>>Production Follows Discoveries
Because it is impossible to produce oil which has not been found, production necessarily follows discoveries. Despite groundbreaking innovations in exploration techniques, discoveries have declined precipitously since peaking in the decade of the 1960s. This decline has proven immune to rising investment for one simple reason. The probability of finding a new field is inversely related to the number of fields left to be found.
The discovery curve (total reserves discovered by year) is front-weighted not only for this reason, but because it is easier to find larger fields than smaller fields, and fields are distributed according to the Zipf’s Law (the product of rank and size is roughly constant across all fields). The ultimate recoverable reserves (URR) of Ghawar, the world’s largest known field, are estimated to be 150 billion barrels, double the size of the world’s second largest known field, Greater Burgan, and triple the size of Safaniya, the third largest known field.
Just as it is easier to find a pitchfork than a needle in a haystack, it is easier to find a giant field than a small field.
Only 507 giant fields (fields estimated to have more than 500 million barrels of recoverable oil) have been discovered (Robelius 2007). Though giant fields represent less than one percent of the total number of fields found to date, they account for more than 60 percent of global production. Discoveries of giant fields peaked in the 1960s, and the total reserves discovered in that single decade are greater than the total reserves of all giant fields discovered in the four subsequent decades.
Narrowing the field to the twenty largest fields, we see that discoveries peaked in the 1940s. Only two of the twenty largest fields were discovered since 1970, and none have been discovered in since 1979.