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Page added on June 17, 2015
Global Oil Production Substantially Lower Than Believed
Even the paper of record for the oil industry, Oil & Gas Journal, got it wrong. With the release of the latest BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in 2014.
If they had asked questions, they would have ended up with a ho-hum headline announcing that last year Russia at 10.1 million barrels per day (mbpd) and Saudi Arabia at 9.7 mbpd were once again the number one and number two producers of crude oil including lease condensate (which is the definition of oil). The United States at 8.7 mbpd remained in third place.
The most important question they could have asked is this: How is BP defining oil? It turns out that oil, according to the BP definition, includes something called natural gas liquids which includes lease condensate–very light hydrocarbons that come from actual oil wells and are included in the oil refinery stream–and natural gas plant liquids which come from natural gas wells and include such things as ethane, propane, butane and pentanes. Only a small portion of natural gas plant liquids are suitable substitutes for oil.
Production of natural gas plant liquids in the United States has grown rapidly as a result of increasing exploitation of natural gas in deep shale deposits, so-called shale gas. These liquids are useful, but they are not oil and only displace oil in a minor way. Moreover, their energy content is around 65 percent that of crude oil and so counting barrels of natural gas plant liquids as equivalent to oil is doubly misleading.
The second question media outlets could have asked is whether natural gas plant liquids can be sold as oil on the world market. The answer is a resounding “no.” In fact, major exchanges accept neither natural gas plant liquids nor lease condensates as satisfactory delivery for crude oil. And, if we subtract lease condensate from each country’s total, U.S. production will actually look relatively lower. It turns out that U.S. wells now produce a higher proportion of condensate as a result of growth in oil extraction from shale deposits (which tend to be rich in these condensates).
All of this leads my friend and colleague, Texas oilman Jeffrey Brown, to point out the following: If what you’re selling cannot be sold on the world market as crude oil, then it’s not crude oil. The implications are fairly obvious: The world has substantially lower oil production than widely believed, and growth in world oil supplies has slowed considerably in the last several years. Using the BP definition of oil, world production in 2014 was 88.7 mbpd. Using the stricter definition of crude oil including lease condensate, the number was 77.8 mbpd. Big difference!
Growth in oil supplies, according to BP, from 2005 through 2014 was 8.2 percent. Using the stricter definition, growth was 5.4 percent, which is down from 15.7 percent for the previous nine-year period. (Worldwide numbers for crude oil excluding lease condensate are not available.)
So, BP and the oil industry have one definition when referring to oil supply–one designed to create a rosy picture of the future–but must bow to the market’s definition when they actually want to sell oil to somebody. Who would you accept as the better authority on what constitutes oil, the buyers or the sellers?
First, although the United States produced 9.6 mbpd of oil proper for the week ending June 5 according the U.S. Energy Information Administration (EIA), it had net imports of 6.2 mbpd. (For comparison, OPEC reports that Saudi Arabian oil production as of May 15 was 10.3 mbpd.)
Second, even the ever-optimistic EIA expects U.S. oil production (crude oil including lease condensate) to decline after 2020. This implies that the United States will continue to be a large importer of crude oil. One independent analysis based on actual well performance suggests that the EIA projections are probably correct in the short run, but far too optimistic in the long run. American production may not remain near current levels for very long and, in fact, may drop considerably in the next two decades.
It’s difficult to call out the venerable BP Statistical Review of World Energy, especially when one considers that BP does this as a service to the world. The company spends money gathering and organizing data on all kinds of energy and makes that data freely available to anyone who wants it. On the other hand, we should recognize that BP has substantial U.S. investments, and this may color its view on the future of U.S. oil production. Downbeat assessments don’t do anything for stock prices.
Perhaps the most important thing to remember about oil supplies is that oil is a worldwide market. It is worldwide supply that matters, and supply from every country needs to be seen in this context.
The current slump in oil prices has many believing that supply will continue to be ample in the long run. But, we ought to consider that the rate of oil production in the United States may be nearing its peak and that all of the production growth in oil worldwide since 2005 has come from just two countries, the United States and Canada. That should make us more cautious about projecting the triumphant pronouncements of one of the world’s largest oil companies very far into the future.
