Global Energy Review

OPEC: Crude Oil Production Capacity to 2015

A Report by Dr Paul McDonald
Consulting Editor, Oil and Energy Trends

Contents

List of Tables

Introduction

OPEC is, on paper, well-endowed with reserves of crude oil. Many of the reserve levels reported by OPEC members have, however, been inflated for political reasons - principally to enable individual countries to obtain high quota allowances - making it difficult to determine exactly how much oil any one member-country has.

The overstatement of reserves is reflected in a number of cases in an overstatement of crude oil production capacity. In some cases, this might throw doubt on official forecasts of future capacity levels.

Oil markets have become increasingly concerned in recent years with the amount of spare production capacity in OPEC. This concern arises out of a fear of what might happen in the event of a loss of supplies from an important supplier somewhere in the world. Such losses are becoming increasingly common. Politically-motivated interruptions have occurred from time to time in the Persian Gulf, such as the oil embargo of the Organization of the Arab Petroleum Exporting Countries (OAPEC) of 1973 and the loss of exports from Kuwait in August 1990 following its invasion by Iraq. These interruptions have become more frequent of late, particularly following the US-led invasion of Iraq in 2003. To these Middle Eastern examples may be added weather-related disruptions such as those sometimes encountered in the North Sea or the more spectacular events seen in the Gulf of Mexico in 2005; along with the attacks on the oil export infrastructure of Nigeria that occurred in 2005 and 2006.

Spare capacity is needed to make up for these disruptions. To be of maximum use, however, it needs to be able to be brought into production at very short notice. It also needs to provide crude oil of a similar grade to that which has been taken off the market, which is not always the case. The lack of suitable capacity can be mitigated in the short term by the maintenance of strategic stockpiles of crude oil. Stockpiles, however, do not provide an answer to the shortage of capacity over the longer term.

OPEC needs to provide two things over the next decade:

This report suggests that some OPEC countries lack the reserves to increase their capacity by large amounts and that consequently world oil markets will experience tight supply over much of the coming decade.

GER LINK

For an earlier consideration of OPEC's reserves and production, see:

'OPEC: Crude Oil Production Capacity to 2010'

Organization of the Petroleum Exporting Countries

OPEC was founded in 1960 by five countries-Iran, Iraq, Kuwait, Saudi Arabia and Venezuela-before expanding to thirteen members in 1975. Since then, it has lost two members-Ecuador and Gabon-and a third country, Indonesia, has ceased to be a net exporter of oil. A further country, Iraq, is at present outside the production quota system.

The member-countries have been as follows:

Country Year admitted
Iran 1960
Iraq  
Kuwait  
Saudi Arabia  
Venezuela  
Qatar 1961
Indonesia 1962
Libya 1962
Abu Dhabi 1967
Algeria 1969
Nigeria 1971
Ecuador 1973 *
Gabon 1975 **
† Membership transferred to UAE in 1974
* Left in 1992
** Left in 1995

Production quotas are set at OPEC's ministerial meetings. At various times, no quota has been allocated to Iraq during wars with Iran and Kuwait. Iraq has been continuously out of the quota system since 1998.

Current quotas are shown in Table 1.

Table 1
OPEC: Production Quotas, February 2006
Country Quota
(mn bpd)
Saudi Arabia * 9.099
Iran 4.110
UAE 2.444
Kuwait * 2.247
Qatar 0.726
Nigeria 2.306
Libya 1.500
Algeria 0.894
Venezuela 3.223
Indonesia 1.451
Total 28.000
* Including half the Neutral Zone
Source: OPEC

Quotas were agreed on 31st January, 2006 and are due to be reviewed on 8th March, 2006.

Crude Oil Reserves

OPEC's 2006 proven resources are estimated by the authoritative Oil & Gas Journal as 902 bn bbl ( see Table 2). As such, they account for 70% of the world's total proven reserves. Of the OPEC total, some 267 bn bbl, or 30%, are accounted for by Saudi Arabia. Four more Middle Eastern countries-Iran, Iraq, Kuwait and UAE-account for 449 bn bbl, making up a further 50% of the OPEC total.

Table 2
OPEC: Proven Crude Oil Reserves, 2006
Country Reserves
(bn bbl)
Saudi Arabia * 266.8
Iran 132.5
UAE 97.8
Kuwait * 104.0
Qatar 15.2
Nigeria 35.9
Libya 39.1
Algeria 11.4
Venezuela 79.7
Indonesia 4.3
Total (minus Iraq) 786.7
Iraq 115.0
Total (with Iraq) 901.7
* Including half the Neutral Zone
Totals rounded
Source: Oil & Gas Journal

It is difficult, however, to verify these reserve levels independently. The figures themselves come principally from the OPEC countries themselves. The kind of data on individual fields that countries like the US and Great Britain might provide are lacking in many cases in OPEC. Moreover, reserve estimates have an important political dimension in that they are used in support of demands for higher production quotas. From time to time, countries will revise reserve levels upwards with little apparent justification for such a move. Since 2003, OPEC's reserves have been increased by 82.7 bn bbl, or 10%, as a result of such revisions ( see Table 3).

In some other cases, figures for proven reserves remain constant from one year to the next regardless of how much oil has been produced in the preceding twelve months. This lack of consistency in the reporting of reserves makes it difficult to forecast future production levels.

The largest recent upward revision has been that of Iran ( see Table 3), amounting to 42.8 bn bbl, or 47.7%. Nigeria has recorded an even larger rise in percentage terms - 49.6% - though much lower - 11.9 bn bbl - in volume terms. Libya's upward revision of 9.6 bn bbl amounts to 32.5% in percentage terms. In only one case-that of Indonesia-has there been a downward revision.

Table 3
OPEC: Proven Crude Oil Reserves, 2003 v 2006 0
Country Reserves (bn bbl)
2003 2006 Change
Saudi Arabia* 261.8 266.8 5.0
Iran 89.7 132.5 42.8
UAE 97.8 97.8 unch
Kuwait* 96.5 104.0 7.5
Qatar 15.2 15.2 unch
Nigeria 24.0 35.9 11.9
Libya 29.5 39.1 9.6
Algeria 9.2 11.4 2.2
Venezuela 77.8 79.7 1.9
Indonesia 5.0 4.3 (0.7)
Total (minus Iraq) 706.5 786.7 80.2
Iraq 112.5 115.0 2.5
Total (with Iraq) 819.0 901.7 82.7
* Including half the Neutral Zone
Totals rounded
Source: Oil & Gas Journal

The upward revisions listed in Table 3 do not fully state the reserves that are supposed to have been added between 2003 and 2006, since they do not make allowance for all the oil produced between those two dates. When allowance is made for this, Iran's reserve additions amount to 47.3 bn bbl, Nigeria's to 14.5 bn bbl and those of Libya to 11.3 bn bbl.

Table 4
OPEC: Reserves:Production Ratios, 2006 †
Country R/P Ratio
Saudi Arabia * 77:1
Iran 93:1
UAE 112:1
Kuwait * 114:1
Qatar 52:1
Nigeria 41:1
Libya 63:1
Algeria 22:1
Venezuela 84:1
Indonesia 13:1
Total (minus Iraq) 77:1
Iraq 166:1
Total (with Iraq) 83:1
† Based on 2005's production * Including half the Neutral Zone
Totals rounded
Source: GER estimates, using reserve totals from Table 1

The official reserve figures give some impressive totals for OPEC in terms of years of production remaining at existing levels of output ( see Table 4). For OPEC as a whole the figure is 83 years. The following countries have over 75 years of output left:

and three of those - UAE, Kuwait and Iraq - have more than 100 years' production remaining, though the Iraqi ratio is grossly inflated by the low level of production in 2005.
Table 5
OPEC: Crude Oil Production, 2005
Country Production
  (mn bpd)
Saudi Arabia * 9.5
Iran 3.9
UAE 2.4
Kuwait * 2.5
Qatar 0.8
Nigeria 2.4
Libya 1.7
Algeria 1.4
Venezuela 2.6
Indonesia 0.9
Total (minus Iraq) 28.0
Iraq 1.9
Total (with Iraq) 29.9
* Including half the Neutral Zone
Totals rounded
Source: GER estimate

OPEC's production in 2005 is estimated at 29.9 mn bpd ( see Table 5), and 28.0 mn bpd, excluding Iraq. This latter figure is the same as OPEC's quota ceiling for the second half of 2005 ( see Table 1). Three countries - Iran, Venezuela and Indonesia - are currently incapable of producing at their full quota levels ( see Table 6).

