May 2008 EIA Oil Production Record. Will it Too be Revised Downward?
Posted by Gail the Actuary on August 7, 2008 - 9:28am
Topic: Supply/Production
Tags: eia, iraq, north america, oil production, opec, original, peak oil, russia, saudi arabia [list all tags]
Yesterday, August 6, the EIA published new International Petroleum Monthly data. The new data revised downward previously published estimates, all the way back to 2002, with the biggest revisions in 2007 and 2008. With the revisions, the latest month, May 2008, shows new record-high oil production. Other recent months which had previously set records are now 67,000 barrels per day to 417,000 barrels per day lower than reported just a month ago. In this post, I offer a few thoughts on what the new data suggests.
How Frequent are EIA Data Revisions
Khebab did an analysis of EIA data revisions back in October 2006. His analysis showed that at that time, crude estimates on average were revised down by about 300,000 barrels from their initial estimate. The downward revision took about three years. Estimates of other liquids tended to get revised upward over time. On a "total liquids" basis, one might expect some offset, since part is being adjusted upward and part downward.
Khebab made these estimates of expected bias in 2006. It is likely that they will change over time. One possible reason for such biases is the practice of estimating future production based on past production, if new numbers are not yet available. If production is declining, as is often the case with crude and condensate, there would tend to be a bias toward over-estimation. Also, if wells are taken off-line for maintenance, or because of a storm, using recent months production as an estimate will tend to miss these dips in production, also leading to overstatements.
Khebab's analysis showed that for portions of "All Liquids" other than crude and condensate, estimates tend to be revised upward. If we think about the matter, these liquids, such as ethanol, tend to be growing over time as a percentage of all liquids. If the same method is used for estimating these (using past months actuals to estimate the most recent month where production is unknown), it is not surprising that they will tend to be biased low, and show upward development over time. Since the "other" items tend to move in the opposite direction of crude and condensate, it is likely that there will be less bias in total liquids estimate than in the pieces.
In this analysis, we are really concerned with the crude portion, not the other items Khebab analyzed. If anything, we might expect crude estimates to be even more overstated in 2008 than 2006, because more countries are experiencing production declines.
One thing we can learn from the recent revisions and from Khebab's 2006 analysis is that we shouldn't put too much faith in the estimates for recent months. The crude and condensate estimate of 74.481 million barrels per day appears to be new record, but this is only 215,000 barrels higher than the record of 74.266 set in May 2005. If we estimate the expected downward revision at 300,000 barrels per day based on Khebab's analysis, the revised amount is expected to be less than the May 2005 record.
Saudi Arabia and Iraq
When we look at the data, the majority of the recent increase in production is from Saudi Arabia and Iraq. I have graphed the EIA crude and condensate production for these two countries, in this stacked graph.
One thing that a person notices about this data is that it is very irregular. The reason that May 2008 looks high is because there were dips in production in 2007 for both countries. The May 2008 numbers are close to the highest production each of these countries have reached, during the period graphed.
One thing ace pointed out to me is that while the May 2008 production estimate for Saudi Arabia is shown as 9.4 million barrels a day, both OPEC and IEA data show Saudi Arabia's production for May as about 9.2 million barrels a day (9.18 million BPD for OPEC and 9.21 million BPD for IEA). Since both of these sources agree with the EIA's April production estimate of 9.1 million barrels per day, the differences in May production estimates raise questions as to whether EIA's May estimate is correct.
The estimation of Saudi oil production is very politically charged at this time, with the election in November. If the EIA gets its initial Saudi estimates from a third party, it might be that the third party allows political motivations to affect its estimates. If the estimate is wrong on the high side, it might be pleasing to the current administration. Who would notice an extra 200,000 downward revision, with all of the other revisions? This additional estimation issue adds further to the apparent bias in the May numbers.
Production Trends for Other Groupings
I thought it might be interesting to look at production trends for other groupings as well.
The graph shows that production now is at a level similar to that in late 2005, when increased production was requested after Katrina hit. Production for these countries also dipped in 2007, similar to the pattern we saw for Iraq and Saudi Arabia.
