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263 comments on DrumBeat: March 27, 2007

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ace on March 27, 2007 - 9:48pm Permalink | Subthread | Parent | Comments top

In IEA's latest report the world production (Table 3) for Feb 2007 is 85.5 Mb/d. Table 2 forecasts world demand at 87.7 Mb/d for the fourth quarter of 2007 (Oct-Dec). This is a difference of 2.2 Mb/d.

Given that non OPEC is unlikely to increase their production significantly, OPEC will have to increase production by 2.2 Mb/d. Guess which country? Saudi Arabia will be expected to increase their production by 2.2 Mb/d. I seriously doubt that Saudi Arabia can do this.

I think that Claude Mandil of the IEA has concerns as well.

From this link below,
http://www.upstreamonline.com/live/article130054.ece

Claude Mandil told Reuters "The current price is much too high and Opec should raise production, but consuming countries also have to cut consumption." Consuming countries have to cut consumption!

Will consuming countries listen to Claude? Probably not. Is that why the IEA has placed this ad on the second page of their latest Oil Market Report:

The International Energy Agency is Seeking
an Energy Emergency Analyst

A Three- to Five-Year, Fixed-Term Appointment

The Emergency Planning and Preparations Division of the IEA is looking for an Energy Emergency Analyst to work under the supervision of the Division head. The Division is responsible for developing strategies and policy and ultimately co-ordinating an emergency response among IEA Member countries in the event of a serious supply disruption, such as were experienced in September 2005 following the hurricanes Katrina and Rita in the Gulf of Mexico

Major responsibilities include:

▪ Participation in the design and improvement of emergency response systems and strategies;
▪ Help to co-ordinate their implementation during actual oil supply disruptions;
▪ Analyse oil/energy and geopolitical situations affecting energy supply security;
▪ Develop and maintain contacts on emergency policies with government officials and oil
companies in major consuming non-member countries, aiming to co-ordinate those policies
with the IEA;
▪ Represent the IEA at international workshops, training sessions and conferences;
▪ Act as Desk Officer for several IEA Member countries, maintaining contacts with officials of
those countries, undertaking reviews of their emergency response policies and programmes.

IEA has an Emergency Planning and Preparations Division which is ultimately co-ordinating an emergency response among IEA member countries in the event of a serious supply disruption. Supply disruption could mean Saudi Arabia's supply is about to fall, more Gulf of Mexico hurricanes, increased middle east military conflict, Cantarell decline faster or Russia declines faster.

It's a good thing that the IEA has this division because it can develop an emergency response to stabilise the oil markets. I wonder what the IEA would recommend if supply suddenly fell by say 4 Mb/d? Claude already gave the answer - "consuming countries also have to cut consumption". This might require a crude oil rationing scheme.

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totoneila on March 28, 2007 - 2:12am Permalink | Subthread | Parent | Comments top

Hello Westexas,

Sounds like the perfect job description for you to internationalize ELP and your Export Land Model! Heinberg and/or Colin Campbell could do the Energy Depletion Protocols too.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

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ace on March 28, 2007 - 4:24am Permalink | Subthread | Parent | Comments top

Definition of OPEC Sustainable Production Capacity from IEA & EIA

On page 15 of IEA March 2007 Oil Market Report is this table which shows OPEC’s spare capacity.

Footnote 3 from the table above states that
”Capacity levels can be reached within 30 days and sustained for 90 days.”

On page 28, Table 3a, of the EIA Short Term Energy Outlook March 2007,
http://www.eia.doe.gov/emeu/steo/pub/mar07.pdf

There is a similar note for OPEC Surplus Capacity:

” “Capacity” refers to maximum sustainable production capacity, defined as the maximum amount of production that:
1) could be brought online within a period of 30 days; and
2) sustained for at least 90 days.”

This simplistic condition on OPEC maximum production capacity levels is disturbing and raises several questions.

How is the “30 days” calculated?

How is the “90 days” calculated?

What happens to production levels after the end of the “90 days”? Is the spare capacity gone?

Do the “30 days” and “90 days” apply to all OPEC countries? If yes, why is it the same for each OPEC country? Is it also the same for onshore and offshore production?

What is the origin of the “30 days” and “90 days”? I could not find a supporting definition on www.opec.org. Did the EIA and IEA just make up the “30 days” and “90 days”?

If the “90 days” is the maximum period for the maximum sustainable production capacity, then it’s not a long time period!

Can someone please help to clarify the true meaning of OPEC Sustainable Production Capacity?

(It is also interesting to compare Feb 2007 OPEC-12 spare capacities: IEA states 4.02 Mb/d; EIA, 2.54 - 3.04 Mb/d. That's a big difference!)

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SailDog on March 28, 2007 - 7:37am Permalink | Subthread | Parent | Comments top

The IEA regularly revises supply figures downwards after a couple of months. Then they say in the blurb at the front of the OMR that production "increased" by x kbd, but when you do the math the increase is negative. Must be all that wine they drink at lunch time in Paris.

The latest month really is just an estimate, estimated on the high side in the hope that when it is corrected downwards a couple of months later that no one will notice.

They also include heavy oil from Orinoco and Alberta as well as biofuels in that 85.5mbpd. I strip out Orinoco (600kbd), Alberta (1mbpd) and the biofuels (340kbpd). That's nearly 2mbpd! 1940kbpd to be exact.

So total production for Feb 07 is not 85.5mbpd, it's 83.6mbpd which is for all intents and purposes the same as it has been since Q3 2004. Hidden within that of course are the situations in Saudi that Stuart and Euan have described so well, Mexico etc etc.

I have a question for anybody who still in the thread. I have heard over the months that sometimes oil producing countries buy crude from other countries to fulfill contracts if they cannot do so themselves. For instance I have heard that Venezuela has done this and Saudi did it in respect of some bunker fuels. Does this stuff get counted twice?

Could there be a whole trade going on below the surface whereby oil is counted twice in the production numbers? If Saudi was intent on maintaining their swing status they could do so by being buyers and sellers.

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Aniya on March 28, 2007 - 7:26pm Permalink | Subthread | Parent | Comments top

Hi Saildog,

Thanks for your IEA explanation.

I'm looking for succint critiques of both IEA and EIA, if anyone can point me in the right direction? (Or, perhaps you might write more and post?)

re: your question. If no one answers, I'd suggest posing on a new thread. It's always good to get clarification.

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263 comments on DrumBeat: March 27, 2007

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