Most countries, with the exception of Saudi Arabia and Kuwait, do not have much spare production capacity, either ( see Table 7) and much of their spare capacity, in any case, consists of heavy, sour crudes, for which there is little demand. Nigeria has spare capacity of about 0.3 mn bpd, but much of this is unusable owing to high levels of unrest in the oil-producing Niger Delta region.

OET ARCHIVE

'Nigeria struggles to expand oil industry' Focus Feb06

'Does OPEC have enough spare capacity?' Focus May05

Table 6
OPEC: Crude Oil Production v Quota, January 2006
Country Production Quota Difference
  (mn bpd)
Saudi Arabia * 9.5 9.1 0.4
Iran 3.9 4.1 (0.2)
UAE 2.5 2.4 0.1
Kuwait * 2.5 2.2 0.3
Qatar 0.8 0.7 0.1
Nigeria 2.3 2.3 -
Libya 1.7 1.5 0.2
Algeria 1.4 0.9 0.5
Venezuela 2.6 3.2 (0.6)
Indonesia 0.9 1.5 (0.6)
Total (minus Iraq) 28.1 28.0 0.1
Iraq 1.6 - -
Total (with Iraq) 29.7 - -
* Including half the Neutral Zone
Totals rounded
Source: (Quotas) OPEC; (Production) GER estimate

According to official estimates of its capacity, Iraq has some 0.7 mn bpd of surplus capacity, but Iraq is something of a special case. In the first place, its output is constrained by high levels of violence. Secondly, it is not at all clear how much of its alleged spare capacity would be usable even in the absence of civil unrest, since the entire production system is suffering badly from years of neglect, sanctions and under-investment. A more realistic estimate of Iraq's spare capacity might well be in the region of 0.4 mn bpd.

OET ARCHIVE

'Violence threatens future levels of output in Iraq' Focus Dec05

Table 7
OPEC: Oil Production v Capacity, 2005
Country Production Production Capacity † Spare Capacity
  (mn bpd)
Saudi Arabia * 9.5 11.0 1.5
Iran 3.9 4.1 0.2
UAE 2.4 2.7 0.3
Kuwait * 2.5 3.1 0.6
Qatar 0.8 0.8 -
Nigeria 2.4 2.7 0.3
Libya 1.7 1.7 -
Algeria 1.4 1.5 0.1
Venezuela 2.6 2.7 0.1
Indonesia 0.9 0.9 -
Total (minus Iraq) 28.0 31.2 3.2
Iraq 1.9 2.6 0.7
Total (with Iraq) 29.9 33.8 3.9
† As of end-2005
* Including half the Neutral Zone
Totals rounded
Iraq's capacity as officially stated, though not fully usable owing to high levels of violence
Source: GER estimate

Expansion Plans

The above considerations concerning reserves, production and production capacity ought to introduce a note of caution into any forecasts of future production capacity levels. In addition to these considerations, the following also need to be borne in mind:

As a starting point, we may examine what is already being planned for the next 5-10 years. The number of projects at first sight appears quite large ( see Table 8), but many do not have definite development timetables and some may not be on-stream as planned by 2015.

Table 8
OPEC: Planned Major Additions, 2006-15
Country Project Capacity † On-stream
    (th bpd)  
Saudi Arabia ** Ghawar (Haradh III) 300 2006
Abu Hadriyah/Khursaniyah/al-Fadhili 500 2007  
Shaybah (expansion) 500 2008  
Khurais 1,200 2009  
Manifa 300 *  
Nuayyim 75 *  
Total 2,875    
Iran Darkhovin II 160 2006
S. Azadegan 260 2007  
Ahwaz 150 *  
N. Azadegan 400 *  
Yadavaran 300 *  
Total 1,270    
UAE Bu Hasa 180 2006
NE Abu Dhabi 110 2006  
Upper Zakum (expansion) 650 *  
Total 940    
Kuwait ** Raudhatain (expansion) 200 2006
Burgan 100 *  
Minagish (expansion) 100 *  
Northern Fields (Project Kuwait) 450 *  
Total 850    
Qatar Bul Hanine 70 2006
Dukhan 380 2006  
Idd al-Shargi 130 2006  
Al-Khaleej 50 2006  
Al-Shaheen 240 2006  
Other fields 93 2006  
Miscellaneous/unspecified 137 2009  
Total 1,100    
Nigeria Erha 165 2006
Agbami 250 2008  
Akpo 100 2008  
SW Bonga/Aparo 250 2008  
Usan 200 2008  
Bosi 150 2009  
Total 1,115    
Libya Elephant (expansion) 125 2007
Murzuk 94 2007  
Waha 150 2007  
Total 369    
Algeria ROD/MLN 100 2007
El Merk 100 2008  
Hassi Messaoud 200 2010  
Total 400    
Venezuela Corcoro 75 2007
Tomoporo (expansion) 150 2008  
Sincor II 200 *  
Total 425  
Indonesia Cepu 170 2008
Total 170    
Iraq Kirkuk 400 2006
Rafidain 100 *  
Subba/Luhais (expansion) 150 *  
West Qurnah (expansion) 300 *  
Total 950    
† Estimated maximum flows
To be decided
** Including half the Neutral Zone
Some dates provisional; capacities subject to change.
Source: Oil press

Some 10.5 mn bpd of new developments are identified in Table 8, of which Saudi Arabia accounts for 2.9 mn bpd, or 28%. There are perhaps a further 0.3-0.5 mn bpd of small-scale projects, which do not appear in the table, giving a total of up to 11.0 mn bpd. This figure, however, does not represent a net addition of anything like that amount between now and 2015, for the following reasons:

Assessing Reserve Levels

OPEC countries give very little information about their oil reserves. The kind of detail found in reserve estimates in the US and Great Britain, for example, is simply not available in most cases. Whilst external estimates exist, they often do little more than repeat the official numbers issued by the OPEC members themselves.

There are grounds for believing that some of OPEC's reserve numbers amount to an overestimate of proven reserves:

OPEC began to take reserve levels into account in setting individual output quotas in the early 1980s. There then followed some major upward revisions. Between 1984 and 1990, Saudi Arabia made net revisions to its reserves of over 90 bn bbl, raising them to 258 bn bbl. Over the same period, UAE added 65 bn bbl, Iraq 57 bn bbl, Iran 42 bn bbl, Venezuela 34 bn bbl and Kuwait 28 bn bbl.

The large upward revisions of the 1980s owe much to a move by Kuwait in 1985, when it increased its reserves from 64 bn bbl to 90 bn bbl. No new discoveries had been reported; so it appears that Kuwait has simply applied a higher recovery factor to its existing reserves than before ( see below). In 1987, it added a further 2 bn bbl.

Kuwait's actions appear to have goaded other OPEC countries into raising their reserve estimates so as not to see Kuwait's production quota rise at their expense. In 1988, Abu Dhabi increased its total to the same level as that claimed by Kuwait-92 bn bbl-compared with 31 bn bbl a year earlier. At the same time, Iran's reserves went up from 49 bn bbl to 93 bn bbl and, not to be outdone, Iraq raised its reserve levels from 47 bn bbl to 100 bn bbl. Two years later, Saudi Arabia followed suit, with a revision from 170 bn bbl to 258 bn bbl. There were some discoveries during this period, but it is difficult to see how they might have justified what were almost certainly a series of politically-inspired upward revisions.

