The Gathering Net Export Storm

Increasing signs of problems with Russian oil production and net exports this year.

The EIA shows crude oil production to basically be flat since 10/06 (between 9.3 and 9.5 mbpd), and more and more investment banks are warning of problems with Russian production.

I received an e-mail from an energy analyst to the effect that preliminary Russian data show a pretty good drop in production and exports for November.

And now, the Russians themselves are forecasting lower exports (note that these are gross, not net exports).

http://www.kommersant.com/p838621/Crude_export_decline/
Dec. 21, 2007
Russia Turns Down the Crude Tap a Bit

Russia’s Industry and Energy Ministry has approved the crude oil export schedule for the first quarter of 2008. The export will go down by 1.5 percent vs. the fourth quarter of this year.

People in the RF Industry and Energy Ministry said yesterday that the ministry had approved the Q1’08 schedule for crude oil export via Transneft pipelines. Some 45 million tons of crude will be supplied to the far-abroad states from January to March, which is 1.5 percent down on quarter.

The schedule specifies the decline in deliveries in Novorossiysk and Primorsk direction. The Czech Republic, Slovakia, Hungary will get less crude oil via the pipelines. But Belarus will receive the same 4.5 million tons, although Ukraine may count on just 4.8 million tons vs. 5.1 million tons in the fourth quarter. The shipment to Pavlodarsk refinery, Kazakhstan, will shed to 1.07 million tons from 1.2 million tons.

At the same time, the transit supplies via Kazakhstan and Azerbaijan will increase (?) to 5.38 million tons from 5.87 million tons, and the transit to Germany via Belarus will step up from 300,000 tons to 375,000 tons. The schedule sets forth the first transit supplies to China via Kazakhstan. The amount is 300,000 tons of crude – TNK-BP and Gazpromneft will deliver 150,000 tons each.

In the ministry, they urge not to dramatize the situation and blame the decline on the seasonal nature of deliveries. But the analysts give different reasons, attributing the drop in crude export not to the cold winter but rather to the surge in export duties coupled with petroleum growth.

Putin attends opening of Toyota's new St. Petersburg plant
http://en.rian.ru/russia/20071221/93651267.html

ST. PETERSBURG, December 21 (RIA Novosti) - Russian President Vladimir Putin attended the launch ceremony of a new Toyota plant, which opened on Friday near his home town of St. Petersburg in northwest Russia.
[...]
The Russian president said about 1,000,000 cars annually would roll off production lines with foreign involvement in Russia over the next three-four years.

Here is what I don't get.... if indeed Russian energy industry insiders know/expect Russia to be peaking in oil imminently, with future declines steep, then why is Time's Man of the Year (and now supposedly the richest man in Europe) encouraging the increase of consumption in his own country, while at the same time also promoting Russia as a export savior (source of energy) to a great deal of Eurasia? Is he anticipating that NG/NGL can more than make up for the loss of crude?

Here is what I don't get.... if indeed Russian energy industry insiders know/expect Russia to be peaking in oil imminently, with future declines steep . .

I suspect that your premise is wrong. I suspect that they believe that the current forecast of a small decline in exports is a result of what they consider to be a short term drop in production combined with the ongoing rapid increase in consumption.

Denial is rampant in oil producing areas.

I have frequently described the comments by the Texas Stage Geologist (in response to a question from me in 2005, 33 years after Texas peaked) that while Texas may not be able to equal its peak oil production, we could, with the use of "better technology," significantly increase our production.

Re: Sakhalin sees Exxon oil output falling in 2008 (posted up top)

Consider this report in light of the following observation about Sakhalin production:

http://uk.reuters.com/article/oilRpt/idUKL1864486120071018
RenCap again cuts Russian
oil output forecast

Thu Oct 18, 2007
MOSCOW, Oct 18 (Reuters)

. . Excluding the Exxon Mobil's Sakhalin-1, daily crude output in Russia, the world's second biggest crude exporter after Saudi Arabia, has been down year-on-year since May. . .

I've been following a Russian website that publishes their crude oil production on a daily basis. Their oil production is expressed in tons. For all of December so far, it has been in an extremely narrow range of 1341-1349 thousand tons per day. Using 7.33 barrels of oil per ton, that translates to over 9.8 million barrels per day. However, I'm not sure 7.33 is the right conversion factor - there are several different ones on the Internet. Does anyone know anything about this?

