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69 comments on DrumBeat: August 16, 2008

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eastender on August 16, 2008 - 9:55am Permalink | Subthread | Comments top

The Divers

One step further along the way of finalizing my version of ELM.

In the first category (yesterday) you saw Saudi Arabia and Russia – the Marquee Players . Now, I present you The Divers. Namely: Mexico, Norway, Venezuela and Nigeria. The causes of their respective slumps may be different, but the result is the same. Fast evaporating net exports.

The Divers exported 9.3 mbpd back in 2001. This number is now down to almost 6.9 mbpd or a decline of 26%. (And to 6.4 mbpd in July 2008)

In effect: in 2001 they accounted for 23.7% of Total Net Exports. This number is now down to 15.3%. (Or a reduction of 35.4% in shares.)

Here are the graphs:

Have a nice day, everybody!

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westexas on August 16, 2008 - 9:55am Permalink | Subthread | Parent | Comments top

It would appear that Saudi Arabia is closing in a cumulative shortfall of over a billion barrels of oil--between what they would have exported at their 2005 net export rate and what they have actually exported. I estimate that it will be about 912 mb at the end of 2008.

The actual EIA Saudi net export numbers for 2005, 2006 and 2007 are shown, along with my estimate for 2008:

2005: 9.1 mbpd
2006: 8.5
2007: 7.9
2008: 8.4*

*Assumptions: average annual total liquids rate of 10.9 mbpd and consumption of 2.5 mbpd.

It would appear that 2009 will tell the tale in regard to whether 2005 was their final annual peak, but I estimate that their 2008 rebound in production will result in an annual decline of about 700,000 bpd in net exports, versus their 2005 rate. Chalk another one up for the things the media don't tell you.

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eastender on August 16, 2008 - 10:07am Permalink | Subthread | Parent | Comments top

I can create another set of graphs if you are interested.

The Marquee Players + The Divers. That would be 6 countries: Saudi Arabia, Russia, Norway, Mexico, Venezuela and Nigeria. These 6 account for 50% of Net Exports and (I think) would show a rather clear decline.

Is it worth creating in your opinion? It may be useful. I can't tell you at the moment.

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westexas on August 16, 2008 - 10:15am Permalink | Subthread | Parent | Comments top

Of course, that was our premise for modeling the top five. I do think that the four key horsemen of the 2008 net export decline are Russia, Norway, Mexico & Venezuela, partly because they are all so close to major consuming areas.

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eastender on August 16, 2008 - 10:42am Permalink | Subthread | Parent | Comments top

OK. Here you go. The Marquee Players and The divers combined.

Nice, isn't it?

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westexas on August 16, 2008 - 10:53am Permalink | Subthread | Parent | Comments top

Very good work. BTW, if you are so inclined, an interesting graph would be estimated combined monthly net oil exports for the top net oil exporters (either top 10 or all those with one mbpd or more of net oil exports) versus average monthly oil prices, either WRI or Brent.

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eastender on August 16, 2008 - 11:02am Permalink | Subthread | Parent | Comments top

I will do that. Let me finish categorizing and grouping the countries first. (There will be 2 or 3 more groups - I'm not sure at the moment.) The process should take another 1-2 day(s). After having done that I'll show you all the categories summed, plus my projections for each group in the following years.

That way we will have a detailed ELM projection. I also have a bimodal function for elasticity, so that could lead to long term price estimates.

Give me a few more days, please. Will get back to you.

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eastender on August 16, 2008 - 11:23am Permalink | Subthread | Parent | Comments top

Here is something else I've just found out. (I kind of knew it all along but it looks 'great' presented this way.)

As we all know, Mexico's exports are dropping like a stone, now over 20% y.o.y. Here is why.

The curves for domestic consumption and exports intersect one another in 2003-2004. From then on, an exponential growth of domestic consumption AND an exponential decline in all liquids production causes exports to decline rapidly.

So once the domestic consumption of Russia gets bigger than its exports... Or to put in in another way: Once the exporter countries' combined consumption is greater than the sum of their exports... it is all over in 5-6 years.