Some of OPEC's reserve estimates appear to be based on recovery rates considerably in excess of those used elsewhere by the oil industry. Some countries are reported to be basing their estimates on recovery factors of up to 60% for oil-in-place in reservoirs, where a figure of around 30% would be rather more realistic.

The application of a 30% recovery factor would reduce reserve levels considerably in some cases and reduce OPEC's total reserve levels to around 600 bn bbl, compared with the 902 bn bbl normally quoted ( see Table 2). This, in turn, would reduce OPEC's reserves:production ratio from 83:1 ( see Table 4) to a more modest 55:1.

Peak Production

The unreliability of OPEC reserve data makes it difficult to forecast production. An important clue to the direction of future output is provided, however, by an examination of the dates when output was at its maximum level. In all but four cases, peak output levels were achieved in the period from 1970-80 ( see Table 9), which suggests that some OPEC countries have permanently passed their peak of production.

Hyper-links:
Table 9
OPEC: Peak Production v Present-day
Country Peak Year Peak Production Production 2005 Difference
(mn bpd)
Saudi Arabia * 1980 9.9 9.5 (0.4)
Iran 1974 6.0 3.9 (2.1)
UAE 2005 † 2.4 2.4 -
Kuwait* 1972 3.3 2.5 (0.8)
Qatar 2005 † 0.8 0.8 -
Nigeria 2005 † 2.4 2.4 -
Libya 1970 3.3 1.7 (1.6)
Algeria 2005 † 1.4 1.4 -
Venezuela 1970 3.7 2.6 (1.1)
Indonesia 1977 1.7 0.9 (0.8)
Iraq 1979 3.5 1.9 (1.6)
OPEC 11 ** 1977 30.9 29.9 (1.0)
* Including half the Neutral Zone
** 1977 total excludes Ecuador and Gabon
† Highest annual total to date
Totals rounded
Source: Pearl Oil

In one or two cases, notably that of Saudi Arabia, OPEC members may exceed their previous maximum level of output; but many now appear to be permanently past their peak and in long term decline. In the case of Iraq, the future could go either way, depending on how soon peace and order return to the country.

The problem for all of OPEC's producers is that their main fields are old and mature. Many began production more than 50 years ago and some of the largest ones reached their peak output more than 20 years ago. OPEC's-and the world's-largest field, Ghawar, in Saudi Arabia, reached its highest level of output in 1981, as did Saudi Arabia's Safaniyah field, the world's largest offshore field. Fields discovered in Saudi Arabia since then have been much smaller, and this is a pattern that is repeated across much of OPEC. Some of the following countries appear to be past their peak:

The following should be able to go on increasing output for several years:

Iraq could exceed its previous peak, but only if peace is rapidly restored there. The prospects for each country in turn will now be considered.

OET ARCHIVE

'Are we running out of oil?' Looking Ahead Apr04

Hyper-links: For links to web sites of the individual national oil companies, see:

Countries below their previous Peaks

Iran

Iran's four largest oilfields were all discovered in or before 1963 and reached their peak output between 1967 and 1977. Despite this, Iran raised its reserve figures by 90% in 1988 to 93 bn bbl, since when it has risen to 133 bn bbl. The highest recorded output was 6.0 mn bpd in 1974: some 2.1 mn bpd above 2005's level. At the start of 2006, Iran was not capable of producing its full OPEC quota of 4.1 mn bpd ( see Table 6).

Iran suffered heavily from overproduction in the 1970s, followed by a collapse in output following the oil workers' strike of 1978 and the subsequent Iranian Revolution. Further damage and neglect occurred during the war with Iraq. Since then, it has tried to persuade foreign oil companies to invest in new fields, but with only moderate success. A 200,000 bpd field complex came on-stream in 2004, Nowruz/Soroosh in the northern Persian Gulf; but it has proved difficult to sell the heavy, sour crude produced there.

Iran has announced plans for production capacity of 5 mn bpd by 2010 and 8 mn bpd by 2015. Production could nevertheless fall over the next few years. The best Iran can hope for by 2015 is about 5 mn bpd.

Kuwait

Kuwait ought in theory to be able to exceed its 1972 production of 3.3 mn bpd, given that it claims to have about 3.1 mn bpd of production capacity at present and reserves of around 100 bn bbl, excluding its share of the Neutral Zone. Given the huge upward revision of reserves described above, however, there must be some doubt about the size of Kuwait's proven reserves.

Kuwait's figure appears to include some 'probable' as well as 'proven' reserves and Kuwait is also reported to be using a recovery factor as high as 60%. There are few independent assessments of Kuwait's reserves, but those that there are tend to put the reserves of the emirate's largest-and oldest-field, Burgan, around 30 bn bbl. It is difficult to see where a further 70 bn bbl might be found. There are several promising fields in the north of the country, but all of them taken together are unlikely to equal anything anywhere near just one Burgan, let alone amount to something more than twice its size.

Kuwait plans to raise its production capacity to 4 mn bpd by 2020. It is not impossible for it to achieve this, but it may struggle to do this, especially if it continues to delay the development of the northern fields. This development, known as 'Project Kuwait' has attracted criticism in the Kuwaiti parliament because of the proposed involvement of foreign oil companies. It has been repeatedly postponed. The latest such postponement came on 15th January, 2006, following the death of the emir, Shaikh Jabar, al-Ahmad Al Sabah. In the worst case, Kuwaiti output in 2015 could still be below 1972's level of 3.3 mn bpd.

OET ARCHIVE

'Kuwait struggles to raise production' Looking Ahead Jan04

Libya

Libya's prospects have been much improved with the ending in April 2004 of the US embargo on the export of upstream technology. US companies that withdrew in 1986 are returning and their involvement is likely to allow the expansion of the Waha field-complex by 150,000 bpd by 2007. There are several good prospects in Libya, but field sizes are generally small and medium-sized. One of the most important new fields, Elephant, discovered in 1997, has proven reserves of less than 1 bn bbl. There is also a question mark over the size of Libyan reserves in general. The National Oil Corporation (NOC) increased its estimate of proven reserves by 33% between 2003 and 2006 to 39.1 bn bbl ( see Table 3) even though there has been only a modest level of exploration activity in this period.

Libya's short term production target is for 2 mn bpd, to be achieved by 2007. This looks achievable. With luck, it could reach its 2015 target of 3 mn bpd as well, but this would probably require the proving-up of several medium-sized oil discoveries.

OET ARCHIVE

'Libya seeks to capitalize on new mood in Washington' Focus Apr04

Venezuela

As a founder-member of OPEC, Venezuela has always been keen to play an important role in the organization. This may well explain its decision to follow the Kuwaitis, Saudis and others in raising its reserve figures during the 1980s. In 1988, Caracas revised its proven reserves upwards by 124% to 56 bn bbl: since then, they have risen further to just under 80 bn bbl ( see Table 3). As in the Middle Eastern examples, there are insufficient new finds to justify such an increase. Part of the explanation may be that Venezuela has chosen to include large volumes of non-conventional crudes in its reserve numbers. As in other cases, there is too little transparency on the reporting of reserves.

Despite its large reported reserve levels, Venezuela is more than 1 mn bpd below its 1970 production. At present, it cannot even produce its full OPEC quota, falling short by some 0.6 mn bpd ( see Table 6). The country has suffered from political instability since 2002, when oil production was crippled by strikes. Output was then running at 3.1 mn bpd. Since that time, it has never recovered and is now only 2.6 mn bpd. Meanwhile, the state oil company, Petroleos de Venezuela (PDVSA), has been kept short of funds by President Hugo Chavez, who has used its revenues to finance an ambitious political programme at home and abroad. Some 0.3 mn bpd of capacity in Venezuela's older, western fields may have been permanently lost as a result of the failure to invest in secondary and tertiary recovery.

