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Page added on November 3, 2014
Global Oil and Other Liquid Fuels Production Update
- Global conventional crude oil + condensate production (C+C) attained a value of 73 million barrels per day (Mbpd) in May 2005. Since then conventional C+C has been bumping along a jagged plateau with the all time high of 73.3 reached in July 2008, immediately prior to the Chinese Olympic Games and the financial crash. It seems possible that the peak in global conventional oil production is behind us (Figure 1).
- All of the growth in global liquid fuels has come from non-conventional sources, shale oil and tar sands, that currently are only produced in N America, and from “other liquids” such as biofuel and natural gas liquids. These liquids are inferior to conventional crude oil in a number of ways such as 1) requiring the use of more energy in their production, 2) being less energy dense and 3) not usable as liquid transport fuel.
Figure 1 Conventional crude oil + condensate production has been on an undulating plateau just over 73 million barrels per day (Mbpd) since May 2005, that is for almost 10 years and despite record high oil prices! As the remainder of this post will show all of the growth in global liquid fuel supply has come from unconventional and low grade sources of supply. The periodic dips in C+C production reflect OPEC production cuts designed to support the oil price. The fact that OPEC has not cut production when faced with current price weakness has resulted in the recent oil price decline. Note that chart is not zero scaled in order to amplify details. Click chart for large version.
In the good old days, oil was oil. But now oil comes in many different flavours making the analysis of production trends more challenging. As it turns out, this also casts some light on the concept and timing of Peak Oil. Oil is now categorised as conventional crude and condensate (C+C), light tight oil (LTO or shale oil), syncrude (tar sands), natural gas liquids (NGL), biofuels and refinery gains (see Glossary at end of article for definitions). The energy content and ERoEI (energy return on energy invested) of all these categories varies significantly and lumping them all together as “global liquid fuel” obscures the underlying C+C production trends. Stripping out the chaff from the wheat shows that the all time high conventional C+C production peak occurred just before the Chinese Olympic Games in July 2008 when 73.26 million barrels per day was produced.
Figure 2 shows the big picture where total global liquid fuel continues to rise. The plateau that many felt may have been reached in 2004-2008 has been swept away by subsequent increases liquid hydrocarbon production. The 73 million bpd plateau in Figure 1 is converted to 92 million bpd by the addition of syncrude, shale oil, natural gas liquids, processing gains and biofuels that now amount to some 19 million bpd, 21% of the global total.
Figure 2 World total liquid fuel production. Conventional crude oil and condensate in blue. Since 2005 all of the significant growth in liquid fuels production has come from unconventional and low grade liquid fuel sources (Figure 3).
Figure 3 Non-conventional C+C and other liquids production. 50% of the total is from natural gas liquids. These will continue to grow in lock step with natural gas production. Only a small portion of NGL is used in transport fuel, the remainder used for heating and petrochemicals feedstock (Figure 4). Individually, shale oil, syncrude and biofuels are not that significant, but collectively they add significantly to global liquid fuel the vast majority being produced in North America.
Figure 4 The uses of natural gas liquids according to the EIA. Some NGL is used in transportation, but much goes to other uses such as petrochemicals and heating.
The OECD economies and global economy remain stuck in the mud. Economic growth requires access to growing supplies of cheap energy, especially oil. Since May 2005, conventional supplies of crude oil stopped growing and energy prices have remained high, in part due to persistent high prices for fossil fuels and in part due to international energy policies that mandate use of new renewable energy sources that are expensive and disruptive.
The recent fall in the oil price, taken as good news by politicians and the public, may actually result in greater constraint on future supplies. The world may yet learn that having ample supplies of expensive oil is better than inadequate supplies of cheap oil.
The extent to which a peak in conventional oil production is responsible for economic malaise and widespread global unrest remains to be assessed. It is a complex picture of debt, geopolitics, economics, geology and technology. Only time will tell.
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Glossary of terms
Conventional Crude Oil and Condensate is the black stuff that normally flows from sub-surface reservoirs to the surface under natural buoyancy pressure. This is the stuff that flows out of the North Sea, Middle East, Texas and Nigeria. It is not always black and there is a continuum towards very light and gassy oil that is called condensate that is a clear amber coloured liquid, like gasoline, when it comes out of the ground.