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Bryant on August 16, 2008 - 11:31am Permalink | Subthread | Parent | Comments top

Wow, eastender, you are doing excellent work! Did I mention fast? Yeah, and fast too!

Thank you.

I know your website is in Hungarian, but do you also post your English graphs? If so, could you remind me what the web address is again?

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eastender on August 16, 2008 - 12:36pm Permalink | Subthread | Parent | Comments top

I rarely post graphs in English, sorry. However, numbers and graphs are easy to understand. So I'll give you the address, you'll find a few models there. (I started only 3 weeks ago, so the number is limited... but we expand fast.)

http://terminus.blog.hu

And thanks for the kind words.

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xeroid on August 16, 2008 - 12:54pm Permalink | Subthread | Parent | Comments top

Peak oil is really a problem of providing enough liquid fuels for transport in 'net importer' countries, that is the crude (C+C) element of EIA estimates of all liquids, the stuff that is traded and refined into useful fuel - production that must grow at ~1.6% per year for OECD BAU growth according to the IEA.

The C+C figures are somewhat difficult to come by, but if you go to individual countries first-hand data a much more worrying picture emerges than the EIA 'all liquids' declines!

Underlying world C+C production decline rate is currently ~5% or ~3.75mbpd - we are relying on new megaprojects and viable alternates for the 1.6% growth required, and this has failed miserably for 4 years now.

For the next several years (according to the Wiki oil megaprojects) we can expect increases of 4.14, 3.60, 3.78, 3.11, 2.8, 0, 0.90, 0.53, 0.48 mbpd - they clearly don't keep production level!

The top 20 'net exporters' domestic growth rate of C+C consumption is currently ~8%.

In short, from my studies, 'net exports' of C+C peaked in 2005 around the same time as Eastender's charts show for 'all liquids' net exports but with a steeper decline rate.

It will be the ELM effects that seriously affect 'net importer' countries - the economic repercussions of unaffordable fuel prices is how we will feel it.

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eastender on August 16, 2008 - 3:44pm Permalink | Subthread | Parent | Comments top

Underlying world C+C production decline rate is currently ~5%

I have a model for this I showed the other day. I have the decline rate at 5.7% in 2008 and possibly at 6.3% next year.

Here is my model for C&C production in the past and coming years, with my version of megaprojects.

And here it is with the 'official' wikipedia megaprojects database.

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gregor on August 16, 2008 - 5:56pm Permalink | Subthread | Parent | Comments top

As someone who has contributed to the Wiki Megaprojects database (in a very minor way, wrt to some Canadian Oil Sands projects) I am wondering how people can use the Wiki to get an accurate picture of coming supply. Here's why I have this question: alot of the Candian megaprojects come on in stages, not all at once. But on the Wiki page, we are asked to enter the peak flows. In addition, most of these projects are continually being delayed. Nexen's Long Lake was delayed. CNQ's Horizon is "not quite" on schedule. Suncor's new projects have encountered some problems. I just wonder, how one can model supply additions, with these ongoing delays, in the oil sands.

Gregor

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xeroid on August 16, 2008 - 6:15pm Permalink | Subthread | Parent | Comments top

IMO the data (even the official data), in general, is very poor - probably deliberately so, for some reason!

Just bear in mind that the lines on the charts are an optimistic 'best case' - plan that reality will be worse than that then life will seem easy if the situation isn't quite so bad after all.

The official decline rates in important exporting countries extracting from under the ocean (like Norway and Mexico) are very high and deteriorating!

BAU it ain't!

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eastender on August 16, 2008 - 6:51pm Permalink | Subthread | Parent | Comments top

I am wondering how people can use the Wiki to get an accurate picture of coming supply. Here's why I have this question: alot of the Candian megaprojects come on in stages, not all at once. But on the Wiki page, we are asked to enter the peak flows.