OET ARCHIVE:

'US energy security plans threatened by militant Venezuela' Focus Sep05

'Latin America loses upstream attraction' Looking Ahead Jun05

Since then, Chavez's government has become embroiled in several tax disputes with foreign oil companies operating in Venezuela. Plans have been announced to increase production to 3.8 mn bpd by 2010, but no details of how this will be achieved have been forthcoming. There may be some extra capacity arising from plans to increase the production of non-conventional, synthetic crude - currently around 0.6 mn bpd - but large increases should not be expected. Some foreign investors may prefer to invest in North America rather than in more volatile Venezuela, where much of the synthetic crude is lower in sulphur than Venezuela's mainly sour syncrude. Conventional crude oil production could even decline by 2015 and is unlikely to rise by very much in the best of circumstances.

Indonesia

Crude oil production is in long term decline with insufficient new fields to replace the older, larger fields such as Minas and Duri. Most of Indonesia's fields are small and its reserve estimates show a decline in recent years. The presence of many western companies in Indonesia helps to provide a better picture of reserves and production than in many countries and the official estimates appear to be quite accurate. Already a net importer, Indonesia is unlikely to be a full member of OPEC by 2015. Output is likely to go on falling.

OET ARCHIVE:

'Indonesia fights off oil and gas crises' Focus Apr05

Countries likely to exceed their previous Peaks

Saudi Arabia

Saudi Arabia claims to have, by far, the world's largest oil reserves, at 267 bn bbl. Some 88 bn bbl were added between 1989 and 1990, without any proper explanation of where they came from and, since then, there have been further additions, amounting to more than 54 bn bbl (being composed of 9 bn bbl of net additions and cumulative production of 45 bn bbl from between 1990 and 2005). The source of much of this oil is something of a mystery.

Some of the additional reserves are 'political', following large upward revisions by Kuwait and others between 1985 and 1988; some are probably based on an increase in recovery factors; and some undoubtedly reflect new discoveries. It remains impossible, however, to determine accurately the true extent of Saudi reserves. Some former officials of Saudi Aramco have suggested that proven reserves lie in the region of 130 bn bbl. The more sceptical independent observers suggest figures between 100 bn bbl and 150 bn bbl.

Saudi Arabia has an official production capacity target of 12.5 mn bpd by 2009. In May 2005, however, the chief executive of Saudi Aramco, Abdallah Jumah, told a US audience that the kingdom was capable of raising its capacity to 23 mn bpd. Some outside observers, on the other hand, believe that the Saudis may struggle to go much higher than 12.5 mn bpd.

OET ARCHIVE:

'Are the Saudis running out of oil?' Looking Ahead Oct05

'Saudi terrorist attacks spark world supply fears' Focus Jun04

It may nevertheless be the case that Saudi Arabia could go to 12.5-15.0 mn bpd between now and 2015. If, however, as seems likely, the country's proven reserves have been overstated, the Saudis may not be able to maintain production at these levels for any great length of time. If we take the reserve estimate of 130 bn bbl given above and assume that proven reserves can be maintained somewhere near this level for the next 5 years, we arrive at a reserves:production ratio of 27:1 in 2010, based on a production level of 15.0 mn bpd in that year. In the absence of any further discoveries after 2010, this figure would be down to 103 bn bbl, giving an R:P ratio of less than 18:1. Whilst this might represent an extreme case, it suggests that Saudi Arabia's long term sustainable capacity is nowhere near the 23.0 mn bpd figure, and may well be below 12.5 mn bpd.

UAE

The UAE is another country that appears to be overstating the level of its proven reserves. In 1988, Abu Dhabi raised its estimate from 31 bn bbl to 92 bn bbl. Since then, it has maintained the figure of 92 bn bbl, suggesting that additions to its proven reserves have exactly equalled the volume of oil produced in each one of the last 17 years: a remarkable coincidence, if nothing else. A similar story is evident in Dubai, which increased its reserve numbers by 185% in 1988 to 4 bn bbl, at which level they have remained to the present day.

What is all the more remarkable about these reserve levels is that fact that there have not been any large discoveries in the UAE for more than a decade. Additions to capacity are coming largely from existing fields. Moreover, one major project - that of raising the capacity of the Upper Zakum field from 550,000 bpd to 1.2 mn bpd - is behind schedule.

UAE plans to raise capacity by 1.25 mn bpd to 3.95 mn bpd in 2010, It is unlikely to be able to maintain the higher level for many years without major new discoveries. Whilst the UAE does contain a number of unexplored prospective areas, it needs to move quickly to shore-up its actual level of proven reserves, which may only be around half the level officially stated.

Qatar

Qatar's proven reserve estimates and plans for capacity expansion are rather more credible than those of some of its Gulf neighbours. It is the only OPEC member not to have increased its reserve numbers in recent years ( see Table 3) and its plans for increases in output capacity are both modest and achievable.

Qatar plans a 0.3 mn bpd increase in capacity between now and 2009, taking it to 1.1 mn bpd. There is scope for a similar-sized increase between 2009 and 2015, but the emirate may decide to leave its capacity more or less unchanged after 2009 as it concentrates on its main export industry, gas.

Nigeria

Nigeria has recently raised its reserve estimates by nearly 50% to 35.9 bn bbl ( see Table 3) and has plans to raise this to 40.0 bn bbl by 2010. There has been considerable upstream activity in Nigeria, much of it by foreign oil companies. Nigeria's problems lie not in its reserve levels but in the social and political unrest in the main oil-producing areas, which has frequently spilled over into violence and delayed several field developments.

OET ARCHIVE:

''Nigeria struggles to expand oil industry' Focus Feb06

''Doubts cloud Nigeria's production outlook' Looking Ahead Jul05

'Nigeria struggles with tensions over oil' Looking Ahead Nov04

These delays, coupled with disagreements between the government and some foreign oil companies over upstream contract terms, threaten plans both to find new reserves and to raise production by 1.6 mn bpd to 4.0 mn bpd. There is also some doubt whether the deeper parts of the continental shelf contain as much oil as has been estimated. If the deepwater fields are to be exploited successfully, Nigeria will have to improve its attractiveness to large international oil companies, since they alone have the funds and the expertise to develop these fields.

With large scale international involvement and an end to the unrest in the Delta region, which is the country's largest producing area, Nigeria might eventually achieve its 4 mn bpd target. Without such developments, it may not go much above 3 mn bpd between now and 2015.

Algeria

Although Algeria has revised its reserve levels upwards in recent years, its estimates appear to be more realistic than those of many other OPEC members. Its plans for expansion are also suitably modest, with a capacity target of 2 mn bpd by 2010.

Reserve constraints may ensure that 2 mn bpd is the maximum Algeria can reach and 2015 may well mark the last year in which it can sustain production at that level. Much of Algeria's upstream efforts, in any case - like those of Qatar - will be concentrated on gas rather than oil.

Iraq: a special Case

Iraq joined its neighbours in raising its proven reserve estimates during the 1980s, when it more than doubled its total to 100 bn bbl. From 1990 to 2003, it was subject to a UN embargo on upstream investment and since that date it has been under US occupation and in a state of political and economic chaos.

OET ARCHIVE:

'Violence threatens future levels of output in Iraq' Focus Dec05

'Iraq's oil sector mired in problems' Focus Feb05

'Bush gambles on a new plan for Iraq' Focus Jan04

'Iraq struggles to rebuild electricity sector' Gas and Power Apr04

Despite the embargoes, war and the lack of upstream investment, Iraq has recorded a net addition to proven reserves of 15 bn bbl since 1990. It has even found an extra 2.5 bn bbl since 2003. Allowing for the 1.9 bn bbl produced since then, this amounts to a gross addition of 4.4 bn bbl since 2003: more than the proven reserves in the British sector of the North Sea. In the chaos of the US-led invasion and its aftermath, it is impossible to see whence such a huge addition might have come.

Iraq has announced a series of production targets for the period up to 2010: all of them somewhat academic. Some of the more far-fetched forecasts have spoken of output levels of 10 mn bpd.