Light tight oil or shale oil is very similar to the light and gassy conventional crude oil apart from it occurs in rocks that lack the permeability to allow it to flow to surface under its own steam. To exploit these resources it is therefore necessary to artificially create permeability through fracking the rocks. This creates permeable fracture networks allowing the liquids to flow to well bore and then to surface.
Syncrude and tar sands are ultra heavy oil deposits found mainly in Alberta, Canada, but also in Venezuela. They are developed through either a mining process or through a process called steam assisted gravity drainage where steam is pumped underground to make the viscous liquids flow. The bitumen produced requires “upgrading” to synthetic crude oil by the addition of hydrogen.
Biofuels come in three main varieties. Sugar cane ethanol from Brazil, corn ethanol mainly from N America and biodiesel produced from crops like rape in Europe. Temperate latitude biofuels tend to have ERoEI around 1 where the main energy inputs are natural gas (ammonia fertiliser), diesel and electricity. Temperate biofuels therefore do not actually represent energy production but rather energy conversion of methane+diesel+electricity+land/soil+water to make a liquid fuel.
Natural gas liquids are C1 to C5 gaseous hydrocarbons produced with natural gas (C1 – methane). These condense in sub-sea pipelines or are recovered in natural gas processing plants. In general, NGL has been increasing in lock step with global gas production. Their inclusion with liquid fuel production is questionable. Their use is detailed in Figure 4.
Refinery gains are a correction applied to account for volumetric expansion of liquids during the refining process. Refinery gains have been increasing since the global crude supply has been marching towards increasingly heavy grades of crude oil. If production was measured by mass (i.e. tonnes) then refinery gains would be reduced.
Data and Methods
1) Global crude + condensate, biofuels, NGL and refinery gains from the Energy Information Agency (EIA)
2) Canadian syncrude and crude bitumen from National Energy Board Canada
3) Bakken shale oil production from North Dakota State Government
4) Shale oil production in Canada from National Energy Board of Canada up to 2012 and extrapolated thereafter.
5) Eagle Ford shale oil production from the Texas Railroad Commission
Canadian tar sands production and N American shale oil production was deducted from the EIA global C+C totals to give the C+C less tar and shale production shown in Figure 1. The compilation of other charts should be self explanatory.
16 Comments on "Global Oil and Other Liquid Fuels Production Update"
JuanP on Mon, 3rd Nov 2014 8:47 am
Thank you, Euan, for an excellent article. Worth archiving for future reference. I love seing articles as good as this here, but they are increasingly rare. This is so educational. Let me reread it and I’ll be back.
JuanP on Mon, 3rd Nov 2014 9:06 am
This is how a PO article should be written, using clear graphs (that are even color matched for products across the whole article, a very nice touch that shows attention to detail), clear definitions, using relevant verifiable data, and presenting everything in a clear, harmonious package that is a pleasure to read all the way down, even the glossary is interesting.
Double A+ to Euan Mearns for this article and all the great work done through the years. I’ll see if others find fault in it, I didn’t.
Northwest Resident on Mon, 3rd Nov 2014 10:12 am
“The world may yet learn that having ample supplies of expensive oil is better than inadequate supplies of cheap oil.”
Both of those options are deadly poison to our global economy. Neither of them will sustain BAU for long.
It’s like an executioner offering his next victim a choice: death by disembowelment or death by crucifixion. Take your pick.
coffeeguyzz on Mon, 3rd Nov 2014 10:45 am
This is an excellent article on many levels.
I would like to point out that the historically strong connections between oil and transportation fuel may be in the early – but accelerating – state of loosening. Yesterday’s national average retail price for diesel was just under $4/gal. Retail CNG was slightly above $2/GGE (gal. gas equivalent).
Commercial vehicles, especially over the road trucks will be at a sharp disadvantage in the market if they refrain from converting to CNG.
The long-running ‘chicken or egg first’ conundrum re insufficient supply points/too few CNG customers is being rapidly resolved at both ends.
shortonoil on Mon, 3rd Nov 2014 11:03 am
The author makes several comments that we have been repeatedly stated over the last two years, Such as:
“These liquids are inferior to conventional crude oil in a number of ways such as 1) requiring the use of more energy in their production, 2) being less energy dense and 3) not usable as liquid transport fuel.”