Yes, I'm aware of this problem. That's the reason I created a 'projected gain coming from megaproject' graph, shown up the thread. I'm not sure my numbers are valid, but generally speaking they show less coming from megaprojects up to 2011 and somewhat more than the 'official number' after 2012. That means: projects are late and tend to move from one year to the next or the year after. (Or, as with Kashagan, many years later - if at all.)

So I do know even my numbers are a bit optimistic... but I know of no better way to create an estimate.

Do you? If so, please don't hesitate to let me know. Thx in advance.

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suyog on August 17, 2008 - 12:11am Permalink | Subthread | Parent | Comments top

Eastender,
What is your definition of a decline rate? I see C&C production increasing in 2008 (compared to 2007) and an increase in 2009 (compared to 2008).
So I don't understand your statement that you see a decline rate of 5.7% in 2008 and 6.3% in 2009.
Thanks,
Suyog

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eastender on August 17, 2008 - 12:27am Permalink | Subthread | Parent | Comments top

world decline rate or DR = ((Y2-Y1)/Y1) X 100

where Y2 = Y1 + M - D

M = total C&C coming from megaprocejts
D = observed decline
Y1 = the present year
Y2 = the following year

It's a rather simple (but absolutely functional) model I used / developed. It has a long version but that would not fit into a post. I put the basic model in one of the Drum Beats a few days ago.

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elwoodelmore on August 17, 2008 - 9:05am Permalink | Subthread | Parent | Comments top

the DR term you use is the effective annual decline rate, de. i find it is easier to work with nominal decline, d. the two are related by d = -ln(1-de).

if the decline is only a few %, though the two can be used more or less interchangably.

for de =1%, d=1.005%

but for de =10%, d=10.5%

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suyog on August 17, 2008 - 12:57pm Permalink | Subthread | Parent | Comments top

I guess my difficulty stems from the fact that you talk of "decline rate" (i.e., decreasing C&C production) whereas production increased in 2008 and is slated to increase again in 2009.

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westexas on August 16, 2008 - 1:47pm Permalink | Subthread | Parent | Comments top

The three key factors which affect a net export decline are: consumption as a percentage of production at final peak; the rate of change in production and the rate of change in consumption. The biggest contributor to a rapid net export decline is consumption as a percentage of production at final peak, i.e., the larger that consumption is relative to production, the more rapid the net export decline rate.

Mexico, like our ELM, the UK and Indonesia, was consuming about half of production at final peak (2004 for Mexico). The ELM, the UK and Indonesia all went to zero in less than 10 years, and I suspect that Mexico will probably approach zero net oil exports in the 2010 to 2012 time frame.

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Seadragon on August 16, 2008 - 2:17pm Permalink | Subthread | Parent | Comments top

Regarding Mexico, of course one of the reasons for increasing domestic consumption is the government subsidies for oil products. I thought I remembered the Mexican government announcing a couple of months ago that subsidies were to be gradually eliminated...wonder how that's going. The articles I read indicated that eliminating the subsidies would be politically difficult...the age-old problem.

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eastender on August 16, 2008 - 3:49pm Permalink | Subthread | Parent | Comments top

The biggest contributor to a rapid net export decline is consumption as a percentage of production at final peak, i.e., the larger that consumption is relative to production, the more rapid the net export decline rate.

Yes. That's the bottom line. See Mexico and compare it with Norway.

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eastender on August 16, 2008 - 3:55pm Permalink | Subthread | Parent | Comments top

The three key factors which affect a net export decline are: consumption as a percentage of production at final peak; the rate of change in production and the rate of change in consumption. The biggest contributor to a rapid net export decline is consumption as a percentage of production at final peak, i.e., the larger that consumption is relative to production, the more rapid the net export decline rate.

Thinking about it some more I realized that the decline in Russia will have a far greater effect than the decline in Saudi Arabia.

1) Russian decline comes sooner
2) Russian decline is steeper (at least in the first 5 years
3) Consumption is greater in Russia
4) The rate of change in consumption is about equal but Russia is just about to boom

+1 After the conflict in Georgia I have my doubts about the Russians giving it their all to provide energy at all costs...

