Where Supply Increases Come From

This graph shows the average annual increase/decrease in supply over the last three years, for all countries that had an average change of more than 75000bpd. All the rest of the world's countries are summed in a single column. The source is the production data in the BP statistical report on energy.

Clearly, it's not accurate to say, as some do, that if Saudia Arabia was declining then the whole world would have peaked. However, it probably would be true that if Saudia Arabia and Russia were both declining to any great degree, the whole world would be declining.

At Dave's request, here is a bigger picture with everything on, that is just about guaranteed to cause eyestrain. For some people, following the link to the PDF might be better.

Here's what BP says total production was from 1998-2004.

Note the dips due to the Asian crisis in 1998, and the slowdown in 2000-2002 following the tech-crash in the US and 9/11. Then the very strong increase of 2002-2004. I made the country plot from 2001-2004 as a balance between not wanting to weight the freak events of any one year too much, but also wanting to stay in the near past (on the theory that the near future will not be utterly different than the near past).

Stuart, since that "rest of world" figure is substantial and you've already done the calculations, could you break it out a bit?
FYI, "increases" from the GOM are looking less likely for the next... year, two, or?

(hey, I thought we dodged a bullet... guess it could have been worse!)

63 offshore platforms destroyed by Rita
Tue Oct 4, 2005 02:06 PM ET
WASHINGTON (Reuters) - A total of 63 offshore platforms in the Gulf of Mexico were destroyed by Hurricane Rita and a further 30 fixed platforms were damaged, the U.S. Interior Department said on Tuesday.

In a briefing on the damage done by Rita, the department also said that 13 offshore rigs were adrift, one was destroyed, 10 were damaged and three rigs were unaccounted for.

Rita hit the Texas-Louisiana border on September 24 with winds of 120 mph.

Here's 140,000 bbl/day 156mmcf current production and 80,000 bbl/day of increase now held off until at least second half next year:

Shell's Mars platform to be down until 2H 2006 - Enbridge

HOUSTON (MarketWatch) -- The key Mars oil and natural gas production platform in the Gulf of Mexico probably won't be back on line until the second half of 2006, an executive with Enbridge Inc. said Tuesday.

The platform is majority owned and operated by Royal Dutch Shell PLC (RDSB.LN), but Enbridge pipelines move the gas produced there. Two other nearby Shell platforms - Ursa and Mensa - will be back up in November, said Doug Krenz, vice president for gas transportation at Enbridge.

"We expect to have the production back up in November at Ursa and Mensa," Krenz said in a presentation to investors. "Mars is a little longer-term fix, probably second half of next year."  http://www.marketwatch.com/news/story.asp?siteid=mktw&dist=moreover&guid={76E323E6-E597-4DD1-98E8-88AA7E05354A}

More data:

WASHINGTON (Reuters) - A total of 108 low producing oil and natural gas offshore platforms were destroyed by hurricanes Rita and Katrina and likely will not be rebuilt, Interior Secretary Gale Norton said on Tuesday.

She said the destroyed platforms account for about 1.5 percent of oil output in the Gulf of Mexico and 0.7 percent of Gulf natural gas production.

Separately, the head of the Minerals Management Service said the damage done to underwater pipelines by the two hurricanes was not as severe as the damage done from mudslides caused by Hurricane Ivan last year.

"We don't think we have as much damage," said MMS director Johnnie Burton.

The DOE's Office of Electricity, Delivery and Energy Reliability has a much more comprehensive listing of damage to the GOM infrastructure in today's report, including numbers for both Rita and Katrina, comparing to Ivan - worth a gander:


Point of interest: the "to-date" cumulative shut in for the two recent storms now exceeds that of the entire period of Ivan shut-in from September 04 through Feb 05.

... and the shut in levels are still way-way ...

BP collects data from various oil producing countries without validating them. It therefore relies on the truthfulness of reserve data as reported by their governments.  So how we are supposed to feel confident about the information in this graph?
There's no reserve data here, only production data. However, the BP data is mildly (order 5%) inconsistent with other data sources, and none of it is probably altogether reliable: some of the reporters have incentives to cheat. However, it's probably not as badly wrong as reserves data, since at least production can also get counted when it arrives in consumer countries.
Hi Stuart,

But how do we know that the figure's supplied to BP aren't also qouating some element of past production? After this appears to have happened in the 2004 review with around 300 billion barrels of OPEC oil being over-reported because past production had also been added to the equation.

