 | DrumBeat: December 18, 2007 | The Oil Drum | New SEC Concept Floated to Change Way E&P Companies Book Reserves |  |
Oilwatch Monthly - December 2007
Posted by Rembrandt on December 18, 2007 - 11:08am in The Oil Drum: Europe
Topic: Supply/Production
Tags: exports, non-opec, oilwatch, opec [list all tags]
The December edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.6 MB, 21 pp).
A summary and latest graphics below the fold.
Latest Developments:
1) Plateau production - Both the International Energy Agency (IEA) and Energy Information Administration (EIA) figures show that the plateau of global liquids production that began in 2005 recently ended due to a large production increase of 1.4 million b/d in September/October. This production increase has been sustained during October/November.
2) Total liquids - In November world production of total liquids increased by 55,000 barrels per day from October according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.55 million b/d, which is the all time maximum liquids production.
3) Conventional crude - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 891,000 b/d from August to September. Total production in September was estimated at 73.49 million b/d, which is 800,000 b/d lower than the all time high crude oil production of 74.30 million b/d reached in May 2005.
A selection of charts from this edition:
http://www.portfolio.com/executives/features/2007/12/14/Lukoil-Chief-Leo...
The Oil Czar
by Matthew Malone Dec 14 2007
The head of one of Russia's largest oil and gas companies discusses the futility of predicting oil prices.
So Yeltsin/Gorbi were apparatchiks of sorts, Putin was a KGB man with a university thesis on controlling the globe strategically using oil and gas, which he has pretty much accomplished as far as possible and now Medvedev is an oil man. This is a logical transition with Putin as chief advisor till Medvedev gets up to snuff.
You post makes no sense at all. Russia hardly controls the world. You can compare number of military bases outside of the country (I think Russia might have 3 or 4). On this comparison Russia probably has less then 1% of US military bases. Same with oil or gas. Russia produces relatively small piece of overall pie as far as oil (or total energy) goes, far less then majority that would be required for "controlling the globe". I would argue that again as an example US controls far more of oil resources then Russia does.
Maybe you meant to say that "evil Putin figured a way to keep Russia independent"?
True! The West likes Gorbatchev, who dismantled the USSR.
They liked Yeltsin, who ruined the economy.
But now they hate Putin, because ... because they don't like to see a strong Russia.
Putin is not perfect, but this is probably the FIRST Russian leader, after so long, that, after all, really did something positive for his country. That's why people in Russia love him.
G.W.B. and his neo-cons are simply pathetic. They want to teach Putin democracy and how to rule - Putin has 75% support in his country, while fool Bush has less than 25% in the USA.
Proof to me that Russia isn't doing "democracy" the "American" way.
Hi,
I know it is fun to bash the US, but Putin is another of a long line of Russian/Soviet thugs who kill dissidents, most recently Alexander Litvinko.
http://en.wikipedia.org/wiki/Alexander_Litvinenko
There is a good reason that the former Eastern block/Soviet countries want to join NATO. They escaped an evil empire that murdered on an inconceivable scale.
Dave
Whereas our thugs now just torture folks from other countries?
Just because Russia may be bad, doesn't mean we're much better. So we choose to be glad we're stuck in the lesser of two evils, with our version presently headed much down the path theirs was then.
I was in East Berlin in about 1982 once, only for a day so it's not like I got more than a "feel" for it. Indeed, their system seemed to produce a lot of people who hated the occupying Russian forces and were not the happiest. Not everybody in the west loved American forces stationed there either. Examples on both sides that I observed acted like smug conquerors much of the time.
The one real advantage I thought the eastern version had then was virtually no advertising, except for political propaganda and there really wasn't as much of that as there was Sony propaganda on the other side. It was the only time I ever experienced a city without a lot of billboards and branding messages.
Both systems were/are based on a form of materialism that, extended out, essentially ends up with the planet exploited, and probably dead. One might have taken a lot longer, but it's a half dozen of one, half dozen of another.
I may not have a good answer for what would work better, but I don't believe what we're doing now is particularly good or likely to be long-lived.
We're slaves to work identities. They pretended to work for the good of the state.
