CGES: OPEC pushing limits of oil production capacity
Paula Dittrick
Senior Staff Writer
HOUSTON, Oct. 21 -- Most members of the Organization of Petroleum Exporting Countries are pushing the limits of their oil production capability, and some probably are finding that their sustainable capacity is not as high as originally thought.
London-based Centre for Global Energy Studies reached that conclusion in its Global Oil Report Market Watch for September-October.
"Indonesia and Venezuela cannot meet their quotas, while Nigeria—which produced at surge capacity earlier this year—finds it must now lock in production at many of its aging fields, proving that its stated capacity is not sustainable," CGES said.
OPEC members have frequently talked up their production capabilities with a view to increasing their allocated quotas within OPEC, but only recently has this capacity been tested.
CGES expects that there will be little more than 1.5 million b/d of incremental oil production capacity by the end of 2005.
OPEC's production currently is estimated at just over 30 million b/d of oil, and its current level of spare production capacity is believed to be about 1.4 million b/d of oil at most, representing only 5% of its aggregate output, or 1.7% of estimated world oil demand for the fourth quarter, CGES said.
Algeria and Indonesia
Algerian Oil Minister Chekib Khelil said that his nation's oil production, excluding condensates, is about 1.35 million b/d. CGES estimates the country's oil production at closer to 1.28 million b/d; however, condensates—which do not make up part of the OPEC quota—bring total production of liquids to about 2 million b/d.
Khelil said Algeria's oil production capacity will rise to 1.5 million b/d in 2005 after new fields are brought on stream. Algeria is planning to boost oil production capacity to 2 million b/d by the end of the decade.
Indonesia's oil production has continued to slip this year. CGES estimated oil output in September at 963,000 b/d, 436,000 b/d below the country's OPEC quota. The country became a net oil importer during the second quarter, and production capacity shows little sign of recovering any time soon.
CGES said that Indonesia's oil production capacity looks set to continue to decline next year.
Iran, Iraq, and Kuwait
Iran currently produces about 3.98 million b/d of oil, which appears to be a sustainable capacity level. National Iranian Oil Co. (NIOC) repeatedly has said it plans to raise capacity by 5 million b/d during the next 15 years—well beyond the peak levels achieved before the 1979 revolution.
"By the end of 2005, the [Iranian] oil ministry hopes to have reached a total sustainable capacity of 5 million b/d, but with an annual reservoir depletion rate of about 200,000 b/d offsetting any gains made by multiple active projects, this now looks highly optimistic," CGES said.
Much work has been done to arrest oil production decline as well as upgrade existing fields, CGES noted. Upgrading offshore fields Sirri and Soroush-Nowruz already stemmed a decline in oil production capacity. Major fields that NIOC is looking at upgrading during the coming year to boost capacity include Aghajari, Masjid-e Suleiman, and Zagros.
Iraqi oil production capacity, meanwhile, currently is fluctuating at 2.8 million b/d.
"While plans are afoot to increase this production beyond 3 million b/d by the end of 2005, production capacity will remain constrained by the security situation and the infrastructure available to export this oil," CGES said.
In Kuwait, bureaucracy and politics have hampered efforts to increase its production capacity much beyond the current level of about 2.4 million b/d, which includes production from the Neutral Zone.
"Continuing doubts over the opening up of the Northern oil fields to international consortiums—dubbed Project Kuwait—has led to abandonment of short-term capacity targets in favor of a longer-term goal of 4 million b/d in 15 years," CGES said.
Until international players are granted access to Kuwait's expansion projects, CGES does not expect much of a boost to Kuwaiti production capacity; it should increase by roughly 100,000 b/d by yearend 2005, it said.
Libya
Libya is rushing to add new oil production capacity and is planning to raise the volume of oil it can produce to 3 million b/d by 2010. The Libyan Oil Ministry now claims an oil production level of about 1.7 million b/d.
