Oil Supply: As Russian Production Tops Out, World Supply Will Continue to Slip 23 comments
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Where would the world be without the extraordinary growth in Russian oil supply, this decade? Not in a good place, actually. Russia’s near 50% oil production increase since the year 2000 did a lot of heavy lifting. And it’s concerning that this very fast growth rate has now topped out.
North American crude oil production (Canada + US + Mexico) saw, during the current decade, its highest levels in 2003 at an annual average of 11.358 Mb/day. The high month of production that year was in September, at 11.450 Mb/day. In that year, 2003, the average price of oil was 31.08. But by 2008, North American crude oil production had fallen to 10.338 Mb/day. Thus, as the price of oil went from 31.08 in 2003 to the 2008 average of 99.67, North American crude oil production lost over a million bbls a day.
Based on data through June of this year, we have currently fallen a bit further, to 10.226 Mb/day. But by cobbling together myriad recent reports from EIA Weeklies, JODI, IEA Paris, and PEMEX reports, it’s likely that we are now slipping below 10 Mb/day.
The North American block highlights what happened to the Non-OPEC block, especially when we take out Russia. And that’s this: the internal structure of Non-OPEC supply essentially peaked early in the decade, in the 2003-2004 period. Only Russia, with its latent supply hangover from the previous recession and financial crisis, was able to burst onto the scene in the 2003-2004 period – thus masking what was happening in the rest of Non-OPEC.
For the past 12 years, Non-OPEC supply has floated between 56.00% and 60.00% of total World supply. But inside of Non-OPEC, it’s been Russia–and only Russia–that’s allowed for Non-OPEC to create its 5 year supply plateau. Indeed, Russia started the decade contributing only 16% of total Non-OPEC supply. But by the production highs of 2008 in OPEC, Non-OPEC, and in World totals, Russia zoomed to provide nearly 23.00% of Non-OPEC supply.
Consider this: without Russia, Non-OPEC oil production would have fallen each year–just as North America fell–steadily into the face of a dramatic price rise in oil from 31.00 to 100.00 (averages). But even with Russia’s extraordinary rescue mission to world supply, Non-OPEC was not able to raise production on a sustained basis after 2004. You can’t raise world production to new highs without Non-OPEC, which currently provides 58% of world supply. And Russia alone cannot get Non-OPEC to new highs.
Total North America, Total Non-OPEC (with Russia), and then OPEC (with Saudi Arabia). In contrast to all the vast detail of global oil supply, the message is really so very simple.
Olga Florenskaya, Happy New Year, 2005.
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mature oilfields declining in production by 6% minimum
ie 3 million barrels/ day annually
assuming significant ongoing investment
without investment the decine rate increases to 9%
expect ugly by 2011
Like you said, oil went from $31.08 in 2003 to $99.67 in 2008. That's only 5 years. Let oil sit at $100 for 5 years and see what happens to supply. There is a big difference in production planning from seeing oil spike to $100, not knowing if it is going to stay there, and seeing oil maintaining $100 for a long period giving a good indication that $100 (or above) is a real sustainable price for oil.
On Sep 12 04:58 PM Northstar10000 wrote:
> The crash you will hear in 2010 will be the democratic party as the
> price of gas goes above 4 per gallon. They wasted valuable political
> capital pushing green energy and restricting drilling. They will
> be forced to open the strategic pet reserve for a tempory short term
> fix.
> They should have pushed drilling as a cover. Now they have none and
> will be seen as short term fools and long term fools. The oil trade
> will be completely wacko as price rocket up and down. Gas spreads
> will spike and the call for government action will be music to the
> democrats ears. Only problem is the tap;ing of the reserve will only
> work short term and cause even more problems.
This move will be good for them, good for the world's oil consumers, and good for the companies that supply the expertise.
We are seeing a similar story all over the world. Estimates of reserves are updated in step with the spreading use of more efficient extraction techniques. Zero sum assumptions can be misleading.
OPEC has at most 1-2 million barrels of spare capacity and it is all in Saudi Arabia, if we believe their figures.
On Sep 12 08:29 PM Gigem77 wrote:
> OPEC has spare capcity of 6 million bpd. Iraq has untapped reserves
> with the potential to add another 3-4 million bpd. World demand is
> still below the highs set last year. www.tradersnarrative.c...
