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Oilwatch Monthly - August 2007
Posted by Rembrandt on August 14, 2007 - 10:10am in The Oil Drum: Europe
Topic: Supply/Production
Tags: exports, non-opec, oilwatch, opec [list all tags]
The August edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.40 MB, 19 pp). New are historical charts portraying production back to 1930, shown next to the production developments from 2002 - present.
Latest developments:
1) Crude oil - Production of crude oil decreased by 503,000 b/d from April to May. Total production in May was estimated at 73.06 million b/d by the Energy Information Administration (EIA), which is 1.21 million b/d lower than all time high crude oil production of 74.27 million b/d reached in May 2005.
2) Total Liquids- Production of all Liquid fuels decreased by 550,000 barrels per day from May to June, according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 84.28 million b/d, which is 564,000 b/d lower year on year from June 2006 to June 2007 and 1.85 million b/d lower than all time maximum liquids production of 86.13 million b/d reached in July 2006.
3) OPEC - Total crude oil production of the OPEC cartel decreased by 50,000 b/d to a level of 30.16 million b/d from May to June, according to the latest estimates of the IEA. Preliminary figures from the EIA show an increase of 370,000 b/d from June to July resulting in OPEC crude production of 30.37 million b/d.
4) Non-OPEC - Total liquids production of non-OPEC decreased by 460,000 b/d from May to June, according to the latest figures of the IEA. Production has dropped from 50.57 million b/d in February to 49.31 million b/d in June. The overall production decrease in June resulted mainly from declining production in Canada (130,000 b/d), the United Kingdom (140,000 b/d) and Norway (370,000 b/d). Mexican production increased with 30,000 b/d in June.
A selection of charts from this edition:
http://science.reddit.com/info/2ey3i/comments
if you are so inclined...
Thanks for putting this together. Enlightening and scary.
The OPEC liquids trend is a joke considering the rate demand is increasing.
LADIES and GENTLEMEN,
let me draw your attention in the left-hand corner to the PROOF that the world, for all intents and purposes
HAS ALREADY PEAKED
Here we have the chart that shows
in an unequivical manner
that exports are off
OVER 5%.
This is of course, a subjective peak. But, like I said, this is the proof that we have reached an **effective** peak.
Verification will come with:
Year on year exports drop 5%.
Month to month crude production drops over 5%.
Month on month all liquids drops over 5%.
Year on year all liquids drops over 5%.
It will take n+1 years appr. to reach each of these verification steps.
2011 will be the year that there will be no possible doubt that 2005/6 was peak.
Just remember the Golden Years, all you who are at the top!
Cheers, Dom
Peak: Wow. Exports already back to 2003 levels. WT appears to be right on target.
Welcome to the Summit.
Enjoy the view.
From here, no matter which way you go, it's all downhill.
Interestingly, the recent drop in production is ocurring without any "above-ground" factors like a huricaine or an Iraq production decline.
The crude oil chart especially has had a number of attempts at breaking to new highs that have failed. This suggests that new projects can create temporary bumps but that it just isn't enough to increase overall production.
One thing that struck me is that the volatility in output for 2005-07 is low compared to 2002-04. To me that suggests that everyone is pumping at capacity without large increments of supply being taken out or added (compare Stuart S's analysis of Saudi output.) The bumpy plateau isn't very bumpy and one wonders whether the descent likewise will be gradual -- at least until a big field like Ain Dar waters out.
I think we will have to wait till late summer of 2008 to see how peak oil will play out. At that point potential demand should be excess of supply. Export Land seems to be running in full force and feed back loops or correlations caused by tight oil supply will begin to have more effect etc.
Right now we basically can't afford any sort of "event" hurricane etc by late next summer we should be having problems with events. Which means of course if we have a bad hurricane next year things will get interesting. On the semi-plus side the global economy should be really cooling down by then with the US in recession so we should see if this helps to slow oil consumption. In my opinion the years after 2008 will be similar to what happens in 2008. While 2007 is sort of the last year of relatively cheap oil.
I think the key will be when major shortages develop without outside events and I think summer 2008 is the earliest we could see these again with the caveat of no major events.
Whats amazing right now is we are probably one major world event away from really expensive oil even a cold winter would probably be sufficient. Its a bit strange that right now both our oil supply and monetary system are susceptible to a single calamity. Next year I think our global food supply will also be in the same boat with one bad harvest sufficient to cause a crisis.
