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Note that Saudi production is down, through 6/06, by 5.2% from last year's level (EIA, crude + condensate). So, as predicted, net oil exports being squeezed from two directions--by falling production and by rising consumption.
- Saudi production down, consumption up, therefore exports way down
- China imports way up (15%?)
- world production flat
- no apparent shortage of oil on the market.
So there is, necessarily, major demand destruction going on. Where? Africa, India? Are the numbers emerging?Saudi Arabia has 20 million people, and GDP per head of c. $8,000.
US consumes 25 bl per person pa, I would bet the Saudis don't consume a quarter of that per person.
Figure 12 bl/per person/ per annum in Saudi: that equates to 240m bl pa or about 600,000 bl/day so less than 10% of total production.
The picture might be a bit more blurry than that because the domestic petrochemical industry soaks up crude (but exports refined products).
The Saudi birthrate is surely an anomaly in terms of classic income-per-capita demographics. It's a rather extreme illustration of the fact that demographic transition is mostly about the emancipation of women.
Income per capita has roughly fallen by 2/3rds since 1974 in Saudi Arabia (population has tripled, the real price of oil is no higher, there hasn't been enough other industry come in to fill the gap).
Saudi Arabia is also dependent on 'shadow water' (the term used to mean the water imported as part of food and other products)- -it doesn't have enough of its own resources.
The country is on the edge of very serious political and social trouble. The combination of widespread religious radicalism, a corrupt ruling class, the absence of any meaningful democracy, and poor prospects for the huge majority of the population under 21 is a lethal cocktail-- precisely what led to Algeria's civil war for example.
Right now, the current high price of oil (and high production) and the ruthlessness of the state security apparatus keeps the lid on. But there is no question the Royal Family has been shocked by the various terrorist attacks, and the incompetence of the Security Forces at defeating them. The security forces themselves are rumoured to be riddled with Islamicist sympathisers.
Whilst Abdhullah remains alive and in power, I don't expect change. He is seen as an honest man, and not personally corrupt. When some of his cousins get to power, the situation may be very different.
Osama bin Ladin may yet see the day when he is welcomed in his homeland as a hero.
India 2004 oil consumption 2,573,000 bpd
India 2005 oil consumption 2,485,000 bpd
One of the developing economies to show a fall in consuption last year. Note that France, Germany and Italy also show falls in crude oil consumption - in part related to de-indutrialisation, but maybe also through introduction of "alternatives"?
When you think about it, the easiest answers tend to be the same ones which make Germany the world's largest exporter - a tight focus on efficiency, a hard headed view of costs, and an awareness of the entire cycle of production, from acquiring raw materials to disposing of the waste at the end.
Oil costs Germany money, whereas wind turbines, for example, are planned as a future export product - and with a fully electric rail transport system, it is possible to substitute long haul trucking with rail, using renewable sources such as hydro, wind, solar - to a major extent, this is seen as an engineering problem, something Germans tend to feel very comfortable in dealing with. Not that Germans are blind believers in technology like Americans - merely that Germans believe technical problems can be solved with technical solutions - for example, if solar is only available during the day, then the freight train schedule will simply have to reflect that fact - in American eyes, that is not a solution, it is a failure.
And Germany has been quite rigorous in creating a bio-diesel framework for trucks and farm tractors. At this point, easily 50% of the long haul trucks seem to be using bio-diesel, from the smell they leave behind.
Germans have known that oil is a finite resource for more than a generation, which is one reason peak oil as handled here is not really a major theme, while consistent effots to conserve through higher efficiency and reduced use are seen as a necessity, not something which can be put off until the future.
But living between Frankfurt and Stuttgart, more or less along the flat and straight A5, which part of the direct route between Frankfurt Airport and the headquarters of Porsche and Mercedes, I expect this stretch of the autobahn to be one of the last unlimited speed routes in the world. Marketing is critical to selling overpriced vehicles.
Speaking very generally, trucks are only allowed 80 kph (50 mph) and up to maybe 90 kph is tolerated - 100kph is not. And those trucks are increasingly using bio-diesel.
This is not a defense of high speed driving - it is that simply the image of the autobahns is not really the same as the daily reality - most cars driven here are not even capable of 200 kph. But those that can go fast are often driven as fast as they can go - which certainly stands out for those not used to driving in such conditions.
After returning from the U.S., I would guess that the average speed of all traffic (not counting heavy rush hour) is at least as high as in Germany, mainly because of all the trucks doing 80 mph (130 kph).
