Follow Global Crude Oil Production
The latest BP Statistical Review of World Energy figures show that crude oil production for the last twelve months has fallen by 126,000 barrels (0.2%) per day.
Against a backdrop of rising world commodity prices and serious concerns about the impact on global economic growth, there is growing pressure on the major producers to raise their production levels of crude oil.
A decade ago the world experienced the impact of the Asian financial crisis and one result was the decision taken by OPEC at its Jakarta conference to increase production.
You can now subscribe to the free Commodity Universe Ezine below, and get the latest articles on the commodity sector . Just your first name and email. It's as easy as 1-2-3! That action led to the collapse of the crude oil price to as low as $10 per barrel, and such an outcome was not what a major OPEC producer like Saudi Arabia was looking to achieve.
It is the possibility of a repeat of such an outcome that troubles Saudi leaders.
Clearly the global economy is seeing the rising demand coming from the emerging economies such as China, India and Brazil, where the populations are keen to have their own car and to spend more money on goods which consume more energy.
Global Oil Production Share
In 2007, according to the BP Review, the OECD countries produced around 23% of the total world figure, while OPEC members contributed 43% to crude oil production, out of a total figure of 81.5 million barrels per day. Non-OPEC countries also made large contribution (41%) while the Former Soviet Union weighed in with 16%. European production was a small 2.9% of the total.
A closer look at the data shows that over the last decade OPEC has increased its annual production from 31.064 million barrels per day (mbpd) to 35.726mbpd, a rise of 15% in 10 years.
Within that total it is interesting to note that two significant producers, Venezuela and Indonesia, actually posted a decline in production between 1997 and 2007 of 21% and 38% respectively. Furthermore, Iraq posted a notable 84% increased production despite the long period of sanctions, the invasion and then the difficult political environment since.
With the Saudi oil conference due to look closely at how the difficult global supply situation can be addressed, the question will no doubt return about the need to invest in new refining capacity.
This will be needed to deal with the mainly heavy sour crude oil that would most likely make up the increased production.
Remember that the high price of crude reflected in the NYMEX WTI futures price refers to light, sweet crude oil which is in such high demand because unleaded gasoline, a major distillate product, is itself in high demand.
Given that the US economy is the largest user of energy and crude oil in the world economy, it is interesting to see the change in North American crude oil production over the decade to 2007.
While North American output has fallen 4.2% from 14.267mbpd to 13.665mbpd, Canadian output has risen 28% from 2.588mbpd to 3.309mbpd.
US production has fallen 16.8% in the decade and we are likely to see Canadian influence growing substantially due to the vast resources of oil sands ready to be extracted from the Athabasca region. The oil fields of the main two European producers, UK and Norway, are in their final stages with both recording declines in daily production over the ten year period.
UK production has fallen over 39% to 1.636mbpd, while Norwegian figures show a fall of 22% to 2.556mbpd in 2007.
Non-OPEC, Non-OECD Producers
The Russian Federation has shown a significant increase in crude oil production over the last decade, going from 6.227mbpd to 9.978mbpd in 2007, an increase of over 60%.
Meanwhile, the former Soviet Union republics in Central Asia show mixed results but Azerbaijan and Kazakhstan have yielded some very healthy growth figures, though the infrastructure needs serious investment to maintain this expansion. While Kazakh crude oil production has increased by 178% over the last decade from 0.536mbpd to 1.490mbpd, output in Azerbaijan has surged 377% to 0.868mbpd.
In Latin America, the BP report shows how Brazil has virtually doubled its oil production in the last decade from 0.868 to 1.833mbpd.
And this growth is likely to continue following the discovery of some major deep water fields off the Brazilian coast.
With its seemingly insatiable demand for oil as well as every other commodity from copper to aluminium, China has also shown a steady increase in crude production over the last decade, posting a 16.6% growth to 3.743mbpd.
Clearly global leaders are anxious about the impact of high crude oil prices on their economies and the social fabric of their communities.
The Saudi conference between heads of state and OPEC leaders is at least recognition of the potential long term damage caused by higher crude prices, and the need to address crude oil production levels.
The demand pressure from economic growth may moderate over the short term, however, rapid economic development in emerging economies suggests the trend will be for demand to remain strong in the medium to long term.
Unless new technology is applied to enable automobiles to run on alternative fuels such as new generation biofuels and hydrogen, the tight demand–supply situation will remain.
More investment needs to be made in infrastructure to allow the predominant heavy sour crudes to be refined into the high demand distillates such as unleaded gasoline. This is the main challenge for global leaders.
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