OGPSS - The top 30 oil producers, a review

These posts have been going through the EIA list of the top oil producers in the world, over the past few weeks, I thought I might just review them collectively, but briefly, before starting to look at individual countries and oilfields. Even the posts that I have written recently have become out of date with new information (Russia increased production again in February by 20 kbd over January reaching 10.23 mbd) and then fell back to 10.2 mbd in March but at this stage, rather than focusing on such details, I am trying to generate a sense of the overall picture. It should also be recognized that I am just grabbing a snapshot of data, rather than the more detailed studies that look at the longer term, which folk such as Rembrandt, Rune and Euan provide. The simplest way to do this is to place my current estimates of production for the top 30 oil producers that I have reviewed in this series against the EIA estimate of their production in 2009.

Top 30 oil producing countries (those increasing production over 2009 are shown in red). (Click on the table to enlarge it)

It is significant to note that while Saudi Arabia was producing 8.05 mbd of crude in 2009, this has risen to 8.869 mbd on average for February as the Kingdom increased production to match the shortfalls in oil exports from Libya, inter alia. (With roughly 1.8 mbd in “other liquids” this takes total KSA production to 10.67 mbd and moves it back to the top of the League. However those numbers were from the March MOMR, which reports on February, In that report Libya was still being recorded as producing around 1.3 mbd). It is now reported that overall OPEC was not able to match the Libyan decline in March, falling about 350 kbd short, while KSA production has now reached 9 mbd, (10.8 including other liquids).

Contrary to President Obama’s recent remarks the EIA are anticipating a decline in US crude oil and liquids production over the next two years, part of which has been blamed on the change in GOM regulations. As a result it would be optimistic to anticipate much more than a US production of 8.3 mbd (and the EIA project it will be down to 8.2 mbd next year). It is unlikely that US production will increase beyond that point.

US crude and liquid fuels production – (EIA )

With China, Iran, and Canada holding relatively steady in the short term, this gives an updated total of 39.83 mbd for the top six, which is about 1.4 mbd higher than when I wrote the initial post back in February, but 500 kbd below the EIA estimate for their 2009 production. (While Russia and the KSA increased, the USA and Iran declined). Of these it is likely that only the KSA can continue to increase production much more.

In the second tier, Mexican production continues to fall, and was down to 2.556 mbd in February, with reports that it will now be an oil importer well before 2020. Exports have already fallen to 1.23 mbd, which does not bode well for customers. The United Arab Emirates (UAE) have, like the KSA, increased production to help out, though so far this has only been up to 2.394 mbd from 2.3 mbd for most of last year. (They also produce roughly another 500 kbd of other liquid fuels). By 2020 they should be able to produce up to 3.5 mbd. And in similar vein Kuwait, now producing at 2.368 mbd, up from 2,3 mbd. Kuwaiti plans are to reach 3.5 mbd by 2015, and be at 4 mbd by 2020.

The current political turmoil has even persuaded Venezuela to increase production, with OPEC reporting levels of 2.39 mbd for February, a gain of around 100 kbd. Though how long that is sustained depends on the success of the many investors that have been persuaded to invest in the Venezuelan oil sands.

In the third group Norway is declining, being now at just over 2 mbd, and even though it has just announced a major new discovery that will not come on line for at least 5 – 10 years, and in the meanwhile production will continue to fall. Norway needs more discoveries similar to this, however, to be able to sustain production levels extending into the future, since without them production will collapse.

Brazil was touted, by President Obama in his remarks about the Energy Blueprint last week, though the increasing volumes of oil that they will produce remain foreign to the United States, and though they will likely increase production up to around 4 mbd by 2020, rising domestic consumption may well take much of that increase.

Which brings us into the states that has some political turmoil. Iraq has been able to bring production back to around 2.64 mbd (according to OPEC) with the hope of reaching 3 mbd by the end of this year. At the moment about 1.2 mbd of this is exported. One of the great questions of the decade is just how close to a projected 10 mbd by 2020 that Iraq will be able to get. Sadly the continuing conflicts there, though reduced in scale, make it difficult for me to see much beyond 5 mbd by 2020.