NASAguy, I, and I know several others, have been looking for such a web site. Could you please post the link.

Thanks a million,

Ron Patterson

It depends on the gravity of the crude. I don't know what the average number is for Russia. The advantage of using tons is that the weight before and after refining is pretty much the same, whereas the volume (barrels) increases after refining. However, when using barrels you don't have to worry about the API gravity.

In any case, are they talking about C+C or total liquids?

BTW, good article I had forgotten about, with pertinent quotes:

http://www.energybulletin.net/16745.html
Published on 3 Jun 2006 by Energy Bulletin. Archived on 3 Jun 2006.
Confessions of a statistician
by Sohbet Karbuz
(former head of Non-OECD Energy Statistics Section of the International Energy Agency)

. . . Furthermore, it is not correct to make a peak oil analysis based on “all liquids,” because the non-conventional fuels I mentioned above do not come from an oil reservoir . . .

. . . Moreover, customs office and ministry/statistics office may not agree with each other on trade statistics (e.g. Russia). . .

. . . Best data come from EIA petroleum supply monthly but it comes out 2 months after the fact. . . .

. . . Missing link - Conversion Factors: Oil statistics in the world over are expressed by using four most common conventions - litre, cubic metre, barrel, and ton. Since world oil balances are usually expressed in barrels, the selection of appropriate conversion factor is essential. Interestingly, not enough attention is paid how different measurement units for oil are aggregated and which conversion factors are in use.

Although, the relationship between volume and mass measured by density or specific gravity, the number of barrels of crude oil per ton for the same country varies widely, depending on the source. The discrepancies in conversion factors in use, although seem small, are not negligible and in fact already play an important role in world oil balance. This can be demonstrated by using the Russian crude oil production. Russia releases its oil production in tons. Take an original Russian production figure in tons for any year. Then apply EIA and IEA’s conversion factors and see the difference. Do the same exercise for other countries that measure their oil in tons. Sum them up and compare the difference. You will be surprised! . . .

NASAguy thanks a million for the link. Now I can answer Jeffery's question.

In any case, are they talking about C+C or total liquids?

It is total liquids:

Crude Oil&Liquids (000 t)
18/12/07
Lukoil 245.4 0.2
Rosneft 312.7 -0.3
TNK-BP 188.3 0.1
Surgutneftegas 172.3 0.0
Gazprom Neft 88.6 0.3
Yukos 1.2 0.0
Tatneft 68.5 -0.1
Slavneft 55.7 0.0
Gazprom 36.1 -0.1
Bashneft 31.5 0.0
Russneft 39.2 0.6
Total in RF 1349.0 2.1

Ron Patterson

For what it's worth, I interpreted one of your excerpts incorrectly until I read it in context:

For instance, American Petroleum Institute and EIA regularly publish weekly data on the US stock position (with sometimes conflicting with each other). Note that the weekly bulletin of API is based on voluntary reporting with coverage of about 90-95% on most major series. Best data come from EIA petroleum supply monthly but it comes out 2 months after the fact.

The ex-IEA guy isn't saying the EIA data is better than IEA data (which is how I originally interpreted it), but rather appears to be saying that EIA's monthly data is better than EIA or API's weekly data, but comes out much later.

Just a heads-up in case anyone misreads that like I did.

Russia releases its oil production in tons. Take an original Russian production figure in tons for any year. Then apply EIA and IEA’s conversion factors and see the difference. Do the same exercise for other countries that measure their oil in tons. Sum them up and compare the difference.

What are these conversion factors? Might they account for the divergence between EIA and IEA figures?

the conversion from api gravity to specific gravity is:
spg= 141.5/(131.5 + api), a metric tonne is 2204.6 (us)lbs.
and a barrel (42 gallons) of water weights 350.5 lbs. the conversion is bbls/tonne = 6.29/spg or bbls/tonne = 6.29*(131.5 + api)/141.5.

so your conversion of 7.33 bbls/tonne would be correct for an api gravity of 33.4 degrees.

i think you mean tonnes (metric) i.e. 1000 kg

In the ministry, they urge not to dramatize the situation. . .

I think that there are two key points here: (1) The Russians themselves are forecasting lower exports and (2) They felt compelled to urge people not to panic.

My "Assume the Opposite" theory is, regarding oil production forecasts, peak oil, etc. by public officials, that one should generally--but not always--assume that the opposite of what they are saying is the truth.