Peak (Crude) Oil in 2005?In my opinion, actual global crude oil production (45 or lower API gravity crude oil) may have effectively peaked in 2005, while global natural gas production and associated liquids (condensates & natural gas liquids) have so far continued to increase.
I’ve always thought it odd that when we ask for the price of oil, we get the price of 45 or lower API gravity crude oil, but when we ask for the volume of oil, we get some combination of crude oil + condensate + NGL (Natural Gas Liquids) + biofuels + refinery gains.
This is analogous to asking a butcher for the price of beef, and he gives you the price of steak, but if you ask him how much beef he has on hand, he gives you total pounds of steak + roast + ground beef. Shouldn’t the price of an item directly relate to the quantity of the item being priced, and not to the quantity of the item plus the quantity of (partial) substitutes?
In any case, the closest measure of global crude oil production that we have is the EIA data base that tracts global Crude + Condensate (C+C). In regard to this data base, a key question is the ratio of global condensate to C+C production. Unfortunately, we don’t appear to have any global data on the Condensate/(C+C) Ratio. Note that when the EIA discusses “crude oil” they are talking about C+C.
Insofar as I know, the only complete Condensate/(C+C) data base, from one agency, is the Texas RRC data base for Texas, which showed that the Texas Condensate/(C+C) ratio increased from 11.1% in 2005 to 15.4% in 2012. The 2013 ratio (more subject to revision than the 2012 data) shows that the 2013 ratio fell slightly, down to about 15%, which probably reflects more focus on the crude oil prone areas in the Eagle Ford. The EIA shows that Texas marketed gas production increased at 5%/year from 2005 to 2012, versus a 13%/year rate of increase in Condensate production. So, Texas condensate production increased 2.6 times faster than Texas marketed gas production increased, from 2005 to 2012.
The EIA shows that global dry gas production increased at 2.8%/year from 2005 to 2012, a 22% increase in seven years. If the increase in global condensate production only matched the increase in global gas production, global condensate production would be up by 22% in seven years. If global condensate production matched the 2005 to 2013 Texas rates of change (relative to the global increase in gas production), global condensate production would be up by about 67% in seven years.
We don’t know by what percentage that global condensate production increased from 2005 to 2013. What we do know is that global C+C production increased at only 0.3%/year from 2005 to 2013. In my opinion, the only reasonable conclusion is that rising condensate production accounted for virtually all of the increase in global C+C production from 2005 to 2012, which implies that actual global crude oil production was flat to down from 2005 to 2012, as annual Brent crude oil prices doubled from $55 in 2005 to $112 in 2012.
The following chart shows normalized global gas, NGL and C+C production from 2002 to 2012 (2005 values = 100%).
The following chart shows
estimated normalized global condensate and crude oil production from 2002 to 2012 (2005 values = 100%). I’m assuming that the global Condensate/(C+C) Ratio was about 10% for 2002 to 2005 (versus 11% for Texas in 2005), and then I (conservatively) assume that condensate increased at the same rate as global gas production from 2005 to 2012, which is a much lower rate of increase in condensate (relative to the increase in gas production) than what we saw in Texas from 2005 to 2012.
Based on foregoing assumptions, I estimate that actual annual global crude oil production (45 or lower API gravity crude oil) increased from about 60 mbpd (million barrels per day) in 2002 to about 67 mbpd in 2005, as annual Brent crude oil prices doubled from $25 in 2002 to $55 in 2005.
At the (estimated) 2002 to 2005 rate of increase in global crude oil production, global crude oil production would have been up to about 90 mbpd in 2013.
As annual Brent crude oil prices doubled again, from $55 in 2005 to an average of about $110 for 2011 to 2013 inclusive, I estimate that annual global crude oil production did not materially exceed about 67 mbpd, and probably averaged about 66 mbpd for 2006 to 2013 inclusive.
