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In the last year I’ve read several articles expounding on the many non-OPEC* oil discoveries that have been made in recent years and how large the oil resource is within the non-OPEC sphere of the world. The objective of these articles is to reassure the reader that all is well for non-OPEC oil production, now and in the foreseeable future. If all is so well outside OPEC, one must ask why the non-OPEC oil production rate has not exceeded the level achieved in 2004 in spite of the elevated price of oil since then.
Figure 1 is a graph of non-OPEC oil production since 1994. Table I contains non-OPEC oil production rate data and changes in production rates for 5 year increments starting in 1994.
Table 1: Non-OPEC five-year incremental production rates and production rate changes
|
Year |
Production Rate (mb/d) |
Change in Production Rate (mb/d) |
|
1994 |
36.20 |
— |
|
1999 |
38.70 |
+2.50 |
|
2004 |
42.07 |
+3.37 |
|
2009 |
41.61 |
-0.46 |
What has been going on, in terms of non-OPEC production, since 1994?
For the 1994-1999 period, there was a broad spectrum of non-OPEC countries that increased their production rates. The top three production rate winners were the North Sea (+0.841 mb/d), Brazil (+0.460 mb/d) and Colombia (+0.366 mb/d).
For the 1999-2004 period, much of the non-OPEC production rate increase was due to Russia (+2.726 mb/d) but Canada (+0.491 mb/d) and Mexico (+.477 mb/d) were significant contributors. During the same period, the North Sea oil production rate went into decline (-0.738 mb/d) while the U.S. production rate continued its decline (-0.462 mb/d).
For the 2004-2009 period, several regions experienced substantial declines: North Sea (-1.537 mb/d) and Mexico (-0.782 mb/d). During the same period, several regions saw substantial increases: Russia (+0.690 mb/d) and Brazil (+0.473 mb/d) but total increases didn’t outweigh total decreases.
As Figure 1 illustrates, there was a fairly substantial increase in the non-OPEC oil production rate in 2009 (+0.406 mb/d) relative to 2008. How was that increase achieved?
Table 2 contains the 5 biggest winners and losers, in terms of increasing or decreasing production rates, for 2009.
Table 2: Oil Production Rate Winners and Losers in 2009
|
Winners |
Losers |
||
| Country |
Production Rate Increase (mb/d) |
Country/Region |
Production Rate Decrease (mb/d) |
| United States |
+0.360 |
North Sea |
-0.210 |
| Russia |
+0.138 |
Mexico |
-0.191 |
| Brazil |
+0.138 |
Egypt |
-0.050 |
| Azerbaijan |
+0.136 |
Canada |
-0.032 |
| Kazakstan |
+0.110 |
Malaysia |
-0.031 |
The changes for most countries in Table 2 should not be surprising but the fact that the U.S. was the top winner may be a surprise. How did the U.S. do that?
The U.S. increase was largely the result of intense development of the deepwater Gulf of Mexico (GOM) with 5 major deepwater projects (+50,000 b/d peak) brought on-line in the last few years: Atlantis (Dec. 2007), Thunderhorse (June 2008), Neptune (second quarter 2008), Shenzi (March 2009) and Tahiti (May 2009). Those fields are among the largest fields ever discovered in the U.S. sector of the Gulf of Mexico. The summed peak production rate for the 5 fields is approximately 750,000 b/d.
Adding to the U.S. production rate increase in 2009 was the fact that North Dakota’s oil production rate increased ~47,000 b/d due to intense development of the Bakken Shale Formation. Also, Prudhoe Bay field improvements in late 2008 led to a production increase for the Prudhoe Bay field of a bit over 12,000 b/d in 2009 after many years of decline.
Two other major deepwater GOM projects will start-up in 2010 with a summed peak production rate of 180,000 b/d: Perdido (first quarter 2010) and Chinook/Cascade (second quarter 2010) which will enhance 2010 deepwater GOM oil production. The 7 major deepwater GOM projects will cause the deepwater GOM production rate to peak in 2010 or 2011.
One of the briefs in the March 8, 2010 issue of Peak Oil Review stated:
The US had remarkably strong oil production growth of 7.1 percent in 2009. The “best guess” scenario is that production will grow around 200,000 b/d for the next two years and then flatten after that. (3/2, #26)
My “best guess” is that the recent deepwater GOM projects should ensure that U.S. oil production increases in 2010. A 200,000 b/d increase may be possible if no hurricanes disrupt production in the Gulf but I expect the increase to be less than 200,000 b/d even without hurricane disruptions. After 2010, I expect U.S. oil production to return to the decreasing profile that it exhibited over the ~25 years prior to 2009.
After the flourish of developments brought on-line from December 2007 through 2010, there is a distinct lack of significant deepwater GOM projects to be brought on-line in the near future. For the 2011-2014 period, the summed peak production rate of scheduled deepwater GOM start-ups is only estimated at ~170,000 b/d, which will be insufficient to overcome declining production from older fields.
Over the next four years, I expect several country production rate changes to occur that will lead to a decline in the non-OPEC production rate. My forecast is based upon the scheduled on-line dates for projects over the next 4 years.
First, I expect the Russian oil production rate to probably increase for the next 2-3 years before it starts declining. Second, I expect the U.S. production rate to increase this year but then resume its prolonged decline in 2011. Third, I expect the Chinese oil production rate to start declining in 2010 with possibly some increase in 2012-2013 followed by prolonged decline after that. Fourth, the Colombian production rate, which increased 82,000 b/d in 2009 after years of decline, should return to decline in 2011.
The result of these changes should lead to a further increase in the non-OPEC production rate in 2010 and possibly 2011 followed by a declining non-OPEC production rate after that.
*OPEC is the Organization of Petroleum Exporting Countries-At present, it includes Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela
Roger Blanchard teaches chemistry at Lake Superior State University and authored the book The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region, McFarland & Company (2005). He also grows fruit trees and hay on acreage outside Sault Ste. Marie (MI).
(Note: Commentaries do not necessarily represent the Peak Oil Review’s position; they are personal statements and observations by informed commentators.)