non-opec: crude oil and ngl production capacity to 2015...continental shelf and the xinjiang-uighur...

©Blackwell Publishing Ltd, 2006

GLOBAL ENERGY REVIEW

Non-OPEC: Crude Oil and NGL Production Capacity to 2015

A Report by Dr Paul McDonald

Consulting Editor, Oil and Energy Trends

A survey of the reserves and production of the principal non-OPEC oil producers,

with forecasts of production for 2015;

Together with a summary of the outlook for natural gas liquids for non-

conventional crudes

30 June 2006


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Contents

Introduction 5

Principal Non-OPEC Producers 6 Countries where Output is in Decline 6

United States 6 North Sea 6 Other Producers in Decline 6

Countries that have arrested their decline 8 Australia 8 Congo-Brazzaville 8 Peru 9 Trinidad & Tobago 9

Countries close to their Peak 10 Bolivia 10 China 10 Ecuador 11 India 11 Malaysia 11 Mexico 11 Sudan 12 Thailand 12 Vietnam 12

Countries where Output is still growing 13 Angola 13 Azerbaijan 13 Brazil 14 Canada 14 Chad 14 Equatorial Guinea 15 Ivory Coast 15 Kazakhstan 15 Mauritania 15 Russia 16

The Reserves Base 18 Countries not yet producing 21

Madagascar 21 Mali 21 Niger 21 Sao Tome e Principe 21


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Other Areas 22 Non-Conventional Crudes and Gas Liquids 23

NGL 23 GTL 23 Bitumen and Extra-Heavy Crudes 24

Production Outlook, 2005-2015 28


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List of Tables

Table 1 Non-OPEC: Producers by Category, 2005 7

Table 2 Non-OPEC Production, 2005 17

Table 3 Non-OPEC Proven Reserves, 2006 19

Table 4 World Tar Sands and Oil Shale Reserves 25

Table 5 World Proven/Recoverable Non-Conventional Oil Reserves 26

Table 6 Non-OPEC Production, 2005-2015 29


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Introduction

Non-OPEC countries produced some 48 mn bpd of the world’s 82 mn bpd output of

crude oil and NGL in 2005, giving them a market share of 59%.

This proportion has been little changed since the 1980s, apart from a short period in the

mid-1980s when there was a surge in production from a number of non-OPEC producers

such as Great Britain, Norway and parts of Africa.

The reverse situation prevails when it comes to reserves. Here, OPEC has by far the

majority of the world’s reported proven reserves. According to the Oil & Gas Journal’s

annual survey, OPEC had some 70% of the world oil reserves at the start of 2006,

compared to non-OPEC’s 30%.

The paradox is explainable by OPEC’s policy of trying to control world oil prices by

controlling production. Since April 1982, OPEC has had a system of quotas designed to

support prices at various levels. Although the quota system has not always been rigidly

observed, it has had the effect over the long term of restricting OPEC’s production whilst

that of most other countries has gone on rising, free of any such constraints.

A few non-OPEC countries have from time to time restrained their output in support of

prices at times when markets have been particularly low, but this has had little effect over

the long term. OPEC’s role since 1982 has thus been that of the marginal or ‘swing’

supplier. Non-OPEC countries meanwhile have tended to produce at or close to their full

capacity, thereby providing the base-load of world supply.

This state of affairs is beginning to change. Most non-OPEC producers are either past

their peak or very close to it. Recent gains in output have come from a small number of

countries, notably Russia. Within a few years, these gains will not be sufficient to offset

the decline occurring elsewhere amongst the non-OPEC producers. At that stage, any net

growth in the world’s production will have to come from a small number of countries

belonging to OPEC.

This net decline in production outside OPEC is not far distant. Non-OPEC output is

likely to reach its long term peak between 2008 and 2010. With luck, non-OPEC should

be able to maintain a plateau level for a few years more; but these seems little doubt that

it will have started to fall before 2015.


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Principal Non-OPEC Producers

This report is primarily concerned with those non-OPEC countries where production is

still rising. In most cases, there is not much more potential for growth. Only a few–

mostly the former Soviet Union and Angola–have much prospect of large gains in

volume. Output figures refer throughout to crude and NGL.

Countries where Output is in Decline

Some 18.3 mn bpd of non-OPEC production, amounting to 38% of the total, comes from

countries where output is in decline. These countries include several important producers

such as the US, Great Britain and Norway.

