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 Even the posts that I have written recently have become out of date with new information (Russia increased production again in February by 20 kbd over January reaching 10.23 mbd) and then fell back to 10.2 mbd in March but at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.

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 - Second tier oil producers

The current series of Tech Talks is aimed at discussing, in gradually increasing detail, where we are, and will be getting our oil and natural gas from over the next two decades. It is relatively easy to do a little hand-waving and say, as for example the BP review did, that Russia and Saudi Arabia are expected to continue to provide 12% each of the world’s oil supply through 2030 . It becomes a little more difficult to see that future if one accepts the rest of the BP argument that global supply will rise to over 102 mbd, requiring both Russia and Saudi Arabia to produce at about 12 mbd each through that time frame. It is a little easier to check the validity of the projections if the totals are broken down into smaller pieces, and then examined by looking at both current and projected production from the different countries that supply significant amounts of oil and natural gas, not forgetting the increasing amount that each country is setting aside for its own consumption. We can also check on how that demand is growing. For example gains in the global economy has caused OPEC, in their February 2011 Monthly Oil Market Report (MOMR), to increase their projection of oil demand in 2011, anticipating a rise of 1.4 mbd to average 87.7 mbd.

OPEC anticipated growth in oil demand (OPEC February MOMR)

While the key questions are often focused on countries such as Russia and Saudi Arabia, however, it is in the second tier that more evident changes may be seen. And as a reminder, we are reviewing the countries that were listed by the EIA as the top world oil producers, initially in 2008.

Source EIA
And so we will begin today with a look at the case of Mexico, which ranked 7th in overall oil production, at 3.186 mbd, in 2008, is illustrative of the need to examine future projections with a little caution.

Change in Mexican production from 2004 to 2009, (EIA )

Between those two dates Mexico’s overall production peaked, and started into decline. In December 2010 it produced an average 2.57 mbd of crude. The giant Cantarell field, which at peak production reached 2.12 mbd, fell below 500 kbd last May. Mexico, remains one of the two largest importers of crude to the United States (the other being Canada) , but may well become an importer of crude by 2015. Which leaves one wondering where the US might make up that 1 .3 mbd ?

Leading importers of petroleum products to the United States (EIA )

Mexico consumed internally an average of 2.08 mbd in 2009. One reason to start with Mexico, which has now fallen to 8th, and to use it as an example is that if we go back to 2007, Sam Foucher at TOD was pointing to the predictions of both the EIA and IEA which foresaw Mexico maintaining production of around 4 mbd in 2010. His projection, that Mexican production would drop by 30% from the 2004 figure by 2012, i.e. to 2.59 mbd turns out to be much closer to reality. (Though as with some of these numbers one needs to be sure that apples are being compared with apples, since there are different values depending on whether NGLs are included in the totals. OPEC, for example, is still reporting that Mexico is producing at 2.9 mbd ). Mexico produces some 7 bcf of natural gas, but uses this internally, and more, so that it is an importer of natural gas, and likely to increasingly be so.

Mexican natural gas production, use and imports (Energy Export Databrowser)

Moving from the troubled conditions in Mexico, the next country down the 2008 list was the United Arab Emirates, which in 2008 had averaged a production of 3.046 mbd. Remembering the decline in demand in 2009, it is not surprising that their output (as part of OPEC) fell in 2009 to average 2.795 mbd, OPEC reports that they produced some 2.35 mbd of crude in December 2010. There was an additional production of NGLs and condensate to give a total liquids production averaging 2.81 mbd in 2010. Consumption within the country has been steadily rising (435 kbd in 2009), and as a result, net exports have been declining.

United Arab Emirates oil production and consumption (EIA )

The UAE are one of the OPEC partners who can and do adjust oil flow to balance the market, and can thus potentially help with coming shortages elsewhere. However the UAE anticipates being able to increase oil production to 3.5 mbd,, though not before 2018. One way of achieving this is through extended reach drilling, and the hope of thus being able to increase the ORR to 70%. Current production capability is estimated at 2.7 mbd.

The UAE at present largely exports to Japan, South Korea and Thailand.

The UAE has the seventh largest reserves of natural gas (at 214 Tcf ) However in 2007 domestic demand surpassed production. Part of the reason for this is that the UAE injects the natural gas into oil bearing formations to improve oil recovery. The demand is partly seasonal, with the use of air conditioning driving summer use to over 7 bcf. Up to 3 bcf of this is imported in the summer from Qatar, with only 4.5 bcf being produced by the UAE. While production is to be increased there is also the likelihood that greater supply will substantially further increase domestic consumption, so that the UAE are unlikely to be exporting in the near future.

In much the same way as with UAE, Kuwait, as a member of OPEC has been controlling its production levels to ensure that prices stay “stable.” Back in 2008 Kuwait was producing 2.74 mbd and was 9th in the production stakes. It also has the second largest oilfield in the world, the Greater Burgan, after Ghawar in Saudi Arabia.. The EIA consider that it has the fifth largest oil reserves.

EIA ranking of proven oil reserves (EIA)

In January 2011 OPEC reported that Kuwait was producing 2.35 mbd, virtually all of which was exported. This in the month when OPEC production returned to the levels of December 2008. Last March Abdulaziz Alattar gave a talk on Kuwaiti oil strategies. The Kuwaiti goal is to reach a production capacity of 3.5 mbd by 2015, and to raise this to 4 mbd by 2020 and maintain it at that level. Concurrently they wish to raise the production of natural gas to 1.2 bcf/day by 2015, which will reduce the amount of natural gas that they currently flare off. In order to achieve this goal they will need to improve EOR capabilities and make the required investment in them. It should be noted that they recognize a difference between capability and actual production. And further they recognize that an increasing percentage of their production will be consumed internally.

Anticipated Kuwaiti internal hydrocarbon consumption (Abdulaziz Alattar)

It was interesting to see this table of relative exploration and production costs, which was being used to encourage investment help in meeting Kuwaiti goals.

Relative E& P costs per barrel (RSA is a Risk Sharing Agreement, PSA is a Production Sharing Agreement) (Abdulaziz Alattar)

Natural gas increases are needed as much to provide for the domestic market as any other reason, as the plot above shows. For, at the moment Kuwait imports half the natural gas that it consumes. Additional supplies are needed to meet water and electricity needs, and so, instead of largely relying on the gas recovered from oil operations there is a new emphasis on producing natural gas directly.

The next country down the list is Venezuela, but having posted on that country at some length recently, I think I will call a halt on the discussion for the evening.