OGPSS - At around 2 mbd - Nigeria, Angola, Libya and the UK oil production

The growing concerns about the stability of the countries of the Middle East and North Africa (MENA) because they make significant contributions to world oil supply adds additional meaning to these weekly posts on the world’s major oil producers. To briefly recap I looked at the top tier oil producers (as listed by the EIA (i.e. those who produce more than 3.1 mbd in 2008) in the first post of the series. (These were Russia, Saudi Arabia, the United States, Iran, China and Canada. ) In the second I looked at the next four countries on the list, namely Mexico, the United Arab Emirates (UAE) Kuwait and referred to Venezuela – subject of a series of posts earlier in the year. The third post covered Norway, Brazil, Iraq, and Algeria. And so now we move on to look at Nigeria (2.35 mbd), Angola (2.0 mbd) Libya (1.87 mbd) and the United Kingdom (1.58 mbd). The numbers in parentheses are the production numbers cited by the EIA for 2008. To further put these countries in context, these take us down to number 18 on the list, and with one more post I will have covered all the countries that produced more than 1 mbd on average in 2008.

I will start with Nigeria, which now is cited as producing 2.4 mbd of crude and condensate in January 2011. The country has been having considerable trouble with sabotage and internal unrest, which has had a negative impact on production. However the country signed an Amnesty Program with militants in 2009 which has reduced disruption. As a result in February Nigeria was able to raise production to 2.6 mbd. If this can be sustained it will bring production back over the peak level that was achieved back in 2005.


Note that, for crude oil production alone, Nigeria is listed as producing 2.17 mbd in January, according to the February OPEC MOMR. (Which is also a gain from the above chart). In light of some of my recent comments on who might be hurt if oil production in some of the MENA countries drops off, it is perhaps interesting to note which countries got oil from Nigeria in 2009.

Nigerian oil customers in 2009 (Source EIA )

Historically Nigeria flared much of the gas that was associated with the oil, particularly in the Niger River Delta, where much of the oil is found. That practice led to some of the more dramatic stories that came from the region, before the amnesty. There is, however, a concerted effort now to capture and market this natural gas, as well as that which comes from gas wells in the country. This has led to some optimism by the Government over future sources of revenue.

The Minister also disclosed that the establishment of two new Liquefied Natural Gas, LNG plants, in Olokola in Ogun/Ondo States and Brass LNG in Bayelsa state, will create over 7,000 jobs and inject over $1billion into the host communities.

There are a total of 6 LNG trains at Finima, on Bonny Island, first coming into production in September 1999, and supplying a variety of customers. While the capacity is at 1.1 Tcf, recent figures have been at about half that volume. (And this is about the same volume that continues to be flared in the country.)

With Nigeria having increased overall production since 2008, though potentially having limited potential for much greater increase, the next country down the list is Angola which, since 2007, is also in OPEC, and OPEC list the January Angolan production of crude at 1.62 mbd. This is significantly below the overall 3.8 mbdoe that BP has reported for total energy production in 2010. Because of some technical problems with water injection, being used to help move oil from the reservoirs, moves to address the problem might overall, reduce the average for 2011 to 3.4 mbdoe. Angola exports about 1. 7 mbd of oil, but is responsive to OPEC requests to control production in order to keep prices at the OPEC comfort level. (Which has risen from around $75 to over $100/bbl in the last few months). Thus the declines shown in the EIA plot below, which only shows through 2009, are more politically induced than due to geological conditions. The EIA, for example, lists project for this year alone that are expected to add 650 kbd to production, and likely export. Unfortunately we are now far enough down the list that while these numbers are significant in their own right, and for the country they may not give that much help to the overall shortages that may evolve over the next year.


Angola currently is building an LNG project at Soyo, expected on stream in 2012 which will handle around 1 bcf/day. Apart from the LNG, which will be exported, the plant will send some 125 mcf/day of natural gas into a distribution network for domestic consumption. Until the plant comes on line most of the almost 1 bcf of natural gas that is produced every day is either flared or reinjected to help with oil production.

Trying to project Libyan future production is rapidly becoming meaningless, I fear as the initial moves to remove the current Leader have not met with sufficient success to eliminate the possibility of civil war. It was only a few weeks ago that Libya was producing at around 1.6 mbd of oil, and Luis de Sousa has reposted an earlier review of the past history of their production. He presciently notes in that post that the rising population of the country is going to demand more of the resource be spent at home. The topic of Libyan production will likely continue to appear in other posts – as it just has – but at the moment it appears, for a variety of reasons, that the system is effectively shut down.