This graph shows the stacked production of the United States, Canada, and Mexico. I have grouped these, since these are our closest trading partners. The dip in 2005 shows the impact of hurricane Katrina and other 2005 hurricanes. Oil production in United States has been declining since 1970. Mexican production began declining in 2005. Canadian conventional production is declining but tar sands production is increasing, providing a small overall increase. One can see from the graph that in total, North American oil production seems now to be declining slightly (about 300,000 BPD in the past year).
This graph shows that North Sea production has been declining, since 2001. The various attempts to hold production up do not seem to have reversed the decline.
This graph shows recent trend in oil production for the "all other" category. The biggest countries in this grouping are Russia and China, which I have shown separately. This grouping also includes all of the non-OPEC countries in South America (including Brazil), the non-OPEC countries in Africa, the various Former Soviet Union countries, other than Russia, and Asian and Australian production.
One can see from the graph that the production for this grouping is still increasing slightly. In the past year, production for this grouping has risen by about 200,000 barrels a day.
Observations
In looking back over the graphs, there is not really very much upward trend in oil production for any of the groupings shown. OPEC production bounces around; an upward trend is not clear. North America and the North Sea both show declining production. The "All other" group with Russia, China, Brazil, and the "stan" countries shows only a slight upward trend--not enough to offset the declines elsewhere.
Nice article.
Just a couple of small corrections:
record oil high production should be record-high oil production
and
Saudi Arabia and China should be Russia and China
Thanks. Should be fixed now.
Gail: in our article "Did Katrina Hide the Real Peak in World Oil Production?"
http://www.theoildrum.com/node/3052
we calculated in Table 12 that a crude peak - without Katrina - in December 2005 would have been 74.73 million barrels/day. So for those who are looking for monthly peaks, we still haven't exceeded this.
Here are the updates of the graphs:
We see:
Crude oil plateau is bounded by 2 underlying peaks: one in 2005 (declining and peaking group) and another shaping up now (hitherto growing group); Saudi uptick; Russia peaked; everything under Iraq and Saudi Arabia is practically flat
As far as I can see, the debate is over regarding the peak in conventional oil production.
In their 'high price case', the EIA says conventional liquids will peak soon (2010). It will be earlier than that, of course, because they lump natural gas plant liquids with conventional crude oil to get what they call conventional liquids. Even ASPO believes natural gas plant liquids will increase in coming years. So, even with NGPL increasing, the EIA says peak 2010. The difference between the EIA's 'high price case' and Deffeyes' 2005 peak has diminished to just a few years -- maybe 3.
They currently regard their high price case as more likely than the 'reference case'.
I used "conventional oil" in the title of the graph below rather than "conventional liquids". You can clearly see how the EIA has revised their views over the years.
EDIT: I should add there is likely to still be plenty of debate on the shape of the slope post peak.
Excellent graph!
Given that track record and systematic positive institutional and governmental bias, perhaps amateur hour is not yet over??
EDIT: I should add there is likely to still be plenty of debate on the shape of the slope post peak.
The production curves of individual fields and regions may tend towards being more or less bell-shaped (is that true?), but I can see a reason why the world curve would have a sizable plateau.
Because there's a global market in oil, there's no immediate crisis for those large consumers that can buy or otherwise extract the oil from the global market. But matters are quite different in the case of the global peak. Here, given the way things are, there's bound to be a desperate attempt to ward off decline. And it can no doubt be done for a while.
Of course that flattening, a long plateau, means the dropoff is sharper when it does arrive.
Pure speculation -- caveat emptor.
This desperation combined with lack of adequate policy change is the worst nightmare regarding peak. I don't place much importance on the idea of a global peak per se. I'm more concerned with the stupidity of the mob mentality.
I just love that graph.
Wasn't late 2005 roughly when Fatih Birol replaced Claude Mandil as the face of IEA? (Anybody?) Birol is a peaker and started making statements (and revising estimates) in stark contrast to the Mandil-led regime. I have a theory that this may have effectively shamed EIA into coming correct as well.
So what have you and Nate been smoking tonight?
