Future global economic growth is in serious trouble as oil discoveries fell to historic lows last year. The International Energy Agency (IEA) reported that the sharp downturn in capital spending by the conventional oil sector was due to extremely low oil prices.

As the oil price fell to $30 in 2016, oil companies cut their exploration and capital expenditures by 25-40%. For example, ExxonMobil, the largest oil company in the United States, cut their capital expenditures by 26% in 2016, from $26 billion in 2015 to $16 billion last year. This had a profound impact on new oil discoveries.

According to the 
IEA report:

Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.

By taking the IEA’s oil discovery data and comparing it to the total amount of conventional oil consumed by the world in 2016, here is the following chart:

The world consumed 69 million barrels per day of conventional oil last year, which equaled a total of 25 billion barrels (source: IEA report above).  Which means, conventional global oil discoveries of 2.4 billion barrels were less than 10% of total world conventional oil consumption. This is extremely bad news.

To understand the breakdown in the different oil types, the IEA provided the following data:

Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.

Global Conventional oil production was 69 million barrels per day (mbd) of the total 85 mbd, which included natural gas plant liquids and other unconventional sources such as shale oil (U.S.), heavy oil and tar sands. Typically, conventional oil is the higher quality, cheaper to produce oil.

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