LONDON The world's store of oil jumped 8.3 percent last year, as exploration rose and record crude prices made marginal projects commercially viable, yet supplies will struggle to meet demand due to political factors, oil giant BP (BP.L) said on Wednesday.
BP said in its annual calculation of global oil and gas reserves, considered the industry's most comprehensive, that oil reserves totalled 1,653 billion barrels at the end of 2011.
That was up from 1,526 billion barrels of extractable oil in the ground at the end of 2010, according to BP's Statistical Review of World Energy last year.
"One perennial question is whether there are enough energy resources for our needs?" Chief Executive Bob Dudley said as he unveiled the report.
"The answer from this review is certainly ‘yes': At today's consumption rates, the world has proved reserves sufficient to meet current production for 54 years for oil."
The report, based on governments' official reserves statistics, including those challenged by analysts, also showed that gas reserves rose by over 11 percent in 2011.
Dudley said oil companies were finding it easier to secure new exploration and production opportunities than a decade ago, partly because new technologies made more projects viable.
Higher oil prices have allowed resources previously known to exist, such as Canada's oil sands and certain deepwater projects, but which were previously deemed uneconomic to produce, to be profitably extracted, and therefore suitable for entry in the calculations.
Also, higher oil prices have spurred exploration, leading to new finds. Brent oil prices were on average 40 percent higher than in 2010 and the average price exceeded $100 (64.26 pounds) a barrel for the first time ever. At $111.26 per barrel, they were the second-highest in inflation adjusted terms, behind only 1864, BP said.
The reserves upgrades are not significantly impacted by shale gas and oil finds, BP said.
Though shale gas and oil have led to a turnaround in U.S. oil and gas production, BP Chief Economist Christophe Ruhl said it would take time to say confidently how large the resource base was.
Nonetheless, increasing comfort around the economics of Canada's oil sands, bitumen soaked soil from which crude can be squeezed, has encouraged BP to include Canada's oil sands as part of its main oil reserves measure for the first time.
This puts Canada in third position in the world reserves rankings, with 175 billion barrels, up from 32 billion last year which excluded all non-producing oil sands.
Heavy oil is also behind the top-ranking reserves base, that of Venezuela, which was rated as having 297 billion barrels. Many analysts have questioned whether the heavy oil reserves in the Orinoco belt are as large as Venezuela claims.
Saudi Arabia is the second-largest reserves holder with 265 billion barrels, mainly made up of conventional crude, which is much cheaper to produce than heavy oil.
BP's optimistic outlook comes as OPEC countries met in Vienna to discuss possible production cuts to stem recent crude price falls.
Yet the current price weakness and the abundant oil reserves did not mean an easy outlook for consumers, Ruhl said.
Despite the increase in opportunities for Western oil companies to invest in new projects, most oil reserves remain in the hands of state-backed oil companies whose investments follow political mood swings rather than economic signals.
Hence, fields may remain undeveloped while demand goes unsatisfied.
"The world faces challenges in growing supply rapidly enough to sustain growth in energy demand and the economy," Ruhl said.
Dudley declined to comment on BP's plans to sell its Russian joint venture TNK-BP, or a report that BP was moving closer to a deal to settle litigation with the U.S. Department of Justice around its Gulf of Mexico oil spill.