Nigeria, which has had its own internal conflicts for some time, is going to the polls as I write this, and the expected winner is planning to overhaul the oil industry. However, if stability continues, then it might be possible to resurrect some of the older fields and perhaps increase overall production by some 350 kbd.

Algeria, which has had some turmoil, but may emerge from the ongoing protests without much change, is producing around 2 mbd of liquids. That has not changed as OPEC has moved to match the decline in volumes from Libya and other countries facing protests, and may reflect the current maximum that the country can produce. In the stability stakes I suspect that Algeria may survive without much change, although the plot I put up from Energy Export Databrowser does suggest that production may have peaked.

Algerian oil statistics (Energy Export Databrowser)

Angola is currently producing 1.7 mbd but may add some 650 kbd this year, for a total of 2.35 mbd. And that brings us to Libya, where the increased fighting, particularly over the oil refinery town of Ras Lanuf, makes it increasingly unlikely that the 1.7 mbd which came from Libya will be available again soon.

The United Kingdom is in significant decline, but recent moves to further tax the oil industry have made it possible that the decline may steepen. This because the new taxes proposed will likely reduce the profitability of the field developments proposed, discouraging their development. Recently production has run at 1.35 mbd of liquids, which is scheduled to drop to 1.3 mbd this year, and 0.94 mbdoe of natural gas, anticipated to fall to 0.85 mbdoe this year. The criticality of investment is shown in the projected production over the next 5 years, with the different colors showing the likelihood of success. Note that the grey of current production is declining at about 10%.

UK Projected Oil production (2011 UK Oil and Gas Activity Survey )

UK Projected Natural Gas production (2011 UK Oil and Gas Activity Survey )


Moving to the next tier down, Kazakhstan is now at 1.6 mbd and slowly increasing production toward a target of 3 mbd by 2020. Qatar is running at 1.4 mbd, but with almost 0.6 mbd of that in NGL. Indonesia is producing right around 1 mbd and may maintain that in the short term. It is being challenged in rank by Azerbaijan which has just incremented up to 1 mbd, a volume that is expected to continue to rise until it reaches about 1.25 mbd in 2014.

The tier that lies below 1 mbd starts with India, which is currently holding a production of around 878 kbd, and having to import increasing amounts of oil to meet demand. Given that the country also subsidizes the price, this is becoming an increasingly expensive consideration for the government. India is followed by Argentina, which is post peak and declined to 0.76 mbd most recently. Egypt is similarly declining, now to 660 kbd, but as one of the early nations to change under the most recent protests, and with the situation still somewhat fluid, it is difficult to predict how much the country will have both for itself, and for external customers, a year from now.

Oman will likely weather the current storms, and is also increasing oil production, to the point that it is moving up to pass India, with an Omani production of 863 kbd, some of which is tied to NGL production.

In the final four that produce more than 500 kbd Malaysia is barely maintaining production at 700 kbd, while Australia has fallen from 588 kbd to 540 kbd. Both are now being passed in production by Colombia, one of the “hotter” places for development at the moment, with production rising to possibly 920 kbd this year. Ecuador, which closes out the top 30, has recently increased production from 485 to 504 kbd.

That completes the top 30, and accounts for some 76.7 mbd of production. Those same countries back in 2009 were reported by the EIA as producing some 79.23 mbd of oil. Remember that world demand is anticipated to increase by somewhere between 1.4 and 1.6 mbd this year, and that of this list of 30 only 13 increased production, and the rest declined and the concern for the future becomes thus more clearly defined. (The difference between the two totals is partially explained by the loss in Libyan oil - we will see within the month how well OPEC covers that).

But it is not the overall production from the world that can be estimated that accurately, but by looking at individual countries and, in some cases, individual oilfields that we can get some better sense of what is to come. So the next step will be looking at these nations in more detail, in the weeks ahead.

OGPSS - thoughts on oil production from the MENA countries in turmoil

The popular protests among the countries of the Middle East and North Africa (MENA) are continuing to roil, and so, rather than the review of the countries that I have been discussing in the posts of the last few Sundays, I thought I would just briefly review the status of the countries that are now in various stages of unrest, and include their relative production and exports of oil. I am not going to discuss the natural gas situation since, in relative terms, there is currently a significant excess of natural gas available to the world market. As a result, should the MENA production falter (providing it does not spread to countries such as Qatar), any default can be made up from elsewhere.