United States

The US had shown signs of having slowed down its rate of decline with the development

of several important new fields in the Gulf of Mexico, but output there was badly hit by

hurricanes in the late summer of 2005, and production is still not back to pre-hurricane

levels. The last of the major hurricanes, Rita, which arrived in September, caused some

1.7 mn bpd of production to be shut-in. In May 2006, around 0.2 mn bpd was reported to

be still off-line.

North Sea

Output from the British sector of the North Sea peaked in 1999 at just below 2.9 mn bpd,

while Norway’s peak year was in 2001, with 3.4 mn bpd. The decline in British

production shows signs of slowing down thanks to a burst of new investment since 2004.

Norway’s shows signs of beginning to accelerate, though it is difficult to quantify the

current rate as output levels for the first half of 2006 have been depressed by higher than

normal levels of maintenance.

Other Producers in Decline

There are several other producers in decline, including some of the world’s earliest

producers, like Romania and Bahrain.


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The most important countries with output now in long term decline are:

o Argentina

o Bahrain

o Brunei

o Cameroon

o Denmark

o Egypt

o Gabon

o Great Britain

o Norway

o Oman

o Papua New Guinea

o Romania

o Syria

o Tunisia

o Turkmenistan

o US

o Yemen

Table 1

Non-OPEC: Producers by Category, 2005

Category Production Share of Total

(mn bpd) (%)

In Decline 18.3 38

Decline arrested 1.0 2

Close to Peak 10.7 22

Still growing 18.3 38

Total 48.2 100

Totals rounded

Source: Pearl Oil estimate


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Countries that have arrested their decline

Amongst the countries in long term decline is a handful that appears to have arrested the

decline for the time-being. One important reason appears to be an improvement in

upstream contract terms that has encouraged private investors back to the country. The

countries concerned are:

o Australia

o Congo-Brazzaville

o Peru

o Trinidad & Tobago

Another country that could be included in this category is Russia, though it could also be

considered as a country where output has begun to rise again (see below). The other

three countries appear to have effected only a short term interruption to a long term

decline.

Australia

Australian output reached its all-time peak in 2000, at 0.8 mn bpd, before falling to below

0.5 mn bpd in 2005. A revival in exploration in recent years has recently begun to pay-

off in terms of production, which is expected to reach just under 0.6 mn bpd this year,

thanks especially to new production from the Carnarvon Basin, off Western Australia.

This minor recovery is unlikely to last much beyond 2006, and Australian production will

probably have resumed its long term decline pattern before 2010. Most of the upstream

activity over the next decade is likely to involve gas rather than oil. This could turn up

some additional liquids in the form of condensate and other NGLs, but Australia's total

output of liquids looks like being somewhere in the region of 0.4 mn bpd by 2015.

Congo-Brazzaville

Congo-Brazzaville’s production peaked at 0.3 mn bpd in 2000, and is now near

0.2 mn bpd, but new finds at Moho-Bilondo and M’Boundi are likely to offset part of the

decline in the country’s mature fields. Some 150,000 bpd of new production is scheduled

to be on-stream by 2008, which could help to ensure that Congo-Brazzaville is still

producing around 0.2 mn bpd in 2015.


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Peru

Peru’s production has declined from 0.2 mn bpd in the early 1980s to 0.1 mn bpd now,

where it appears to have temporarily stabilized, and even increased slightly, thanks to

recent outside investments. These are now being out at risk by a change of political

direction inside the country putting more stress on state control. Output looks like

resuming its downward path within a year or two and could well be around 50,000 bpd by

2015.

Trinidad & Tobago

Output in Trinidad & Tobago peaked at just over 0.2 mn bpd in 1978. Last year saw a

10,000 bpd increase to 160,000 bpd, with every sign that the recovery has been continued

into 2006. The new output is coming from the Angostura field, which is expected to

produce 80,000 bpd at maximum, bringing Trinidad & Tobago back towards 0.2 mn bpd.

Much of the country’s exploration effort, however, is going into gas rather than oil, and

output of the latter will probably be back around 0.1 mn bpd by 2015.


