TORONTO: How much could Saudi Aramco, the world’s largest and most integrated oil company, fetch today?

Spinning off parts of Aramco could generate hundreds of billions of dollars. Crude reserves are the biggest and the most eyed asset of Saudi Aramco. The bigger the asset base, the larger could be the revenue. So how big then is the asset base?

Aramco today boasts of the largest proven reserves in the world – over 261 billion barrels of crude oil and condensate. According to the Organisation of the Petroleum Exporting Countries (Opec) Annual Statistical Bulletin for 2015, Saudi proven reserves stood at 266bn barrels.

By contrast, Exxon Mobil Corp, the largest non-state-controlled oil company, had proven reserves of 25.3bn barrels of oil equivalent in 2014.

However, a new analysis from the Norwegian oil and gas consulting firm Rystad Energy says the United States, and not Saudi Arabia, is the country with the largest volume of oil reserves in the world.

After analysing data from 60,000 wells over a period of three years, Rystad Energy estimated recoverable oil in the US from existing fields, discoveries and yet undiscovered areas standing at 264bn barrels. This surpasses, as per Rystad estimates, Saudi Arabia’s 212bn and Russia’s 256bn in reserves.

The data reportedly distinguishes between reserves in existing fields, in new projects and potential reserves in recent discoveries and in yet undiscovered fields.

The data recorded only the economically viable reserves of each country. Other global oil reserves data, like the closely watched BP Statistical Review that is based on official reporting from national authorities, show the US still ranks behind countries such as Saudi Arabia, Russia, Canada, Iraq, Venezuela and Kuwait.

Even when Rystad applied more conservative estimates of proven oil reserves, the United States fell to fourth place, behind Saudi Arabia, Russia, and Iran with just 29bn barrels of proven reserves.

Many are thus questioning the Rystad data. Indeed with Aramco and other national oil companies, holding most of the assets globally today, not permitting any independent audit of the data they release, how Rystad reached the conclusions about their asset base remains questionable.

Indeed, calculating oil reserves is indeed a complicated and tough business, as countries deploy different, often opaque, methods to measure their resources, one needs to concede here.

Yet, the timing of the Rystad report is crucial. To potential investors, this carries considerable weight. The report definitely doesn’t shed a very positive light on Saudi Aramco asset base – impacting the very valuation process. And this has the potential to delay or hamper the overall privatisation process.

Rystad data also leads to some interesting conclusions. Oil alone would not be able to meet the global energy requirements of future. World would need other forms of energy to meet its growing needs and cannot remain dependent upon fossil fuel, the report said, underlining why it’s critical to focus on developing other, more sustainable and renewable forms of energy too.

Fossil fuel would indeed continue to play a significant, rather dominant role in the global energy mix, yet the contribution from others would definitely need to go up, the report pointed out.

As per the report, the total global oil reserves today stands at around 2092bn barrels, or 70 times the current production rate of about 30bn barrels of crude oil per year.

For comparison, cumulatively produced oil up to 2015 amounts to 1,300bn barrels. Unconventional oil recovery accounts for 30 per cent of the global recoverable oil reserves while offshore accounts for 33pc of the total. The seven major oil companies hold less than 10pc of the total.

“This data confirms that there is a relatively limited amount of recoverable oil left on the planet. With the global car-park possibly doubling from 1bn to 2bn cars over the next 30 years, it becomes very clear that oil alone cannot satisfy the growing need for individual transport,” Rystad said.

The world definitely needs newer energy resources to meet its growing future needs.

Published in Dawn, July 24th, 2016