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Global Oil and Other Liquid Fuels Production Update

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.

Global crude and Condesnate production

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.

Related: Why Investors Shouldn’t Overlook Argentina’s Energy Reforms

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 in 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.

World Total Liquids Production

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).

Global Liquids Production Excluding Conventional C+C

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.

NGL Attribute Summary

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.
_______________________________________________
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.

Related: The End of the Crisis for Now: America Is Awash in Energy

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.

By Euan Mearns

Source – www.euanmearns.com

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Leave a comment
  • Lee James on November 05 2014 said:
    Not sure why no one has commented yet... this article was very helpful to me. It did not contain surprises, but it clearly points out the importance of tracking non-conventional oil sources.

    The current oil glut and crude price dive is hardest on some components of unconventional oil. We see from the excellent charts that Canadian synfuels are significant, and economics are similarly affected as US shale oil.

    There's NG liquids, biofuel and refinery gains to track. A barrel of crude is not quite what it used to be. Really, shale oil gets a little lost in the mix -- especially in world production.

    As Mr. Mearns suggests, the picture is complex and only time will tell. I'm hedging my bets in favor of less fossil fuel dependency and more clean energy.

    Thank you for a very clear and useful profile of where oil production in the US has been and where it stands today.

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