69 Comments on "Global Oil Production Substantially Lower Than Believed"
GregT on Thu, 18th Jun 2015 4:31 pm
NWR,
We all know what happened the last time prices tanked. Wait until Nonymarm runs out of drinking water……….
shortonoil on Thu, 18th Jun 2015 4:38 pm
http://peakoil.com/forums/viewtopic.php?f=1&t=71458
“And Short, you still haven’t responded to the link above and on the right side of the website. It’s for you, go there and respect the question with an answer.”
I did not respond to it because I did not know it was there. I put up a Etp Model Q&A thread for such questions, or a comment could have been sent to me at the site. Anyway, that subject has been discussed here in the main forum several times. I’ll try to put up an answer in the next couple of days, but I’m leaving Tuesday and have a lot to do in the meantime.
As far as Ron’s site? Ron does a very good job of tracking production. His articles are well worth reading. As to the comments all I can say is how does someone who claims to be running a 100 stripper well operation in Texas find the time to post page, after page, after page of syntactically perfect posts day, after day. I ran a 300 man mining company for years. I had trouble finding time to write my wife a birthday card.
Believe what you want, you obviously will anyway? The Etp Model has been amazing resilient. Its projections forward, and backward in time have been repeatedly accurate to a 4.5% margin of error. Until it is proved wrong it stands! For some reason I suspect that you are not going to be the one that does it.
http://www.thehillsgroup.org/
Nony on Thu, 18th Jun 2015 4:39 pm
you’re like this guy making fun of the cornies:
https://www.youtube.com/watch?v=TWC6W1ctkMY
Northwest Resident on Thu, 18th Jun 2015 4:42 pm
GregT — Yeah. Or meds, which it looks like he’s already run out of. Nony/marm is vicious sometimes. I wish I knew whether he is spreading his special brand of manure out of dedication to the fantasy world he loves so much, or if he’s some oil/finance company’s paid attack dog. Could be either/or. But I have to admit, I had to see Perk Earl breaking bad and going all Nony/marm on us. He was one of the really laid back and sensible posters on this forum, we traded a lot of fairly reasonable ideas and back/forth chats. Now, look at what Nony has done to Perk Earl now that his ghastly persona has taken control of the Perk Earl moniker — terrible to behold!!
GregT on Thu, 18th Jun 2015 4:44 pm
How come no comment on this article Nony?
http://peakoil.com/consumption/economics-for-a-full-world
After all, isn’t this your area of expertise?
Apneaman on Thu, 18th Jun 2015 4:50 pm
You’re starting to get crazed again nony-marm, just like last fall before you ran away. I can hear you huffing N puffing and slamming your keyboard through the inter-tubes. Sounds painful.
Nony on Thu, 18th Jun 2015 5:25 pm
Greg:
I was going to troll it by saying there should be an offshore oil well drilling in the fish picture. But decided that was juvenile. Seriously, though the thread had a bunch of weird diagrams and just seemed like word salad.
Let me pick where I comment please. I know you enjoy it, but I get tired.
Nony on Thu, 18th Jun 2015 5:26 pm
Ape, there’s an element of truth to that. I need to get out and get a workout in.
Nony on Thu, 18th Jun 2015 5:28 pm
https://www.youtube.com/watch?v=iJ9wNT21c_s
GregT on Thu, 18th Jun 2015 6:07 pm
“But decided that was juvenile.”
No more juvenile than everything else that you’re ignorant of Nony.
Davy on Fri, 19th Jun 2015 7:00 am
Mak, did you read about this?
http://www.wsj.com/articles/venezuela-oil-loans-go-awry-for-china-1434656360
Venezuela Oil Loans Go Awry for China
China Development Bank is on the hook as South American country struggles
By PRUDENCE HO
June 18, 2015 3:39 p.m. ET
HONG KONG—As Venezuela’s economy totters thanks to low oil prices and years of mismanagement, a Chinese government-owned bank is badly on the hook.
China Development Bank has lent nearly $37 billion to Venezuela since 2008, helping to prop up the regime of Hugo Chávez and his successor, Nicolás Maduro, while becoming one of the Latin American nation’s biggest creditors. Venezuela says China has pledged billions more.
Ted Wilson on Fri, 19th Jun 2015 9:38 am
Yes, BP includes Ethane, Propane, Butane as Oils when those are actually gases at room temperature.
So any hydrocarbon which has more than 1 Carbon Atom is considered as Oil. 60 % of the NGL fuels (Ethane, Propane, Butane) comes from Natgas and those are put under Oil category. Only Methane which has 1 carbon atom comes under Natgas.