It appears that SA (Saudi Arabian) production has now plateaued which is the reason we are seeing such a huge effort on their part to secure new equipment in order to drill more wells using teriary recovery methods, especially in ghawar, to shore up falling production and keep up appearances.  What this does to overall depletion rate only time will tell, although it probably won't be a pretty picture.

I can't comment on Russia which will retain much geopolitical strength far into the future by virtue of her reserves, but I also wager that it cannot replace SA as swing producer, which means as SA peaks so does the world.



Since Saudi Arabia is the place where the US and IEA wish to see 25Mbd and if as has been suggested, decline rates could approach 15% on their production of sweet light crude, we could see numbers like -700KB in a small number of years.  Additionally while Russian numbers look good on the greaph above, their expected production increases are 3% this year and 2% next year or 300KB and 200KB.  Additionally Norway and the UK have seen much greater declines at about 15% last year than they did in 2001 when it was 6-7%.  I think we are very much closer to peak than this graph implies.  In fact if SA is in decline, then I would agree that the world is in decline.
Speaking of Russia, this article on TASS sounds positively giddy:

In our latest report we have modeled three oil price scenarios for Russia for 2006-2015: (1) A base case of an average long-term Urals Med oil price of $32/bbl (from 2007); (2) A $50/bbl average oil price in 2006-2015; and (3) A $10/bbl annual increase in the oil price until it reaches $100/bbl in 2010, remaining there through 2015. The results in the latter two cases were striking.

Under our $50/bbl scenario: President Vladimir Putin's goal of doubling GDP by 2012 would not be met - it would only come in 2013, which is still a remarkable achievement given the derision with which the original target was greeted. Meanwhile, Russia's average monthly income would rise five-fold to $1,386, providing strong support for the current consumption boom; the country's nominal dollar-based GDP would be $2.8trn, overtaking Spain's; and Russia's per capita GDP would be $20,073, approaching Portugal's $25,658.


Now, its written by equity analyst, not the government, but you can imagine the giddyness in Russian govt. of the prospects.

Nary a word about reserve life or depletion.

Meanwhile, Iran:

Official: Iran could run out of oil reserves in 9 decades

Madrid, Oct 4, IRNA-Iranian Oil Ministry Deputy for International Affairs Hadi Nejad-Hosseinian said that Iran could run out of oil reserves in nine decades.

Speaking at a gathering dubbed "Iran in the 21th century: Energy and Security" in Madrid on Monday, he cited latest figures which put Iran's crude oil reserves at 137 billion barrels, accounting for 11.6 percent of the world's total reserves.

He also said that Iran has about 29,000 billion cubic meters of gas which is 15.3 percent of the world's total gas reserves.

Quoting research findings, the official said that due to the fact that Iran's gas reserves were diminishing and gas and oil production in other parts of the world was uneconomical, the Middle East could emerge as the biggest supplier of the world's needed energy by 2030, supplying about 95 percent of global requirement.


95, eh? How nice.

But some in Iran see renewables as important:

Member of the Energy Commission at Majlis Mohsen Yahyavi told the National Energy Committee's quarterly meeting entitled "The Impact of Increase in Global Prices of Crude Oil on Country's Energy Policies" that dlrs 10 billion/year is to be invested in the oil sector in the Fourth Plan as scheduled.

Yahyavi said increase in the prices provide a good opportunity to replace crude with the new and renewable energy resources such as solar and wind energy.


I have not read "Twilight in the Desert" are there graphs Like the above in it for Saudi Arabia?

Matt Simmons Has a handle on this topic for some time now.

If We are in the midst of the Peak Like Ken Defayes(sp) Has predicted for the Thanksgiving week 2005.  Then By this time next year we will see some really fishy things coming out of the Arabian Pennisula.

