Saudi announces rise in oil reserves after external audit ahead of Aramco IPO

Top oil exporter Saudi Arabia announced a slight rise in its crude oil reserves on Wednesday after they were independently audited, providing more detail about the size of deposits shrouded in secrecy for decades.

Saudi Arabia’s reserves of easily recoverable oil have long been the world’s largest but few details were public. The external audit was started as part of preparations for the initial public offering of state oil company Saudi Aramco.

The Saudi Energy Ministry said in a statement carried by state news agency SPA that Saudi Arabia’s proven oil and gas reserves stood at around 268.5 billion barrels of oil and 325.1 trillion standard cubic feet of gas as of the end of 2017.

“The results point out that the kingdom’s reserves of oil and gas are bigger than what we have been announcing,” Saudi energy minister Khalid al-Falih told a news conference in Riyadh.

The audit will dispel scepticism in the oil industry about the size of Saudi reserves and provide assurance for potential investors in Aramco investors, should the initial public offering which has been delayed eventually go ahead.

Falih’s news conference took place hours later than initially scheduled and SPA corrected its initial announcement of the reserves figures.

‘MOST PROFITABLE’ RESERVES

The 2017 figure for crude reserves is larger than the total 260.8 billion barrels Aramco reported in its 2016 annual review.

“This certification underscores why every barrel we produce is the most profitable in the world and why we believe Saudi Aramco is the world’s most valuable company,” Falih said in the statement.

Aramco’s cost of production is a mere $4 a barrel, he said, giving a rare insight into a key metric not usually disclosed.

Industry experts say it can cost between $30 to $50 to produce a barrel of U.S. shale oil.

Saudi Arabia confirmed for the first time that Dallas-based consultants DeGolyer and MacNaughton carried out the audit.

The consultant evaluated 54 major oil reservoirs operated by Aramco, out of 368 in its portfolio. In DeGolyer’s view, these contained 213.1 billion barrels of proved oil reserves, compared to 210.9 billion as estimated internally by Aramco.

For almost 30 years – despite rising production, large swings in oil prices and improved technology – Riyadh had annually reported the same number for reserves at around 261 billion barrels, according to a statistical review by BP.

Plans for the Aramco IPO were shelved last year for the forseeable future, sources told Reuters. Falih said on Wednesday the kingdom would still go ahead, and list the company by 2021.