Similarly the alcohol fuels like Ethanol, Propanol, Butanol which has 2, 3, 4 carbon atoms are also placed under Oil even though much of the Ethanol is produced from plants (Corn, Cane, Beets). This is a clear misrepresentation of fact.
But no one can question BP since they are providing these stats for free and also its a #3 Oil company in the World.
Soon they are going to include Edible Oils like Canola, Sunflower, Palm in Crude Oil category since these edible Oils have more than 1 carbon atom and they are combustible.
So in summary, any hydrocarbon or alcohol which has more than 1 Carbon atom is Crude Oil.
But then there is another component called Petroleum Coke which contains 99% Carbon and 1% other impurities and this comes out as residue after hydrocracking the heavy fuel oil. Petcoke does not contain any Hydrogen.
So why is this placed under Oil category. We cannot question BP the Boss.
That’s the way EIA also defines it now.
Jerry McManus on Fri, 19th Jun 2015 11:05 am
Very entertaining thread.
Has anyone read the book “The Phantom Tollboth”?. A young lad enters a strange land populated by demons in the guise of ordinary looking people doing utterly inane and pointless things.
I’m thinking of one demon in particular who would beguile unsuspecting passer-by’s into doing excruciatingly pointless tasks, such as moving a large pile of sand – one grain at a time – with a pair of tweezers. Then moving it back again.
I’m always reminded of that when I see such long and heated arguments over this or that number of barrels, or this or that number of BTU’s.
Meanwhile the entire biosphere of our modest but beautiful little planet crashes and burns around our heads.
Oh well, pay no heed… Keep those spreadsheets flailing!
Davy on Fri, 19th Jun 2015 11:22 am
Ya, Jerry like I said somewhere on this board this morning life is so strange and surreal these days you have to pinch yourself to make sure you are actually here.
Nony on Fri, 19th Jun 2015 11:29 am
petcoke is a product, no? Would not be included as crude.
C2-C4 are not 60% of the natural gas stream unless you are counting noses, not amount. Methane is over 90% of the volume.
You can go by C&C if you want. Or can even just do total petroleum. Include methane, and NGLs explicitly. Somehow, you need to account for the NGLs though, as a separate category or added to gas or oil. If you just do dry gas and C&C, you’re missing some production.
P.s. The conspiracy muttering about BP and EIA is just silly. Like ASPO protesting on the steps of the DOE.
GregT on Fri, 19th Jun 2015 12:21 pm
“Meanwhile the entire biosphere of our modest but beautiful little planet crashes and burns around our heads.”
Kind of makes me wonder what the hell is wrong with people. Welcome to the land of bizarro.
I’m with Davy, it’s like being in a strange dream that doesn’t make any sense.
Ted Wilson on Fri, 19th Jun 2015 1:10 pm
Nony
You have misunderstood.
What I stated is 60% of C2-C4 comes from Natgas and the other 40% from Crude Oil.
Not that 60% of Natgas is C2-C4.
Petcoke is included in Oil category. Check the data later from EIA. Now they are in some Beta testing.
Yes Petcoke should not be include in crude, but BP & EIA does this.
Nony on Fri, 19th Jun 2015 4:23 pm
OK, Ted, on the 60%. I assume the 60% is part of liquids and the 40% is a downstream product of crude processing (don’t double count the 40%, but counting the 60% somewhere makes sense).
It doesn’t make sense to count petcoke as crude supply. That would be double counting it, since it comes from crude. Are you sure? This EIA link says it is a product (makes sense).
http://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm
GregT on Fri, 19th Jun 2015 5:45 pm
Earth Will Cross the Climate Danger Threshold by 2036
“Most scientists concur that two degrees C of warming above the temperature during preindustrial time would harm all sectors of civilization—food, water, health, land, national security, energy and economic prosperity.”
“If the world burns significantly less coal, that would lessen CO2 emissions but also reduce aerosols in the atmosphere that block the sun (such as sulfate particulates), so we would have to limit CO2 to below roughly 405 ppm.”
“To avoid breaching the 405-ppm threshold, fossil-fuel burning would essentially have to cease immediately.”
http://www.scientificamerican.com/article/earth-will-cross-the-climate-danger-threshold-by-2036/