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xeroid on August 16, 2008 - 5:55pm Permalink | Subthread | Parent | Comments top

In general I agree with your 'net export' graphs but IMO they are 'best case' - so, flows to importers are likely to be worse than indicated ( but bear in mind these are an interpretation of some quite poor/inconsistent data) - I think many people are being more positive about the future than maybe they should be. Even allowing for the poor data, IMO there are some difficult things for 'net importers' hidden in the raw data!

There appears to be quite a few people, in various countries, who are deliberately being 'economical with the truth', I wonder why? - maybe has something to do with "difficult to get somebody to understand something if their livelyhood depends on them not understanding it"! ... or telling people what they want to hear?

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eastender on August 16, 2008 - 6:39pm Permalink | Subthread | Parent | Comments top

In general I agree with your 'net export' graphs but IMO they are 'best case' - so, flows to importers are likely to be worse than indicated

The graphs do NOT indicate the FUTURE. They are simply drawn using existing data from the PAST. I will show you the future projections next week. (I.e.: projections for the decline in net exports. E.g.: I have Russia at an 8% export decline next year.)

I have been modelling this since last June. I was SLIGHTLY optimistic, but not by much. For example I had WTI at USD 130 for July, and it turned out to be USD 133. Or I had the average WTI spot at USD 120 for 2008 and we are 114ish or so at the moment. As for production numbers I'm well within 0.5% with my predictions so far. (Reality being somewhat worse than predicted but not by much.)

So I agree with you: My views are best case. But pretty realistic, I think.

And as far as best case is concerned... I have C&C production at 60 mbpd in 2015. So that's a situation when 'our best is not good enough'. :-/

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westexas on August 17, 2008 - 9:22am Permalink | Subthread | Parent | Comments top

Also, Russia (at least their mature producing basins) is at a more advanced stage of depletion than Saudi Arabia. Our middle case has Russia approaching zero net oil exports around 2025.

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eastender on August 17, 2008 - 2:10pm Permalink | Subthread | Parent | Comments top

My model also says 2025.

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hummingbird on August 16, 2008 - 4:57pm Permalink | Subthread | Parent | Comments top

Isn't there some way you could post the graphs so I could click on them and see the right half. It is cut off on my browser and I am unable to see the most important years.

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eastender on August 16, 2008 - 5:03pm Permalink | Subthread | Parent | Comments top

It stops at 2015, as I used a time window.

Here are the two graphs you cannot see properly:

http://terminus.blog.hu/media/image/YSPADDEN/augusztus/olajmega2/newmega...

http://terminus.blog.hu/media/image/YSPADDEN/augusztus/olajmega2/newmega...

However, you can also right-click the graphs and use the 'save as' funtion to download them onto your computer and open it from there.

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aangel on August 16, 2008 - 6:23pm Permalink | Subthread | Parent | Comments top

Also, right-click and choose "open image in new window/tab." You'll see the entire image. Several browsers have this feature.

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BillJames on August 16, 2008 - 10:21am Permalink | Subthread | Parent | Comments top

Great graphs. Net Exports and the ELM should be monthly reports at EIA. We are working on a report on contingency plans. I will post a draft before we finalize to assure we have outlined the status correctly.

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Just Another Statistic on August 16, 2008 - 4:47pm Permalink | Subthread | Parent | Comments top

What is your data source for these graphs?

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eastender on August 16, 2008 - 7:04pm Permalink | Subthread | Parent | Comments top

For data of any one country I use EIA data where available. In some cases it is not (Norway). So those are calculated with IEA data. In the future I will also have to use (limited) BP data as well.

I know it's not the best of things to mix data coming from different institutions, however, it's still better than not using data at all. :-)

You can find most of this at: http://netoilexports.blogspot.com showing the top20 exporters since 2001.

As for total net exports, one should bear in mind that the top 20 account for 92-93% of the total. Earlier (2001ish) it was 92%. Right now it closer to 93%. 92.5% was the proportion I used however.

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69 comments on DrumBeat: August 16, 2008

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