An official of Libya's National Oil Co. (NOC) claimed during OPEC's recent conference in Vienna that Libya could add 300,000-350,000 b/d of new oil production by mid-2005, raising its oil production capacity to 2 million b/d well ahead of schedule, CGES said.
"However, he gave no indication of where this new capacity might come from. This latest assessment represents a significant acceleration from plans reported as recently as April, which saw production capacity reaching 2 million b/d in 2008 and 3 million b/d by 2014," CGES said.
A number of oil fields operated by international oil companies are expected to begin production, or see significant increases in output levels, in the near future.
There also are hopes that the "Oasis Group" of US oil companies—ConocoPhillips, Marathon Oil Co. and Amerada Hess Corp., which was forced out of Libya by the US government in 1986—will be able to boost production from its former fields by 100,000-200,000 b/d of oil within 2-3 years.
Nigeria
Nigeria's oil production capacity, which the CGES currently estimates at 2.55 million b/d, is expected to reach 2.6 million b/d by the end of the year, possibly rising a further 200,000 b/d in 2005.
"However, it must be asked whether this capacity is sustainable. August saw 250,000-300,000 b/d shut in just to protect the aging onshore oil fields and infrastructure after production reached surge capacity levels in response to high prices, although Presidential Advisor Edmund Daukoru has promised this capacity would be restored by the end of 2004," CGES said.
Daukoru recently was quoted as saying there is a current limit of 2.5 million b/d for Nigeria's capacity.
"While civil unrest in the region and a national workers strike have yet to affect total oil production so far, Nigeria may have its work cut out simply holding on to its current production capacity in the short-term. Increments in production capacity will almost certainly arise from offshore fields, unaffected by unrest and growing maturity," CGES said.
Qatar, Saudi Arabia, and the UAE Qatar currently produces about 800,000 b/d of oil of its estimated 950,000 b/d production capacity. The CGES sees little change in production capacity over 2005, with small incremental additions contributing only 20,000 b/d to overall capacity.
Saudi Arabia's production capacity, including that from the Neutral Zone, currently is about 10.5 million b/d of oil, which is expected to rise to more than 11 million b/d by yearend as Abu Safah and Qatif fields start to make an impact.
Production from these fields is expected to reach 800,000 b/d of oil from the 150,000 b/d they collectively produced during September.
Saudi Arabia has been unable to use its spare capacity to take advantage of high prices and record demand because its oil is heavy and sour. For this reason, a number of projects have been lined up to expand production capacity of Arab Light.
Saudi Arabian officials maintain that the kingdom's spare capacity of 1.5-2 million b/d of oil is a matter of policy to retain its position as "swing producer" and that there is no need to alter their longer-term plans to do this. CGES estimates that by yearend 2005, the kingdom could reach a sustainable oil production capacity of about 11.5 million b/d and a surge capacity closer to 12 million b/d.
In the UAE, Abu Dhabi National Oil Co. has suggested that the emirate's sustainable output capacity could reach 3.6 million b/d of oil in 2005 from its present level of 2.7 million b/d.
CGES estimates that current sustainable capacity is at 2.55 million b/d of oil—about the level at which the UAE is currently producing—and this is set to rise to only about 2.6 million b/d by the end of 2005 as small gains are offset by declining production in Dubai. However, the UAE's capacity increases are due by 2006-07.
Venezuela
Venezuelan production capacity stands at about 2.7 million b/d of oil. The nation struggles to maintain its capacity because of aging oil fields and a lack of qualified workers with experience in working with these fields after the mass cull of state-owned oil firm Petroleos de Venezuela SA's technical staff.
Venezuela's Hydrocarbon Law and its recent hike in royalties due from heavy oil projects are unlikely to have an immediate impact on oil production because of high oil prices, CGES said.
"But unless conditions for foreign investment are made much more stable and favorable, Venezuela under President [Hugo] Chávez will struggle to maintain its present oil production capacity, let alone reach its [oil production] target of 5 million b/d by 2009," CGES said.