Our model, the Etp Model, indicates that conventional peaked at the end 2005 (the start of 2006 by our model). The 0.3 Gb (which at 0.4% is not statistically significant) increase in 2008 they refer to resulted from an uptick in Canadian tar sands production that year.
The author also makes another statement, and this one we believe is in error:
“The fact that OPEC has not cut production when faced with current price weakness has resulted in the recent oil price decline.”
The Etp Model is a “thermodynamic” evaluation of petroleum production. It determines the average total energy required to produce petroleum, and its products. In conjunction with data provided by the EIA and the World Bank it can also determine the average price, and production cost of petroleum. Graph# 17 at our site demonstrates the result:
http://www.thehillsgroup.org/depletion2_010.htm
The model also projects that past the energy half way point of 2012 (were it required half of the energy content of the oil to produce it, and its products) the price would begin to decline. That was the point were the energy delivered to the end user was no longer sufficient to power the economic activity needed to pay for it at the then market price. For 2012 our model indicates that was $102/barrel.
If the OPEC nations are aware of this, and we have good reason to believe that they are, there would be no incentive for them to cut production. Any cut in production to raise prices would not be compensated for by a corresponding increase in price. Since future prices are going to be lower than present prices, their loss would never be recovered. In lieu of a very distributive geopolitical event, OPEC is most likely to continue at full production.
“Current price weakness” has not resulted from OPEC’s lack of market control. It results from petroleum’s ongoing depletion effect.
http://www.thehillsgroup.org/
Tor on Mon, 3rd Nov 2014 11:16 am
Good reading, thanks. Articles like this reminds me of TOD – R.I.P
Northwest Resident on Mon, 3rd Nov 2014 1:54 pm
Saudi Arabia lowers price of oil to USA, but raises the price for Asia and Europe? WTF?!!
This is along the lines of “global oil and other liquid fuels”, so not entirely off-topic.
If what I am reading in the article linked below is even somewhat true, it means that (fill in the blank). Actually, what it means I can only speculate about.
I do not believe that Obama has teamed up with SA to punish the Russians with lower oil prices. That POV is absurd — IMO.
It DOES look like SA is taking direct aim at American fracking/unconventional producers — at least, that’s what it looks like to me. But why would they bother?? Fracking/unconventional producers are no threat whatsoever to Saudi Arabia?
And here’s where I speculate. I speculate (again, one more time) that Saudi Arabia is cooperating in an effort to put a stake through the heart of shale oil and other unconventional producers, and is just fine with being set up as “the fall guy” — the one that all the investment banks and portfolio managers, that all the politicians and all the unconventional producers can point their finger at and say “they did it!! They destroyed our business before we could turn a profit. Sorry investors, THAT is why you have just lost your asses on your multi-billion dollar investments in shale/unconventional. Blame Saudi Arabia, not us.”
The resource burning, debt accumulating, environment destroying fracking business had to come to an end sooner or later. It has played out. Now they’re just looking for somebody to blame for the demise of “American Energy Independence — The Shale Miracle” — and this will do the trick.
Pure speculation on my part. For your reading enjoyment.
Northwest Resident on Mon, 3rd Nov 2014 1:55 pm
Oh yeah — the link:
In an awkward headline for mainstream media to explain, The Kingdom has raised prices of its Arab Light crude exports to Asia and Europe but cut prices to the USA significantly, potentially pressuring domestic suppliers with foreign ‘cheap’ imports.
ht tp://www.zerohedge.com/news/2014-11-03/saudi-arabia-raises-asia-europe-prices-cuts-us-prices
shortonoil on Mon, 3rd Nov 2014 5:08 pm
“Saudi Arabia lowers price of oil to USA, but raises the price for Asia and Europe? WTF?!!”
SA knows that oil prices are going down, it also knows that it has one of the largest low cost reserves left in the world. The rest of the world is a much larger buyer of Saudi oil than is the US. The Saudis know that it will soon be a dog eat dog oil world, and they want the US military machine watching their back. There will be many envious eyes watching those fields in the years to come. This move supports the Petro Dollar by maintaining a demand for dollars to buy their oil, and gives SA a measure of security without having to cut their overall price. Saudi Arabia has thrown in its lot with the Great Satan; it will be interesting to see how the rest of OPEC responses!