I am going to take a quick look at Libya, Yemen, Syria, Algeria, Morocco, Bahrain and Jordan, as counties that are looking less than stable. The list is my estimate of the order in which they will fall, or not, in the sequence shown (my unapologetic dominoes). I am not going to talk about Tunisia and Egypt since, optimistically, they are now in transition with little impact, in the short term, for their hydrocarbon statistics. (And Schlumberger would add Ivory Coast to the list.)

Let me start with Libya, since I was struck by a comment by a Guardian reporter on the current situation there.

Everywhere, there are long queues at petrol stations, sometimes with hundreds of vehicles stretching down the road as they wait. At one queue, drivers were relieved when a tanker finally delivered a load of fuel, but then reacted with frustration when there was no electricity to operate the pumps.

If there is no fuel within the country, then the time it will take to bring the oil refining and distribution system back into operation will get longer, as the crisis continues. And since domestic demand will be met before exports restart, the length of time that Libyan oil will be off the world market continues to grow.
Just as a reminder of the balance between exports and domestic use, here is the EIA plot of that balance.

Libyan oil statistics (Source EIA )

The impacts of the protests in Libya was almost immediate and the world market has lost 1.4 mbd of oil. The impacts in other countries will be more or less drawn out, depending on the nature of the change.

Yemen appears to be the next shakiest in my rather murky crystal ball. With Yemen, although the President there just withdrew his promise to resign, the protests are beginning to follow the Libyan model in that the protesters have taken over part of the country, and fighting has started. Yemen produces some 260 kbd of oil, but exemplifies the Export Land model in that production as now declining, and domestic consumption rising, the volume available for export is rapidly diminishing. The EIA report that it was 125 kbd in 2009, and mostly went to Asia.

Yemeni oil statistics (Source EIA )

It is beginning to look as though Syria might collapse along the same path. The precursors are starting to happen, in the same way as for Libya, and if it goes there is another 368 kbd of production that may be lost. Of this some 148 kbd is exported, mainly to Germany, Italy and France. Internal consumption, on the order of 200 kbd, may decline, which will, in itself, likely foment unrest.

Syrian oil statistics (Source EIA)

While the protests in Algeria have died down, for now, should more governments topple (as seems increasingly likely, vide the above) then protests may return to more public visibility, since the causes of the unrest largely remain. However we are now moving from the countries where significant change is beginning to seem probable, to those where it is increasing unlikely. Algeria is, I suspect, right in the balance on this. There is less motivation to get back into the troubles that preceded the French leaving the country back in 1962, when a million people died, and then there was a civil war that ended in 1999 that killed another 150,000. As a result there is more of a chance for the current President to make enough changes to survive.

I wrote about Algeria, which produces more than 2 mbd, earlier in the series and for now will presume that the production of both oil and natural gas will continue.

Algerian oil statistics (Energy Export Databrowser)

Morocco, which produces only around 4 kbd of crude, needs to import around 191 kbd to meet domestic needs. It is also a country where, after some initial unrest, the king took some actions and has promised reforms. Whether these will come to pass and will be sufficient remains in question, but for the present it moves the country over more toward stability, and I will accept that for now.

Bahrain, produces around 40 kbd of oil, with recent investments of $15 billion being projected able to increase that to 100 kbd by 2017. This is expected to require an additional 3,500 wells be drilled.

Bahrain has seen more turmoil than some adjacent countries and had seemed to be heading along the Egyptian path. However it lies close to Saudi Arabia, and there has been sufficient intervention from tanks and troops from there that the unrest seems to have been quashed. Unfortunately the economy has nose-dived, but this is unlikely to affect the oil production.

Jordan follows along the same lines as Morocco, in that the king remains relatively popular, and the unrest is more directed at the government. The recent protests demonstrated the conventional use of the police water cannons for riot suppression, as opposed to cooling spent nuclear fuel piles (as in Japan recently). In terms of oil production, Jordan sensibly stopped producing oil around 1992, and has imported around 100 kbd since then. Thus with a low probability of the monarchy falling, and no oil production, there is likely to be little impact from Jordan, at the present.

