Global Energy Review

Introduction

Contents

Summary

OPEC {http://www.opec.org}'s crude-oil production capacity is smaller than is generally reported. According to our estimates, it is 29.6 mn bpd, or just 2.7 mn bpd above OPEC's estimated production for 2003. Moreover, plans to increase capacity may be described as only modest. We estimate OPEC's crude production capacity at 33.8 mn bpd by 2010: only 6.9 mn bpd, or 26%, above 2003's production total.

How much of that capacity will be used will depend on political decisions about output quotas and quota compliance in individual countries. Our estimates are based on reserves, geology, infrastructure, and on plans already announced or reported concerning capacity expansion. We assume that quotas will still be in operation in 2010 and that Iraq will have rejoined the quota system by then, though not without considerable controversy concerning the allocation of production shares.

OPEC quotas have been a source of contention since they were introduced in 1982. Most countries want an increase in their quotas. Two, however - Venezuela and Indonesia - are now producing below their current quotas and one at least - Indonesia - is unlikely ever to be able to exceed its present quota.

Spare capacity is concentrated in a small number of countries in the Persian Gulf, plus Nigeria and Venezuela, though Venezuela is a special case since its output was curtailed in 2003 by labour unrest. Growth in capacity is even more concentrated: Saudi Arabia, Iraq, and Nigeria are forecast to account for 5.0 mn bpd or 72% of the forecast 6.9 mn bpd increase between now and 2010.

NB: Figures for Saudi Arabia and Kuwait each include 50% of the Neutral Zone unless otherwise specified. An asterisk by the entries for Peak Output and Peak Year means that the country in question is expected to exceed its previous maximum level of output.

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Organization of the Petroleum Exporting Countries

OPEC was founded at a meeting in Baghdad in September 1960, against a background of rising nationalism in oil-producing countries, notably Venezuela, Iran, and the Arab world. In April, 1959, the First Arab Petroleum Congress, meeting in Cairo, resolved to seek a higher level of upstream participation for producing countries and a corresponding reduction in the role of foreign oil companies. Venezuela sought to ally itself with this sentiment and, from 10 to 14 September, five countries - Venezuela, Iran, Iraq, Kuwait, and Saudi Arabia - signed a declaration demanding to be paid higher prices for their oil and agreeing to study and formulate a system to regulate production to ensure 'a steady income to the producing countries', though production quotas were not actually introduced until 1982.

OPEC gradually expanded to embrace 13 members, as follows:

Country Year Admitted
 
Iran 1960
Iraq 1960
Kuwait 1960
Saudi Arabia 1960
Venezuela 1960
Qatar 1961
Indonesia 1962
Libya 1962
Abu Dhabi 1967 †
Algeria 1969
Nigeria 1971
Ecuador 1973 *
Gabon 1975 **
 
† Membership transfer 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 as follows:

Country (th bpd)
 
Saudi Arabia 7,963
Iran 3,597
Venezuela 2,819
UAE 2,138
Kuwait 1,996
Nigeria 2,018
Libya 1,312
Algeria 782
Indonesia 1,270
Qatar 635
 
Total 24,500

Quotas are due to be reviewed on 10 February 2004.

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The Resource Base

Tables

Overview

On the face of it, OPEC has an impressive endowment of crude-oil resources: sufficient to allow an increase in production capacity of more than 10 mn bpd over the next decade or so. Reserves are not evenly distributed, however, and in some cases the size of reserves may in fact be overstated.

Reserves in OPEC are a matter of politics as well as geology. They are used to justify individual quota levels and, as such, are prone to being exaggerated by certain countries. Data showing the breakdown of reserves by area, formation, and so on are often kept confidential within the member countries, forcing outside estimates to rely heavily on the countries' own figures. From time to time there have been upward revisions in some countries' data with little apparent geological justification for the move (see section on the individual countries).

The lack of consistent and reliable data on reserves and discovery rates makes depletion forecasts difficult and subject to error. A number of generalizations are nevertheless possible from the individual country surveys:

All these considerations incline us to a conservative view about future output capacity. We have also considered plans already announced for capacity expansions, which give a reasonable indication of what is likely to be available by about 2007-8. To these can be added a small number of other projects for which detailed development plans do not so far exist. The number of field developments with production capacities of 100,000 bpd or more is quite modest. Those so far announced are as follows:

Country Project Capacity On stream
 
Saudi Arabia Haradh (Ghawar) 300 *
  Qatif 500 *
Iran Ahwaz 350 *
  Azadegan 100 *
  Kushk 100 *
UAE North East Abu Dhabi 110 2005
  Bu Hasa 250 2006
Kuwait Northern Fields 475 *
Nigeria Bonga 225 2004
  Bonga South 250 2005
  Erha 150 2005
  Agbami 225 2006
  Akpo n/a *
Libya Elephant 150 2004
Iraq Khurmala (Kirkuk) 100 *
  Majnoon 360 *
  West Qurna II 650 *
 
* No date finalized. In most cases, probably after 2008
Source: Petroleum Review, January 2004.

The projects listed above represent about 4.4 mn bpd of new capacity, to which may be added a maximum of a further 2.5 mn bpd from smaller fields, better oil-recovery factors, and from schemes not yet announced, mainly in Iraq. Iraq represents the biggest uncertainty as far as OPEC's production is concerned. If order is not restored within the next year or so, OPEC could fail to achieve the 6.9mn-bpd increase forecast by this survey for 2010. Moreover, unrest in Iraq could lead to a general nervousness about investment in the Middle East, affecting countries with large upstream projects earmarked for foreign participation. In this case, OPEC's capacity increase might be as low as 4.0 mn bpd. One further consideration should be noted. OPEC's newest oilfields will deplete much more rapidly than the older ones that formed the mainstay of past production levels. This reflects the technology now employed to produce oil. The new fields are also much smaller in reserve terms than the older ones. Most 1 of the reserve estimates for the fields listed above are below 1 bn bbl, compared with remaining reserves of more than 10 bn bbl in Saudi Arabia's five largest fields. Thus, while many of the above fields might be producing at capacity in 2010, their output could begin to fall sharply shortly afterwards.