This is called the “end game”.
Nony on Tue, 4th Nov 2014 9:56 am
NWR: The thing is the shale production is really very easy to turn on/off. It’s fast to production and fast to exhaustion. And it’s scalable. And the dry hole percentage is very small. Other than being inherently expensive, it’s really pretty cool business. More like manufacturing than traditional drilling for traps or doing massive offshore projects.
So if the Saudis, let up the pressure, the shale turns back on. That makes it hard for them to put the pressure on in the first place. Also, it may help with getting the export controls lifted…if they come off, SA won’t be able to play this game with the WTI-Brent spread. They’ll have to lower prices world wide. Harder for them.
P.s. I was looking at a 2011 article and the experts said no way US drilling could drive gas prices from 4 to 3. Looks dumb in hindsight. Drill, baby, drill made a difference. Open the offshore and allow the pipelines to be built and see how much more we can drill!
Davy on Tue, 4th Nov 2014 10:12 am
NOo, the finance is harder to turn on and off. It is possible martial law will fire it up if it turns off. NOo there is more to it than your corn simplicity Econ 101 supply and demand. We are talking now potential collapse you are talking normal corn BAU.
Northwest Resident on Tue, 4th Nov 2014 10:37 am
Nony — Shale oil extraction has been and still is the result of incredible technology and the highly educated and skilled individuals who develop and use that technology. No argument there.
But it shale oil extraction is a resource intensive activity, and as you know, there are legitimate questions as to whether shale oil extraction taken as a whole is even producing enough net energy to make it worthwhile from that perspective.
The downsides to shale oil (and all unconventional) extraction are well known, no reason to list them here. They are not self-sustaining businesses. They need a constant inflow of new investment money, and they burn a LOT of the remaining “good” oil to get that fracked liquid out of the ground.
Fracking/unconventional, for the most part, is unsustainable. And it looks like we’ll be saying good-bye to fracking a little sooner than we thought.
Someday aliens will find planet earth and explore it. They’ll find a giant tombstone but no humans. On that giant tombstone will be written:
Drill Baby Drill!
marmico on Tue, 4th Nov 2014 10:48 am
So what’s going on with the price of petroleum liquids Davy-boy? Annually, $160 billion less with the consumer cap on, $120 billion less with the domestic producer cap on and $40 billion more with the importer cap on.
How can that not be net positive in the short run for low income quintiles. The 0.1 percenters are laughing. Jet fuel from Greenwich to Naples is 25% off. 🙂
Davy on Tue, 4th Nov 2014 11:34 am
Marm, like you said short term it’s looks great on the surface. No argument there. Longer term we will see the energy sector rattled and energy sector speculators reposition. Those situation have a way of being negative when you have an overextended debt driven bubble. Main Street is not going to do much with $160BIL when it is already limping along.
Marm you can argue positive but is see a mixed bag and mostly doo doo. But hey your the numbers guy. I am the salad shooter king. Oh, my baby brother will enjoy the jet fuel situation. He prefers Palm Beach. I recommend Taboo for lunch BTW.
marmico on Tue, 4th Nov 2014 12:28 pm
The Kingdom has raised prices of its Arab Light crude exports to Asia and Europe but cut prices to the USA significantly, potentially pressuring domestic suppliers with foreign ‘cheap’ imports.
$2 a barrel is benign. It’s the difference between Dollar Store and Walmart for 10 dohinkies.
KSA exports less than 20% of its export volume to the U.S. Off the top, it is 1.2 mb/d. U.S. refineries input ~15 mb/d of which most of the KSA imports are assigned to KSA/USA jointly owned refineries.
Arithmetically, demonstrate that KSA is pressuring anything in the U.S.
FWIW, KSA isn’t going to repeat or rhyme with the 1980’s when it cut export volumes by 65%.
Davy on Tue, 4th Nov 2014 1:38 pm
Marm, agreed, it must be for some propaganda consumption purpose they mentioned that in the MSM.