The world's big private oil companies are reporting record profits on the back of high oil prices. They should enjoy it while it lasts, for they are struggling to find new reserves to replace the stuff they are pumping.

..The big oil companies are probably less worried about riding out public opinion than they are about operational challenges that threaten their future. Executives may be popping champagne corks now, but the oil wells that generate the big bucks are drying up. Behind the headline figures, less enticing numbers lurk. Shell's profits came despite a decline in its oil production compared with the year before; Exxon also suffered a small decline (see chart). And Shell replaced only 70-80% of the oil it pumped with new reserves. In 2004 the replacement rate was even lowerunder 50%and the firm suffered a scandal over the misreporting of its reserves. BP replaced a healthier 95% in 2005 according to a formula set by America's Securities and Exchange Commission. Exxon replaced 83% by the same measure (or 112%, according to its own less conservative calculations).

TMC Net