I have noticed lately more trucks driving slower (55mph). I assume on orders to save fuel by the bosses.
It appears Schlumberger's "8%" decline rate is indeed a fact, and perhaps a very conservative one.
If Saudi Arabia and Kuwait follows this trajectory, you'd better be buckled in for a wild ride!
* * *
By the way, WestTexas, is SA production down 5.2%, or is that the decline rate for their Exports?
Based on EIA crude + condensate, highest KSA number last year was 9.6 mbpd. 6/06 was 9.1. 12/05 was 9.5 (9.6 to 9.1 is down 5.2%). Some Saudi ministers suggest about 9.0 for August, some suggest 9.2 range.
The annual production decline rate, based on 12/05 to 6/06, was 8.3%.
Based on the 12/05 to 6/06 EIA data, the top 10 net oil exporters, based on estimated consumption, showed about a 9.2% annual decline rate in net oil exports.
Any models of oil production should take into account that only exportable oil is traded. There is no way exportable oil is going up with Saudi Arabia and Russia growing like they are. I don't think anyone can pound the table hard enough on this point.
A quick calculation using average monthly all liquids production 2004->2005 shows a SA and Russian combined net exports increase of 364,000 bpd.
So yes, there is a way, and you can stop pounding the table.
Same method for Saudi Arabia: http://www.eia.doe.gov/emeu/cabs/saudi.html#oil However the EIA only presents Saudi domestic oil consumption in a graphical format. Therefore you have to eyeball the numbers and make a calculation of growth.
Saudi is closer to 4% from 00 to 04 according to the EIA data in the EIA.
How about trying to extrapolate to first half 06? Use bp data for consumption, assum this continues as in 05, then look at published first half production...
with SA down, even with russia up, my guess is that exports are probably flat at best, but maybe down.
The export number - 52 - is interesting. Its too late here for me to work this out - oil price go up or down with this number?
right side of page inder publications
first link Statistical Review of World Energy
Russia's Institute of Energy Policy's numbers updated through July 2006 show essentially no growth in oil production since mid 2004. see the presentation on this page http://www.energypolicy.ru/enews.php?id=1002255
It is hard to believe that domestic consumption hasn't risen when auto sales in Russia are growing 6%+ every year and the economy is growth above 7%. http://www.autofieldguide.com/columns/0805strat.html
Going forward, Russia's Institute of Energy Policy in the above link states: "Russian oil production will likely remain flat in the next 10-12 months," (from 7/06 to 5/07 to 7/07) also that Eastern Siberia (which is the only area of Russia that offers significant potential for production increases) "remains too underexplored to become new major Russian oil producing region."
The Russian energy minister stated in 2005 that Russian oil production could peak in 2010, which is consistent with the above presentation. Also note that, through 2010, Russian's oil Russian gas production from two of Gazprom's three major gas producing fields (Urengoy and Yamburg) is set to decline by 30%, from 2004 levels. To the extent coal cannot make up the energy difference, some oil may be diverted to satisify domestic energy needs.
So this evidence points to flat to declining growth in production and exports going forward. The EIA's data shows increasing export growth from Russia in the past three years http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide10.gif but I cannot find forecasts by the EIA for Russian exports -- but if the assessment of Russia's Institute of Energy Policy is accurate then there is not much chance of Russian exports increasing.
The expansion of Jubail Industrial City is planned for the next few years, which is, according to Bechtel, the largest engineering project in the world -- a city of 230,000 (up from 90,000 in 1999)based around petrochemical production http://www.bechtel.com/spjubail.htm
Petrochemical production is increasing in Saudi Arabia between 20-25% per year -- due to the goverment's attempts to provide young people with work and the country's strong balance of payments position.
All this points to continued higher domestic oil consumption for Saudi Arabia in the future - -note that Saudi Arabia alone accounts for 23.4% of world oil exports in 2004.
In either case the same amount of oil or gas comes out of the ground and the same amount of products are available to other economies.
From an economic standpoint, it is clearly positive for SA and negative for petrochemical producers that don't have access to resources. However in terms of how it impacts oil & gas export figure it is just a technicality. The statistics capture oil & gas as energy and petrochemicals as "not energy".
Why should this worry people who don't work at or hold shares in Dow Chemical, for example, or large Chinese and Taiwanese petrochem operators?
Good for SA. Good for me. Right?