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Page added on February 17, 2014

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‘Big oil’ getting smaller as production keeps falling


* Top seven western majors all seeing liquids output fall
* Supermajors’ share of global market dropping every year
* BP reports fastest decline of 30% from 2009-13
* Production becoming more evenly split between oil and gas


The biggest western oil companies are continuing to see their oil output decline, despite record investment in recent years spurred by sustained crude prices in excess of $100/barrel, according to data released by the companies.


Furthermore, with total world oil output continuing to rise every year, the western majors are seeing their share of the global market fall even faster, with new volumes coming largely from their rivals in places like Russia and a host of smaller companies at the heart of the shale oil boom in the US.

Combined output of crude and other liquids by the seven biggest western majors — ExxonMobil, Shell, BP, Chevron, Total, ConocoPhillips and Eni — amounted to 9.517 million b/d last year, down 2.2% from 2012 and marking the fourth consecutive year of decline.


Liquids output from the same group has been falling every year of late, having been as high as 10.865 million b/d in 2009.


As a group, the seven have seen their combined liquids output fall by 1.348 million b/d, or 12.4% over the period from 2009 to 2013.


The most notable contribution to the overall decline comes from BP, whose production of oil and other liquids has fallen by more than 30% from 1.695 million b/d in 2009 to 1.176 million b/d in 2013.


These figures do not include production associated with BP’s current 19.75% stake in Russia’s Rosneft or its previous 50% stake in Russian oil producer TNK-BP.


This is a much sharper fall than other majors have experienced, and is evidence of the scale of the asset divestment program the company has been going through to cover its actual and potential liabilities in the wake of the disastrous Gulf of Mexico oil spill in 2010.


While its peers have not seen production fall by the same degree, they have nonetheless all experienced declining oil production since 2009.


Even ExxonMobil, the biggest of the group in terms of production and profitability, saw its oil output fall by 4.5% in 2011 and 5.5% in 2012, the two years with the highest average international oil prices of all time.


In 2013 ExxonMobil’s oil output rose by 0.8% to 2.202 million b/d, but it still remained more than 200,000 b/d below where it was in 2010.


Shell, Chevron, Total, ConocoPhillips and Eni also all saw their liquids production fall in 2013.


Total’s output declined by 15.5% between 2009-13, Eni’s by 17.3% and ConocoPhillips’ by 12.4%. Shell has seen the smallest fall of 2.5% over thesame period.


Dwindling share of global output


According to the International Energy Agency, total world oil supply has risen in recent years from 85.66 million b/d in 2009 to an average of 91.53 million b/d in 2013.


As a result, the seven leading western majors have seen their share of this total supply fall from 12.7% to 10.4% over the same period.


While this group is seeing its production fall, others have clearly been heading in the opposite direction.


The most obvious is Russia’s Rosneft, which has grown at breakneck pace in recent years on the back of a debt-funded acquisition spree, including the purchase of former rival TNK-BP.


Rosneft is now the world’s biggest publicly listed oil producer with total crude and liquids output of close to 4.2 million b/d.


In other words, Rosneft alone now produces almost as much oil as ExxonMobil, BP and ConocoPhillips combined.


The western majors are not short of either the expertise to produce more oil or the money to fund developments after 2013 marked the third consecutive year of Dated Brent prices above $108/barrel.


The recurring challenge for the western companies in recent years has been to find attractive investment opportunities, with several of the world’s leading oil reserves holders offering limited, or even no access to international operators.


“It’s an access question,” said an official from one of the western majors, who asked not be identified. “Who will let us in? They’ll only let us into the difficult bits like the deepwater projects, or tight gas, that kind of thing,” he said.


Gas growth


With their liquids output falling, the so-called “oil majors” are gradually becoming less oily and more reliant on gas production.


Oil accounted for more than 60% of ExxonMobil’s total hydrocarbons output in 2009, but by last year this figure had fallen to less than 53%.


It is a similar story for Total, where oil’s share of total production has fallen from 60.5% in 2009 to 50.8% in 2013.


Shell produced more gas than liquids last year, the third time in the last four years this has happened, and BP is not far away from a 50:50 split.


Of the seven majors who embody the image of “Big Oil” the only one bucking the trend towards greater gas exposure is Chevron, where oil continues to account for two thirds of all production — a full 10 percentage points more than any of the rest of the peer group.


17 Comments on "‘Big oil’ getting smaller as production keeps falling"

  1. rockman on Mon, 17th Feb 2014 1:20 pm 

    Just a couple of points. It has been decades since Big Oil was a significant player in the US. The only change in that trend has occurred in the Deep Water GOM. But Big Oil has lots of company out there from Little Oil.