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Countries close to their Peak

Several important non-OPEC countries are still increasing their output, but about half of

them are almost certainly within a few years of their peak output. Countries in this latter

category include:

o Bolivia

o China

o Ecuador

o India

o Malaysia

o Mexico

o Sudan

o Thailand

o Vietnam

Bolivia

With an output of 50,000 bpd, Bolivia is hardly a major oil producer. There is

considerable interest in gas, but the country’s increasingly nationalist stand in relation to

foreign investment makes it unlikely that Bolivia will attract much more oil exploration

from outside. It is unlikely ever to produce more than 0.1 mn bpd and output in 2015

could be slightly lower than it is at present.

China

China’s two main oilfields, Daqing and Shengli, are in long term decline, as are several

other older onshore fields. Their replacements are much smaller and it is no clear how

much longer the Chinese can go on finding relatively large numbers of small fields to

offset the decline of their two largest ones. The country’s two most prospective areas, the

continental shelf and the Xinjiang-Uighur Autonomous Region in the north-west of the

country, have failed to live up to expectations that they would contain large new oil

deposits. It therefore seems unlikely that Chinese production will grow by much more.

This year, it may put on an extra 0.1 mn bpd, taking it to 3.7 mn bpd. There could be

scope for further growth of up to 0.5 mn bpd of production by about 2010, but long term

decline seems likely thereafter, leaving it with production levels close to those of the

present day by 2015.


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Ecuador

Ecuador’s production has grown strongly: from 0.4 mn bpd in 2000 to nearly 0.6 mn bpd

in 2005. This year it could grow by a further 50,000 bpd. Over 60% of Ecuador’s

production is accounted for by foreign firms. Like some other Latin American countries,

Ecuador wants to renegotiate its upstream terms to improve the returns to the state. This

may inhibit further exploration. Ecuador’s prospectivity may nevertheless be sufficient

to allow production to rise to somewhere in the region of 0.7 mn bpd by about the end of

the decade, declining shortly afterwards to 0.5 mn bpd by 2015.

India

India’s output suffered in 2005 as a result of a fire at the 265,000 bpd Bombay High

field–the country’s largest–in July. The expected growth of 50,000 bpd in 2006 partly

reflects the fact that Indian output was depressed in 2005 by the Bombay High fire.

There has been a good deal of offshore activity in recent years and efforts have been

made to revive production at the country’s older fields. Output might increase from the

current level of 0.8 mn bpd to somewhere near 1.0 mn bpd, but there appears to be little

prospect of major new finds. Indian production is likely to be in decline by 2015, with

output of about 0.8 mn bpd.

Malaysia

A number of new exploration agreements have been signed since 2004 and additions to

reserves have been reported. There is also increasing interest in deepwater acreage.

Nonetheless, Malaysia's output is nearing its peak in the absence of any large new

discoveries. The national oil company, Petronas, will probably keep production around

1.0 mn bpd for as long as possible rather than seek to raise it to a higher and shorter-

lasting peak level. Output in 2015 is likely to be close to 2005’s level of 0.9 mn bpd.

Mexico

Mexico is unlikely to be able to raise its output much above 2005’s level of 3.8 mn bpd

thanks to a decline in its 2.0 mn bpd Cantarell field, which is expected to be producing

only 1.4 mn bpd by 2008. The main problem, however, is the failure of state oil company

Pemex to replace its reserves. In 2006, Pemex reported that proven oil reserves had


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fallen by 1.0 bn bbl to 11.8 bn bbl between 2004 and 2005. Output is unlikely to exceed

4.0 mn bpd over the next decade and could be around 3.5 mn bpd by 2015.

Sudan

Sudan’s oil production could be constrained by the high level of violence in the country

which has already affected the main production areas in the south. Plans for expansion

have also been delayed by disputes over exploration rights. The commissioning of fields

in the Melut Basin should raise output from 0.3 mn bpd to more than 0.5 mn bpd by the

end of 2006. Further developments in Melut could help to raise national output to

0.8 mn bpd, but several previous production forecasts have proved over-optimistic.

Output in 2015 may be somewhere in the region of 0.6 mn bpd, but only if the south of

the country can be pacified; otherwise output may peak around 0.5 mn bpd between 2010

and 2015.

Thailand

Thailand’s output has been growing, but small reserves and the lack of large new finds

are likely to bring such growth to a halt within a short time. By 2015, output should be in

long term decline, at about 0.2 mn bpd.