Given the concern by Schlumberger let me end with a quick glance at the Ivory Coast. The EIA page for the country is currently down, and to remind you of the problem there – there was an election and the incumbent President was defeated. He has, however, refused to step down, and so unrest is growing as the winner would like his job. The more immediate impact may come in the price of cocoa, since this is the major export, but there is an oil component. The concern comes because the Ivory Coast is along the off-shore trend from Nigeria, through Ghana, that is now being followed by international exploration. Results haven’t been particularly promising, but the ongoing violence is reducing exploration drilling to validate potential.

To summarize the situation therefore it would seem that, for just the MENA countries, the developing unrest could take Libyan (1.4 mbd); Yemeni (125 kbd); and maybe Syrian (148 kbd) oil from the export market. The domino that is starting to look a little unstable is Algeria at 2 mbd, but at the moment I doubt that it will go.

The rolling blackouts in Japan are a warning of what will happen in other countries that start to come up short in energy production. It makes industrial production difficult, and thus plans for load shedding will become more important. Wonder which companies are working on them? Because the numbers are beginning to look worrisome in terms, not just of price, but also of availability of oil at the time that it is needed in the non-too-distant future.

Revolution - the threat to American imports

The countries of the Middle East and North Africa (MENA) are currently in the middle of a series of popular uprisings. While it is not possible to see the outcome in any of these countries at the moment, it is certain that some are likely going to end with a set of different governments and philosophies. This is not just of academic interest, since the countries involved produce collectively a significant amount of oil and natural gas, a lot of which is exported to North America and Western Europe. Looking just to the oil imports to the United States, and the natural gas imports (LNG) and averaging the volumes for October and November 2010, since there can be some wide variation month-to-month I came up with the following table, using the EIA information.

Average imports into the United States from MENA countries, averaged from October and November 2010 (EIA).

The largest concern at the moment is likely with Libya, since they supply Europe with needed oil.

Libya, a member of the Organization of Petroleum Exporting Countries, produced around 1.6 million b/d of crude oil during 2010, of which approximately 1.5 million b/d were exported, mostly to Europe. Therefore, unlike Egypt the situation in Libya has the potential to have a big impact on global oil supply. Latest news that has emerged is that oil output has stopped at Libya’s Nafoora field as workers have gone on strike.”

Algeria, as I noted in my last Tech Talk, plays a similar role in the supply of natural gas

The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

While it is too early at this stage to determine what the outcomes of the different struggles will be, it is realistic to expect some disruption of the current production in at least some countries, and the possibility of a reduced investment in future production, as the economies of the nations are restructured. And the consequence of that will be an increase in the price - Did somebody mention $147 a barrel?

OGPSS - Lower second tier oil producers - Norway, Brazil, Iraq and Algeria

This current series of posts is aimed at an overview of the top oil producing nations, seeking to establish how the ranking of the countries is changing from the original table that EIA put out in 2008, After looking at the conditions governing the top six, this was followed last week when I looked at the condition of the following three (Mexico, UAE and Kuwait) in a little detail, but, having spent four posts on Veneuela in the recent past forebore going back there again.

Source EIA

It is worth recapping, however, that the initial order has changed, and that, currently Russia is at the head of the League, slightly ahead of Saudi Arabia., and both producing somewhere around 10.2 mbd. I’ll go more into that detail as the posts focus in on the individual countries later. The United States production, if one includes ethanol, is around 8.2 mbd, and this is in third place,. China has moved into fourth place, slightly ahead of Iran which is followed by Canada. At present these six appear to be the only countries producing over 3 mbd.

In the next tier down I have already mentioned the United Arab Emirates, which have moved into 7th place, with a production of around 2.81 mbd, how ahead of Mexico, albeit perhaps barely (based on the addition of NGLs etc). As with the UAE Kuwait has been limiting production in line with OPEC requests, but while only producting at around 2.35 mbd at the moment, is looking to increase this to up to 3.5 mdb by 2015, which would move it into the top tier. Venezuela, although it too has some grandiose plans, based on the potential increases in production from their tar sands, is currently producing at down around 2.26 mbd. As I have mentioned Venezuela does have plans to raise production to 4 mbd by 2015. However recent commitments to China of up to 1 mbd and problems that Venezuela continues to have in meeting current obligations leaves a large question mark on those predictions.