Little if any oil can be shipped out of Libya because most ports were closed. Meanwhile, storage tanks were filling up rapidly. Oil traders said one major oil company cargo ship was supposed to berth this week, but no one was at the port to deliver an oil shipment, and shipping companies were reluctant to send ships into the Libyan ports.

I have also discussed elsewhere the likelihood of sufficient increase in production in other countries to make up the shortfall. Gazprom has been helping Italy, for example, and Saudi Arabia increasing production, but how long this will last, and how much will ultimately be needed remains an unknown. It really depends on how many dominoes fall, and how long they remain on the table.

Which brings us to the United Kingdom. Back in the troubled days of the first oil shocks some thirty to forty years ago, it was the combination of new production from the fields in the North Sea and the North Slope that helped bring oil prices down to the low level which allowed the years of growth until now. But we have reached a point where those resources are beginning to disappear, and the UK has turned from an energy exporter to a growing importer. Euan Mearns has documented this progression in a much more detailed and better way than I illuminating, for example, back in 2008, the coming seriousness of their problem.

Euan’s plot of the UK Predicament, from 2008

If we look at the situation today, the reports for last year note

In 2010, the UK produced 850 million barrels of oil and gas equivalent (boe) or 2.3 million boe per day. Current plans now target reserves of 11.6 billion boe, 1.3 billion boe more than was anticipated a year ago, reflecting the outcome of increased exploration and appraisal activity across the UKCS and particularly West of Shetland. Oil & Gas UK believes there could be up to 24 billion barrels of oil and gas still to recover from the UKCS.

This was about 60% of the UK energy need. Production of crude for last November was 1.047 mbd from offshore, and 9,344 bbl from land wells. The natural gas numbers were 2.7 Bcf from offshore oil wells (as associated gas) and 2.8 Bcf from offshore gas wells. In addition there was some 12 kbd of condensate from the offshore gas fields.

Whether one uses Euan’s plot, or that from the Energy Export Databrowser:

UK Oil statistics (Energy Export Databrowser)

The UK is clearly entering a more expensive future as it must find more oil from overseas, just as that supply is tightening.

On the other hand, while the situation is getting somewhat worse more rapidly with natural gas, as the EIA plot below shows ( and it contributes to Euan’s total figures) there is a sufficient glut on the world market at the moment that there will not be that immediate a problem in the short-term.

United Kingdom trends in gas statistics (EIA )

UPDATE The energy situation in the UK is becoming recognizably more dire, and the Secretary of Climate and Energy, Chris Huhne has just pointed out that the price of $100 a barrel for oil justifies a greater investment in green technology

Drawing on research conducted for the previous government by Lord Stern, Huhne argued that a $100 a barrel price is the exact point at which the economics of climate change pivot so that it becomes cheaper for British consumers and businesses to invest in green technology than remain with the status quo.

He said that if oil only reaches $108 a barrel by 2020 as predicted by the US Department of Energy, which would also lead to higher gas prices, then "the UK consumer will win hands down". He said the UK consumer would be "paying less through low-carbon policies than they would pay for fossil fuel policies".

This does not recognize that most renewable energy technology currently focuses on generating electricity, while the crisis is in liquid fuels for transportation, and it also ignores the likely over supply of natural gas which is separate that price from the rising price of oil over the coming years. Tsk!

The current situation in the MENA countries is in such a state of flux, and the impacts barely recognized as yet, that it is becoming even more difficult to have any confidence that the predictions of performance that were being used only a couple of months ago will continue to have much validity in predicting what is likely to occur even in the relatively short term future.

How do we make up for Mexico's declining exports?

The current turmoil over the supply of gas from Russia, highlights the increasing dependence that the world has to place on energy supplies from a shrinking pool of suppliers. This past week the Energy Information Agency (EIA) shows that the United States imported some 14.5 million barrels of oil a day (mbd). Domestically we produced 4.9 mbd, having fallen below 5 mbd just as the calendar kicked over into December, 2008. The October import figures the most recent available, (pdf) show 6 mbd came from OPEC countries and 7.4 mbd from non-OPEC nations.

This supply came from a total of 49 countries, ten of whom are in OPEC and 39 of whom aren’t. However if we count only countries that contributed more than 250,000 bd to this supply we end up with Canada (2,567 kbd); Saudi Arabia (1,487 kbd); Mexico (1,483 kbd); Venezuela (1,162 kbd); Nigeria (979 kbd); Iraq (577 kbd); Algeria (555 kbd); Angola (539 kbd); Russia (394 kbd); Brazil (354 kbd); the United Kingdom (386 kbd): and the U.S. Virgin Islands (267 kbd).