Vietnam

Vietnam has largely failed to live up to its original promise. Reserves are modest and

new discoveries have tended to be small. More small fields may be discovered, but the

main finds in future are more likely to be gas. Output is unlikely to go above 0.5 mn bpd

and should be in decline by 2015 at around 0.3 mbd.


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Countries where Output is still growing

A number of countries appear to have the potential to produce significantly more oil by

2010 and, in some cases, by 2015. They are:

o Angola

o Azerbaijan

o Brazil

o Canada

o Chad

o Equatorial Guinea

o Ivory Coast

o Kazakhstan

o Mauritania

o Russia

Some of these are small, new producers. The main gains in volume terms are likely to

come from Angola, Azerbaijan, Kazakhstan and Russia.

Angola

Angola’s output has already increased since 2005, when it produced just over 1.3 mn bpd.

The field developments currently under way should more than offset the expected decline

from Cabinda, Palanca, Quito and Xikomba. Among the planned developments are

Dalia, Blocks 18 & 31, Pazflor and a possible ultra-deepwater development by Total in

Block 32. Oil production should go on rising to 2010, when it should be near

2.5 mn bpd. Thereafter there could be a dip in output as the number of new field

developments falls. By 2015, however, output could be in the region of 2.4 mn bpd,

assuming Block 32 is by then in operation.

Azerbaijan

Azeri production has risen steadily since the early 1990s and is now over 0.5 mn bpd.

Most of Azerbaijan’s prospects are centred on the Azeri-Chirag-Guneshli (ACG)

development, operated by BP, which began operations in 1997 and is being developed in

stages. Phase III is expected to take Azeri crude oil production to 1.0 mn bpd by 2009,

which could well represent a peak. Gas liquids from the Shah Deniz field could help to

raise total output to 1.2 mn bpd. There appear to be no large developments scheduled


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after ACG is on-stream and Azerbaijan’s production may well be starting to decline by

2015, at somewhere near 1.1 mn bpd.

Brazil

Brazil’s production has more than doubled in the last decade in spite of what appear to be

modest reserves. The continental shelf is especially prospective, but several important

developments lie in deepwater and ultra-deepwater areas. Some of the oil is also very

heavy. State oil company Petrobras hopes to see national production at 2.4 mn bpd by

2010: a rise of 0.4 mn bpd over 2005. There appears to be little scope for any increase

beyond that date without major new developments offshore. In the meantime, several

important fields are in decline. Output in 2015 might be around 2.2 mn bpd. As with

some other Latin American producers, Brazil’s progress will be determined to an

important extent by the degree with which it continues to attract foreign investment.

Several countries there are adopting more nationalistic policies towards foreign

companies.

Canada

Canadian production is rising, thanks largely to the development of its large reserves of

tar sands in Alberta, which is more than replacing the decline of older fields of light

crude. Production from all sources looks set to rise from 2005’s level of 3.1 mn bpd to

more than 3.5 mn bpd in 2010. With continuing tar sands developments, Canada could

still be producing about 3.5 mn bpd by 2015.

Chad

Chad’s once-promising future is now under something of a cloud following a dispute

with the World Bank and an Exxon-Mobil-led consortium on the terms for developing its

Doba oilfields. There is a further threat to production from the spread of violence and

civil unrest from neighbouring Sudan. The dispute with the World Bank has led to the

freezing of an account administered by the Bank handling some of the country’s oil

revenues. The Chadian government has threatened to shut-in production if the dispute is

not resolved. In the present uncertainty, it is difficult to see how production can rise

much above 0.2 mn bpd in the foreseeable future, despite the potential for a modest rise

in output over the coming decade.


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Equatorial Guinea

Equatorial Guinea has promising offshore acreage and production has risen from less

than 20,000 bpd in 1996 to 360,000 bpd in 2005. Increasing condensate production could

ad a further 60,000 bpd this year, but the country appears to be more gas-prone than oil-

rich. Oil production is unlikely to exceed 0.5 mn bpd and will probably be in decline by

2015 unless a further large discovery is made, though with further small discoveries it

could be in the region of 0.3 mn bpd.

Ivory Coast

With output of 45,000 bpd in 2005, Ivory Coast is a minor producer. Its reserves are also

correspondingly small. Rising production from the Baobab field could help to push

output above 60,000 bpd in 2006. Peak production looks likely to be around 0.1 mn bpd

and output could well be in decline by 2015 and back below 45,000 bpd.

