You know it is winter when Russia and Ukraine publically row about supplies of natural gas. On Tuesday Ukraine completed the signing of an agreement with Turkmenistan for the supply of natural gas. In the past the purchases have been for up to 36 billion cu m per year, although this was historically through Russian intermediaries. That deal ended in 2006, and Turkmenistan has been able to find a customer in China that now provides an alternate sale that does not leave it dependent on whatever price Russia was willing to provide.

But this does not mean that Ukraine has been able to escape having to pay whatever price Russia wished to impose, since to get from Turkmenistan to Ukraine the natural gas still requires passage through a pipeline that runs through Kazakhstan and Russia. There is no prize for guessing that Gazprom owns those pipelines.

This continues to give Gazprom leverage over Ukraine, and with the North Stream pipeline now approaching its full potential after the second string was commissioned last October, Europe can receive up to 55 billion cu m per year without the gas having to pass through Ukraine.

Executive Summary

This is the final installment of the tour of global crude + condensate + natural gas liquids (C+C+NGL) production data as published by the International Energy Agency (IEA) and deals with the rest of the world. OPEC and OECD production was described in earlier posts.

After many decades of growth, Chinese oil production appears to have stalled in 2012 at just over 4 million bpd. It remains to be seen if this is a temporary glitch or whether this heralds peak and decline in Chinese oil production.

Russia + Former Soviet Union (FSU) production has been on a plateau for 3 years at just below 14 million bpd. Russian production continues to grow slowly offset by declines in other FSU states.

Oil production in Oman peaked at 960,000 bpd in 2001 and declined steadily to around 700,000 bpd in 2008. An aggressive program of enhanced oil recovery (EOR) has turned things around and production has risen by over 200,000 bpd in the last 4 years and Omani production is challenging the 2001 highs. There are profound lessons to be learned here about the potential impact of EOR on heavy oil fields and future global production.

Columbia has also seen a reversal of fortune with new field developments reversing declines and new production highs just under 1 million bpd have been set in recent months.

Figure 1 Oil production has been largely flat in South and East Asia over the decade, rising slowly from 2002 to 2011 and since then in gentle decline. Production in China and India has been rising offset by declining production in Indonesia and Malaysia. All data published in this interim report are taken from the monthly IEA Oil Market Reports.

From May 2007 to August 2010, Rembrandt Koppelaar published an e-report called Oil Watch Monthly that summarised global and national oil production and consumption data from the International Energy Agency (IEA) of the OECD and Energy Information Agency (EIA) of the USA. This is the fourth in a series of new Oil Watch reports, co-authored with Rembrandt and details crude oil production data for the Rest of The World as reported by the International Energy Agency. Earlier editions:

Oil Watch - World Total Liquids Production
Oil Watch - OPEC Crude Oil Production (IEA)
Oil Watch - OECD Oil Production (IEA)

[Editor's comment: This article is by Dr. Tad Patzek, chairman of the Department of Petroleum & Geosystems Engineering at The University of Texas at Austin. Dr. Patzek's research involves mathematical modeling of earth systems with emphasis on multiphase fluid flow physics and rock mechanics. He is also working on smart, process-based control of very large waterfloods in unconventional, low-permeability formations, and on the mechanics of hydrate-bearing sediments. In a broader context, Patzek works on the thermodynamics and ecology of human survival and energy supply schemes for humanity. He has participated in the global debate on energy supply schemes by giving hundreds of press interviews and appearing on the BBC, PBS, CBS, CNBC, ABC, NPR, etc., and giving invited lectures around the world. This article first appeared on Tad's blog Life Itself.]

Before I discuss the logic behind negating a peak of production of anything, let me sum up where we are in the U.S. in terms of crude oil production.  According to the Energy Information Administration (EIA):

The United States consumed 18.8 million barrels per day (MMbd) of petroleum products during 2011, making us the world's largest petroleum consumer. The United States was third in crude oil production at 5.7 MMbd. But crude oil alone does not constitute all U.S. petroleum supplies. Significant gains occur, because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and we have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.6 MMbd in 2011.

Let me parse this quote.

On occasion, the British Government goes through an internal shake-up that leads to various pundits trying to explain to us lesser mortals what it all means. Thus, with changes in the Ministers who work in the Department of Energy and Climate Change, there is a suggestion that the UK is pulling back from their commitment to wind energy, and instead beginning to look more seriously at shale gas supplies.

The UK is not unique. The success of the American development of long horizontal well drilling, with follow-on multiple fracture of the shale beds to release gas at economic volumes into the well, has caught the world’s attention, and with it a desire to emulate that success. Though it should be said that the American success comes in part with the volume of the release in supply and the consequent fall induced in the price of natural gas. That, in turn, is providing a less well-recognized boost to the US economy, through lower energy costs.

This has not been lost on the Chinese, who are fully aware of their own need to keep finding resources at as cheap a price as possible to keep their own economy growing. It is, in relative terms, however, still an industry in its infancy. Earlier this year China agreed to buy 65 billon cu m of more conventionally produced natural gas from Turkmenistan – about twice the initial buy - roughly the equivalent of 6.3 billion cu ft/day (bcf/d). In addition, from April 1, China has started to import natural gas from Uzbekistan. That sale has been projected to be at around 10 bcm/year (1 bcf/day) and there has been a move in Uzbekistan to increase coal-fired power generation in the country in order to free up more gas to meet export demands as the sales to China ramp up to perhaps double this level in the next few years.

Further China still has the option of buying more natural gas from Russia, which has the potential to supply an additional 65 bcm/year into China. (6.3 bcf/d)