If the Political Fallout of the Higher than Normal heating season doesn't rock the Oil world enough, Something else is bound to happen before next OIL reports have to be filed.

           Acorns,  The larger the better, Soak, peel, boil (get the bitter taste out) , and then roast makes a great flour or hot mash meal.

Stuart, you used production data from the BP statistical review. Are you really sure whether these are reliable? (We know the reserve data are not). In M.R. Simmons' "Twilight in the desert" SPE papers refered to 8 million barrels/day for 1994, while the BP statistics show 9 mb/d
I'm sure that if you pointed out a more reliable source of numbers, that Stuart would be happy to use them. He's pointed out many times, that the numbers will often be off less than 5% from other sources. That shows that there's noise in the data and it's likely not perfect. But you go to war with the army you have ;)
Stuart, does the BP data just have the values for this period or is there data for each individual year?

It would be interesting to see just the 2004 figures, as I'm sure it would not be as positive as for the 3 years.

My guess is that some of the countries with overall production increases over this time may have even declined in 2004.  It would certainly reduce the 'rest of the world' increase.

Thanks for your work on this.

I added the global production graph for the last six years. Actually 03-04 is as strong an increase as any. There are some indications of slowdowns now, as others have noted.
Off-topic, but here's a document from the USGS you rock hounds might find interesting. It goes into mind-numbing detail on the geology of the Ghawar region, and explains the USGS technique of estimating undiscovered oil there. Maps galore (in some places they don't match the ones from Greg Croft which Stuart has posted).

Total Petroleum Systems of the Paleozoic and Jurassic, Greater Ghawar Uplift and Adjoining Provinces of Central Saudi Arabia and Northern Arabian-Persian Gulf

According to the Russian News Agency
Russian oil output this year is expected to fall by 2.4% this year. This takes the bottom blue bar from 750 on the positive side to off the scale on the negative side at -222
Dear Mr Rouse,

I recall seeing that article. But it appears to emphasize insufficient economic and political incentives for production far more than the effect of "dwindling geologic resources." The former are certainly important, but are there any hard facts on the latter? Both China and Japan are eager for Russian oil. The Japanese are so keen to block Chinese access that they attached this condition to a proposal for funding a pipeline from Siberia. Having these two big powers fighting over your oil is great for business, perhaps most especially if you and the rest of the world are at or nearing peak.

(Here's a Feb 2005 CRS Report for Congress on Northeast Asia energy competition)

My guess would be that it's a better spin to say that it's just a political/economical problem than to say the times of absurd plenty (for some) are starting to end.
Russia should have no incentive to increase its production.  It is currently exporting over twice as much oil as it is consuming.   If oil prices continue to increase it needs less and less exports to maintain the same revenue stream.  As it stands now the billions of oil dollars flowing into the Russian economy drive inflation, partly as a result of the policy of requiring part of foreign revenues to be converted into domestic currency.
When I looked at the Iran data for the last years change, there was a small increase from 2003 to 2004 in the bp data, but it was almost exactly made up for by the increase in Irans domestic use.  Assuming the BP numbers are close to reality, I don't think they added any more oil to the market in 2004 than 2003.  Is it worth plotting the whole world like this?
This is a nice graph!  A good summary of the global situation that gives people an idea of a ratio between those countries that are increasing production against those experiencing declines.  When people need to get their head around what is meant by "peak oil" graphs like this one are useful teaching devices, to be sure.

There is more to be read into this graph however.  How about the list of those  6 or 7 countries with the greatest increase in production during this period:

Saudi Arabia
Russian Fed. (does anyone know if this is mainly from Caspian region?)

Anybody care to map these countries against recent US foreign policy and top national security interests?  (maybe evn why the US tolerates Chavez in Venezuela as much as it has to date?)

I know:  Invade Canada!

Invade Canada? Surely you jest. Not all of it, just those provinces with oil and hockey teams.
haven't you guys read NAFTA?  We don't have to invade Canada OR Mexico.  They are obligated to sell us petroleum through its tenets...

(why else do you think the PTB made such an (at the time) politically unpopular move?)

Actually, I've read all of NAFTA (that's a long story). You'll find Chapter 22 particularly riveting: it stipulates the entire agreement can be cancelled with simple written notice, six months in advance.