It is almost certain that Iraq's recoverable reserves have declined since 1990 thanks to a combination of poor depletion practices and a lack of spare parts, leading to a decline in reservoir pressures. As a consequence, several billions of barrels may have been permanently lost. Poor reservoir management is continuing, and the situation is made worse by frequent attacks on oilfield installations. Iraq will be doing very well indeed to be producing much more than 3 mn bpd by 2015, and may even be producing less if the present high levels of violence are not brought under control.

GER LINK::

Iraq's oil and energy policies were examined in some detail in a previous GER Report:

'Rebuilding Iraq: the Outlook for the Energy Sector'

Other Sources of Hydrocarbon Liquids

In addition to its output of crude oil, OPEC produces some 3.4 mn bpd of natural gas liquids (NGL) and 0.6 mn bpd of non-conventional crude. Both of these categories lie outside the cartel's quota system, which has given a powerful incentive to countries to classify as much of their liquids' production under these headings. This has led to the classification of some light crudes as condensate in order to allow their unrestricted production.

This not only distorts the production figures for many countries: it is also clear that some NGL and non-conventional crude have been included in some countries' estimates of their proven oil reserves. Whilst some figures exist for Venezuela's non-conventional crude reserves (i.e. bitumen and ultra-heavy crudes), there are no reliable estimates of NGL reserves. All this makes it difficult to forecast future levels of output.

Table 10
OPEC: NGL Production, 2005
Country Production
(mn bpd)
Saudi Arabia * 0.8
Iran 0.2
UAE 0.5
Kuwait * 0.1
Qatar 0.3
Nigeria 0.1
Libya 0.1
Algeria 0.8
Venezuela 0.2
Indonesia 0.1
Total (minus Iraq) 3.3
Iraq †
Total (with Iraq) 3.4
* Including half the Neutral Zone
† <0.1 mn bpd
Totals rounded
Source: Author's estimate

It is quite likely that several countries will increase their production of NGL, particularly those with ambitious gas development plans. Venezuela meanwhile might double its production of non-conventional crudes, giving a total addition to OPEC's non-crude liquids' output of 2.1 mn bpd by 2015 ( see Table 11).

Table 11
OPEC: Outlook for Non-Crude Oil Liquids' Production
Country Production **
(mn bpd)
Saudi Arabia * 0.8 1.1 0.3
Iran 0.2 0.6 0.4
UAE 0.5 0.6 0.1
Kuwait * 0.1 0.1 -
Qatar 0.3 0.8 0.5
Nigeria 0.1 0.2 0.1
Libya 0.1 0.1 -
Algeria 0.8 1.1 0.3
Venezuela ** 0.8 1.4 0.6
Indonesia 0.1 † (0.1)
Total (minus Iraq) 3.9 6.0 2.1
Iraq † 0.1 0.1
Total (with Iraq) 4.0 6.1 2.1
* Including half the Neutral Zone
** NGL plus non-conventional crude
† <0.1 mn bpd
Totals rounded
Source: Author's estimate

OET ARCHIVE:

'Condensate's prospects boosted by shortage of light crude', Focus Nov05

There could be a further boost from liquids synthesized from gas using gas-to-liquids (GTL) processes. Qatar is due to begin producing 34,000 bpd in 2006. Further GTL plants are planned here and in Indonesia, Iran, Nigeria and Venezuela. Around 1.1 mn bpd of GTL capacity has been proposed in these five countries between 2006 and 2020. By no means all of it is likely to be built. Qatar, which has the most ambitious programme, has already announced a delay to some of its projects.

OET ARCHIVE:

'Qatar move casts shadow over GTL' Gas and Power Sep05

It appears likely that no more than half the projects proposed across OPEC will go ahead. GTL output looks like being in the region of 0.6 mn bpd by 2015. This gives a total growth of hydrocarbon liquids other than crude oil of 2.7 mn bpd, between 2005 and 2015, made up as follows:

(mn bpd)
NGL 1.5
Non-conventional crude 0.6
GTL 0.6
Total 2.7

OET ARCHIVE:

'Liquids from gas: technological fix or expensive mistake?', Focus Oct03

Production Outlook, 2005-2015

The outlook for OPEC's production of crude oil is summarized in Table 12. The figures for 2015 are for production capacity . Actual production will be determined by market conditions prevailing at the time. The scenario presented in Table 12 suggests an increase in production in the range of 4-13 mn bpd. The amount of capacity available will depend principally on the size and nature of the reserves remaining in OPEC. The considerable uncertainties about reserve sizes, outlined above, account in part for the wide range in the forecast estimates.

Table 12
OPEC: Outlook for Crude Oil Production Capacity
Country Production 2005 Production Capacity 2015 Change
(mn bpd)
Saudi Arabia * 9.5 11.0-12.0 1.5-2.5
Iran 3.9 4.0-5.0 0.1-1.1
UAE 2.4 3.0-4.0 0.6-1.6
Kuwait * 2.5 3.0-4.0 0.5-1.5
Qatar 0.8 1.1-1.5 0.3-0.7
Nigeria 2.4 3.0-4.0 0.6-1.6
Libya 1.7 2.0-3.0 0.3-1.3
Algeria 1.4 1.7-2.0 0.3-0.6
Venezuela 2.6 2.0-3.0 (0.6)-0.4
Indonesia 0.9 0.5-0.8 (0.4)-(0.1)
Total (minus Iraq) 28.0 31.3-39.3 3.3-11.3
Iraq 1.9 2.6-3.6 0.7-1.7
Total (with Iraq) 29.9 33.9-42.9 4.0-13.0
* Including half the Neutral Zone
Totals rounded
Source: Author's estimate

The figure of 4 mn bpd is in line with the OPEC Secretariat's forecast for 2010. It is by no means inconceivable that OPEC could increase its capacity by between 3 mn bpd and 4 mn bpd by then. Thereafter, it is likely that capacity will rise at a modest rate towards 2015. The 13 mn bpd increase is only really possible if OPEC's reserves are close to the levels claimed by the group. To achieve an increase of this magnitude would also require a period of political calm across OPEC, particularly in the Persian Gulf, as well as the pacification of Iraq. Neither scenario looks plausible at present.

Politics has a further role to play. OPEC's raison d'être is to maximize the incomes of its members. It attempts to achieve this by controlling production through a series of quotas for each country. As production outside OPEC peaks and goes into long term decline, OPEC's ability to add to its production capacity gives it enormous influence not only over future price levels but over world political and economic developments as well. The threat to postpone or cancel additions to capacity could become just as potent as past threats to cut off exports.

There are already OPEC members who would like to use the 'oil weapon' to influence US policy in the Middle East. President George W Bush may have increased the risk of this in his State of the Union address to Congress on 31st January, 2006, when he called for the US to reduce its oil imports from the Middle East by 75% within 20 years. Some Persian Gulf countries may wonder where this leaves their ambitious and expensive plans to increase capacity between now and 2015. It is beginning to look as if the expansion of capacity within OPEC is going to lie within the lower half of the range suggested in Table 12, with 8 mn bpd a plausible figure for crude oil, giving total capacity increases by 2015 as follows:

(mn bpd)
Crude Oil 8.0
NGL 1.5
Non-conventional crude 0.6
GTL 0.6
Total 10.7

This would allow an annual growth of up to 1.2% in world oil demand: somewhat below its most recent level. Competition for oil could soon become a major source of friction across the world.

Latest Developments

Kuwait

OET ARCHIVE LINK: ‘Kuwait tries again to revive energy sector’, Focus, Jun 10

Previous:

Meeting, 17th March 2010

OPEC ministers, meeting in Vienna on 17th March, left their production ceiling unchanged at 24,845,000 bpd, and decided not to meet again until 14th October.