Kazakhstan

Output of 1.2 mn bpd makes Kazakhstan the most important producer of the

Transcaucasus/Central Asia region. There are several prospects that could increase this

total considerably. The principal of these are the Karachaganak and Kashagan fields.

Karachaganak is primarily a condensate deposit with operators BG and ENI plan to boost

from 350,000 bpd to 1 mn bpd over the next ten years. Kashagan is often described as

the largest oil development in the world and is designed to produce some 1.2 mn bpd by

2016. The development of the field, which lies in the northern Caspian, involves a

formidable range of technical and environmental challenges. The crude is also high in

sulphur. The field was due on-stream in 2005, but first oil is not now expected until late

2008. As a result, the Kazakhs will probably not meet their target of 3.6 mn bpd in 2015.

If these two large fields are developed as now planned, Kazakhstan could be producing

up to 3.2 mn bpd in 2015, which would still give it the largest volume gain of any non-

OPEC country over the coming decade.

Mauritania

Mauritania became Africa’s newest producer in the first quarter of 2006 with the

commissioning of the onshore Chinguetti field. Output was supposed to be in the region

of 75,000 bpd but was reported at only 45,000 bpd in May 2006. Output is supposed to

reach 100,000 bpd in late 2007, and there are plans to explore other areas apart from


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Chinguetti, including the offshore sector, which contains some promising ultra-deepwater

acreage. Reserve levels are expected to rise, as is production, perhaps reaching

0.3 mn bpd by 2015.

Russia

Russia has reversed a decline in production that began after 1987, putting in strong

growth in recent years. Output peaked in 1987, at 11.5 mn bpd then fell sharply, reaching

6.1 mn bpd in 1996. By 2000, it had recovered slightly, to 6.5 mn bpd, but since then, it

has risen strongly, reaching 9.5 mn bpd in 2005. There has been much talk of large

unexplored areas in Russia containing large, undiscovered reserves. This is unlikely to be

the case. Russia was well-explored under the Soviet regime, though some areas were left

undeveloped, notably in the Pacific Ocean, off Sakhalin and in parts of the Caspian, since

the USSR then lacked the expertise to develop offshore fields (see also Kazakhstan).

Much of the increase in Russian production has come from Sakhalin and the drilling of

deeper horizons in existing Central Siberian fields. There may be more to be gained from

this re-working of existing areas, plus some more from offshore, but Russia is unlikely to

exceed its 1987 peak. Output for 2015 is likely to be in the region of 10.5 mn bpd.


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Table 2 Non-OPEC Production, 2005

Country/Region Production (mn bpd) Countries in Decline

US 7.3 Great Britain 1.8 Norway 3.0 Others 6.2 Total 18.3

Countries that have arrested Decline Australia 0.5 Congo-Brazzaville 0.2 Peru 0.1 Trinidad & Tobago 0.2 Total 1.0

Countries close to Peak Bolivia 0.1 China 3.6 Ecuador 0.6 India 0.8 Malaysia 0.9 Mexico 3.8 Sudan 0.3 Thailand 0.3 Vietnam 0.4 Total 10.7

Countries where Output is growing Angola 1.3 Azerbaijan 0.5 Brazil 2.0 Canada 3.1 Chad 0.2 Equatorial Guinea 0.4 Ivory Coast * Kazakhstan 1.2 Mauritania * Russia 9.5 Total 18.3

Total Non-OPEC 48.2 Totals rounded * < 50,000 bpd Source: Pearl Oil


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The Reserves Base

There is less contention over non-OPEC reserve levels than is the case with OPEC.

There is nevertheless no standard measure of ‘proven reserves’. The Oil & Gas Journal’s

annual survey is widely used in the oil industry, but there are disagreements over proven

reserve levels in a number of countries, as Table 3 shows.

The disagreements become greater when discussing ‘probable’ and ‘possible’ reserves.

The most optimistic surveys suggest that these two categories together could at least

equal the present level of ‘proven’ reserves and might even be more than twice that level.

The situation becomes even more controversial when it comes to dealing with non-

commercial crudes (see below).

At the other end of the scale are the deep pessimists, who maintain that ‘proven’ reserves

have been exaggerated–sometimes considerably–and that world oil production is on the

verge of a steep decline. In default of any agreement between these two extremes, this

survey relies principally on the Oil & Gas Journal’s figures, though with some

adjustments, as noted in Table 3.