Like I said, it's just a theory...and I wasn't able to figure out when Birol became the go-to guy...what is your recall?
Hi Chris - I'm on vacation in S France and have succumbed to some of the local pleasures. Rumors circulating in Scotland that the Sun had gone out I find were over done.
I likely agree with your analysis that Fatih Birol has brought a new sense of realism to the IEA - BUT - the 2008 estimate showing crude production rising to over 80 mmbpd in 2030 is hallucinatory.
What event in the early 2020s is going to turn oil depletion around?
It is interesting to observe the shifting perceptions from 2006 to 2008. 2007 was a bad year for forecasting?
You lucky dog...it's been WAY too long since I sampled the pleasures of Provence! Have a duck confit or an epoisse for me.
Agreed that the projections of both are still too optimistic, but I think they're backing into the truth slowly. I, for one, will be extremely interested to see how EIA responds to the IEA report in November.
It's easy enough to say that the supply problem will resolve itself more than a decade in the future, if palliatives are what you're after. Such projections rarely get called out. So that's a nice little safety zone for them.
I think 2007 wasn't a bad year for forecasting so much as a good year for optimism. Energy stocks were all on a tear.
Nobuo Tanaka replaced Claude Mandil his position at the IEA. Fatih Birol is still the chief economist. It is said that the changeover from Mandil to Tanaka did lead to a different perspective within the IEA that is now driving upwards. But I have no proof of this, which makes it speculation.
I don't think this has anything to do with the EIA monthly corrections. Doesn't sound logical at all.
Yes, but Tanaka is rarely mentioned in the press, at least on this side of the pond. At some point--wish I could nail down when--the spokesman reguarly cited in the press switched from Mandil to Birol, which seemed to correspond with a distinct change in the tone of their announcements. Scuttlebutt I heard at ASPO-USA last year was that it was due to Birol's being convinced of a relatively near-term peak oil. My point about EIA is that they seem to have followed IEA, starting two or three years ago, in downward revising their projections. (Sorry, I didn't mean the historical monthly corrections.)
Hey, even I can follow that graph!
Perhaps when the Olympics are over, you can (try and) impress it upon MS media; tie it in with those current "white-out" back-drops the morning shows keep broadcasting. Or do they need the oil price to veer north again?
(The problem I currently have with with global-production graphs is, although they look flatish, they don't yet seem "scary" - to Average Joes and Janes such as myself, that is. And not-scary indicates little meaningful talk, much less action).
Regards, Matt B
From the Land Down Under
Interesting. But in all honesty, Iraq has NOT been running at full capacity since Desert Storm. With the embargo no longer there they could (in theory) get back up to their full potential (of ?? 6mb/d ??).
So, while the rest of the World's production goes downward the numbers from Iraq will make it look as if oil production is still healthy.
I agree--Iraq is one of the potential bright spots going forward. Even if they can increase their production by, say 3.5 million barrels a day, this won't last very long in meeting the world's increasing demand. I have not investigated this enough to know what a reasonable estimate of this amount might be, and over what timeframe.
I think the HL method would be tricky here as production was artificially restrained for over a decade (Desert Storm-2003), and then followed by the "above ground factors" (i.e., infrastructure destruction) that continues with the insurgency. Then there're the political factors of which of the 3 geographic areas can produce what amount.
On top of that, the reserve figures have also changed over time (to who knows what).
Would make for a good Geology Master's thesis though.
I take a slightly different view of Iraq's potential impact, in the future.
On one hand, I assign a kind of chaos dynamic to future Iraq production. Which means that it's so complicated to gauge risk of US withdrawal, US presence, Iran's influence, sectarian tensions, and Israel-Iran tensions, that I throw up my hands. I'm a big believer in keeping a strong "I have no idea what will happen" in my analysis, if that's what's called for.
However, one data point on which I can rely is the fact that daily Iraqi oil production has now fully recovered to the levels we saw prior to the Iraq War. Not to the two, monthly spike-peaks we saw when clearly the government jammed production higher, in anticipation of conflict. But, in 2008 we are tracking at 2.3MB/day. So that is easily matching the 2002 average of 2.02MB/day.