Kuwait

Kuwait’s Oil Minister, Ahmad Abdullah Al Sabah, survived a vote of no confidence in parliament by one vote. The motion concerned the conduct of Shaikh Ahmad as Information Minister, but also reflects growing parliamentary disquiet about the Emirate’s oil policy including its plans for a 615,000 bpd grassroots refinery.

UAE

OET ARCHIVE LINK: ‘UAE attempts to revive upstream expansion programme’, Focus, Jan 10

Politics

Russia and Azerbaijan both hinted that they were interested in some kind of co-operation with OPEC.

Condensate Production

OET ARCHIVE LINK: ‘OPEC plans more condensate production’, Focus, Oct 09

Venezuela

OET ARCHIVE LINK: ‘Venezuela faces future of declining output’, Looking Ahead, Aug 09

Ministerial Meeting

OPEC kept its 24,845,000 bpd production target unchanged at its meeting in Vienna on 28th May. Prompt oil prices hit a six-month high on Nymex at $65.08/bbl. Saudi Arabia’s King Abdallah said he believed $75-80 was a "fair price" for oil in current market conditions.

Quatar

OET ARCHIVE LINK: ‘Qatar raises LNG capacity’, Gas&Power, May09

OPEC’s oil ministers, meeting in Vienna on 15th March, decided to keep their production target at 28,845,000 bpd. Many believed that a further cut ran the risk of deepening the world’s economic recession, leading ultimately to lower oil prices. Crude prices nevertheless gained slightly on the decision and prices began to be quoted above $50/bbl for the first time in 2009. The recovery in prices was moderated, however, by a build-up in oil stocks at sea.

Kuwait

OET ARCHIVE LINK: ‘Kuwait lurches from crisis to crisis’, Looking Ahead, March 09

Refining

OET ARCHIVE LINK: ‘Refiners reassess projects as recession deepens’, Looking Ahead, Feb09

Opec

OPEC’s ministers agreed the largest-ever production cut in their history at a meeting in Oran on 17th December.  The cartel declared that it would cut some 4.2 mn bpd from its September output, giving the 11 members subject to production quotas a combined ceiling of 24,845,000 bpd, with effect from 1st January, 2009.  OPEC did not specify how much each member-country was permitted to produce, giving rise to speculation that there had been disagreements over individual quota levels.

Oil markets were unimpressed and the price of several leading crudes fell (see ‘Oil Price Review’).  The price of most crudes dipped below $40/bbl and some heavier grades were quoted below $30/bbl.

Two days after their meeting in Algeria, OPEC’s ministers attended a gathering of producers and consumers hosted by the British government in London.  Those attending agreed that price volatility was a bad thing, and on little else.

Opec

After hints by OPEC of further production cuts, ministers meeting in Cairo on 29th November decided to leave quotas unchanged. This was followed by a sell-off in crude markets that saw WTI front-month futures down as low as $49.05/bbl on 1st December and the London Brent contract as far down as $47.77/bbl for the spot month.

Saudi Arabia’s Oil Minister, Ali Naimi, opined that $75/bbl was a ‘fair’ price and OPEC’s Secretary-General, Abdallah al-Badri, said that the outlook for crude oil was in a range of $70-90/bbl. All this was to no avail as far as market sentiment was concerned.

Opec

Following a sharp fall in crude oil prices OPEC’s oil ministers held an emergency meeting in Vienna where they announced a cut of 1.5 mn bpd in production.  Oil markets judged this irrelevant and prices continued fall as newly-published figures suggested that a sharp decline was occurring in oil consumption across most industrialized countries and that the Chinese economy was also beginning to slow down.

OET ARCHIVE LINK: ‘OPEC battles with financial crises and recession’, Focus, Nov08

OPEC

OPEC ministers meeting in Vienna on 9-10th September said the group would “strictly comply” with its production ceiling, implying a cut in output of 520,000 bpd.

Kuwait

Kuwait’s Audit Bureau is to investigate alleged irregularities in the awarding of construction contracts for the country’s long-delayed fourth refinery at al-Zour.

OET ARCHIVE LINK: ‘Brazil: A future Member of OPEC?’, Looking Ahead, Sep08.

Oil Prices

Oil prices began the month at record levels but soon began to weaken amid indications that demand was being curtailed by persistently high prices. The decline was temporarily interrupted by a war of words between Israel and Iran over Iran’s nuclear programme and the threat of further attacks on oil facilities in Nigeria. The 11th July saw Brent futures hit $147.50/bbl and WTI at $147.27 before crude and product prices resumed their downward path. The early part of the month saw some Asia/Pacific prices quoted about $150/bbl, including Tapis at $151.80 and Kutubu at $153.20. OPEC’s Secretary General, Abdallah al-Badri gave a brief fillip to prices by declaring that attacks on Iran’s nuclear facilities would cause an “unlimited” increase in world oil prices, but geopolitics were soon forgotten as markets began to focus on falling demand.

Condensate

OET ARCHIVE LINK: ‘Condensate Producers seek Markets’, Looking Ahead, Jul08

Middle East

OET ARCHIVE LINK: ‘Middle Eastern Countries examine Nuclear Option’, Gas and Power, Aug08

Venezuela

OET ARCHIVE LINK: ‘US faces Supply Threat’, Focus, Aug08.

Oil Prices

Following a meeting between producing and consuming countries in Jeddah on 22nd June to discuss ways of curbing high oil prices, the price of crude oil surged to a new record high.  Even a promise by Saudi Arabia to raise production failed to do anything to interrupt the steady rise in prices.  Libya and Venezuela rejected calls for production to be increased.

OPEC’s President reacted by saying that high prices were a result of ‘speculation’ and without this, they would be about $70/bbl

Meeting, 1st February, 2008

OPEC ministers met in Vienna, where they agreed to leave their output ceiling unchanged at 29.673 mn bpd.

Angola

Angola’s production capacity has risen to 2.1 mn bpd with the commissioning of the 200,000 bpd Kizomba-C field. This is 0.2 mn bpd above the country’s OPEC quota.

Meeting, 5th December, 2007

OPEC ministers did nothing to ease market fears when, at their meeting on 5th December in Abu Dhabi, they decided to leave the organization’s output ceiling unchanged at 27,253,000 bpd.  The ministers rejected calls from consuming countries to produce more oil, declaring in their communiqué that the market was “well-supplied”, with stocks at “comfortable levels”.  The high level of prices was blamed on what the communiqué called “speculative activity” by financial funds and others.  Angola and Ecuador were brought into the production-sharing system, being given output quotas respectively of 1.9 mn bpd and 520,000 bpd.

Angola

Angola has taken the final investment decision on its LNG export project, paving the way for start-up in 2012.  The terminal will be located at Soyo and will have a capacity of 700 mn cfd.  The US is expected to be the main market.

Indonesia

Despite the deregulation of domestic oil markets in Indonesia, state-owned Pertamina has been nominated as the only company to sell subsidized  fuel there during 2008.  Five foreign companies also bid for the role

Venezuela has protested against the allocation of production quotas made at the ministerial meeting of 11th September (see previous GER update). As a result, OPEC says that no individual distribution of quotas has been made, but the production ceiling has been retained at 27,253,000 bpd

Meeting 11th September, 2007

Ministers meeting in Vienna decided to raise their production ceiling from 1st November, 2007 by 1.45 mn bpd from its February 2007 level of 25.80 mn bpd.  The new quotas are as follows:

Country Volume

(th b/d)

Saudi Arabia*

8,943

Iran

3,817

UAE

2,567

Kuwait*

2,531

Qatar

828

Nigeria

2,163

Libya

1,712

Algeria

1,357

Venezuela

2,470

Indonesia

865

Total

27,253

Gas Exports

OET ARCHIVE LINK: ‘Middle East and North Africa take growing share of EU’s gas market’, Focus, Aug07

Indonesia

OET ARCHIVE LINK: ‘‘Indonesia still struggling to produce more’, Looking Ahead, Aug07

OPEC

OET ARCHIVE LINK: 'OPEC nears production capacity’ Focus, Jul07

Kuwait

Kuwait’s petroleum sector is beset by allegations of corruption. The Oil Minister, Ali a-Jarrah Al Sabah, resigned at the end of June rather than face a parliamentary vote of no confidence.

