Global Oil Production Stats

Energy, On the cover, Sin categoría

Interesting table from our friends at The Oil Drum. Only 14 of the 54 oil producing nations in the world are still increasing their oil production. Considering 2008 saw a global all-time-high in exploration and production expense, could provide some food for thought in terms of geopolitical risk changes (see which countries are depleting more rapidly) and where the new areas of resources could be coming from. To be considered past-peak, a producer’s current (2008) production has to be at least 10% less than its best year, and the best year must have occurred prior to 2005.

  • CountryPeak Prod.2008 Prod.% Off PeakPeak Year
  1. United States112977337-35%1970
  2. Venezuela37542566-32%1970
  3. Libya33571846-45%1970
  4. Other Middle East7933-58%1970
  5. Kuwait33392784 -17%1972
  6. Iran60604325-29%1974
  7. Indonesia16851004-41%1977
  8. Romania31399-68%1977
  9. Trinidad & Tobago230149-35%1978
  10. Iraq34892423-31%1979
  11. Brunei261175-33%1979
  12. Tunisia11889-25%1980
  13. Peru196120-39%1982
  14. Cameroon18184-54%1985
  15. Other Eur/Eurasia762427-44%1986
  16. Russian Federation114849886-14%1987
  17. Egypt941722-23%1993
  18. Other Asia Pacific276237-14%1993
  19. India774766-1%1995
  20. Syria596398-33%1995
  21. Gabon365235-36%1996
  22. Argentina890682-23%1998
  23. Colombia838618-26%1999
  24. United Kingdom29091544-47%1999
  25. Rep. of Congo 266249-6%1999
  26. Uzbekistan191111-42%1999
  27. Australia809556-31%2000
  28. Norway34182455-28%2001
  29. Oman961728-24%2001
  30. Yemen457305-33%2002
  31. Other S. America153138-10%2003
  32. Mexico38243157-17%2004
  33. Malaysia793754-5%2004
  34. Vietnam427317-26%2004
  35. Denmark390287-26%2004
  36. Other Africa7554-28%2004
  37. Nigeria25802170-16%2005
  38. Chad173127-27%2005
  39. Italy127108-15%2005
  40. Ecuador545514-6%2006
  41. Saudi Arabia1111410846-2%2005 / Growing?
  42. Canada33203238-2%2007 / Growing
  43. Algeria20161993-1%2007 / Growing
  44. Equatorial Guinea368361-2%2007 / Growing
  45. China37953795-Growing?
  46. United Arab Em.29802980-Growing
  47. Brazil18991899-Growing
  48. Angola18751875-Growing
  49. Kazakhstan15541554-Growing
  50. Qatar13781378-Growing
  51. Azerbaijan914914-Growing
  52. Sudan480480-Growing
  53. Thailand325325-Growing
  54. Turkmenistan205205-Growing
  • Peaked / Flat Countries Total-49597-60.6% of world oil production
  • Growing Countries Total-32223-39.4% of world oil production

"Hoarding" and short term oil price volatility

Energy, On the cover, Sin categoría

CONTANGO JULY

The recent pullback in front-end oil prices is likely to remain for a short period of time. Hoarding is to blame. The Chinese government revises petroleum product prices every 30 days or so. The required increases in the past months has led to the phenomenon of “hoarding”, as participants in China buy large quantities of oil in anticipation of a price increase to match international prices. This practice has led to an increase in oil purchases of 3million barrels per day from May to June, which justified the increase to $68/barrel. Once this “hoarding” cycle is over, the recent pullback is easily justified. Hard to envisage a large increase in short term demand to offset this extraordinary buying activity, but there is certainly a “short covering” effect likely to cushion the fall. Oil has not risen to stratospheric levels and is still in reasonable levels considering average production costs, so the funds that have shorted into the hoarding cycle will likely unwind their trade gradually.