So what that tells me is that the potential swing higher, from current levels, is not quite the eye-opening swing it might have been, say, from levels 1, 2, and 3 years ago, when Iraqi production slumped below 2Mb/day . As important is consideration of the long-term damage to Iraqi oil fields that took place under previous rule. I should add I have seen or received some dispute over this idea from Iraqi Petro engineers. Perhaps a middle case is appropriate here: potential for significantly increased production lies in wait, in Iraq. But the speed by which that increase would take place may very well surprise, on the downside.
I assign high risk to the advent of both an Obama or a McCain administration. Simply put, they both represent change. This will provoke anticipations, reactions, and new dynamics. I'm not optimistic. My most optimistic case for Iraq oil production is that it could be crossing above the production level of 3Mb/day in late Q3 2010--with hope for 4Mb/day in late Q3 of 2011.
G
Gregor,
Which War? I remember reading that in the late 1980s Iraq had the potential to produce 6mb/d. That was before Desert Storm, the UN embargo, and then Operation Iraqi Freedom.
Also, production had been disrupted by the Iran-Iraq War that happened even before Desert Storm.
So production around the 6mb/d may still be a possibility
... or maybe not.
Iraq oil production never reached 6 million, Iraq maximum production took place in 1980 at around 3.3 bpd, the talk about 6 million barrel a day goes as far as the days when I was a kid living in Baghdad in the mid-80s, in order for Iraq to reach this 6 million a day number, it require massive multi-billion dollar investment program, but the issue is not really about money, the issue with Iraq is about politics, the hydrocarbons law has stalled for years in the parliament, the Kurds will not sign on the law before the issue of Kirkuk is resolved, and by looking at the deadlock regarding Kirkuk local election of late, the Kirkuk issue seems far from over.
The best Iraq can do is sign the long talked about technical oil contracts (even thought those have also stalled), should Iraq sign those, Iraq oil production can increase by 0.5 million bpd, however it is also worth noting that any political stability in Iraq will also greatly enhance internal demand which has been artificially depressed for too long, as a matter of fact Iraqi oil exports already decreased from 1.99m bpd in May to 1.85m bpd in July, due to the current relative stability:
http://www.iraqdirectory.com/DisplayNewsAr.aspx?id=6653
regards,
Nawar
Thanks Nawar,
This is the most credible summary that I have seen on Iraq. Demand must have been hugely depressed by all the violence and is bound to increase in the advent of stability.
ELM in action.
I didn't check my email until this morning and the first thing I checked (before I came here) was "what happened to the previous peak (2/2008). Given what's been said, we may be back (shortly) to the C+C peak of May 2005. That number has been adjusted several times, but it seems that we are zeroing in on a final number.
I will continue to note the former peak in my graphics because it seems that the latest one's eventually fall by the wayside.
As I noted yesterday, I think that the best way to handle the monthly EIA C+C data is to calculate the cumulative difference between what we would have produced at the 5/05 rate and what we actually produced. The last time I ran the numbers is was something north of 700 mb--and the cumulative shortfall has increased in 2008, albeit at a low rate. What this number measures is the cumulative failure of producers to simply match the 5/05 rate, despite vastly higher oil prices.
the EIA published new International Petroleum Monthly data. The new data revised downward previously published estimates, all the way back to 2002, with the biggest revisions in 2007 and 2008
We'll just change the numbers. How convenient.
Poof! No more Peak! What? Don't be silly, there's no man behind the curtain.
Now, let's go to the beach!
(groan)
IOW:
Shout the lie.
Whisper the retraction.
That is exactly what they are doing. As World Crude Oil Production (Including Lease Condensate), Part D clearly demonstrates, the February 2008 "new peak" is now no longer the peak. Later peaks are also quite likely to suffer from similar revisions.
You know, if all these "new peaks" in 2008 get revised BELOW May 2005, I will guarantee that none of the well-known trolls who screamed about these new peaks disproving Deffeyes will have the honesty to come back and admit they were wrong.