One of the reasons for putting the list up here and now is that we can come back, next year and see how things have changed, and note how and where the dependence has moved to. But, as I noted in Pick Points, Mexican production has fallen to around 3 mbd, of which half is exported to the U.S., and if their production continues to fall at 500,000 bd per year, then within this next year there is going to be some greater crunch between domestic use and exports. So where will the United States make up the difference?


Now the volume each supplies varies by month, two months ago Norway supplied (for that month) 2.175 mbd so that drawing conclusions from a single month is of no great value, but if one goes back and looks at figures for 2007 (pdf), one ends up with almost the same list, only Brazil having since joined (by 154 kbd). In 2005 the top 14 countries importing to the US would have dropped off Russia, Brazil and the U.S. Virgin Islands, but Colombia, Ecuador, Kuwait and Equatorial Guinea were still on it.

The largest proportion of the U.S. imports come from Canada, yet outside of the Oil Sands of Alberta and the possibilities of production from the Bakken shale, their production has been declining, with the Newfoundland fields perhaps peaking at 369 kbd in 2007. The oil sand production, currently at 1.4 mbd is scheduled to increase, with an initial target of 3.5 mbd, once planned for 2015, but now slipped back to 2020. Unfortunately for US consumers, there are two snags to relying on this source to offset Mexican declines. The first is the slowing of the expansion plans of those working the oil sands as prices fall; the second is:

The 2007 federal energy bill says U.S. government fleets can't buy fuel from the oil sands and other sources whose production emits more greenhouse gases than conventional oil.

And if someone gets serious about enforcing that . . . . .
So if Canada cannot expand their production enough, and Mexico is going to cut their exports, for the sake of discussion by 0.5 mbd, where do we look to next?

That would be Saudi Arabia, from which we get about 1.5 mbd. But Saudi Arabia is a strong advocate of OPEC production cuts and has already dropped their production from a peak of 9.7 mbd to 8.5 mbd in November. While it may go lower, probably not below 8 mbd, they have just warned Asian customers that cuts, of up to 15% will continue. So no luck there.

Moving down the list of suppliers, in terms of import size, that takes us to Venezuela. This is an interesting case, since there is a fairly large difference between how much oil the country says it is producing (3 mbd) and the amount others have estimated (2.4 mbd). In accord with OPEC wishes to cut production, so that prices will move back up, Venezuela is cutting some 189 kbd or production, 166 kbd of which was going to the United States. So I guess we’d better not look there.

Next on the list, moving down, is Nigeria, where we get just under 1 mbd. Well they are currently exporting, in total, around 1.66 mbd, but this is a cut of 12% (from 1.88 mbd) to accord with OPEC requests.. Although the country has a potential to produce perhaps 2.5 mbd, the problems that have been created by widespread conflict has pulled it down to perhaps the current level, although, with perhaps as much as 200,000 being siphoned off to illicit sales, it is going to be difficult to estimate true production – but I wouldn’t gamble on getting more out either.

And so we come to Iraq, which has now, with 0.577 mbd, made it to sixth on the list. A year ago I would have thought that increasing that number would have been almost impossible, but the nation is moving ahead with plans to double oil production (from around 2.5 mbd today, of which 1.85 mbd is exported), within three or four years. If this can be achieved, and one of the fields planned for expansion lies beneath Baghdad, then this could solve the US shortage , if not . .

The next candidate on the list is Algeria. But while their production is continuing to rise, together with exports, they also hosted the latest OPEC meeting with its call for 3.3 mbd of oil cuts. Thus while the US may get up to about a third of their exports, of about 2 mbd total production, their share is not going to go up in the short term, even though they hope, when markets grow, to increase production to 2.6 mbd by 2018..

Angola is eighth, but as a member of OPEC they are falling in line to drop production, from the 1.9 mbd that they produced in 2008, even though new fields are coming into production, and the production cut is anticipated to lower this to 1.5 mbd.

At ninth in line, there is Russia. But while Russia now vies with Saudi Arabia to be the worlds largest producer of oil, it has announced that it will go along with the OPEC cuts and, in collaboration with Azerbaijan, reduce their output by 600,000 bd. There is also a question as to whether overall Russian production has not peaked, since production last year fell year-on-year (Y-o-Y) by 815 kbd, to 9.74 mbd, with exports falling 16% to 3.53 mbd. Guess we had better not look there.

And so we come to the tenth candidate – which is Brazil. Brazil reached energy in 2006, but though a lot of credit was given to sugar cane ethanol the reality is that it was achieved with increased production of oil, particularly from offshore. However the costs for developing those fields is above the current price of selling the oil from those fields. So maybe we should not send out tankers down there yet.

Hmm, well lets see where that leaves us, Can it be that we are left hoping for production increases from Iraq as our likely savior, should demand start to resurrect?


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