So in 2008 we will have three key parts of our economy under threat or having problems oil money and food a hell of a trifecta.
"Its a bit strange that right now both our oil supply and monetary system are susceptible to a single calamity."
The idea that a massive credit cycle peak and Peak Oil could occur at roughly the same time is very scary. The credit cycle, no problem, we can get over it with a depression or recession, but could PO have come at a worse time?
Given the mood of the people, the denial is likely to last longer and the chances of a serious response to the problem are diminished.
You say a 2008 peak, but the chart of global liquid is not showing any upside momentum. I think we are at peak oil now. A strong month next month could change my mind, but as it looks at this moment, I think we passed it. Any significant leg down and price will react to the upside. Odds are we get a Carribean hurricaine or a cold winter that has an effect.
Just note I'm not saying a 2008 peak but it takes years after peak before the effects of decline begin to be felt. If we peaked in 2005 then 2008 is the first year when what I call post peak forces are really beginning to have effect. Once we have insufficient oil for potential demand then the condition is in place even less oil does not change the dynamics.
I think the critical factor is how much demand destruction is caused by a faltering global economy. I happen to think it will not be that much or more important lack of investment in the oil industry will drop oil supply faster than economic induced demand destruction. So if you include this effect I think that lower prices from demand destruction wont happen.
So you can see how in 2008 the factors the will influence oil prices for the next several years will be in place.
Right now we still are in effect living off our credit cards from the financial bubble so we won't know how a reasonable economy will respond until later in 2008.
"Its a bit strange that right now both our oil supply and monetary system are susceptible to a single calamity."
A global recession will cause demand to drop. Prices will drop and production will not increase. But the prices will not induce additional exploration and development.
I think eventually growing emerging markets will mop up the excess at low prices. For nations who are too deep in the credit crunch, they will see oil prices drop for a while and the prices rise as the productive nations mop up excess. The nations stuck in depression/recession will see inflation at the same time. What is a central banker to do in this situation?
I happen to doubt prices will drop that much if at all. What will drop is investment in the oil industry because of uncertainty about future prices plus OPEC will continue to pull back production especially KSA which would I'm sure be happy to have real reserve production if they have peaked.
We will see next year. But I'd be surprised if prices drop below 70 and expect them to stay in a 70-100 band between major events. The weakest post peak argument is that demand destruction will cause prices to drop. Since this means demand will drop under supply which does not make a lot of sense given a lot of pent up demand already exists for cheaper oil.
This is conventional wisdom but it assumes that a recession lowers production faster than production drops naturally. If production drops faster than consumption drops due to the recession, prices can actually increase during an economic downturn.
In short, you have limited yourself to thinking in terms of when oil was plentiful. It is less plentiful now and there may be consequences depending on if/when consumption intersects production declines.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Not strange at all. You may think they aren't related, but in fact they are. The credit crunch is partialy caused by peak oil and wouldn't happen otherwise.
Follow me... At the root of this credit crunch are the "twin debts" of the United States (external and internal debts). Those debts were what made americans poorer, and forced them into debt. Since the government didn't want a recession, it made cheap credit available to its people, that took advantage of it. Then, after cheap credit was not enough, because there was nobody to get it, it started to undervalue risks, so even people that didn't afford credit could get it, what leads directly to now.
Now, what was the cause of the twin debts? Expensive imports and a bad government. Ok, a bad government (responsible for the internal debt) isn't a fault of peak oil, but expensive imports (responsible for the external debit) are caused exactly by expensive oil.
Does anyone know how much extra money went into buying oil over the last 4 years say vs a price of 20 dollars a barrel and how this would effect the economy. TPTB claim its had no effect but they also claim a lot of things that simply are not true. I agree I think the effects have been masked by the huge amount of liquidity thats been pumped into the system. Once this stops I think we will find that 70 dollar oil did and does have a real effect on the economy.
One aspect that makes me think its had a big effect is even with the debt boom we have seen US car makers not do that well. This tells me that in general people have not been able to afford cars unless they used home equity loans for the purchase. It seemed from the outside that US car purchases where tightly tied to the HELOC craze and not any sort of general gain in income.
On the other side since buying and selling goods simply moves money around its seems that high priced oil causes capitol to be concentrated and slows the velocity of money for daily business. So it seems that in might be a big factor in the overall concentration of wealth. Since the ME countries tend to reinvest in big companies etc we have wealth flowing from the middle class through the Middle East and back out into the hands of the banks and other wealthy people for reinvestment for a fee.
