Non-OPEC Oil Supply Gains
Posted by Bubba on January 3, 2006 - 4:00am
A lot has been written and discussed recently about here possible non-OPEC-supply gains occurring between 2005 and 2006. There are definitely new projects coming on stream in several countries, including Angola, Azerbaijan, Russia, Brazil, as well as some other countries that might help make this happen. However, I am sitting here looking at a report from a well-known consultant (one that shall remain nameless for now - but you know who I am talking about) and I notice a slight of hand going on.
They forecast production, country-by-country through 2007 (total liquids) and show significant increases from 2005 to 2006 and 2006 to 2007. Although the expected increases are shown in expected countries listed above, they show slight but significant changes in trends in almost all countries across the board. For example, they show Ecuador's production decreasing from 2004 to 2005 but increasing in the following 2 years. Mexico, India and Norway also show dramatic turnarounds in 2006. The UK turns around in 2007. So does Argentina and Oman. And of course there is the all-inclusive "Others" category which constantly increases throughout the forecast period and picks up almost 300 kbd between 2004 and 2007.
I don't know about you, but for this type of forecasting, the devil is in the details, and it looks like there is a Pandora's Box full of sin hidden in the details of this consultant's report. It is clear to me that they have assumed very modest decline rates for most of these countries, and that they have assumed non-project-specific growth models for almost all countries. This gets into arm-waving territory where a forecast becomes opinion rather than fact driven.
Just to give you an idea, the Oil and Gas Journal gives the following percentage declines from 2004 to 2005. (caveat - the O&GJ numbers are crude only and the other report is total liquids)
(Sorry, but I can't seem to format a table properly)
- Ecuador -2.9%
- Mexico -1.9%
- India -4.0%
- Norway -8.3%
- UK -11.8%
- Argentina -3.8%
- Oman +0.1%
- Western Europe Total -8.7%
- Western Hemisphere -2.5%
- Africa Total +6.8% (dominated by Nigeria, Lybia, and Algeria {OPEC} and Angola {non-OPEC]
- Eastern Europe and FSU +4.2% (dominated by Russia)
- Asia Pacific +1.2% (dominated by China)
- Total Middle East +1.6% (dominated by OPEC and esp, Saudi Arabia)
- Total OPEC +2.1%
- Total non-OPEC -0.1%
- Total World +0.8%
I don't know about you, but for this type of forecasting, the devil is in the details, and it looks like there is a Pandora's Box full of sin hidden in the details of this consultant's report. It is clear to me that they have assumed very modest decline rates for most of these countries, and that they have assumed non-project-specific growth models for almost all countries. This gets into arm-waving territory where a forecast becomes opinion rather than fact driven.
“We have only two modes—complacency and panic.”
—James R. Schlesinger, the first energy secretary, in 1977, on the country's approach to energy
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Don't know where they get the mojo for that set of projections. Would appreciate enlightenment!
I wonder what inflation adjustment thet are using? Consumer CPI, core CPI, GDP deflator CPI... or a realistic CPI measure?
But taking a more practical pespective... they couldn't suddenly switch to a realistic estimate - that would have made their previous estimates look silly ( ho ho ho ) so they'll probably increase their estimate by about 50% per year and: hey presto, by 2024 it will be nearly accurate ;)
I might believe the Caspian Sea region and Africa. Not the rest. Also, almost no decline in other areas. Uh-huh.
Norway -8.3%
UK -11.8%
With Western Europe down 8.7%
This surely must change the geopolitical situation for Europe, and therefore, for the world. At this pace, if we want to see how an advanced set of nation will try to cope with "peak oil" or depletion, we should be watching Europe.
How long will it be (especially given the Russian/Ukraine natural gas debacle in which Europe was the one to get smacked in the face), and given Europe's increasingly dire position on energy, before some Euro-lectuals start saying and writing that the U.S and the Russians are essentially trying to choke Europe out of existance?
Unless the growth in production is spectacular in other places in the world, it is hard to see how the North Sea decline does not have the effect of giving MASSIVE POWER to the OPEC nations, with the money that comes from it.
What are Europe's options?
> First, the "dash for gas", meaning essentially a bit of foot kissing of the Russians and the Caspian Sea nations, and some fast building of pipelines and LNG terminals and ships...
>Second, a fantastic push into Africa, and signing long term contracts with the mentioned nations, Algeria in particular for the gas (this leaving us with Trinidad and Tobago as an even bigger lynchpin in our LNG plans, and running behind in the race to get long term LNG contracts unless we get in the fight soon (in 2003, it was said by Energy Secretary Spencer Abraham that the U.S. will face a shortfall of 25% by 2030, but that was using "old" depletion numbers. Like Britain and Norway, our depletion seems to be speeding up rapidly, so the 25% could get here much earlier...remember, that even a 10% to 15% shortfall, which looks possible by the 2010 is a major emergency. Weather will be everything in stretching this number out)
>Third, Fourth, and Fifth, NUCLEAR, NUCLEAR, NUCLEAR. Europe may be the land of the militant "Greens" but even the Greens don't want to freeze to death or see Europe become a slave state to Russia/U.S.