Further, I will state that as soon as another fresh "new peak" appears, these same trolls will reappear, shout the same bullshit, then vanish again as data accumulates against them.
I agree... There has to be more transparency about oil production. Hopefully, once Obama comes to power, everything would change for the better. We will have better understanding of the remaining resources, and then would be able to properly allocate them for future survival.
Modified Pickens Plan
REMEMBER: we do not have an energy crisis, we have a liquid fuels crisis
firstly, forget the wind plan aspect
One report from the gas industry says the US has 112 years supply of gas, or 2,688 TCF recoverable
OK, they are exaggerating, so lets cut that in half, and say we have 50 years supply, at current consumption of 24TCF/yr = 1200 TCF recoverable
Now lets convert cars to run on nat gas. Costs about $3000/car
If there are 100M vehicles of the right age & technology to be converted, thats $300B (half of one years oil imports)
So when you convert 100M vehicles, you increase annual consumption of nat gas to 73TCF/yr = 16 years supply. this assumes straight conversion, no hybrids, no new effiencies
In ten years the US will be producing 3 MBD oil. Canada is ramping up to produce 4 MBD in ten years. So sustainable 7 MBD in ten years
If total NA use today is 24 MBD, if we cut 1/3 due to efficiences, demand destruction, increased use of VESPAs and hybrids etc. Then cut 1/3 due to conversion of transportation to nat gas. Then we have sustainable 1/3 from domestic production
the key is a sustainable domestic economy. No ELM issues. The conversion would be a crash program. Manhattan project etc. But there is no technical risk here at all. If we do the conversion, we reduce global demand dramatically, and thus reduce price, and thus the effects of oil price on the economy. the nat gas conversion would be a big boost to the economy
the reduction of $700B in outflows would be a BIG boost to the trade deficit, and level of the dollar internationally.
Improve balance of payments
We thus get to keep the economy in some basic recognizeable form.
This gives us breathing room, - a 10 year window - the time to put a sustainable long term plan in place.
right now we are facing a brick wall.
On all of the Oil Drum, I have not seen any other viable plan, despite all the arm waving
REMEMBER, its not an energy crisis, it is a liquid fuels crisis
As Margaret Thatcher would say "TINA" or "There is no alternative"
In the face of a 4+ year plateau in oil production, I don't see the relevance of looking for a peak at a particular year or month. What matters most is how long the current plateau can be sustained and what happens when production falls off that level.
I don't buy the idea that a liquid fuel crisis is different from an energy crisis. As soon as we try to create a substitute for gasoline-powered cars, then the crisis becomes a full-on energy crisis. If we electrify our vehicle fleet or try to create a hydrogen-powered fleet, we transfer the the crisis to our power grid. If we convert the fleet to natural gas, or synth fuel from coal, etc., we create a general energy crisis.
I already believe we have an emerging generalized global energy crisis. India and China increasingly don't know how to fuel their electricity expansion plans. We are competing with the global economy for our coal supplies. Global demand is bidding up the price of fissionable uranium and alternative energy capacity, and so on.
The EIA says we are hitting all-time record production. We have not hit a peak yet. Even while Iran, Iraq, Libya, Russia, Nigeria, Venezuela, Mexico and even KSA labor under horribly repressive, despotic, backward, cruel, non-free market and undemocratic regimes. In other words, every serious oil exporter is run by thugs, and oil production reflects that. Surely, every country on the above list could be at least 1 mbd higher, were they part of the free world.
Still, reality is reality, and this political problem could take decades to solve and even then. What is remarkable is how world oil production keeps rising, while wonderful new technologies, including the GM Volt, come to market.
If oil stays above $100 (dubious proposition), then the GM Volt, and copycats, get introduced worldwide, and we will have radical declines in oil demand -- while our cities enjoy cleaner air and quieter streets.
Hard to see a downside here.
Never bet against the inventiveness of man in a well-captalized free society. Or against the price mechanism in commodities markets (unless rigged by speculators).
Anyway, I think the oil bulls have left town. They will take huge losses this month, than abandon ship. Then we get another price dump on the NYMEX.