Venezuela

Venezuela signed preliminary agreements to raise the state’s shareholding in the country’s four foreign heavy oil joint-ventures from 40% to about 78%. Compensation terms have still to be agreed.

Kuwait

The refusal by Kuwait’s Oil Minister, Shaikh Ali al-Jarrah Al Sabah to reveal the government’s official figure for the emirate’s proven oil reserves has reignited the controversy over Kuwait’s reserves.

OET ARCHIVE LINK: ‘ Kuwait : Have its oil and gas prospects been exaggerated?', Focus, Jan07.

Shaikh Ali referred to additional non-proven reserves of 150 bn bbl but gave no details. There is some scepticism over Kuwait’s claims of proven reserves of 99 bn bbl. The Minister’s insistence on regarding the official number as a state secret has probably only served to increase such scepticism.

Nigeria

For updates see West Africa.

Nigeria

Following a turbulent election campaign, Nigeria’s President-elect, Umaru Yar’Adua declared his intention to tackle the unrest in the country’s oil-producing region of the Niger Delta. Violence and kidnappings have continued despite earlier signs of a lull in the attacks on foreign oil and gas installations. Four hostages were released in early April and Shell–the company worst affected by the unrest–announced that it was preparing to restart production amounting to nearly 500,000 bpd from its Forcados and EA fields. In the event, Shell was unable to commit to any firm timetable and trouble returned to the Delta region when around 20 foreign oil-workers were reported kidnapped in separate incidents, one of which forced Chevron to shut-in its 15,000 bpd Funiwa field. About 150 foreign workers have been reported as having been abducted since the start of the year: more than twice as many as were kidnapped in the whole of 2006. Nearly 700,000 bpd of Nigeria’s oil production is currently affected by the violence there.

UAE

The Abu Dhabi National Oil Company (ADNOC) says it will invest $7 bn to increase gas production from 5.3 bn cfd to 7.2 bn cfd by 2009 and to double the output of NGLs by 2010 to 225,000 bpd.

OPEC

A meeting of OPEC ministers on 15th March in Vienna decided not to make any further cuts in production and to continue those previously agreed in Doha and Abuja.  Angola attended the meeting for the first time as a full member but was not asked to join the cartel’s quota system.

Indonesia

OET ARCHIVE LINK: 'Indonesia tries to reverse output decline’ Focus, Apr07

Nigeria

There was more trouble for foreign oil companies operating in Nigeria with further violence, kidnappings and damage to installations.  Shell, which had some 475,000 bpd shut-in at the beginning of March, was temporarily forced to cut production by a further 190,000 bpd when a pipeline was damaged.  It was not immediately clear what had caused the problem.  Around 700,000 bpd was reported shut-in across the whole of Nigeria in mid-March, including fields operated by ENI, Total and Chevron, as well as Shell, which has been hardest hit.  Attempts to raise production in Nigeria are being hampered by the refusal of some oilfield service companies to work there. 

UAE

OET ARCHIVE LINK:‘UAE faces delays on gas imports’ Gas and Power, Apr07

Nigeria

Violence continues to affect Nigeria with kidnappings of foreign oil workers and attacks on the oil production and export infrastructure. About 600,000 bpd of exports are being lost at present and two of the country's four refineries remain closed. One militant group, the Movement for the Emancipation of the Niger Delta (MEND), has threatened “a full scale war against the Nigerian government and oil companies”.

UAE

OET ARCHIVE LINK: ‘UAE production plans may prove over-ambitious’ Focus, Mar07

Venezuela

Venezuela has nationalized its four foreign-owned heavy oil joint-ventures, which produce 600,000 bpd of upgraded crude. The mainly US partners must cede a 60% shareholding to PDVSA by 1st May. Venezuela is also to sell another of its US refineries in favour of investing in more “friendly” Latin American countries. Japan and Peru want to import more oil from Venezuela.

Venezuela

OET ARCHIVE LINK: ‘Latin American militancy grows’ Focus, Feb07

Nigeria

Violence has flared-up once more in the oil-producing regions of the Niger Delta as local groups continue their campaign to prevent oil revenues being siphoned-off to the north of the country.  A spate of kidnappings of foreign oilworkers broke out in January, whilst communal violence in Nigeria’s Rivers State forced Shell to evacuate staff and shut three wells producing around 175,000 bpd of oil. Trades unions threatened strike action if the violence continued.

Meanwhile, a report from the Department of Petroleum Resources revealed that Nigeria’s four refineries operated at just 16% of their total capacity of 440,000 bpd in the fourth quarter of 2006 as a result of the unrest in the Delta and the poor quality of some of their equipment.

A ministerial meeting in Abuja , Nigeria agreed to cut production by 500,000 bpd from 1st February, 2007. The cuts were agreed as follows:

Country

Reduction

 

(th bpd)

Algeria

25

Indonesia

16

Iran

73

Kuwait

42

Libya

30

Nigeria

42

Qatar

15

Saudi Arabia

158

UAE

42

Venezuela

27

Total

500

OPEC also agreed to admit Angola to membership from 1st January, 2007.

Indonesia

Indonesia announced that it had missed its crude and NGL production target for 2006 of 1.05 mn bpd by 43,000 bpd. In an attempt to stem the rate of decline in output, the country is to offer at least 30 exploration blocks in 2007.

Production from the 25,000 bpd Cepu field is likely to be delayed to 2009 rather than begin in 2008 as planned.

Nigeria

Nigerian oil facilities suffered a series of attacks during December, beginning with a raid on the 200,000 bpd Brass crude oil export terminal and the taking of four foreign oil workers as hostages. ENI, the terminal's operator, said that loadings were not affected and the Italian company was even able to announce that it had been able to reopen its 55,000 bpd Okono/Okpoko terminal, which had been shut in November following a similar attack then. Further attacks on foreign installations followed, however, including one on the Nun River flow station in Bayelsa state, which forced Shell to shut-in 12,000 bpd of crude production, and another on Total's Obagi facility, serving the Bonny crude export terminal. Militant groups warned of further violence. The government nevertheless declared that Nigeria was on track to raise its production capacity by 0.9 mn bpd by 2010. The Christmas holiday was marked by the death of an estimated 700 Nigerians when a vandalized petrol pipeline exploded and caught fire in Lagos .

OET ARCHIVE LINK: ‘ West Africa plans ambitious gas-to-power program', Focus, Nov06

Nigeria

Violence continues to affect oil production in Nigeria . On 12th November, armed men forced ENI to shut-down a flow station in Bayelsa state, causing some 45,000 bpd of production to be shut-in. Nigeria has lost oil production amounting to more than 750,000 bpd as a result of armed attacks this year. On 22nd November, the Italian oil company suffered a further blow when one of its oil workers was taken hostage and killed. Oil trades unions threatened strike action if the violence continued. Despite the attacks, refiners in Asia considerably increased their purchases of West African crudes. Indian buyers raised their purchases by nearly two-thirds between October and November following the opening of Essar's new 210,000 bpd refinery at Vadinar.

OPEC's ministers, meeting in Doha on 19th October, decided to cut their production by 1.2 mn bpd from 1st November. The reduction is based on an output total of 27.5 mn bpd, which represents the production of the ten quota-observing countries in the weeks immediately preceding the Doha meeting. The Kuwaiti Oil Minister subsequently observed that the OPEC-10 were unlikely to be at their 26.3 mn bpd target before the second half of November. Venezuela said its 138,000 bpd cut would be concentrated on foreign joint-ventures operating in the Orinoco heavy oil belt. Crude oil prices fell in the wake of OPEC's announcement, prompting the Saudis to speculate that the group might cut production by a further 500,000 bpd at its meeting in the Nigerian capital, Abuja , on 14th December.