Paula Dittrick
Senior Staff Writer
HOUSTON, Oct. 21 -- Most members of the Organization of Petroleum Exporting Countries are pushing the limits of their oil production capability, and some probably are finding that their sustainable capacity is not as high as originally thought.
London-based Centre for Global Energy Studies reached that conclusion in its Global Oil Report Market Watch for September-October.
"Indonesia and Venezuela cannot meet their quotas, while Nigeria—which produced at surge capacity earlier this year—finds it must now lock in production at many of its aging fields, proving that its stated capacity is not sustainable," CGES said.
OPEC members have frequently talked up their production capabilities with a view to increasing their allocated quotas within OPEC, but only recently has this capacity been tested.
CGES expects that there will be little more than 1.5 million b/d of incremental oil production capacity by the end of 2005.
OPEC's production currently is estimated at just over 30 million b/d of oil, and its current level of spare production capacity is believed to be about 1.4 million b/d of oil at most, representing only 5% of its aggregate output, or 1.7% of estimated world oil demand for the fourth quarter, CGES said.
Algeria and Indonesia
Algerian Oil Minister Chekib Khelil said that his nation's oil production, excluding condensates, is about 1.35 million b/d. CGES estimates the country's oil production at closer to 1.28 million b/d; however, condensates—which do not make up part of the OPEC quota—bring total production of liquids to about 2 million b/d.
Khelil said Algeria's oil production capacity will rise to 1.5 million b/d in 2005 after new fields are brought on stream. Algeria is planning to boost oil production capacity to 2 million b/d by the end of the decade.
Indonesia's oil production has continued to slip this year. CGES estimated oil output in September at 963,000 b/d, 436,000 b/d below the country's OPEC quota. The country became a net oil importer during the second quarter, and production capacity shows little sign of recovering any time soon.
CGES said that Indonesia's oil production capacity looks set to continue to decline next year.
Iran, Iraq, and Kuwait
Iran currently produces about 3.98 million b/d of oil, which appears to be a sustainable capacity level. National Iranian Oil Co. (NIOC) repeatedly has said it plans to raise capacity by 5 million b/d during the next 15 years—well beyond the peak levels achieved before the 1979 revolution.
"By the end of 2005, the [Iranian] oil ministry hopes to have reached a total sustainable capacity of 5 million b/d, but with an annual reservoir depletion rate of about 200,000 b/d offsetting any gains made by multiple active projects, this now looks highly optimistic," CGES said.
Much work has been done to arrest oil production decline as well as upgrade existing fields, CGES noted. Upgrading offshore fields Sirri and Soroush-Nowruz already stemmed a decline in oil production capacity. Major fields that NIOC is looking at upgrading during the coming year to boost capacity include Aghajari, Masjid-e Suleiman, and Zagros.
Iraqi oil production capacity, meanwhile, currently is fluctuating at 2.8 million b/d.
"While plans are afoot to increase this production beyond 3 million b/d by the end of 2005, production capacity will remain constrained by the security situation and the infrastructure available to export this oil," CGES said.
In Kuwait, bureaucracy and politics have hampered efforts to increase its production capacity much beyond the current level of about 2.4 million b/d, which includes production from the Neutral Zone.
"Continuing doubts over the opening up of the Northern oil fields to international consortiums—dubbed Project Kuwait—has led to abandonment of short-term capacity targets in favor of a longer-term goal of 4 million b/d in 15 years," CGES said.
Until international players are granted access to Kuwait's expansion projects, CGES does not expect much of a boost to Kuwaiti production capacity; it should increase by roughly 100,000 b/d by yearend 2005, it said.
Libya
Libya is rushing to add new oil production capacity and is planning to raise the volume of oil it can produce to 3 million b/d by 2010. The Libyan Oil Ministry now claims an oil production level of about 1.7 million b/d.