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Table 3

Non-OPEC Proven Reserves, 2006

Country/Region Reserves Reserves remaining

(mn bbl) (years)

Countries in Decline

US* 21,371 8

Great Britain 4,029 6

Norway 7,705 7

Others 33,372 15

Total 66,477 10

Countries that have arrested Decline

Australia* 1,437 8

Congo-Brazzaville 1,506 21

Peru 930 25

Trinidad & Tobago 990 17

Total 4,863 14

Countries close to Peak

Bolivia 441 24

China 18,250 14

Ecuador 4,630 21

India 5,848 20

Malaysia* 3,000 9

Mexico 12,882 9

Sudan† 563 5

Thailand* 291 3

Vietnam† 600 4

Total 46,504 12

Countries where Output is growing

Angola† 5,412 11

Azerbaijan 7,000 38

Brazil 11,243 15

Canada§ 178,792 158

Chad 1,500 21


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Equatorial Guinea‡ 1,100 8

Ivory Coast 100 6

Kazakhstan 9,000 21

Mauritania‡ 125 7

Russia† 60,000 17

Total§ 274,272 41

(minus Canadian tar sands 112,280 17)

Total Non-OPEC§ 392,116 22

(minus Canadian tar sands 230,124 13)

Totals rounded

* Reserve figure omits some important NGL reserves.

BP gives the following estimates for crude+NGL, as of the beginning of 2005:

(bn bbl)

US 29.4

Australia 4.0

Malaysia 4.3

Thailand 0.5

† Higher reserve estimates are provided by some authorities

§ Figure includes tar sands. BP gives 2005 estimate of crude+NGL as 16.8 bn bbl,

giving R:P ratio of 15:1

‡ Pearl Oil estimate

Source: (Reserves) Oil & Gas Journal; Pearl Oil

(Reserves remaining) Pearl Oil


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Countries not yet producing

A small number of countries may begin producing oil between now and 2015. The

principal candidates are:

o Madagascar

o Mali

o Niger

o Sao Tome e Principe

Madagascar

Madagascar has attracted interest from independents, such as Vanco, and at least one

major, ExxonMobil. Assuming oil is found in commercial quantities, production may be

up to a decade away. It is unlikely to be able to produce more than 0.1 mn bpd between

now and 2015.

Mali

Mali appears to be underlain by the Taoudeni Basin, which is also the source of

Mauritania’s oil production. The structure is thought to be similar to those found further

north and east in Algeria and Libya. Some blocks have already been awarded for

exploration in northern Mali. Exploration is not due to be completed until about 2008. If

Taoudeni proves to be as prospective as predicted, Mali might be producing up to

0.2 mn bpd in 2015.

Niger

Niger is attracting interest from Asian companies and Algeria’s Sonatrach. Petronas has

already discovered oil, though reserves are thought to be modest. Output in 2015 is

unlikely to exceed 0.1 mn bpd.

Sao Tome e Principe

Considerable optimism has been expressed for the continental shelf surrounding Sao

Tome e Principe. Development has been delayed, however, by arguments over upstream

terms and the need to agree offshore boundaries. Some foreign companies have dropped

out. Production-sharing contracts are currently being negotiated for an area shared with

Nigeria, known as the Joint Development Zone. Some of the companies involved in


22

recent licensing rounds have lacked the necessary offshore experience to operate in this

area. There could nevertheless be some production–up to 0.3 mn bpd–by 2015.

Other Areas

The western side of Africa is attracting upstream interest in several other places,

including Namibia and the Canary Islands. There has also been interest in East Africa.

No significant oil production is expected from any of these areas before 2015.


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Non-Conventional Crudes and Gas Liquids

Included in the estimates and forecasts of production in this report are unspecified

volumes of non-conventional crudes and NGL. By 2015 liquids should be available from

a third source: gas-to-liquids (GTL).

NGL

NGLs range from ethane to pentanes-plus. Ethane production is normally recorded under

‘natural gas’, leaving propane, butane (LPG) and pentanes-plus (condensate) in the ‘oil’

category. These last three examples are not always recorded separately. Condensate, for

example, often forms part of ‘crude oil’ streams. World NGL production is in the region

of 9 mn bpd, of which about 5 mn bpd is found in non-OPEC countries. Just over

1 mn bpd of the latter is condensate that is traded separately from crude. The main

source of this non-OPEC condensate is the Asia/Pacific region.