Of course, that's never going to happen, at least not over the sale of oil. The US can buy all it can afford.

But, if I start to see Bush and Cheney painting us as terrorists, I will properly get nervous.

Re: Gulf of Guinea (West Africa)

I see that we have substantial positive contributions from Angola, Nigeria and Equatorial Guinea. On the negative side, we're down small amounts in the Congo, Gabon and Cameroon.

There's a nice article by Big Gav out today about "Africa: US Oil's New Target", a German documentary. There's commentary in the film from Yergin, Klare and Barnett. Here's a quote
The whole of the coastal sweep of West Africa has become an "oil Dorado". Sao Tomé, in the Gulf of Guinea and the second smallest country in Africa, is just one example of the region's potential. Off the coast of this tiny nation lies 24 billion barrels of black gold and some oil industry experts have even described it as a second Kuwait. Oil interests from across the world have now flocked to the nation.
There's also reported sightings of American troops in Sao Tome. Stay tuned....
Nigeria can't be counted on for the long run, and not just because of the fairly constant civil unrest there -- its one of the worlds most populous countries, shoved into a small space.

The only way they can move forward is to use more and more of their energy for their own purposes. Eventually... in a peak or peaking oil world, they will look inward not outward.

24 billion - wow. That's comparable to UK North Sea....
The 24 billion barrels estimate sounds like unrestrained optimism similar to the original expectations about the Caspian basin.
It's hard to confirm that proven reserves number.

Quoted here -- 15 bbo proven deep water reserves (2003)
Quoted here -- The West African oil province (the so-called Ecowas region or Gulf of Guinea) holds 33.8 bln barrels of proven oil reserves, 3.1% of the global total
Quoted here -- Besides the countries neighbouring the Mediterranean, Africa's "Oil-Dorado" encompasses the Gulf of Guinea, with reserves estimated at up to 60 billion barrels of crude oil.

But hey, as reported by worldpress.org United States Eyes West African Crude ,
The rate of discovery of new oil reserves in Africa has been the fastest in the world in the past five years, according to the U.S. Corporate Council on Africa.
so, who's counting?

Here's a serious document Gulf of Guinea Geology (pdf, reprinted from Oil & Gas Journal, Feb 16, 2004). It covers the "Golden Triangle" including Nigeria, Equatorial Guinea and Cameroon (and excluding Angola, others).

I think of this entire region, including onshore Nigeria and Angola, as just like the UK/Norway North Sea and predict it's Hubbert linearisation (as discussed in Stuart's posts) will have almost exactly the same pattern (eventually) as Nick's plot of the UK.
A few comments on the chart -

First, it reflects increased production, but not necessarily increased production capacity. Almost all of the SA, Kuwait, and other OPEC increase came from producing oil that had been held back from production to support prices and keep a reserve, not from new capacity. It does not reflect true new oil supply. That reserve is now gone, and therefore we won't see the increase continuing. The Russian production came largely from working over older largely depleted fields with new technology, which gives a temporary production burst, followed by rapid decline. As this has run its course, again the increase won't be (and isn't) continuing. Mexico is another major contributor to the increase shown, but we know that its major field is in decline, and 2005 production is less than 2004, with decline only beginning to accelerate. Each year new contries join the decline column. Given all this, I wouldn't be too sanguine about the direction things are headed. The chart can be misleading if you don't know the story behind the numbers.

My interpretation of the chart is roughly that we will be at peak when the area under the declining countries is the same as the area under the increasing countries. This chart is a trailing indicator - it's about the last three years - and tells us we didn't peak between 2001 and 2004. That in itself is certainly not news, but it's interesting to look at what it would take for us to peak between 2005-2007. Either significant declines in Russia and SA, together with no massive changes in recent trends elsewhere, or lots of negative news in many smaller countries. If indeed, we are about to get lots of new deepwater/west african production, that will increase the positive area, and delay peak (as Colin Campbell is saying now) unless there are offsetting negative events.
OK, but if you look at just the 2004 figures, does it look any 'closer' to peak?  That is, is the difference between the positives and the negatives less?
No - total production increase between 2003-2004 was the largest any time recently. I added that total production graph up top.
The 2003 - 2004 time frame is when OPEC decided to abandon its quota system and produce to the max due to the explosion in demand at that time - esp China/India.  
Um, didn't the US abandon its quota system right around the time it peaked?