OPEC: Proven Crude Oil Reserves, 2003

Country Reserves (bn bbl) Reserves Remaining (years)
 
Saudi Arabia 262 82
Iran 90 66
Venezuela 78 81
UAE 98 119
Kuwait 97 121
Nigeria 24 31
Libya 30 57
Iraq 113 237 *
Algeria 9 22
Indonesia 5 14
Qatar 15 59
 
Total 821 84
 
* Total inflated by low output during 2003. At pre-war production level of 2.6 mn bpd, reserves remaining are 119 years.
Sources: OET, Annual Statistical Review, 2003; Oil & Gas Journal.
NB: Totals rounded

OPEC: Crude Oil Output v. Quota, 2003

Country Output Quota* Difference
  (mn bpd)
 
Saudi Arabia 8.75 7.96 0.15
Iran 3.75 3.60 0.15
Venezuela 2.25 2.82 (0.57)
UAE 2.25 2.14 0.11
Kuwait 2.20 1.97 0.23
Nigeria 2.12 2.02 0.10
Libya 1.42 1.31 0.11
Algeria 1.13 0.78 0.35
Indonesia 1.00 1.27 (0.27)
Qatar 0.70 0.64 0.06
 
Total (excl Iraq) 25.57 24.50 1.07
Iraq 1.30    
 
Total (incl Iraq) 26.87    
 
* OPEC had three quota levels during 2003 as follows:
Jan: 23.00 mn bpd
Feb-May: 24.50 mn bpd
Jun-Oct: 25.40 mn bpd
Nov-Dec: 24.50 mn bpd
 
The 24.50 mn bpd was the longest lasting, being in operation for six months
NB: Totals rounded
Iraq is not part of the quota system

OPEC: Crude Oil Capacity v. Quota, 2003

Country Capacity Quota Difference
  (mn bpd)
 
Saudi Arabia 9.00 7.96 1.04
Iran 3.85 3.60 0.25
Venezuela 2.60 2.82 (0.22)
UAE 2.45 2.14 0331
Kuwait 2.40 1.97 0.43
Nigeria 2.55 2.02 0.53
Libya 1.50 1.31 0.19
Algeria 1.15 0.78 0.37
Indonesia 1.05 1.27 (0.22)
Qatar 0.75 0.64 0.11
 
Total (excl Iraq) 27.30 24.50 2.80
Iraq 2.30    
 
Total (incl Iraq) 29.60    
 
NB: Totals rounded

OPEC: Crude Oil Output v. Capacity, 2003

Country Output Capacity Difference
  (mn bpd)
 
Saudi Arabia * 8.75 9.00 0.25
Iran 3.75 3.85 0.10
Venezuela 2.25 2.60 0.35
UAE 2.25 2.45 0.20
Kuwait 2.20 2.40 0.20
Nigeria 2.12 2.55 0.43
Libya 1.42 1.50 0.08
Iraq 1.30 2.30 1.00
Algeria 1.13 1.15 0.02
Indonesia 1.00 1.05 0.05
Qatar 0.70 0.75 0.05
 
Total 26.87 29.60 2.73
 
* Saudi Arabia describes its production capacity as 9 mn bpd with a further 1 mn bpd able to be brought on-line within 90 days.

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Natural Gas Liquids

OPEC produces considerable volumes of natural gas liquids (NGLs) ranging from ethane to condensate. These are normally listed separately from crude-oil totals. This is primarily for political reasons since NGLs do not count against individual countries' production quotas. The lighter NGLs tend to be marketed as distinct NGL streams, but condensate may either be sold as a separate product, such as Saudi Aramco's A 180, or spiked into crude-oil streams. OPEC has tried to clarify the position on condensates 2, but they continue to be inconsistently reported. Our estimate for NGL production for 2003 is 3.5 mn bpd (this total includes heavy crudes and bitumen from Venezuela).

A growing interest in gas production means that NGL production is likely to increase over the next few years. In 2004 alone, output could rise by over 0.5 mn bpd thanks to increases in Saudi Arabia, Qatar, Algeria, Iran, and Venezuela. Saudi production is likely to go up by 0.3 mn bpd compared with 2003, with a further rise of 0.1 mn bpd coming from Qatar.

Production Outlook

OPEC's NGL production has risen sharply in recent years: from about 2.8 mn bpd in the late 1990s to 3.5 mn bpd in 2003, and to a possible total of nearly 4.1 mn bpd in 2004.

Our output forecast is as follows:

2003 3.5 mn bpd 3
2010 5.0 mn bpd 4

OPEC members are likely to maximize their production of non-quota hydrocarbons; hence there should be little unused capacity.

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Notes:

1 In some cases, reserve estimates have not been published.

2 In 1988, OPEC agreed the following minimum standards for defining condensates:

API Gravity: > 50°
Gas-to-Liquids: > 5,000 scf/bbl
C7 content: < 3.5 mole % wt

3 Includes 0.5 mn bpd of heavy oil and Orimulsion for Venezuela.

4 Includes 0.8 mn bpd of heavy oil and Orimulsion for Venezuela.