NGLs (excluding ethane) are included in the figures given for production and reserves,

though in the latter case, some may have been omitted (see footnotes to Table 3). The

proportion of NGLs in total production is expected to increase by a few percentage points

between now and 2015 as non-OPEC gas production rises.

GTL

Considerable optimism has been expressed concerning the probable contribution of GTL

to world liquids’ supply by 2015. Some have predicted production levels in excess of

2 mn bpd by 2015-16. These forecasts are totally unrealistic. Several companies are

already scaling back proposals as a result of increasing capital and feedstock costs.

Qatar, which was the most enthusiastic supporter of GTL, originally had plans for nearly

0.9 mn bpd of capacity between now and 2015. It now looks likely that the total will be

under 0.5 mn bpd.

Nearly all the GTL projects that have been proposed have been or OPEC countries. Non-

OPEC production of GTL is currently around 50,000 bpd, from two plants in Malaysia

and South Africa. It is unlikely to exceed 0.2 mn bpd in 2015.


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Bitumen and Extra-Heavy Crudes

Bitumen and extra-heavy crudes are included in the figures presented in the tables for

production and (partially) for reserves. As with GTL, there have been several over-

optimistic forecasts both of reserves and future production levels. The US has expressed

particular interest in developing its own deposits of bitumen as a means of reducing

future levels of oil imports.

Bitumen and extra-heavy oil are not found in conventional reservoirs from which they

can be relatively easily removed and transported. They exist as heavy deposits in sands

or shales and are usually classified as ‘oil sands’ or ‘tar sands’, or as ‘oil shales’,

depending on the nature of the rock strata in which the bitumen or heavy crude is

contained. The main deposits that are currently being worked in Alberta, Canada and in

the Orinoco Belt in Venezuela are in the form of tar sands. Much of the rest of the

world’s non-conventional reserves are in the form of oil shales.

The oil in tar sands exists in two forms: either as bitumen or as extra-heavy crude. The

two are chemically the same but different physically. Bitumen exists in a solid state

underground whereas extra-heavy crude occurs in the reservoir as a liquid. This makes

bitumen more expensive to extract since it either has to be mined or heated in the

underground reservoir (for example, by injecting steam) in order to be extracted. In

Canada, the tar sands contain bitumen; Venezuela’s have their oil in liquid form as extra-

heavy crude. It should be noted, however, that Venezuela’s heavy crude is naturally

liquid only within the reservoir: at atmospheric temperature and pressure it can no longer

flow naturally.

The world’s reserves of shale oil and tar sands are immense, far exceeding its reserves of

conventional crude and NGL (see Table 4). Estimates for the former run into trillions of

barrels; but ‘estimates’ is all they are. In fact, in many cases, they are better described as

‘guesses’.


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Table 4

World Tar Sands and Oil Shale Reserves

Country/Region Reserves Remarks

(bn bbl)

Australia 24 Low estimate

82 High estimate

Canada 2,516 Ultimate volume in place

1,630 Initial volume in place

308 Ultimately recoverable

162 Proven reserves

FSU 1,171 Initial volume in place

Jordan 350

Morocco 700

Nigeria 43 Initial volume in place

US 2,000 Ultimate volume in place

100 Proven reserves

Venezuela 1,182 Volume in place

235 Recoverable volume

Source: Company reports; Alberta Energy & Utilities Board; Arab Oil & Gas Directory;

US Geological Survey; PDVSA

Most of the 8 trillion-plus barrels identified in Table 4 must be considered speculative,

particularly given the huge ranges for some countries. The US figure of 2 trillion barrels

appears to refer to the ultimate volume in place (i.e. including reserves not yet fully

identified). The much more modest figure of 100 bn bbl has been suggested as being

close to the proven reserves (though this is still about four-and-a-half times the US’

conventional proven reserves). It is still too early to say how much of this 100 bn bbl

may actually be recovered.


26

Taking the lowest estimates contained in Table 4, we arrive at a figure of 2.8 bn bbl,

which may be taken as approximating to the ‘proven’ reserves of the main potential non-

conventional crude producers. This figure could be reduced further in the case of the

former USSR, Jordan, Morocco and Nigeria. If we assume that 10% of the totals for

these countries is recoverable, we come up with the totals presented in Table 5.