So Far, Global Net Exports of Oil Peaked in 2005Because of the way that we define net exports, we have to deal in terms of total petroleum liquids (plus other liquids for the EIA data set).
Some definitions:
Global Net Exports (GNE) = Combined net exports from (2005) Top 33 net oil exporters, total petroleum liquids + other liquids (EIA), which accounted for about 99% of total global net exports of oil in 2005
Available Net Exports (ANE) = GNE less Chindia’s Net Imports (CNI)
CNE = Cumulative Net Exports (for a given time period)
ECI (Export Capacity Index) Ratio = Ratio of production to consumption
GNE/CNI Ratio is analogous to the ECI Ratio
Six Country Case History. The Six Country Case History consists of the major net oil exporters (net exports of 100,000 bpd or more) that hit or approached zero net exports from 1980 to 2010, excluding China. China, like the US, became a net importer prior to a production peak, because of a rapid rate of increase in consumption. Combined production from the Six Countries virtually stopped increasing in 1995, showing only a 2% increase from 1995 to 1999.
The following chart shows the normalized values for production, ECI Ratio, net exports and remaining post-1995 CNE (Cumulative Net Exports) by year (1995 values = 100%).
Note that even as production increased slightly from 1995 to 1999 (by 2%), net exports fell, because of rising consumption, as illustrated by the decline in the ECI Ratio. And note that even as production increased from 1995 to 1999, remaining post-1995 CNE fell by 54%.
Estimated Six Country post-1995 CNE were about 9.0 Gb (billion barrels) based on the 1995 to 2002 rate of decline in their ECI ratio. Actual post-1995 CNE were 7.3 Gb.
The key point is that a declining ECI Ratio corresponded to a rapid rate of depletion in remaining CNE, and even as Six Country production rose from 1995 to 1999, the rate of depletion in remaining post-1995 CNE accelerated, from 15%/year in 1996 to 26%/year in 1999.
Global Net Exports of oil (GNE). GNE, the combined net exports from the top 33 net exporters in 2005, fell from about 46 mbpd (million barrels per day) in 2005 to about 44 mbpd in 2012. Preliminary 2013 data show that GNE in 2013 fell to 43 mbpd. Combined production from the top 33 net exporters in 2005 rose slightly from 2005 to 2013, but because consumption increased faster than production, net exports fell, as evidenced by the decline in the ECI Ratio.
The following chart shows the normalized values for production, ECI Ratio, net exports and estimated remaining post-2005CNE (Cumulative Net Exports) by year (2005 values = 100%).
Based on the 2005 to 2012 rate of decline in the Top 33 ECI Ratio, I estimate that remaining post-2005 Global CNE fell by about 21% by the end of 2012. As noted above, this methodology was too optimistic for the Six Country Case History, in regard to estimating post-1995 CNE.
Available Net Exports of oil (ANE). ANE are defined as Global Net Exports of oil (GNE) less the Chindia region's (China + India’s) net imports (CNI). ANE, the volume of GNE available to importers other than China and India, fell from 41 mbpd in 2005 to 35 mbpd in 2012. Based on the preliminary 2013 data, ANE fell to 34 mbpd in 2013.
The GNE/CNI Ratio is analogous to the ECI Ratio. The following chart shows 2002 to 2012 GNE/CNI data, with the extrapolation based on the 2005 to 2012 rate of decline in the ratio.
At a GNE/CNI Ratio of 1.0, China and India alone would theoretically consume 100% of Global Net Exports of oil, leaving no net oil exports available to about 155 net importing countries. Of course, the global economy can’t survive if only two countries are consuming anywhere close to 100% of Global Net Exports of oil, but that has been direction we have been headed in since 2002, up to and including 2013.
I’ve called what happens from 2012 to 2022, and in following years, to the GNE/CNI Ratio the “$64 Trillion Question.” The conundrum is that we continued to slide, at least through 2013, toward a point in time--a GNE/CNI Ratio of 1.0--that we cannot arrive at.