• 4 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 7 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 11 minutes Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 14 minutes Wonders of Shale- Gas,bringing investments and jobs to the US
  • 12 mins Trump needs to educate US companies and citizens on Chinese Communist Party and People's Liberation Army. This is real ECONOMIC WARFARE. To understand Chinese warfare read General Sun Tzu's "Art of War" . . . written 500 B.C.
  • 22 mins Evil Awakens: Fascist Symbols And Rhetoric On Rise In Italian EU Vote
  • 3 hours Is $60/Bbl WTI still considered a break even for Shale Oil
  • 1 hour Level-Headed Analysis of the Future of U.S. Shale Oil Industry
  • 5 hours Asia Oil Refiners Mull Run Cuts With Margins At 16 yrs. Low For Season
  • 3 hours Trump bogged down in Mideast quagmire. US spent $Trillions, lost Thousands of lives, and lost goodwill. FOR WHAT? US interests ? WHAT INTEREST ? . . . . China greatest threat next 50 years.
  • 9 hours Devastating Sanctions: Iran and Venezuela hurting
  • 3 hours Why is Strait of Hormuz the World's Most Important Oil Artery
  • 33 mins Apartheid Is Still There: Post-apartheid South Africa Is World’s Most Unequal Country
  • 3 hours Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 4 hours ARAMCO BOARD: Former Dow Chemical CEO Andrew Liveris: I want to help Saudi Arabia become a 21st century economy
  • 5 hours IMO 2020 could create fierce competition for scarce water resources
  • 5 hours IMO2020 To scrub or not to scrub
OPEC+ Top Priority: Don’t Crash Oil Prices

OPEC+ Top Priority: Don’t Crash Oil Prices

OPEC+ is reportedly considering increasing…

A Value Play Too Good To Ignore

A Value Play Too Good To Ignore

The coal industry may be…

Was 2015 The Peak For Crude And Condensate?

There is concern that World C+C may decline steeply after the peak, I believe those concerns are over blown. There is always the possibility that there could be a severe recession due to high debt levels, high oil prices or potentially due to both problems in combination. War and environmental damage due to overpopulation are also potential problems which may lead to a crisis.

If none of these problems arises in the near term (say for the next ten years), and demand for oil is high enough to keep annual average oil prices above $75/b from 2018 to 2025, then the average annual decline rate of oil (C+C) output will remain under 2%.

For simplicity in the analysis that follows, I assume the peak in C+C output is 2015 and that output will decline at a relatively steady rate from 2015 to 2025. This in unlikely to be the case in practice and the actual path of future world output is unknown, the intention is to determine a likely trend line for World C+C output. Using quarterly C+C output data from the EIA, I constructed the charts that follow.

Data is from the International Energy Statistics page at the EIA website.

The “Big 14” oil producers from 2002 to 2015 are (in order from largest to smallest): Russia, Saudi Arabia, United States, China, Iran, Mexico, Canada, UAE, Venezuela, Kuwait, Iraq, Nigeria, Norway, and Brazil. The Rest of the World (ROW) is all other oil producers besides the “Big 14”.

All charts below (except the natural log charts) are in kb/d.

The Big 14 increased C+C output by about 8 Mb/d from 2010 to 2015.

For the ROW C+C output decreased by about 3 Mb/d from 2010 to 2015.

Related: Are The Saudis And Russians Deliberately Sabotaging Doha?

To consider decline rates we look at the linear trend of the natural log of output. For the ROW the average annual decline rate was 2.69 percent from 2010 to 2015.

The C+C output of the Big 14 increased at an average annual rate of 2.71 percent from 2010 to 2015.

Related:Why Oil Prices Will Rise And Many Pundits Will Be Caught By Surprise

As a very simple future scenario, I assume the ROW decreases at 3 percent per year and that the rate of increase of the Big 14 is zero. The chart below shows the scenario, with ROW output read from the right axis, output is in kb/d on both left and right axes.

If we look at the natural log of World output we can find the average annual decline rate for the scenario above over the 2016 to 2024 period, it is 0.63 percent per year.

The scenario above is very conservative, as oil prices rise above $85/b it is possible that the output of the Big 14 will rise at 0.52 percent per year (5 times slower rate of increase than 2010-2015) and that ROW might decline at an average rate of 2 percent/year on average over the 2016 to 2024 period.

Related: Driverless Cars Or Electric Vehicles, Which Will Dominate The Future?

That scenario results in a plateau in C+C output, chart below, ROW is read from right axis.

In either case, C+C output either does not decline at all for 8 years (optimistic scenario) or declines slowly at 0.6 percent per year in a conservative scenario.

By Dennis Coyne via Peakoilbarrel.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • JHM on April 08 2016 said:
    Mr. Patterson presents two scenarios: one where the Big 14 stop growing production, and another where they slow to one-fifth the growth rate. Both scenarios yield declining aggregate production.

    The slow growth scenario (for the Big 14) supposes that oil price expectations remain at $85/b, but somehow this is not enough to continue at the full growth rate among the Big 14. I'd like to know why the author believes this to be the case.

    If we consider a third scenario where oil expectations are sufficient for the Big 14 to keep growing at full rate, then total supply rises from about 80 mbpd in 2015 to 95 mbpd by 2025. The problem with this scenario is that it perpetuate a glut as demand is unlikely to grow by 15 mbpd over the next 10 years. An if there is a glut, the price cannot meet the expectations that motivated the expansion of supply. So oil potentially remains below $40/b for the next ten years, while producers madly grow supply. This makes no economic sense over such a long timeframe.

    Perhaps the author has this in mind in his slow growth scenario. If so, the limiting factor is oil demand, not geologically limited supply. It may well be that the only way for the oil industry to enjoy sustained $85/b prices is to allow the supply to decline over the next ten years. The way to do that is to pull back investment until the oil futures curve slides up from $52/b in 2024 to $85/b. Overinvestment is the key thing that will destroy wealth in the this industry.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News