    And one needs to be careful how they interpret production gains by Big Oil. Often a large percentage of those gains is not new oil/NG but reserves acquired in an acquisition. ExxonMobil loves to brag about how good they are at replacing their production. But several years ago when the acquired XTO that on acquisition accounted for more than 80% of their reserves “increase” that year.

  2. Davy, Hermann, MO on Mon, 17th Feb 2014 1:42 pm 

    @rock – good points from between the lines.

    My view is that if we are going to grow like the “lobby of plenty projects” then this oil major situation should not and cannot happen. The math does not add up. So these and a multitude of other above ground factors are going to weigh heavily on the ability to secure the needed energy to keep production and prices in the “goldilocks range”. The all-important financial system is delicate, manipulated, and increasingly volatile. Another oil shock will destroy the current shaky financial stability. Allot of noise recently on China. Here is a funny. Remember how the US was bitching about China’s industrial espionage then that stopped with the NSA scandal. Also remember China bitching about FED money printing when their own debt creation is unprecedented in modern time. You don’t hear anything out of China these days about the FED. Oil and $$$ go hand in hand. One does not work without the other.

  3. ghung on Mon, 17th Feb 2014 1:55 pm 

    ?? => Rockman: Does ‘Little Oil’ have the CAPEX to go after the ultra-deep water and remote (Arctic) plays that Joe Sixpack is expecting will fuel his Ram 350 and bass boat in coming years?

  4. rollin on Mon, 17th Feb 2014 2:34 pm 

    From a peak oil point of view, I am not sure there is any relevance. Companies merge, eat each other, then divest. I worked for a company that had been around for over one hundred years, was doing very well – a leader in it’s area. It got absorbed by one of those giant corporate blobs, spit out later to another one and now does not exist.

    Business does not operate on a simple model anymore, it’s much more predatory and not an indicator for anything.
    Without looking at the whole picture it’s meaningless.

    As far as gas to liquids, meaningless since there is money to be made in both and companies move to money. Doesn’t mean oil is depleting. It is but the business ratios are not an indicator.

  5. shortonoil on Mon, 17th Feb 2014 3:43 pm 

    “Does ‘Little Oil’ have the CAPEX to go after the ultra-deep water and remote (Arctic) plays that Joe Sixpack is expecting will fuel his Ram 350 and bass boat in coming years?”

    So far “BIG Oil” hasn’t had the CAPEX to go the route. I know of no operating wells north of the Arctic Circle. All we’ve seen are attempts that result in shut-in and pull out. As to ultra deep water, even BP appears to have given up on those. We may have pushed our technological limits about as far as they can be pushed.

  6. Feemer on Mon, 17th Feb 2014 4:30 pm 

    Sigh oil companies are gonna go after the arctic soon =(

  7. rockman on Mon, 17th Feb 2014 4:42 pm 

    I agree with shorty. Little Oil has been willing to put some big $’s on the table for DW GOM. Last well I drilled for Devon out there was a $148 million dry hole. Of course when NG prices crashed they were severley crippled and sold off their DW GOM.

    But there has been billions of bbls PROVEN oil established out in the DW GOM. Not the case in the Arctic so far. Also with no close-by logistics it will take a company with a lot of international experience to handle the job up there even though it’s technically in the US.

  8. MSN fanboy on Mon, 17th Feb 2014 6:03 pm 

    We need more “little oil”, a tapestry is made up of multiple threads after all. (Well the best kind)
    It also encourages a free market and more competition.
    Which encourages tech advancement.
    The price also rises therefore oil is forever, much like diamonds are 007.

  9. DC on Mon, 17th Feb 2014 6:11 pm 

    The western oil cartel historically has operated under the assumption that it can treat the entire world as one big oil reserve where it can go when and where it pleases to ‘develop’. The new reality however, is far different. There are only 2 ways the uS oil corporations can actually raise their production.The problem for the uS is, they can print money easy-like they are doing now, but even they realize money is not oil. They can print trillion more and hand it over to the oil corporations, it wont make one more barrel of oil appear if it isn’t there.

    One, find a few new ‘super-giant’ fields in areas under the direct control of the uS. Like Cantarell level fields(unlikely). The other, is ask the uS military to go get it for them(the current plan), IoW, the Libya, Iraq option. If you are looking for a gauge of future instability, and I am talking about in the *west* here, then the numbers this article is referring to, is what we should paying very close attention to. I fully expect as the extraction rates of the corporate majors continues to slide, we will see a marked increase in uS aggression-directed at countries that have lots of easily accessible oil of course.