> The US increased total annual production last year when BP brought
> their "Thunderhorse" platform online. Supply has far outstripped
> demand.
>
> The futures markets are dominated by large speculative players like
> GS, MS and JPM. Hedge funds and oil companies vie with each other
> for tankers to store crude as part of their trading strategy. GS
> is the largest trader in the oil futures market. They neither produce
> nor consume oil. CFTC head Ginsler is correct in seeking to limit
> the large speculators.
a little touchy about the townhalls are we? Unfortunately Northstar is correct. The Dems are doing everything in their power to self-destruct. That includes ignoring constituents, continuing to milk the system for more graft and payoffs and ticking off their most important constituency, seniors who now will not vote for a Democrat if they were running for dog-catcher. The Dems are the party of corruption, cheating, mass media distortion, and union thugs trying to intimidate public speech. Are you sure you want to defend that track record? I sure as hell would not.
Yank
On Sep 13 12:19 PM Road Runner wrote:
> Take your conservative cult zombie talk somewhere else. This is not
> a town hall meeting.
The IEA predict peak oil in 2030. The EIA in 2090. The average of the top 20 extraction forecasts reveals oil is poised to rise from 84-mbd today to 93-mbd in 2023.
MacDonald seems to be feeding some kind of agenda-driven purpose rather than any connection with reality.
Thanks Freddy. I was wondering if you could do the audience a favor: since you regard natural gas liquids as oil, you simply go on record as stating "I Freddy Hutter regard natural gas liquids as crude oil, and do so in all my analysis and data." I think this would clarify for people where you are coming from.
Best,
G
In short, nobody cares about your silly narrow definition of "real" oil.
We will see a lot more unconventional "oil" and liquid fuels. This will topple peak oil catastrophe predictions.
The intermediate future (2020 ++) will see increasing gas to liquids, coal to liquids, biomass to liquids, and increased processing of the trillion ++ barrels of kerogen and bitumen to liquids.
Of course all of these unconventional liquids are oil equivalents. It may take ten years for demand to justify the expense of tooling up refineries and new pipelines,
Let me remind you of something. 50% of Americans don’t feel associated with either party. I am one of those people. I am something that cult leader Russ Limbaugh says does not exist, a moderate. I also don’t like the flaky liberal thinking that doesn’t understand that an economic system must allow people to get ahead (like be able to live in a better part of town, go to better schools, get better health care, etc.) Without this motive, then why bother working hard, starting businesses, etc..
I attack conservative cult zombies wherever I find them because they are standing in the way of meaningful debate to decide what government should and should not do. That is why I attack them on this stock investment site. We can’t even have a good debate about what the US’s energy policy should be because the conservatives turn everything into a name-calling (like telling the President he’s a liar on national TV) mud-slinging (inventing lies about what’s in the proposed health care bill) partisan battle. The conservative cult zombies only have one goal in mind – grab back power. They are not interested in the good of this country - only destruction of their opponents. At least the Democrats have some desire (I’ll leave out Nancy Pelosi who is just as bad as the Republicans) to make the US a better country, even if it is misguided.
On Sep 13 04:43 PM yank wrote:
> Runner:
> a little touchy about the town halls are we? Unfortunately Northstar
> is correct. The Dems are doing everything in their power to self-destruct.
> That includes ignoring constituents, continuing to milk the system
> for more graft and payoffs and ticking off their most important constituency,
> seniors who now will not vote for a Democrat if they were running
> for dog-catcher. The Dems are the party of corruption, cheating,
> mass media distortion, and union thugs trying to intimidate public
> speech. Are you sure you want to defend that track record? I sure
> as hell would not.
>
> Yank
> All stakeholders consider NGL as part of All Liquids as defined by
> the agencies and producers. Your implication that Regular Conventional
> Crude (light sweet) is about to undergo some earth shattering seachange
> is misdirected. RCC peaked at 68-mbd in 2005 and is only 62 today.
> It is a mere 74% of All Liquids and will be less than 50% in the
> commonly used time frames.
>
> In short, nobody cares about your silly narrow definition of "real"
> oil.
But one has to wonder whether the big shift in world focus on CO2 will play a part on the political wranglings on gas to liquids (GTL).