And so we come to the lower half of the second tier.

In order to create the current ranking we have to first work out what the current levels of production are, and the future potential. So let’s start with Norway, since that country did rank 11th in 2008. Statoil has noted that their equity liquids production fell to 1.945 mbdoe in the fourth quarter of 2010. Statoil anticipate that there will be little change in production this year, but that there may be a slight rise thereafter. Statoil is not, however, Norway, being responsible for about 80% of the countries production (with properties abroad as well) but I mention it as indicative of the trends. One hopeful sign of which been the agreement with Russia that defines who owns what in the Barents Sea. However when we look at the long-term Norwegian trend is is recognizably downwards, with the Norwegian Petroleum Directorate predicting a 1.7 mbd average production in 2011. The Directorate is predicting that oil production will fall to 1.54 mbd by 2015. This does not consider other liquids and if these are included, while the overall total still lies below 2 mbd, it is currently a lot closer to that, though that is not expected to last.

Norwegian oil production in 2011 (Norwegian Petroleum Directorate)

In January this total, was made up of 1.836 mbd of crude oil, 256 kbd of NGLs and 69 kbd of condensate. Most of Norwegian production is exported, and the percentage can be seen from the EIA Country Analysis. The relatively flat domestic production is (as we have discussed with the Export Land Model) not typical.

Declining production, and thus exports of petroleum from Norway (EIA )

Natural gas production, on the other hand, is continuing to rise, though it depends on finding and developing new fields, and 95% of this is exported.


Norway produced 3.65 Tcf in 2009, with the majority of production coming from the Troll, Oman Lange and Asgard fields.

The next country down the 2008 list was Brazil, and here there is a change in order since Brazil is now rising past 2.12 mbd of crude production in December, moving ahead of Norway. Offshore production in the Tupi field, which may hold 6.5 billion barrels of oil, will be followed by that from the Jupiter field, possibly of similar size. The fields fall deep offshore in the Santos and Campos Basins, which will deserve a couple of posts on their own, down the road.

Location of the Santos and Campos Basins off Brazil

Development has now started.

The Tupi field is being developed as a pilot project in two phases. In the first phase tests will be conducted to gather information about the future production systems. This phase is expected to end in 2012.

The second phase is expected to start from 2012 and will include two parts. In the first part (2012-17) ten production units will be installed at the field with 20 producing wells and injectors expected to be drilled during this time.

In the second part of phase two (after 2017), new technologies such as dry completion units will be employed to recover oil and natural gas from the field.

Brazil plans to double crude production from the current 2 mbd to 4 mbd by 2020, reaching 3 mbd by around 2014. However overall liquids production is already at 2.7 mbd and the EIA anticipates that this will rise over 3 mbd by next year. With the cumulative liquid totals Brazil has also passed Venezuelan production and may soon be competing with Kuwait as they both move into the top tier.

Brazil also produces ethanol, mainly from sugar cane, with production at around 450 kbd However, with a growing economy, the country does not, as yet, have much of its production available for export. (The BP figures are a little more pessimistic than those of the EIA).

Brazilian oil information (Energy Export Databrowser)

Brazil continues to find oil onshore, most recently in the Amazon Basin and this bodes well for the targets that it now envisages.

Brazil gets most of its electric power from hydro-electric power plants, but is able to use the natural gas that is recovered during oil production to meet about half of the national need for gas, the rest being imported.

The next country on the original list was Iraq. And this poses a problem of prediction since we have to decide who to believe in the tales of competing numbers that have been used, among other places by BP in predicting the sources of future oil supply. The problems in this case are as much geo-political and locally ethnic and religious as they have to do with the capabilities of producing oil. At the moment Iraq has finally got back up to a production level of 2.6 mbd not that this will necessarily help Western imports that much:

The rising output will boost Iraq’s oil exports by 5 percent to 2 million barrels a day next month, Falah al-Amri, head of the country’s State Oil Marketing Organization, said today in an interview in Baghdad. The nation sells about 60 percent of supplies to India, China and other Asian countries where demand is increasing, he said