    Someone should start tracking US\Nato aggression and subversion of oil producing nations vs decline in the majors oil production.

  10. Northwest Resident on Mon, 17th Feb 2014 7:21 pm 

    “They can print trillion more and hand it over to the oil corporations, it wont make one more barrel of oil appear if it isn’t there.”

    That point kind of touches on a significant issues that QE is running into these days — everything is already bought and/or invested in. Printing all that extra money was never more than a desperate attempt to buy time anyway, but as long as they had junk investments to sink that money into (taco stand start-up business in Haiti, for example), then they could move the debt/future profit onto the balance sheet. Problem is, there isn’t anything left to buy or invest in. All the junk investments have already been taken. Big big troubles coming up soon for this economy…

  11. Davy, Hermann, MO on Mon, 17th Feb 2014 7:38 pm 

    @N/R – QE is the most visible manifestation of diminishing returns on a global scale as well as entropic decay of our global social fabric. BTW China is at it more than the FED in absolute numbers but differing being China’s economy in a quasi-open economy. All the central banks are at it. The global monetization of debt was a response to the predicament of declining growth. Now this very response is a new predicament. This is a prime example of running out of resources and failing to solve societal problems. It is also an example of making problems worse. The global economy is now a snake eating its tail.

  12. Kenz300 on Tue, 18th Feb 2014 5:02 am 

    It is time for big oil to diversify or go the way of the buggy whip.

    Alternative energy sources are the future.

    They should be “energy companies” and not “oil companies”.

    Time to diversify into wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste. That is where the future is.

  13. Davy, Hermann, MO on Tue, 18th Feb 2014 11:50 am 

    @kenz – We need a buffet as a society not just the oil companies. It can’t only come from the top down. It must be a generalized awakening from top and bottom. We need, while there is time, to utilize resources in a very efficient way. Not the way of market manipulation for greedy ends but for survival. Places of comparative advantage must use the best technology for their location. This has to happen or we are throwing good $ after bad $. There is a chance this could happen in a gentle ride down the energy gradient. Would I take those odds and bet the house on it. Probably not but stranger things have happened. It may be our only chance. A quick decent may prove good for Mother Nature and most of her criters but it will mean maybe 9 out of 10 here die a quick and unhappy death. Some of us may find heroism and the finer aspects of our spirit. Yet, watching your family die will be heart breaking even for the toughest of us. So which pill do you want? Which bet are you going to take. We are talking betting the house on this. I would say it will be like a cruel roman gladiator contest. It will be your life. “WILL” is a strong word—coffee is kicking in I am feeling a burst of energy on this cold morning. At least the wood stove is warm. I will have a nice breakfast in a bit. Fasted yesterday. I am in training for food shortages. I am hoping the weather breaks so I can get back to building my lifeboat. It has been a long hard winter here. Spring I hope will bring some much needed optimism if only for the moment!

  14. rockman on Tue, 18th Feb 2014 12:29 pm 

    “They should be “energy companies” and not “oil companies”. I agree but they need to be oil/NG companies first. Without some stability in those supplies the system won’t be able to transition to the alts. Better to let Apple, Google and Star Bucks get into the energy business IMHO. We need economic solar panels more the $5 cups of coffee. LOL

  15. Davy, Hermann, MO on Tue, 18th Feb 2014 12:41 pm 

    @rock – agreed oil/ng companies. I am not sure they should get into other energy fields. The energy guys have a particular attitude and personalities that I am not sure meshes with the alt energy market. “But” who knows maybe these attitudes would be better business models then the current altE business plans. Sure has been allot of failures in altE business recently

  16. rockman on Tue, 18th Feb 2014 5:57 pm 

    “I am not sure they should get into other energy fields.” You mean, like maybe, because they don’t sh*t about wind turbines and solar panels? LOL.

    Hey…I have a master’s degree in geology… a scientist per se. Maybe I would be a good gynecologist too. I actually tried that logic in my wild youth but it seldom worked.

  17. Nony on Mon, 24th Feb 2014 11:49 pm 

    They’ve tried being “energy companies” before, but it didn’t work. Where is Exxon nuclear now?

    They have some expertise in petroleum exploration and production. That doesn’t necessarily convert to other lines of business. Actually their ability to do large and distant logistics has transferred to supplying troops in the field (Haliburton) more than it has to other energy sources.

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