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ExxonMobil’s reported oil and gas reserves dropped by 19 per cent last year as it struck out 3.5bn barrels of heavy bitumen at an oil sands project in Canada, the company said in a regulatory filing on Wednesday evening.

It is the largest drop in reserves to be reported by one of the big international oil companies for at least a decade, and the second year in succession when Exxon’s reported reserves have fallen.

In its 10-K annual report to the Securities and Exchange Commission, Exxon said low oil and gas prices during 2016 meant that some of its assets no longer qualified as proved reserves. Its reported reserves were cut from 24.8bn barrels of oil equivalent (boe) at the end of 2015 to 20bn boe at the end of 2016.

The company said that the cut, which was required by the SEC’s reporting rules, was “not expected to affect the operation of the underlying projects or to alter the company’s outlook for future production volumes,” and added that it could be reversed wholly or partially if crude prices recover.

The company warned of the likely fall in reported reserves last October, when it became clear that low prices were likely to mean that billions of barrels, mostly in the oil sands of western Canada, could no longer be defined as “economically producible” under the SEC’s definition.

Most of the reduction comes from Exxon being forced to “de-book” the entire 3.5bn barrels of bitumen that it had previously reported for its Kearl oil sands project, which cost C$21.5bn.

In its 10-K report, Exxon said bringing the reserves back again as proved reserves would depend on “a recovery in average price levels, a further decline in costs, and/or operating efficiencies.”

A further 800m barrels equivalent of oil and gas in North America was also revised out of reported reserves, mainly from fields that are now expected to be shut down sooner.

The SEC’s rules require companies to report reserves that are economically producible, based on average oil and gas prices price on the first day of each month during the year.

Offsetting the downward revisions to reserves were additions of about 1bn boe from new projects and acquisitions in the US, Papua New Guinea, Indonesia and Norway. Reserves were also boosted by Chevron’s decision to go ahead with the expansion of its Tengiz project in Kazakhstan, where Exxon has a 25 per cent stake.

Copyright The Financial Times Limited 2017. All rights reserved.
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