Europe bears much study and watching (we may even may want to try to help them, if we are still able), the wolf is on the hunt there first.
But I think you forget the most important alternative; it wil be coal, coal and coal. It is what made Europe big and it will be used again.
We will see a whole new (new?) social lower class: coal mine workers, mark my words.
Ageria has been in decline from 1999. And there is also the domestic demand. If Africa wants to develop, it needs its own gas. Look at South America - they are building their regional pipeline system for their own use. This is where Bolivian gas is heading, for instance.
It is not only world natural gas production nearing to the peak, but also increasing domestic and regional use outside Europe end the US.
http://online.barrons.com/article_email/SB113598700926335171-lMyQjAxMDE1MzM1MTkzODE3Wj.html
"Why does ExxonMobil have a different view of where the oil price is headed?
I don't have the vaguest idea why they could ever think we are going back to $25 oil other than their business model desperately needs that to happen to have their long-term strategy work. High oil prices are very bad news for big oil. The higher the price, the more proven reserves they've already booked they lose in these foreign concessions, because once their projects hit their payout targets, then the host government's share rises. I think the major oil companies are lost in the wilderness right now."
Can anyone elaborate on how these foreign concessions agreements are typically structured?
Venezuela will save a minimum of 3 billion U.S. dollars under the terms of the deal, because the oil companies used to sell 500,000 barrels per day (bpd) to the government at international prices rather than at cost prices.
http://news.xinhuanet.com/english/2006-01/03/content_4002394.htm
Use TT or CODE to get monospace. Also use only spaces not tabs.
Ecuador -2.9%
Mexico -1.9%
India -4.0%
Norway -8.3%
UK -11.8%
Argentina -3.8%
Oman +0.1%
Western Europe Total -8.7%
Western Hemisphere -2.5%
Africa Total +6.8% (dominated by Nigeria, Lybia, and Algeria {OPEC} and Angola {non-OPEC]
Eastern Europe and FSU +4.2% (dominated by Russia)
Asia Pacific +1.2% (dominated by China)
Total Middle East +1.6% (dominated by OPEC and esp, Saudi Arabia)
Total OPEC +2.1%
Total non-OPEC -0.1%
Total World +0.8%
Also a typo repeated from above - it is Libya, not Lybia.
http://tinyurl.com/9uu8m
Sorry about that.
That said, this is the most-discussed consulting firm that has a very public and optimistic view of oil production going forward.
The report, which is quite lengthy, does not go into project level detail as to where this extra production will be coming from. They don't talk about their country level decline assumptions. They also don't talk about growth assumptions except on a region or major-country basis.
We all know about the major projects and those can be accounted for. However, it is what is going on in the background that really controls their forecast. The low declines and subtle turn-arounds in the countries that most people don't pay attention to are the major reasons that this firm show's increasing production worldwide beyond 2010.
My point in trying to share this is that, in some sense, they are trying to pull a Saudi Arabia on us. They are trading on their name, and saying "Trust Us. We know what is going on. You don't really need to know the details."
Rest of this post on non-OPEC production left intentionally blank
How much did you guys pay for this, Bubba?
I searched their web site to see if there was somewhere to download some of the raw data, but if it was there, I couldn't find it. I may try emailing them.
The report is full of descriptive verbage about the global economy, demand forecast, pricing forecasts, refinery capacity, and forecasts country by country. However, the forecasts do not go any deeper than country level - except for the general mentions of the major projects we all know about (e.g. Kizomba B, Salym, Tengiz, Barracuda, Caratinga, White Rose etc.)
"FUA" means fields under assessment, which is where it all comes from starting only next year, from fields which evidentally aren't even evaluated yet, but which of course must have enormous amounts of oil.
YTF is yet to find.
I'm not convinced. Thanks Stuart, I was considering trying to find this post again and put it up.
August 2005 1.21 million barrels/day
September 2005 1.38 million barrels/day
If they cannot get current production right what confidence
can you place in their predictions.
Slightly off topic, but an interesting note regarding the CERA predictions which I haven't seen explicitly voiced. They make a decent mention about the risks which might affect their predictions on the downside, but they don't discuss events which might affect their predictions on the upside.
I can help with the CERA predictions: there are no upside risks in their recent production forecasts - which is why they don't mention them and why many here feel they are irresponsible and unrealistic. There is, however, potential for demand destruction by economic slowdown or worse, that might (if severe enough) give their estimated PO date a sporting chance.
Perhaps those of us in favor of making it easy for windfarmers and other providers of alternative energy, to obtain the necessary permits, should submit comments to the MMS. Article on comment solicitation via Rigzone:
http://www.rigzone.com/news/article.asp?a_id=28214
This news report based on a recent Pemex announcement. So, Cantarell (Gulf of Campeche) is toast. What about the others? From Pemex in September 2004 here Well Ku-Maloob-Zaap (in the Gulf) is still in development according to Rigzone. Assuming a hurricane doesn't delay any of this. From the EIA Frankly, I don't know what we can expect from Mexico in 2006 and I don't think Pemex knows either. Your consultant (who shall not be named) is no doubt getting their data from Pemex.