Medvedev as an oil man will concetrate hopefully on renewing infrastructure in the industry and investing in new developments. Putin can do the rest of the work as Prime Minister. Russian internal stability with rule of law, business development, prosperity and the stability of Russian oil and gas production is critical of peace in The West.
I thought the other day that Putin was in a quandary after his party won the elections. He was so popular that he could easily rule his whole life and change the constitution. However the moment he made that move his legitimacy, the whole basis of his popularity wouldhave been withdrawn. As long as he is seen as legitimate and democratic, playing by the rules, Mr. Clean in a sea of corrupt politicans, protecting the country, his actions will be legitimized. The moment he tries to cash out and become "Dictator for Life" his legitimacy is out the window. So he had to take a lesser job with likely almost the same power as before. His popularity and influence come from his personal integrity as much as from his office. We see what Bush has done with the title of President and this statement no longer seems completely naive.
He is probably the most competent and normal leader of Russia since Peter the Great. There have been so many idiots and weaklings and mad men along the way.
We should all stop looking at Russia all from ideological slant or in terms of our recent relationship to Russia. We need a stable partnership with a happy, prosperous country and these leaders are the best you can ever expect to get.
Putin's university thesis of leveraging oil and gas for geostrategic influence seems a logical basis for foregin policy as it is really all they have at the moment. Total global domnination in the US sense would be completely unreasonable as a goal. This has only brought the US to the verge of collapse similar to the situation the Soviet Union had by supporting East Bloc and 3rd world countries with weapons and economic subsidies whiole maintaining a huge weapons programs. Maybe we could compare the current Russian and US situation to the Byzantine and Western Roman empires. In the East they scaled back in time and concentrated on the basics and survived nicely for 1000 years more while in the West they jsut kept up appearances and tried to maintain a massive empire which guaranteed collpase. Maybe USA is like Rome forcing itself into collapse by ignoring reality while Russia will remain modest and self contained maintain stability well into the future.
75% approval rating for Putin? what figures are you thinking of?
the ones the KGB fixed, or the ones the Russian Mob fixed?
maybe the ones Gazprom took.
those perhaps?
I honestly doubt Putin has an approval rating that high, maybe 60% but 75? about as likely as finding oil under Washington DC.
Russia has a lot of nukes and oil. But not much else.
75% still is nowhere close to Saddam Hussein. He had 99% according to official poll, so Putin has a ways to go. He's on the right track though.
what kind of job is the us doing "controlling" oil in a country like say.....................iraq ? and at what cost ?
http://www.kommersant.com/p836972/hydrocarbons/
Dec. 17, 2007
Bankers See Grim Outlook for Russian Oil
ANALYSIS-Europe refiners look to Russia as N.Sea oil fades
Tue Dec 18, 2007 1:19pm GMT
By Ikuko Kao
Our middle case shows both Norway and Russia approaching zero net oil exports by 2024. I have acknowledged that the Russian outlook may be too pessimistic because of frontier basins, but my WAG is that the new basins are to Russia as Alaska was to the US--very helpful, but it doesn't fundamentally change the long term picture.
Gotta love a billionaire who's angling for more government support. If only we were all so needy.
The story from western media outlets is that there is not enough investment in oil field development in Russia and other countries were western corporations don't rule the oil industry. Fedun is just repeating the propaganda. Investment will not create oil that is not there.
Rembrandt - this is truly amazing work. I'm glad your old second hand lap top is still struggling on and wonder what all these free loading multi-billion $ corporations will do when it eventually croaks?
My feeling is that we are still on an undulating slowly rising plateau. Stuart's moving averages were trending down, and I suspect that they will now start to trend up. I think we'll see this ragged plateau rising to about 90 mmbpd by 15 nov 2011. At that point every sinew of the oil industry will be strained and tired and the system will break and begin its relentless decline.
A few notable points;
UAE - I've heard rumors they have production shut down for offshore maintenance. Can anyone elaborate? Most of UAE production is onshore. Amongst all ME OPEC states I think UAE likely has the most suspect reserves - and so wonder to what extent they've pushed some reservoirs over the brink?
Kuwait - seems to have had another rush of blood to the head.
Saudi - is ticking up again - I wonder if they are now marketing more sour heavy crude - with ongoing upgrading of global refining capacity?