An official of Libya's National Oil Co. (NOC) claimed during OPEC's recent conference in Vienna that Libya could add 300,000-350,000 b/d of new oil production by mid-2005, raising its oil production capacity to 2 million b/d well ahead of schedule, CGES said.
"However, he gave no indication of where this new capacity might come from. This latest assessment represents a significant acceleration from plans reported as recently as April, which saw production capacity reaching 2 million b/d in 2008 and 3 million b/d by 2014," CGES said.
A number of oil fields operated by international oil companies are expected to begin production, or see significant increases in output levels, in the near future.
There also are hopes that the "Oasis Group" of US oil companies—ConocoPhillips, Marathon Oil Co. and Amerada Hess Corp., which was forced out of Libya by the US government in 1986—will be able to boost production from its former fields by 100,000-200,000 b/d of oil within 2-3 years.
Nigeria
Nigeria's oil production capacity, which the CGES currently estimates at 2.55 million b/d, is expected to reach 2.6 million b/d by the end of the year, possibly rising a further 200,000 b/d in 2005.
"However, it must be asked whether this capacity is sustainable. August saw 250,000-300,000 b/d shut in just to protect the aging onshore oil fields and infrastructure after production reached surge capacity levels in response to high prices, although Presidential Advisor Edmund Daukoru has promised this capacity would be restored by the end of 2004," CGES said.
Daukoru recently was quoted as saying there is a current limit of 2.5 million b/d for Nigeria's capacity.
"While civil unrest in the region and a national workers strike have yet to affect total oil production so far, Nigeria may have its work cut out simply holding on to its current production capacity in the short-term. Increments in production capacity will almost certainly arise from offshore fields, unaffected by unrest and growing maturity," CGES said.
Qatar, Saudi Arabia, and the UAE Qatar currently produces about 800,000 b/d of oil of its estimated 950,000 b/d production capacity. The CGES sees little change in production capacity over 2005, with small incremental additions contributing only 20,000 b/d to overall capacity.
Saudi Arabia's production capacity, including that from the Neutral Zone, currently is about 10.5 million b/d of oil, which is expected to rise to more than 11 million b/d by yearend as Abu Safah and Qatif fields start to make an impact.
Production from these fields is expected to reach 800,000 b/d of oil from the 150,000 b/d they collectively produced during September.
Saudi Arabia has been unable to use its spare capacity to take advantage of high prices and record demand because its oil is heavy and sour. For this reason, a number of projects have been lined up to expand production capacity of Arab Light.
Saudi Arabian officials maintain that the kingdom's spare capacity of 1.5-2 million b/d of oil is a matter of policy to retain its position as "swing producer" and that there is no need to alter their longer-term plans to do this. CGES estimates that by yearend 2005, the kingdom could reach a sustainable oil production capacity of about 11.5 million b/d and a surge capacity closer to 12 million b/d.
In the UAE, Abu Dhabi National Oil Co. has suggested that the emirate's sustainable output capacity could reach 3.6 million b/d of oil in 2005 from its present level of 2.7 million b/d.
CGES estimates that current sustainable capacity is at 2.55 million b/d of oil—about the level at which the UAE is currently producing—and this is set to rise to only about 2.6 million b/d by the end of 2005 as small gains are offset by declining production in Dubai. However, the UAE's capacity increases are due by 2006-07.
Venezuela
Venezuelan production capacity stands at about 2.7 million b/d of oil. The nation struggles to maintain its capacity because of aging oil fields and a lack of qualified workers with experience in working with these fields after the mass cull of state-owned oil firm Petroleos de Venezuela SA's technical staff.
Venezuela's Hydrocarbon Law and its recent hike in royalties due from heavy oil projects are unlikely to have an immediate impact on oil production because of high oil prices, CGES said.
"But unless conditions for foreign investment are made much more stable and favorable, Venezuela under President [Hugo] Chávez will struggle to maintain its present oil production capacity, let alone reach its [oil production] target of 5 million b/d by 2009," CGES said.
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