In January, OPEC reports, Iraq produced a total of 2.7 mbd, which was 300 kbd up on production in the last quarter of 2010. To put this in context in February 2003, just before the conflict began, Iraq was producing 2.8 mbd. At the moment production is centered on the North and South Ramalla fields and that of Kirkuk in the North. The problems of Iraq are not so much, in the short term those of most of the rest of the world, i.e. in finding more oil. In the immediate short term the information on fields that have been known for some time (and in some cases were previously producing) already exists. What is needed is some way of ensuring that the infrastructure is repaired and, if necessary, new pipelines laid. Those plans are now advancing although it is now going to be more difficult to foresee their short-term success, given the developing turmoil in the region. The EIA has posted a table showing the potential from the different regions.

Estimate of oil availability in Iraq

Consumption in Iraq has been fairly stable until about 2007 where it started to climb, and, given a little more stability in the country, it is reasonable to expect that it will surge as it has in much of the Middle East. On the other hand it is a little difficult for me to see production rising to the 12 mbd figures that are now discussed as being possible for Iraq by 2017.

Until recently Iraq was flaring more than 60% of the natural gas that it was producing (perhaps as much as 1 bcf/day) One option that is open is to pipeline some of the gas up to Turkey and then feed it into the Nabucco pipeline. There is a hope that this can lead to exports of up to 2.5 bcf/day but new legal hurdles are continuing to delay progress. Apart from resurrecting the pipelines there is also the possibility of installing an LNG train or two.

And when one is considering the growing instability of the region, the next country down the list is Algeria, and that has now started to be mentioned among the countries feeling the fallout from the initial protests in Tunisia. The Algerian Foreign Minister is denying the risk of a “domino” effect. Possibly this could be because, as it is reported the income from oil and gas sales can, in this case help.

Unrest in Algeria could have implications on the world economy since it is a major oil and gas exporter, but analysts say an Egypt-style revolt is unlikely because the government can use its energy wealth to placate most grievances.

There are, however, other opinions.

Algeria is a member of OPEC, which reports the January 2011 production of oil at 1.28 mbd, which has been relatively stable for some time. The EIA consider that the crude is some of the finest in the world . Production is supplemented by condensate (450 kbd in 2008) and NGL (357 kbd) for a total liquid fuels production of over 2 mbd. It is the largest oil-liquids producer in the African continent.

Algeria, which operates the oil and gas through the company Sonatrach exports most of its natural gas, through pipelines to Europe and through LNG terminals, with a new one that is to be completed in 2012. Total exports are around 2 TCF making it the fourth largest exporter. (CIA 2011 World Factbook). Gazprom has recently become involved in field development. It also provides a useful fuel for the processing of fertilizer in Morocco, as Jeff Vail noted, back in 2008. As one of the world’s largest exporters of natural gas, Algeria supplies Southern Europe.

The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

Algerian natural gas delivery network

The Algerian reserves are found in the Sahara

• 67% of oil and gas reserves contained in the Oued Mya and HassiMessaoud areas, where the two giant fields Of Hassi Rmel (Gas) and Hassi Messaoud (Oil) are located. 

• The Illizi basin comes third with 14% of initial reserves;

Then come the basins of Rhourd Nouss (9%), Ahnet Timimoun (4%), and the Berkine basin.

Algeria is hoping to increase exports by 50% by 2015, using a new pipeline into Spain to help develop the European market.

But the current turmoil may make some of these plans moot.

Natural Gas - Liquid from abroad

Most frequently these days questions about the likely price and supply of natural gas, focus on the production that is likely from the gas shale deposits around the county. Natural gas drilling rigs are being shut down in large numbers, the count is now over 50% down, at 790 rigs, over last summer and new well numbers reduced, in order to lower supply levels to that closer to demand. (In passing it is worth commenting that horizontal rigs have not dropped as much as vertical, so that the numbers are now approximately equal). The assumption is that as supply declines, and demand stays relatively robust (this not being one of the global warming years – at least so far) the two will come closer to parity, and prices can be restored. At the EIA meeting, most of the audience seemed to anticipate that this would occur this year, and the latest Natural Gas Weekly Update notes that prices do seem to have reached, at least temporarily, some sort of floor.