The recent concentration of wealth is obvious but I don't think people have looked at the role that expensive oil plays in the process to me it seems to be a big drive in causing concentration of wealth.
The timing of current correction is in my mind worst case.
People start believing that the lower growth in GDP will reduce oil demand. - Oilprice will fall.
OPEC will at its september meeting use this now popular theory and keep quotas unchanged.
Now they got an excuse not to raise production, if oil was 85, and stocks low, they would have to raise quotas, and as many believe would have a hard time actually producing to quota. They would have been called on their bluff.
The more times we have high oilprices, that "always fall again" the harder it will be to pursuade people to change their way of living, once the rising cost of oil "Is for real"
If there is to be a recession before PO is accepted mainstream, the cushion (in the form of wasted oil) will be gone once the news about PO is accepted.
If people realized PO today, it would be much easier to saved 5 mbpd, and we would have much more time.
In two or three years (I expect a full blown recession would give us this time before the daily lack of oil would cause attention) people are living on basics, and we are no longer at the top of the peak with steady or -1% production.
We might be on the slope down with -2% annually!
I truly hope that the market will recieve soo much liquidity that it will survive.
Adding liquidity might be as temporary a fix as wetting you pants when cold, but once PO is fully understood I don't think these exstra billions in fictious money will make any difference.
Anything that will delay PO awareness is a BAD THING as it gives us less time to react.
Rune
check my posting below, canada dropped 500,000 barrels in 5-6 months with NO warning or news.
any insight into canadas liquids dropping like a rock?
That's interesting, I haven't heard anything about declines in Tar Sand Land.
i dont think it is purely tarsandland. canada crude is way past peak, but tarsandland may be soaking up all the investment... (but my hindbrain says no rational investor would ignore real benefits especially when the MR is above the ATC, so WTF?)
The largest 6 month loss in OECD supply is from canada, why is there NO NEWS ON THIS. I SEE NO information on this. Nothing in the news, or anything.
This is distressing for me, very distressing. No factors are mentioned at all. Canada lost pretty much 1/6th of its production.
Is this caused by oilsands scaling? (are inputs greater than output??)
EDIT when i get back to school i will talk to one of my profs, he worked for shell for 20 years, he may have some insight.
The data show the decline coming from non-conventional liquids, but then a closer look reveals that the liquids number is IEA and the crude number is EIA so perhaps these are not directly comparable. Maybe this is "noise" but one wonders. There are limiting factors in the oil sands including signficantly the diluent used to make the crude transportable by pipeline, so production would be subject to significant declines from time to time given the complexity of the operation up there.
More generally, there is a drop in IEA figures that makes them closer to EIA's one than before. They have splitted for almost one year, making the plateau being much more conspicuous in EIA's figures than in IEA's. I've never seen any explanation for that. IT seems that much of the recent decrease can be explained by the drop in non conventional Canadian oil alone. Was there something wrong in the way IEA counted tar sand production? (hope for them it's not just a silly extra zero in some excel table ;) ).
Regarding Figure 7 for Canada, I don't understand the big drop from February 2007. Below is the chart I get using the last EIA (up to May 2007) and NEB numbers (for Tar Sands and Crude Oil + condensates (C+C)):
NEB's projections do not indicate a big drop (unless it's coming from the NGPL category).
What's NGPL?
Natural Gas Pipeline Company of America (NGPL)???
Natural Gas Plant Liquids: Propane, butane etc...
Basically, NGL minus lease condensates:
(ref)
I've never looked at this closely before today. The Katrina signal comes loud and clear in the last third of 2005. I saw a recent article indicating our exposure grows by the hour - something like a hundred square miles a year of coastline are dissolving due to nutria clean cutting vegetation and wind/wave action. Pipelines that used to be in the middle of a marsh are now standing in 6' of water ... and not built to take a good sized surge, let alone the stuff a surge drags along with it.
We've got one rowdy storm in the Atlantic headed for our Gulf, an organized swirl of aircraft carriers making trouble in another Gulf, and suddenly my limited stock of fuel and extra food seems not nearly enough.
