They bestrode the earth like giants. Few companies match the global reach of the oil majors, even as the new oil fields they find get smaller. Hence the excitement of BP's new “giant” discovery in the Gulf of Mexico. Value Tiber's perhaps 1bn barrels of recoverable oil at $5 apiece, and it could be worth $3.7bn to BP – although at 10km below the earth's crust, and under 1,259m of sea, the challenges of developing the field will be huge.
Giant fields are the industry's lifeblood. The world's 20 largest – out of a 70,000 total – account for a quarter of world production. Most have been pumping for decades; the largest, Saudi Arabia's Ghawar, was discovered in 1948 and is only halfway through its 140bn barrels of recoverable reserves. Yet the rate of discovery is falling. In the 1960s, it stood at 56bn barrels a year. By the 1990s, it had fallen to 13bn. Furthermore, most newly-discovered fields are small or offshore. A decade ago, deep-water finds accounted for a quarter of all discoveries; now they account for half. This is significant as small or offshore fields tend to decline faster.
Annual discoveries equate to only half the oil the world currently consumes, which sounds apocalyptic. Yet the ratio of reserves to production has remained surprisingly constant, at about half a century, for several years. This is thanks to geologists finding that fields hold more oil than first thought, and companies recovering more of that oil. Indeed, raising recovery rates from 35 per cent to 50 per cent would double world reserves to over 2,400bn barrels. The hoopla surrounding BP's discovery is therefore justified, as was the rise in its share price. Even so, the majors' most important work consists of incremental technological grind, rather than finding sleeping giants.