Table 5

World Proven/Recoverable Non-Conventional Oil Reserves

Country/Region Reserves

(bn bbl)

Australia 8

Canada 162

Former Soviet Union 117

Jordan 35

Morocco 70

Nigeria 4

US 100

Venezuela 235

Total 731

Source: Pearl Oil estimate

Even the total of 731 bn bbl probably over-estimates considerably the amount likely to be

recovered over, say, the next 50 years. The amount actually producible during that period

may well be less than 100 bn bbl, given the nature of the tar sands and shale oil reserves

outlined above. Moreover, there are as yet very few concrete proposals to develop vast

new areas for production. Given the lead times required to establish projects in these

frontier areas, it may be some time before the world’s reserves of non-conventional crude

are widely exploited.

There is no large scale, commercial production of synthetic crude from tar sands or oil

shales outside Canada and there are few schemes outside Canada for the large scale

production of non-conventional crude. Moreover, those in Canada are fairly modest.

Venezuela wants to raise production as well, but it is not clear where the investment is to

come from. Australia has plans to exploit its oil shales but these have already run into

problems. Vague proposals have been made for Jordan, Morocco and the former USSR.


27

Nigeria is unlikely to bother with its relatively small reserves for the foreseeable future,

given its existing programme to develop conventional oil and gas reserves. This leaves

only the US as a source of major new developments, and even here the picture is not

exactly clear.

Canada has tar sands’ production of just over 1 mn bpd, with plans to raise this to

3 mn bpd by 2020. It is unlikely, however, to be producing much more than 2 mn bpd in

2015. By 2015, there is unlikely to be more than 0.5 mn bpd of non-Canadian production

in non-OPEC countries.


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Production Outlook, 2005-2015

The forecast presented in Table 6 suggests that output from non-OPEC countries

currently in production will peak at some time in the next decade and will be in long term

decline by 2015.

Of the countries listed in Tables 2 and 3, only eight are shown in Table 6 as producing

more in 2015 than in 2005. They are:

o Angola

o Azerbaijan

o Brazil

o Canada

o Kazakhstan

o Mauritania

o Russia

o Sudan

The following countries will probably have begun producing by 2015:

o Madagascar

o Mali

o Niger

o Sao Tome e Principe

Assuming all the countries listed in Table 6 produce at capacity, non-OPEC production in

2015 should be 48.1 mn bpd. This represents a fall of 0.1 mn bpd over 2005, though for

the countries already in production output is forecast to be down by 0.6 mn bpd.

The forecast is summarized as follows:

2005 2015 Change

(mn bpd)

Countries now in production 48.2 47.6 (0.6)

Countries not yet in production 0.0 0.6 0.6

Total Non-OPEC 48.2 48.1 (0.1)

Totals rounded


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Table 6

Non-OPEC Production, 2005-2015

Country/Region 2005 2015 Change (mn bpd) Countries in Decline

Total 18.3 12.9 (5.4)

Countries that have arrested Decline Australia 0.5 0.4 (0.1) Congo-Brazzaville 0.2 0.2 — Peru 0.1 0.1 — Trinidad & Tobago 0.2 0.1 (0.1) Total 1.0 0.8 (0.2)

Countries close to Peak Bolivia 0.1 * * China 3.6 3.5 (0.1) Ecuador 0.6 0.5 (0.1) India 0.8 0.8 — Malaysia 0.9 0.9 — Mexico 3.8 3.5 (0.3) Sudan 0.3 0.6 0.3 Thailand 0.3 0.2 (0.1) Vietnam 0.4 0.3 (0.1) Total 10.7 10.2 (0.5)

Countries where Output is growing Angola 1.3 2.4 1.1 Azerbaijan 0.5 1.1 0.6 Brazil 2.0 2.2 0.2 Canada 3.1 3.5 0.4 Chad 0.2 0.2 — Equatorial Guinea 0.4 0.3 (0.1) Ivory Coast * * * Kazakhstan 1.2 3.2 2.0 Mauritania * 0.3 0.3 Russia 9.5 10.5 1.0 Total 18.3 23.7 5.4

Total 48.2 47.6 (0.6) Countries not yet producing 0.0 0.6 0.6 Total Non-OPEC 48.2 48.1 (0.1) Totals rounded * < 50,000 bpd Source: Pearl Oil

non-opec: crude oil and ngl production capacity to 2015...continental shelf and the xinjiang-uighur...

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