From an oil drum article www.theoildrum.com/sto... :
"Of course there is a catch. GTL is not all that efficient. There are efficiency losses during both the POX and the FT processes. It would be far more efficient to run automobiles directly on the natural gas. ... But the efficiency losses are significant. According to the Syntroleum link, it takes 10,000 cubic feet of gas to make 1 barrel of fuel. 10,000 cubic feet of natural gas contain roughly 10 million BTUs, but a barrel of fuel contains only around 5.5-6 million BTUs. Forty percent of the BTUs are either lost as radiant heat, or turned to steam and consumed in the GTL plant. Unless carbon sequestration is in place (unlikely), all of those BTUs wind up as carbon dioxide in the atmosphere. On top of that, the BTUs from the barrel of fuel are going to wind up as carbon dioxide in the atmosphere after the fuel is combusted."
While GTL isn't as eff as we would like, it still makes diesel for about $1/gal at today's NG prices. And if the waste heat from the FT process is captured to make electricity added to the diesel/gasoline which I might add are far cleaner than oil based ones, it is profitable by a good amount.
For the Rush nuts here the Dem's won't get blamed when oil rises as they are trying to get us off oil vs the repubs who are forcing us to stay on it. PHEV's, EV's, High mileage cars, CAFE, are going to be looking like very good ideas when gas hits $4/gal next yr and the repubs just like their madness on Obama's education speech and wanting him to fail, etc, shows what you are all about.
The thing I don't get is why when repub energy, war, debt, tax , lack of regulation policies have destroyed our countries wealth by 50% in their last 8 yrs in power, you still like them? Just how is your savings doing? Since those 8 yrs real inflation went up 100% you would have to double your savings just to break even. Has yours?
Are you not tired of 25% of our income tax going to subsidize oil? All the tax breaks, depletion allowances, Persian Gulf military, $500B/yr imported oil, soon to be $1T/yr going directly to Iran, Russia, oil dictators and terrorist, and future oil wars cost?
Think how our economy would be if we put these subsidies in the price of oil, get a tax cut, help in switching to other energy sources, eff, conservation and pay down the huge debt repubs put on us, our children? That's an $1T easily boost to our economy and they great thing about it as it will drive down the price of oil, Iran, Russia, oil dictators would pay most of it!! One way is patriotic and the other is traitorous. No?
Clinton gave us a lot of wealth for everyone, balanced the budget and was a fiscal conservative. Repubs took that and turned it into a $10T loss.
Back to oil, the US, Canada increased production through unconventional oil, only Mexico dropped because of incompetence in the last few yrs.
But the world as a whole has dropped in reserves, finding only 1bbl for every 4 used. So the world oil production has peaked as we will find out next yr when oil hits $150/bbl, throwing us, the world back into recession, again and again until we stop importing oil.
On running our cars on NG is a non starter as it takes too much space, fear and can't use tunnels. Best by far is the same NG in Cogen powerplants charging EV's that will go 3-6x's as far on the same NG.
But I expect trucks, semi's, trains to switch to NG.
This isn't a technical problem, but a political one. The Dems are trying to solve it and repubs are trying to keep us hooked on oil, war. No?
You can skip the math and read the sections on oil field depletion and forecasts. The graphs are most telling the future of oil.
> Many comments on oil forecasts use a number of conflicting references. It is best to read detailed and independent research such as: dss.ucsd.edu/~jhamilto... with the title "Understanding crude oil prices" from a number of researchers of the Departments of Economics, University of California at San Diego.
You can skip the math and read the sections on oil field depletion and forecasts. The graphs are most telling the future of oil. >
I think the software here has trouble with some of the characters in that link. I believe I found it, however. Anyone who had the same problem and is interested in the links might try:
"Understanding Crude Oil Prices", Energy Journal 2009, vol 30, no. 2, pp. 179-206. Working paper version: tinyurl.com/nszgrv
Slides in Power Point format: tinyurl.com/lh7avp
Professor Hamilton's online papers etc.: dss.ucsd.edu/~jhamilto/
Another slideshow that I found interesting and informative was on the EIA website (you can close the bookmark section on the left for full screen viewing):
www.eia.doe.gov/conf_p...
To get his power point slide show to work via the URL in the earlier post I had to click on the 1st very tiny icon in the outline that pops up.
P.S. If you don't have Power Point you can download the Open Office Suite for free at: why.openoffice.org/ -- The "Impress" program in that suite is similar to Power Point and can read &/or edit the slides. Alternatively, you can download a free reader from Microsoft at: www.microsoft.com/down...