The output reductions were agreed as follows:

Country

Reduction

 

(th bpd)

Algeria

59

Indonesia

39

Iran

176

Kuwait

100

Libya

72

Nigeria

100

Qatar

35

Saudi Arabia

380

UAE

101

Venezuela

138

Total

1,200

Nigeria

Nigeria 's oil production continues to be affected by unrest in the Niger Delta region. Early in October 2006, Shell shut-in 27,000 bpd of Bonny Light production following attacks on its facilities. Later in the month, local people occupied crude flow stations belonging to Shell and Chevron, causing production losses estimated at 56,000 bpd. At the end of October, trades unions threatened a strike that could stop ENI's 200,000 bpd production. The unions were demanding extra payments for working in such a dangerous area.

Production

The ten quota-observing countries in OPEC are struggling to produce at their full quotas. GER estimates their combined first quarter output at 27.75 mn bpd: some 250,000 bpd below the current ceiling.

Some 750,000 bpd of production is shut-in in Nigeria, owing to unrest in the Delta region.

Production capacity is falling in Iran and Indonesia.

Meanwhile, the start of production from new fields in Algeria and Libya has been delayed.

Output in Iraq continues to be adversely affected by attacks on oil installations, including the export pipeline to Kirkuk.

First half 2006 crude oil production is estimated by GER as follows:

Country

Volume

Quota

Difference

 

(th bpd)

Algeria

1,370

894

476

Indonesia

920

1,451

(531)

Iran

3,900

4,110

(210)

Kuwait *

2,500

2,247

253

Libya

1,680

1,500

180

Nigeria

2,200

2,306

(106)

Qatar

800

726

74

Saudi Arabia *

9,280

9,099

181

UAE

2,500

2,444

56

Venezuela

2,600

3,223

(623)

Total

27,750

28,000

(250)

Iraq

1,900

Total OPEC

29,650

Totals rounded
* Including half the Neutral Zone

Nigeria

Nigeria has been forced to shut-in 800,000 bpd of crude oil production as a result of attacks on oil installations and the murder and kidnapping of oil workers. The latest incidents include the loss by Shell of 180,000 bpd of Bonny Light production as a result of damage to a pipeline, though it is not yet clear if this is the result of sabotage or whether the damage is accidental. ENI lost 35,000 bpd of Brass Blend when a flow station was attacked in the Niger Delta. Shell has a further 480,000 bpd off-line and Chevron has lost more than 50,000 bpd. Nigeria 's total production has not fallen by much because of the commissioning of new fields.

On the other hand, Nigeria is being forced to import refined products owing to sabotage to pipelines serving refineries, shutting-in 235,000 bpd of crude distillation capacity. The parlous state of the country's refining system forced the government to announce in July that it was postponing plans to privatize its four refineries. Now, in a further blow to Nigerian energy plans, protestors have threatened violent attacks on an LNG export scheme known as OK LNG which is being developed by NNPC, Chevron, Shell and BG.

Venezuela

Venezuela is continuing its policy of reducing its reliance on the US market by closing its Citgo-branded gasoline stations in ten states. It is also to sell its interest in the Colonial Pipeline and both its US asphalt plants. It may also dispose of some of its 900,000 bpd refinery capacity in the US.

Kuwait

OET ARCHIVE LINK: ‘Kuwait 's oil production plans in confusion', Focus, July06

Nigeria

Attacks continue on oil and gas installations. The Movement for the Emancipation of the Niger Delta (MEND) has prevented the repair of a pipeline serving the Warri and Kaduna refineries, causing their closure; there have been further threats to kidnap oil workers in the Delta region; and Shell was forced to shut down a gas plant serving its Bonny Island LNG terminal.

Venezuela

Venezuela is extending its system of subsidized oil exports to neighbouring countries by agreeing to supply Granada with 1,000 bpd of refined products. It has also said it may build a mini-refinery in Dominica to supply nearby islands. Venezuela has agreed to supply about 200,000 bpd of cheap oil to Caribbean countries as part of a wider plan to counter US influence in the region.

A ministerial meeting in Caracas left quotas unchanged at 28.0 mn bpd.

Saudi Arabia

OET ARCHIVE LINK: ‘Saudi Arabia may be about to revive stalled gas programme', Gas and Power June06

Nigeria

Deliberate damage to an oil products pipeline in Nigeria was succeeded by a fire, which killed an estimated 100 people, some of whom were helping themselves to fuel that was leaking from the line. Sabotage to a crude oil pipeline caused the closure of the 125,000 bpd Warri refinery in the Nigerian Delta region.

Venezuela

PDVSA and Petrobras have postponed a decision on developing the Mariscal Sucre offshore LNG project until August. The project has suffered a series of delays.

OET ARCHIVE LINK: ‘Bitumen and heavy crudes', Focus June06
‘Latin America ponders nationalist energy policies', Looking Ahead June06

Nigeria

Nigerian exports showed signs of recovering with the export of the first cargo from the Erha field to India. Output is rising at two other new fields, Bonga and Yoho, leaving the country only 0.2 mn bpd below the level it was exporting before the latest series of attacks on oil installations owned by foreign oil companies.

Qatar

Qatar is to build a 3.5 bn cfd pipeline to the UAE and Oman. It will begin exporting 2.0 bn cfd to UAE in 2007, extending the line to Oman by 2008.

UAE

The UAE has announced plans to increase production capacity to 3.5 mn bpd within five years. Capacity is currently 2.7 mn bpd.

Refining

OET ARCHIVE LINK: ‘World's refiners plan massive increase in capacity', Focus May06

USA

Refining

OET ARCHIVE LINK: ‘World's refiners plan massive increase in capacity', Focus May06

NORTH AFRICA

Algeria

Algeria 's state Electricity and Gas Regulatory Commission has announced new gas-fired power generating capacity plans as follows:

Plant

Capacity

On-stream

 

(MW)

 

Skikda II

825

April 2006

Berrouaghia

484

Sep-Oct 2006

Hadjret Ennous

1,200

July 2008

Libya

ENI's long-delayed Elephant field came on-stream in March 2006. It is expected to reach its full production of 175,000 bpd in 2007. It has been blended into the 44°API Esharara export stream. The National Oil Corporation says that it will raise output capacity to 2.0 mn bpd by the end of 2007, compared with 1.7 mn bpd at present.

Tunisia

State oil company ETAP has announced 2005's production as follows:

Oil

(th bpd)

Adam/Dalia/Hawa/Nur

16

Ashtart

10

Others

22

Total

48

Gas

(mn cfd)

Franig

18

Others

30

Total

48

Ministers meeting in Vienna on 8th March left the collective output ceiling unchanged at 28 mn bpd (for details of individual country quotas, see GER ‘Latest Developments', July 2005).

Nigeria

Violence is restricting exports of crude oil from Nigeria . At the beginning of April, some 550,000 bpd of production remained off-line, according to oil minister, Edmund Daukoru. Before the latest round of attacks on oil installations and foreign industry personnel, Nigeria was producing 2.6 mn bpd. The volume of oil production shut-in rose during March to 625,00 bpd following an attack on ENI's Tebidaba-Brass crude pipeline, though this was repaired later in the month. Shell is the worst affected producer, with 445,000 bpd shut-in at the start of April.

Venezuela

OET ARCHIVE LINK: 'Venezuela plans to import and export gas', Gas and Power, Mar06

USA

OET ARCHIVE LINK: 'US braces itself for gasoline and diesel shortages', Focus, Mar06

Saudi Arabia

Saudi Aramco is studying the following expansion schemes:

Field/Project

Present Output

Proposed Additions

Date due

 

(th bpd)

(th bpd)

 

Shaybah

500

300

2008

200

After 2010

Neutral Zone

300*

150

2010

Manifa

Field Mothballed

300

2011

300

2013

400

After 2013

* Saudi Arabia and Kuwait produce 300,000 bpd each. Figures refer solely to Saudi output.

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