LNG and NGL - there seem to be a number of countries ticking up with NGL's
Azerbaijan - wtf is going on there?
UK and Norway - both up, coming out of summer maintenance.
I'd tend to see this as multiple cycles in different parts of the industry that have just come into phase to produce this spikelet. If demand falters and prices weaken then you'll see KSA and Kuwait cutting back post haste.
As for 2008. My feeling there, is that we most likely have delayed projects always rolling up into the front year. And so anticipate about 5 mmbpd new capacity in 2008 - enough for average production to rise to about 86 mmbpd. And a year from now we'll be looking at 8 mmbpd new capacity in 09. I think I may spend some time scrutinising the 08 mega projects.
ACE work
Euan,
Re UAE shutting down production for maintenance. See:
UAE forced to slash oil output by a quarter (Arabian Business, Sun 23 Sep)
http://www.arabianbusiness.com/index.php?option=com_content&view=article...
Article: Scheduled maintenance at three of the UAE's largest oilfields will cut oil output by 600,000 barrels per day (bpd) in November, the Abu Dhabi National Oil Company (Adnoc) said in a statement on Sunday.
Adnoc's statement confirmed work widely expected by the industry and reported by Reuters in August. At its peak, the maintenance would cut 810,000 bpd of output from the world's sixth-largest oil exporter, oil traders said last month.
The output reduction as detailed by Adnoc was about a quarter of the UAE's output. The Opec member produced about 2.56 million bpd in August, according to a Reuters survey.
Adnoc will also do work at the 415,000 bpd Ruwais refinery from December 22 to February 25, cutting crude processing by a total of 5 million barrels during the maintenance period, Adnoc said.
... ADNOC gave no details on the length of the oilfield maintenance. Industry sources said last month the work would last for two to three weeks and start in late October.
The state oil firm also gave no details on the units to undergo work at Ruwais, the UAE's largest refinery. An industry source in August said Adnoc's refining arm Takreer would undertake work on a crude distillation unit and a diesel-making hydrocracking unit, shutting in around 150,000 bpd.
Thanks Doug. It strikes me as being a bit odd. In the North Sea, production drops every year for maintenance. There is nothing like this before in the 2002 - 2007 record of UAE. I would have thought a rolling maintenance program would be more likely. Using the same crew, moving from one field to the next, all the while trying to maximise production. This is one to watch.
It's a pure WAG, but I wonder if they are having problems with saltwater/bacterial corrosion (as at Prudhoe Bay) and/or they are having to dramatically increase their ability to handle (and reinject) produced saltwater.
Same idea I had water handling would be a reason to have to shutdown most of the production. I'd guess it has to be something critical thats being upgraded.
My feeling is water handling facilities too. If this is off shore then it is basically water clean up and tip it over the side - but if they're producing more water - then they also need to inject more - and that's major engineering in the offshore environment.
I second this sentiment, and add: any hedge fund out there that has profited from analysis from this site, please send Rembrandt a new laptop. Email editors box for address. No other renumeration required...;)
For real!
"Why is it that the greatest danger to mankind is only addressed by people who are doing it on their spare time, and can’t get any funding for it from the government, industry, investors, or anybody else? They have to do it on their own time and with their own money!" -- Charlie Hall, ASPO Houston 10/17/07
I have long contended that this situation is a travesty, and that the investing community should step up and fund the work of ASPO and TOD and other deserving analysts. It's enlightened self-interest, if nothing more. Any interested parties please write me privately. I have ideas about how to do it...
Beautiful, and highly useful work, Rembrandt. Thank you! I will stash these charts away for future reference.
--Chris Nelder
Energy Analyst, journalist getreallist.com
Given that the Kuwaitis are supposed to be producing at a "sustainable" level these days -- i.e. that they have been apparently limiting their production voluntarily to conserve for the future -- the sudden up-tick in recent months is quite striking.
I suspect they got their arms twisted at OPEC, to produce a temporary surge.
I suspect that the OPEC "surge" strategy was calculated to prevent the world economy from stalling on high oil prices, given that they expect an increase in production from new projects in 2008. It looks to me that it was a smart move, in terms of their own medium-term interests.