Are you referring to natural capital? Social, built, human capital? Or just financial capital? (which of course is fiat, compared to the other 4)
Fallacy of composition. Perhaps a good bet with respect to a micro enterprise, it is certainly not true for the economy and environment as a whole. Where we should be running things on income, we are running on capital. And our scale is beyond what we can run on income. Ooops. Time for some creative financing, right?
It's not clear to me any more how "well-capitalized" our overall environment remains. The environment has accumulated far too many liabilities. We cannot build our way out by further drawing down capital.
We cannot build our way out.
Nor are we are not free to operate by a different economic paradigm. So much for the free society.
I would bet against.
cfm in Gray, ME
In the same vein, Poly says:
emphasis added.
Now, I don't know about him/her, but three grand is a chunk of change for me and I'm sure for a lot of other people.
Finally, there aren't a lot of natural gas fueling stations out there so the new infrastructure also has to be included some place along the line via an increase in the price.
Todd
The Western world, despite our nice mortgage mess, actually is enjoying something of a capital glut, which is one reason interest rates remain low. Asia and Europe every year produce capital surpluses, that need to be invested. I will quickly concede they have been burned by US residential MBS, and there may be fall-out from that. Still, compared to 20 years ago, the world has plenty of financial capital, and almost every worthy venture capital venture, esecially in energy, can find financing.
China is investing mightily in a wide variety of energy ventures, including several million acres of jatropha, and nukes galore, coal plants etc. (Also a GM Volt-tyope car is being built there, and they have many, many lithium battery companies). China has plenty of capital, and still buys US Treasuries, freeing up US capital. It has been a long, long time since anyone heard the expression "crowding out." I wonder if anyone even remembers what this means.
The point remains that nearly all the "thug state" oil exporting nations, were they free market states, could increase production by 1 mbd each, and no one argues that point. That would mean another 8-9 mbd on the market.
We are also lucky (answering Hagens q. again) that we are better capitalized in terms of education and human skills than ever before, and particularly the alternative energy sector is growing rapidly.
Is it not remarkable that France gets 80 percent of its electricty from nukes, and soon will be able to buy GM-Volt type cars? In short, they may be "home free" so to speak, in just 10 years. The U.S. will get there to, hopefully with healthy dollops of solar, wind, and geothermal power.
As to Mexico, Venezuela, or Russia, I find the people of such nations to be wonderful and warm. (I have not been to the other nations on the list). However, their governments are truly wretched and deeply corrupt.
Of course, in time, production in the Thug States would fall, even if they are free (although Heading Out says Venezuela has 1 trillion barrls of oi, 20 percent of which is recoverable at $1 a barrel, citing a Rigzone article.
I was being facetious. There is no such thing as financial capital. Money and credit are convenient abstractions that we accept as real, because others do.
Bank capital and growth only exist due to natural, social, human and built capital.
From natural capital comes natural interest, in the form of ecosystem services like wind, hydropower, biomass, etc. Our 'capital glut' as you put it, from a very high vantage point is due to us drawing down our natural capital instead of just using our natural interest. If we were forced to maintain society TODAY, on just the interest on our natural capital base, there would be NO financial capital.
Well, it gets nearly metaphysical here, but no such thing as financial capital? Yes, it is blip on a tape in bank, erased by a keystroke. An IOU, or credit, exists as a figment of the imagination.
So does a marriage contract. Try telling that to your wife. Is it real?
Fact is, if a Chinese company came to me, and offered me a fat contract, I would take it. They would pay me, and I would have real buying power.
The financial system has worked now for 70 years or so. The S&L crisis of the Reagan Era was worse. Bu$h jr. is trying hard to top Reagan, but he can't. He is crewing up pretty bad, but no that bad.
In the real world, there is plenty of capital out there, and it is getting invested in companies doing real things. And, int he real world, we may see a France in 10 year geeting 80 percent of its power from nukes, and driving GM-Volt type cars around. They will have cleaner air, quieter citie, and much, much lower oil bills.
If lazy France can do it, taking their 8 weeks off a year, I suspect we can do it too.
So it seems a batch of contaminated weed is circulating in cyber space.