One of the questions, going forward, however, relates not to the availability of domestic supply, but rather the supply that might be available from abroad. In the past, with almost all gas being supplied by pipeline, that was not much of an issue, but at present there is a significant growth in the availability of liquefied natural gas (LNG) as both liquefaction facilities and available tanker numbers increase. There is the potential, as this supply increases, and if global demand does not match this increase, given the breadth of the economic turndown, that LNG will be available into the American market at a low enough price that it will keep domestic prices, and thus production, constrained.

LNG facilities are not something that can be put in overnight. As the most recent example in Poland shows current new agreements will lead to facility construction and production that appears in around 2014. The Polish facility is planned to handle 2.5 million tons of LNG, and the company has just contracted to get 1 million tons of that from Qatar. Of course, if the permits are turned down (as happened with the Broadwater application this week, after the Department of Commerce joined the governments of New York and Connecticut in rejecting the plan) then those deliveries become moot, and New England gas prices may continue to stay high. (Depending on what happens with the Marcellus – but we will save that discussion for another day). At least that is a decision – down in Australia there is still some uncertainty over plans for a new liquefaction facility in Western Australia, though given the state of world supply, delays might not be all bad.


There are three major facility costs involved in creating an LNG supply. First the gas has to be cleaned, separated and condensed. This is generally done in facilities geared to produce a set volume a year (defined as a train) so that, for example, the facility at Point Fortin, in Trinidad, is made up of three trains, each of which can produce 3.3 million tons/yr of LNG, and one train that produces 2.4 million tons/yr.

To give some idea of scale LNG imports into Europe in 2008 totalled 44.8 million metric tons, with a capacity of 78 mill tons/yr. Most of the supply has come from Algeria (16 mill), Egypt (4.4 mill) , Nigeria (12.5 mill) and Trinidad and Tobago (4.4 mill). (Source Oil & Gas J Apr. 13, 2009 pp 38 – 48 – sub reqd).

The largest facilities for producing LNG are in Ras Laffan in Qatar. The current facility is being doubled to produce 77 million tons/yr by 2010. At the moment supply from the second train (Qatargas2) is scheduled to go the United Kingdom at the South Hook Terminal at Millford Haven, where it will supply some 20% of the national need.

The LNG has to be transported to the receiving terminals by carrier. There are at present some 151 LNG carriers in service, with an additional 51 under construction. They have a total carrying capacity of some 635 million cu ft. (Natural gas is condensed by a factor of 600 when it is liquefied). There are several sizes of carriers that are available, but they are usually divided into three classes. The largest can carry over 4.2 mcf of LNG (125 carriers); the intermediate between 1.75 and 4.2 mcf (15 carriers); and the smallest below 1.75 mcf (15 carriers). Almost all the new carriers are at the 5 mcf size.

There are eight U.S. facilities that can import LNG and while there are 40 more under consideration, industry analysts predict that at best only 12 of these might be built.
They are located in:
Everett, Massachusetts
Cove Point, Maryland
Elba Island, Georgia
Lake Charles, Louisiana
Gulf Gateway Energy Bridge, Gulf of Mexico
Northeast Gateway, Offshore Boston
Freeport, Texas
Sabine, Louisiana
There is also an export facility in Kenai, Alaska.

The new production coming on line in Qatar is more than the current market can absorb, and the Qatar CEO notes

“For the shorter term, I don’t think the UK will be able to take 16 million tons,” al-Suwaidi said. “Anything the UK cannot absorb, we will have to find a market for.”

Since their supply will build over the next three years, while gas shale production remains relatively high, this suggests that American prices will remain lower.

The consumption of petroleum products in Japan, the world's biggest buyer of LNG, is projected to fall 4.7 per cent in the year starting this month, according to the Institute of Energy Economics Japan, a government-run think tank. The global recession has reduced electricity use in Japan.

LNG producers probably will ship excess supply to North America, which might prevent a recovery in US natural-gas prices next year, Law said.

(Note that a metric ton of LNG is equivalent to 48,700 cu.ft. of NG. ) LNG is cooled to – 260 deg F ( - 160 deg C) reducing the volume by 600-fold as it turns liquid.

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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