What about the Mexican production? The graph that is displayed differs from the one shown in the pdf-file.
Additionally I wonder: total liquids and crude oil are equal or at least almost 100% correlated. Just one drop in total liquids is not mirrored in the crude oil production. Can anyone explain this to me?
The graph displayed shows the EIA STEO figures, the one in the pdf the EIA IPM figures.
Sorry for any confusion, I was playing around with these two datasets a bit.
EIA crude oil production still shows a slightly declining trend. Around 500 kb/d of the September increase came from the North Sea and Mexico, both areas we know are in terminal decline. This will not last long.
Yes, we'll have to work out what the statistical definition is of a spike compared to a peak.
Although the MegaProjects database is and will be a fantastic asset we still are not certain what the numbers mean since we don't have reliable forecasts for preceding years. I suspect that past years also looked similarly rosy from forecasted data and reality turned out less. Its a resource that will be invaluable going forward but we are not quite sure what it really means yet.
Next you can be fairly certain that extensive infield drilling has contributed a lot to stemming declines over the last several years we have no accurate accounting of how much redevelopment and accelerated development is left in existing fields. I happen to think that has been a critical factor in maintaining our current production levels. And would not be surprised to see this winding down in 2008.
So my best guess is that in 2008 we will see a slowing in infield development resulting in increased decline rates coupled with more fields in decline so we should see a increase in the underlying decline rate. If things go well and the large increases in production are real and not just a result of better accounting then we could well make it through 2008 flat or with slightly increased production.
Regardless by the end of 2008 we will hopefully have enough data both ways to really understand whats happening world wide with existing production and also how successful we are at bring on new production.
On the financial side this long period of high prices should have been enough to ensure that market forces are robust enough that if significant new production can be brought online and decline rates are low then we should begin increasing production again by the end of the year.
So overall assuming the world economy does not degrade dramatically we should be able to have a very good understanding of where world oil production will be like by the end of 2008.
My opinion is of course that we will see both accelerated declines and that the projected new production actually comes in less probably 30-50% less than we have currently projected so we will if we have peaked I think end the year in a situation where its practically impossible to overcome decline.
The key factor continues to be what the world decline rate is. It seems that at a technical level we probably cannot bring on more than about 10mpd of new oil production online from new fields and infield drilling in any given year and I don't expect this to change much often it seems that the real result is less but never from what I can tell does it seem to be a lot more at least since 2000 or so. One reason I'm suspicious we will get the 7mbpd of new production plus infield drilling which would put us well over any thing we have done in the past. We might have done this in 2003-2004 but I think spare capacity played a big role in that jump of about 4mbpd in total production.
For my part, I think it's telling that conventional crude is still struggling to return to 2005 levels and that most of the gains seem to be coming from oil equivalent liquids.
The rush at this point appears to be to bring everything possible to market no matter what the cost as 85 - 95 dollar a barrel oil supports almost all products -- conventional and non-conventional alike.
Seems to me that everyone is doing their best to launch off the plateau and are, as noted in the comment above, 'straining with every sinew.'
So it looks like we're off to the races. I think that each month from this point forward will provide more information. Back of the napkin possibilities:
1. We may well see a demand destruction based recession in 08 and, if supplies maintain, a partial relaxing in price. Demand destruction will do some pretty unsettling things to the world economy, though and options for growth are severely limited by the plateau if it continues.
2. Somehow the bubble continues to expand in 08 and demand and economic growth extend along with it. In the short run this will look prettier but the long tail will whip back far more painfully if oil supply do not substantially expand.
3. Supply manages to claw its way forward at a tortured pace putting world economic growth on shaky legs running more slowly forward.
4. Supply bells out and goes down again as depletion rates bite into the markets and new projects fail to keep up. The predicted recession deepens, inflation kicks in worldwide, oil prices remain high despite demand destruction and stagflation sets in.
5. A rush to efficiency and alternative energy sources in this first 'realized peak oil year' begins. Some added efficiencies and conservations help make up for some of the negative pressures of high oil prices and limited supply. But gains will be long term and ablated by any realized reductions in world oil supply.
6. Regardless of these and other possible scenarios it seems the great race to stand still has begun...
Yes but does it not really come down to what the real base depletion rate/production decline rate is without new production and in field drilling ?
