middle East possesses 16% of global natural gas resources. This is linked to the easily accessible gas fields in the region, most of which are already classified as reserves. Seen another way, there are comparatively few gas deposits in the Middle East that are difficult and expensive to develop. Europe/Eurasia takes the largest share of the overall resource with 26%. This can easily be attributed to Russia’s enormous deposits. All other countries also have, compared to the reserves statistics, larger resources than one would expect.

The theoretical potential of the resource-to-production ratio would result in a theoretical remaining life of 227 years at a capacity of 796 tcm and an annual production of 3.5 tcm.

Uranium – Reserves

The reserve situation of uranium is estimated to have a potential of 1.3 mt (million tonnes) worldwide. This estimate only includes uranium deposits in the category < 80 USD/kg uranium listed. However, these values have to be considered with caution as the studies used state that precise information regarding uranium is often unavailable. This means that for strategic reasons, individual countries may not disclose their reserves.

Furthermore, the world has more experience with traditional fossil energy sources. As a result, it has been possible to observe reserve capacities as they have grown steadily over a span of decades. In the case of uranium, this raw material is still relatively recent to be classified in terms of the awareness of its deposits. However, if the reserves-to-production ratio is taken into account, 1.3 mt of reserves and 0.06 mt of annual production give a remaining life of 22 years.

Uranium – Resources

If one looks at the global uranium resources, that is, all deposits that are priced above the mining price of 80 USD/kg uranium, the picture changes significantly. The locations of the largest resource capacities differ greatly when compared with the other fossil energy sources. Thus, Australia, Kazakhstan and Canada have the largest deposits. Generally speaking, the resource deposits are distributed among only very few nations. Six countries own almost two-thirds of the global resources and thus determine much about the world’s uranium market.

Australia has the largest deposits with 21%, Kazakhstan is in second place with 15% of the resources, and Canada is in third place with 11% of the deposits. The calculation of the theoretical Resource-to-Production Ratio Potential results in a remaining life of 268 years with 16.1 mt uranium and an annual production of 0.06 mt uranium.

Fazit

It’s a fact that the end of fossil fuels can never be denied. However, this end cannot be predicted precisely. Due to a shortage of reserves, the price of raw materials will continue to rise. As a result, resources that have not been mined profitably to date will become reserves. However, this estimate is highly speculative and accurate predictions cannot be made here.

By looking at the development of the reserves stocks over the last 20 years, one can see enormous increases despite ever-growing primary energy demand. Furthermore, one should not underestimate both the technological development and likelihood of as-yet undiscovered reserves and resources.

This means that fossil fuels would, in any case, have the potential to maintain the dominant energy system for many decades to come. At the same time, however, the question arises whether the environment can tolerate such an unwavering approach for much longer without further aggravating weather extremes and related natural disasters. As seen in our posts on LCOEs, renewable energies are already among the least expensive energy sources, suggesting that the logical approach is to further harvest and develop those technologies.

Once the storage problem of renewable energy sources is solved, the world will no longer be dependent on fossil fuels, and estimations of remaining lifespans will no longer be necessary.

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[1] https://science.sciencemag.org/content/281/5380/1128

[2] https://www.bgr.bund.de/DE/Themen/Energie/Produkte/energiestudie2016_Zusammenfassung.html?nn=1542330

[3] https://www.bgr.bund.de/DE/Themen/Energie/Produkte/energiestudie2016_Zusammenfassung.html?nn=1542330

[4] https://www.nsenergybusiness.com/features/five-coal-exporting-countries/#:~:text=in%20the%20world-,Australia,about%2015%25%20for%20domestic%20needs.