Calling the bottom on power prices in Europe

Energy, On the cover, Sin categoría,

Although overcapacity in Europe plus excessive renewable installations remain the biggest threat to power prices, and a quick price recovery seems highly unlikely, these are the main reasons why i believe we could be reaching a bottom:

  • . I believe CO2 has reached a very strong support level at €13/MT. Utilities keep adding to their hedges at this level despite demand concerns. Even with -1% demand in 2010-2011 a CO2 price of €12-13/MT is widely accepted as a solid risk-reward price (basically the NPV of 2013 €23/MT with a 10% discount).
  • . I believe demand is showing some small but encouraging signals of bottoming. We have seen encouraging data from the countries with highest overcapacity like Spain and Italy. Demand data for Spain for June is down only 2.7%, versus down 8% in May. This is temperature and working days adjusted, so not influenced by external factors. Same trend was seen in Italy with June figures only down 3% adjusted.
  • . Capex cuts could reach 15% in 2010. Moody’s and S&P are demanding (expecting) power capex cuts in 2010 to reach up to 15% in Europe’s rated power groups. I had a chat with Neil Bissett from Moody’s yesterday in which they believed that generation companies should start thinking about moving closer to more cyclical company-type of gearing. That is c30% net debt/nd+equity!. Not only large groups are facing higher pressure to control capex and gearing, but smaller power companies are likely to be unable to finance agressive growth plans in current conditions. The effect is likely to be evident in 2011 and will hopefully bring reserve margins to tighter levels in Europe.
  • . Gas prices look well supported into summer by ongoing Norwegian supply discipline (and more worryingly, inability to offset decline) and revamped Russia-Ukraine dispute risk. However, winter looks uncertain. The gas market is the key uncertainty to this picture as it looks awful considering LNG.
  • . …But maybe the threat of LNG could be less agressive. You know me, I always trust Exxon, and so far it works. BP, Exxon and BG are seeing enough Asia demand to close large long term contracts. Additionally BP believes through TNK that Russian gas production could be peaking as reserves could be overstated. Exxon wants LNG in the US for two reasons: a) lower US gas prices benefit them and b) lowers the valuation of gas assets which they would takeover gladly.
  • . In coal we are seeing supportive data from recent broker comments of a tender for met coal out of Australia completed recently at US$132/t, which is the first deal above the benchmark price of US$129/t. Spot prices have rebounded from US$115–118/t last month, due to months of strong purchasing activity by the Chinese. Strong Chinese steel production, signs of an end to steel destocking in the world ex-China, as well as infrastructure constraints in Australia (Dalrymple Bay vessel queues up from 25 to 40 ships), have contributed to the move upwards.

US Natural Gas Dynamics

Energy, English, gas, On the cover, US

US natural gas is set to continue rising but fundamentals keep it capped at $6.5/MMBTU mid-term. The conclusion is that US gas is likely to be in a tight range of plus/minus 15% of the marginal cost of production (downside to $3.5/MMBTU and upside to a c$6/MMBTU short-term) as the contango flattens.

I would highlight three data points:

  1. Current 55-60% decrease in gas directed drilling activity in the US has not been sufficient to balance 2009 supply and demand. These rigs will gladly come back any time gas reaches $5-$5.5/MMBTU. Additionally, onshore rigs are being moved to Russia and West Africa, where there are stronger conomics. On the support side, coal-to-gas switching tends to kick off at $4/MMBTU
  2. Estimated base decline with current drilling activity (33%) can be misleading as production will still be c54BCF/day in the US in a worst case scenario and there is plenty of resources (if demand stays weak as predicted) in unconventional gas plus ample new reserves in the US (Marcellus, Barnett) .
  3. I do however believe the LNG “threat” is less than what market anticipates (although I am happy to assume 2-2.5BCF/d LNG into the US in 2010). Case in point is that all of consensus expects Chevron-Exxon’s Gorgon and BG’s Queenland Curtis to supply at sub-target ROCE levels (DB expects them to make 13% versus a target of 20%). This (in my view) is unlikely to happen as these are companies that ruthlessly monitor and manage ROCE, and have proven, to everyone’s surprise, that delays in LNG happen. The LNG overcapacity disappears in 2012 (no more LNG projects commissioned post 2011) so waiting and monitoring is not an issue.