There is also Invest 91L that just materialized in the Gulf off Cuba.
http://www.wunderground.com/tropical/
Cheer up, the latest projections have it heading for the Atlantic coast instead, according to the best oil patch site www.therigzone.com .But we've got hot water in the Gulf, and plenty of time left in the hurricane season. I'd also like to note that these are computer models, not a storm track. With storms this big anything can happen, all the weathermen can give you is a projection based on past experience and observations over a 75 year period. There are just too many variables, no matter what anybody claims on TV.
Bob Ebersole
Forgive me for being so blunt, but what in the hell is there to 'cheer up about' when it comes to hurricane strikes? I swear, some people almost WANT a hurricane to strike the gulf coast again. But I suppose we should be GRATEFUL that this one is headed towards the Atlantic, where it might strike those on the eastern coast. Lives mean nothing if it punishes oil production it seems...
Oil Man Bob lives in the other major US city destroyed by a hurricane, Galveston.
Perhaps a bit of gallows humor lite ?
Best Hopes for High Sheer Winds,
Alan
PartyGuy,
I live in Galveston, but it seems that at least half of the hurricanes that go into the Atlantic end up not hitting land and disipating in cold northern waters. Any hurricane in the Gulf hits either the US, Mexico or Cuba. I'm sorry if you live on the East Coast.
And, frankly I resent your implication that I care more about oil production than people. That's a slur, and unnecesary.
Bob Ebersole
I read that the loss of land in the delta is the lack of silt deposits. The straight fast shipping channels don't allow silt build up the way a slow meandering stream does.
thomas deplume,
That's a definite factor, along with the levees that keep the silty flood waters out of the marsh. Also, dams on trbutaries up stream trap silt, and the Gulf of Mexico has been subsiding since the paleozoic. Sediments compact too.The canal dredging for the intercoastal and all the marsh wells causes salt water incursion, plus oil and gas production sometimes causes subsidence, and also fresh water wells for industry and cities.
Pointing fingers and arguing about who to blame isn't confined to any one American problem, in fact is it an American problem.
Bob Ebersole
Rembrandt,
This is excellent work. If I could recommend one thing at this point it would be to order your graphs from highest to lowest in production rather than by region, or organization(OPEC). The data is usually presented in the order I just described and sometimes it makes it hard to understand the totality of the numbers. This might be helpful in differentiating your presentation.
Also, where do you get your monthly IEA Kazakh and Azeri numbers? They seem to group these two under FSU "other." Wait, I know, you probably actually read the reports :) Nice work.
@Echelon
The IEA Kazakh and Azeri numbers are from the quarterly publication by the IEA for the OECD called oil, gas, coal and electricity.
Thanks Rembrandt!
Also there is this report of the UAE figures being overstated.
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=165431...
I don't really understand this news article. The EIA data says UAE produced 2,515,000 bpd (2,525 thousand barrels).
All of the dow jones figures seem off by a factor of 10? Does anyone have further data on the UAE?
If the article really meant to say dropped to 800,000 that would still be major news. It would take the UAE out of the top 10 exporters.
Using the 2005 to 2006 data from the IEA there is a -3.8% change in the top 10. Which is very fast, and not at all predicted by Stuart Staniford's "hubbert is a slow squeeze" article.
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm
However, if we use the 800,000 value for the UAE then the drop was -8.4% for the top 10 exporters which makes Samsam Bakhtiari (5%) look like an optimist. And it begins to put us the dangerous line between difficult adaption and collapse outlines in Stuart's "4% or 11% who cares?" post.
Time for a closer look at the UAE.
Jon Freise
Analyze Not Fantasize -D. Meadows
Khabab did a linearization of the UAE, but stated it did not behave well. Looking at his work, it would seem production should have trended down to follow the curve. Maybe it really did?
http://static.flickr.com/76/230245715_74a7a33291_o.png
http://graphoilogy.blogspot.com/2006/09/hubbert-parabola.html
Is the UAE dependent on one major field for most of it's production? Could it be doing a Cantrell?
Jon Freise
Analyze Not Fantasize -D. Meadows
The post you linked is a guest post from Roberto Canogar.
Ah, how embarrassing. My apologies to Roberto.
@gTrout
Dubai is a part of total UAE production. Next to Bahrain, Sharjah and Abu Dhabi. The part that Dubai produces in total UAE production is 240,000 b/d according to the news article, or one tenth of total UAE production.
The largest chunk of UAE production comes from Abu Dhabi (2+ million b/d)
But OPEC's Market Indicator Repo