OPEC August Production Data

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Includes: BNO, DBO, DNO, DTO, DWT, OIL, OILD, OILK, OILU, OILX, OLEM, OLO, SCO, SZO, UCO, USAI, USL, USO, USOD, USOI, USOU, UWT, WTID, WTIU
by: Ron Patterson

Data for the OPEC charts below are from the OPEC Monthly Oil Market Report. All OPEC data are through August 2018 and in thousand barrels per day.

OPEC 15 crude only production was up 278,000 barrels per day in August to 32,565,000 bpd. Most of that increase was Libya, up 256,000 bpd.

July OPEC production was revised down 38,000 barrels per day.

Sanctions are beginning to have an effect on Iranian production.

Iraq reached a new high in August, but just barely. They had 4,649,000 bpd. Their previous high was 4,642,000 bpd in December 2016.

Libya was the big gainer in August, up 256,000 bpd to 926,000 bpd. They are still fighting rebels, however. They will likely be down slightly in September.

I think Saudi Arabia will hold pretty close to this level for a while now.

Venezuela's decline continues. They are now over 1,100,000 barrels per day from their average in 2015.

No change in the OPEC Big 5 output this week. The decline in Iran was offset by slight gains from the other 4. But I look for declines in the Big 5 in the next few months because of Iranian sanctions.

The OPEC Other 10 was up in August because of Libya. But the decline will continue.

There was no increase in Russian production in August, but OPEC did have an increase. It is my opinion that both OPEC and Russia will level out for a few months and then start a slight decline.

The three charts below are from Baker Hughes, and the data are through August 2018. The Baker Hughes Iran and Iraq rig counts are incomplete and therefore not included.

Saudi began its massive infill drilling program in 2006. They tapered off in 2009 and 2010. It is likely that the big increase that began in 2011 was mostly for the Khurais and Manifa projects. The oil rig count was 66 in August.

Kuwait's oil rig count went from an average of 11 in 2009 to over 40 in 2017. The August count was 35.

The UAE rig count, (Abu Dhabi+Dubai), went from an average of around 13 in 2010 to over 50 today. The count was 54 in August.

From Oil and Gas Journal 05/08/2000 (subscription required)

Horizontal wells find varied applications in Saudi fields

King Saud University, Riyadh Horizontal-well applications in Saudi Arabia have many objectives, such as controlling oil and gas coning in relatively thin remaining columns, improving waterflood sweep efficiency, improving productivity rates from thin and tight reservoirs, and saving development costs. At yearend 1999, about 200 horizontal wells had been drilled in Saudi oil fields. Horizontal wells are recognized as one of the most important technical advances in the oil and gas industry in the last 20 years. At first, the industry considered this technology to be an exotic way of drill…

And that's all I could read of the article without a subscription to Oil and Gas Journal. But that's enough. We know that in 1999, Saudi oil columns were getting thin and that they had a serious coning problem.

(Above: Verticle oil well water coning.)

They began combatting the problem by drilling horizontal wells with laterals right along the top of the reservoir. They had, at that time, about 200 such wells. But 200 wells is not very many. They would need a lot more.

The image below was posted by Stuart Staniford on April 7, 2007, on The Oil Drum.

The Status of North Ghawar

Western flank cross section of North 'Ain Dar. Source: Figure 9 of Alhuthali et al, Society of Petroleum Engineers Paper #93439, March 2005.

The legend on the right is percent water. It is very hard to read, especially if, like me, one has defective color vision. But the 2004 image is not nearly as bad as it looks. If you go halfway down the column, from the top, you still have less than 50 percent water. So in 2004, there was still a lot of oil left in the 'Ain Dar section of Ghawar. But you can understand that the vertical wells were starting to pull up a lot of water. In fact, the water intrusion was so bad that all Saudi fields, at that time, had an average decline rate of about 8 percent. But not to worry, Saudi had a solution.

Other Ghawar fields, Shedgum and Uthmaniyah, show similar profiles as 'Ain Dar.

I published most of the following in March 2014. The Ravensworth link had already been removed when I published this piece. However, Saudi Arabia's Center for Strategic and International Studies link was valid at the time but since been removed. The "International Business Publications" link still works, but this publication is updated annually, and the version with the quote below is no longer available. However, it is a Saudi publication and is still interesting.

Ravensworth.org published the following in 2006:

One challenge for the Saudis in achieving this objective is that their existing fields sustain 5 percent-12 percent annual "decline rates," (according to Aramco Senior Vice President Abdullah Saif, as reported in Petroleum Intelligence Weekly and the International Oil Daily) meaning that the country needs around 500,000-1 million bbl/d in new capacity each year just to compensate.

That quote by Abdullah Saif was widely circulated, and in 2007, International Business Publications published this on page 144:

One challenge for Saudi in achieving their strategic vision to add production capacity is that their existing fields sustain, on average, 6 to 8 percent annual "decline rates" (as reported by Platts Oilgram) in their existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline.

However, in 2006 Saudi Arabia's Center for Strategic and International Studies claims they have gotten this decline rate down to almost 2%.

Without "maintain potential" drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

The drilling program they are talking about is those horizontal wells placed at the very top of the reservoir. Now imagine, that with all those brand new horizontal wells sucking the oil right off the top of the reservoir, they still had a decline rate of over 2%! Of course, that was in 2006, 12 years ago. And just what might that decline rate be today?

We have the following quote from the Aramco CEO in the Annual Review 2017, published August 17, 2018 (bold mine).

Notwithstanding an improved market picture, the oil industry's preparedness for the future remains in question as the sector has lost an estimated $1 trillion in planned investment since the market downturn began. The situation becomes more disconcerting when seen in the light of global demand growing at the rate of 1 to 1.5 million barrels per day annually, and maturing oil fields around the world exhibiting steepening natural declines that must also be offset by continuing Investment in the industry.

- Khalid A. Al-Falih, Aramco Chairman of the Board of Directors.

Then we have this (bold mine):

Saudi Aramco Signs Deal With Baker Hughes To Boost Offshore Oil Production

Marjan is the first of three major offshore field expansions that Saudi Arabia plans. The other two will be for the Zuluf and Berri offshore fields, which currently have capacity of 800,000 bpd and 200,000 bpd, respectively, S&P Global Platts data shows.

The three major offshore expansion plans are expected to add 1 million bpd of production capacity by 2023. This could offset declining production from aging fields in Saudi Arabia, which continues to be viewed as the swing oil producer in the global market.

These three fields are themselves very old and mature oil fields. Berri was discovered in 1964, Zuluf in 1965, and Marjan in 1967. And all three have been on-line since. Saudi has discovered several new fields, but they are all tiny little things that will add little to Saudi's production capacity. So, they must turn to more infill drilling in their old offshore fields to try to keep production flat.

Saudi's last major discovery, Sahybah, was in 1968 but did not go on-line until 1998 due to its very remote location. Khurais and Manifa were both discovered in 1957 and produced for many years before being mothballed because of low production and other problems. But both were brought out of mothballs due to declining production in their other fields. Massive water injection was used to increase reservoir pressure. There are no more supergiants to be discovered in Saudi Arabia and no more old giants to be brought out of mothballs and put back on-line.

Conclusion

I believe Saudi Arabia can keep producing at, or close to, current levels for a few more years. That is, if more infill drilling in their old offshore fields can compensate for declining production in their old onshore fields. But don't look for increased production from them if demand and prices increase in the future. They will, very likely, only try to keep production level, as long as they possibly can.