As you mention we really have thrown a lot of resources at oil production over the last few years and the net result is we have at best managed to stand still.
With simple calculations its reasonable to guess that depletion rates of 10-20% and base production decline rates of 8-10% are not unreasonable.
This means about 8-9 mbpd of new/infield drilling each year is needed to stand still on production and say 10 or more mpbd of new production to make up for the high depletion rates. We seem to be depleting faster than production rate is declining. So if this is even reasonable we may be getting to the point that we need close to 20mbpd of new production from all sources each year just to stay close to where we are now.
The point is production rate can stay fairly constant from the time a field is brought up to max production until the field is close to about 80%+ depleted.
It stands to reason that we should be able to keep production rates high and even increasing well past 50% URR with enough investment given our current technology. This is a variant of your 2-3.
So your 2 and 3 are pretty much the current consensus but its not clear yet to me at least that they are the most probable.
Thank you for posting this. The slight uptick in liquids is interesting. Hello Red Queen, welcome to our world.
If technology is really the main driver now then we can expect a "undulating plateau" followed by a steep drop off. If its not and we are around 50% URR then given our current technical expertise we can expect production to continue to increase or at least hold steady till past 80% URR. I do not agree with peak production and 50% URR being equal given the advances in extraction. Even HL which gives inflated results if extraction rates are increasing from technology is giving peak production at 60% URR.
In many cases we can extract oil 500%-1000% faster today then we could in the 1950's-1970's. The latest MRC wells gives a flow rate 5-10 times higher than a traditional vertical well extraction methods.
The extraction rates you've quoted are scary. Wouldn't this result in short term gains in exchange for a much more severe long term crash in individual well production? Are these rates being applied to older, giant, wells like those in Saudi?
Throughout 2007, from spring to summer to fall, the same mantra has been repeated here - "the next 3 months will be telling". The idea that the next 3 or 6 months will finally reveal The Truth about peak oil has been ongoing, and yet, the months go by, and the situation has not gotten clearer. This latest uptick in production is again clouding the issue, and the arrival of a few megaprojects in 2008 seem likely to continue to cloud the issue.
I'm guessing 2008 will be a lot like 2007 - volatile prices, continuing uncertainty as to the real production capacity of OPEC and Saudi Arabia in particular, economies living on the knife edge of every pipeline explosion, every menacing word from D.C./Iran/Israel/Turkey, every hurricane and ice storm, every fed rate cut. It stinks, but it seems like all we can do is sit back and wait.
We can argue "why," but it's a virtual certainty that the current top five net oil exporters are going to show an accelerating decline rate in net exports in 2007 versus 2006. Basically, their net exports appear to be collectively dropping at about a million barrels per day per year, from about 23.6 mbpd in 2005. I'm estimating about 21.6 mbpd for 2007.
Our middle case shows them collectively approaching zero net exports in 2031 (peak to zero in 26 years). One of the oddities about net export math is that the decline is close to a linear decline, approximating a fixed volume per year, which is an accelerating annual decline rate.
Note that a drop of about one mbpd per year from the 2005 level gets one to zero around 2029.
We shall see if the pattern holds in 2008.
WT: do we have monthly oil production data spanning, say 4 years around the US lower 48 peak? Was there a limited rebound of production as the system noticed it was peaking? The same thing might happen at global level.
I'm not aware of any monthly data, but the annual data for both Texas and the overall Lower 48 show basically flat production for the first two years after the peak. For example, rounding off to the nearest 0.1 mbpd, Texas was as follows:
1972: 3.5 mbpd
1973: 3.4
1974: 3.4
The long term Texas net decline rate has been about -4%/year. This is net after very intense drilling, secondary and tertiary recovery techniques, advanced seismic, etc. We can make money finding and producing smaller fields, but we can't bring production back to the peak level.
Monthly would be interesting. I've thought about doing HL plots on monthly data.
KSA's monthly production actually swings quite a bit +/- 1mbpd for example.
http://www.economagic.com/em-cgi/data.exe/doeme/paprpsa
That is until recently. Makes me think the latest numbers we get are bogus.
Well it depends on the mo