Which reminds me of a question I've been meaning to ask. Production will presumably be nearly flat for several years around peak. But demand will keep going up. Doesn't that mean that scarcity predates peak by several years?

I've never heard of the US having a quota system. Do tell...
Stuart, I think this kind of graph is extremely useful to try to guess the peak date. Great work. But I think you partly misinterpret it.
it's interesting to look at what it would take for us to peak between 2005-2007. Either significant declines in Russia and SA, together with no massive changes in recent trends elsewhere, or lots of negative news in many smaller countries

That is not so. For 2005-2007, you have to imagine that all the countries lie first on the 0 line, and then see how they change. The US will have a similar decline (actually greater because of the hurricanes) while Norway and the UK will have greater declines. Now, as you well noted the area of the rest of the world will have to compensate and exceed that for supply to rise. So you don't need "significant declines" in Russia and SA. Just leave them on the 0 change line (witch seems likely), and leave as well all OPEC countries there, together with Mexico. Now, Nigeria, Angola, Canada and the Rest of World have to compensate for the decline in the North Sea and the USA. Add to the decline group Indonesia and a couple of countries more, and I don't see supply being able to rise at all!. So your conclusion that Russian and SA declines are needed to stop supply growth are not correct IMO.

I look foward to further posts by you on the issue, and maybe new graphs with some 2005 data? :-)

Have a nice day
It's not so clear I think. Both the US (because of deep water GOM), and the UK (because of Buzzard) where expected to mitigate their declines somewhat in the next few years. Hurricanes have not helped, and perhaps there will be more of them. I agree Mexico is expected to decline soon, but why assume that the other OPEC countries will not continue the recent trend of modest increases?
Because they are pumping at capacity? Or so has been widely repoted. They also have "temporarily" suspended the production cuotes, witch should be another indication that at least they could be producing at capacity.
Well, but what's to say they can't continue to increase capacity at some modest rate, as they have been?
They haven't so much increased capacity as production. It's the reason the world doesn't have any spare capacity left. They used it up. Of course, they can still increase it. Who nows?
Good comment, peakearl. The graph shows nicely how Russia has saved the situation after 2002. But now it is over. The Russians have spoken for some time about the future decline of their production and in every case it is clear that the growth rate of laste year, 14% cannot sustain. The projected decline next year will be about 300,000 bpd. That's a lot. And it may be more. And we can count it also this way: Russias decline means that almost 1,5 million bpd is missing from the expected production this year and next.

Oil peaking or not but no chances for such an over 4% supply growth like last year. Seems that supply is now and next year practically flat, the increase is at most 1% - 1,5%. This shows already in the oil prices. Saudis need not go in decline, it is enough for them to stay flat to virtually kill the world supply growth. This may not be the Peak but...    

Spotted at PeakOil.com:  The latest ASPO Newsletter

624. Revision of the Depletion Model
A detailed revision of the deepwater evaluation has been made on the basis of new information covering the world's fields, which have been modeled individually. The new evaluation suggests an Ultimate recovery of about 52 Gb with a peak of 12 Mb/d in 2011, up from 3.5 Mb/d in 2005. This has an impact on the overall model, as illustrated in the Table on Page 2, shifting the peak of All Liquids from 2007 to 2010. Anyone familiar with this forecasting will know of the many uncertainties and difficulties, but it seems best to advance step by step reporting progress as it occurs, remembering always that it is subject to change.


Yeah - saw that. I don't have time right this minute, but I'll do an up front post about it tonight.
Hmm...I still need to read the newsletter too.  But this certainly seems to move the pessimists closer to some of what I would have thought were more optimistic projections.  Didn't the Hirsch report give something like 2015 as a the probable peak?

I wonder if people will sustain interest that long?

This makes the top of the Hubbert curve more flat. This increase will mean under 1% growth of the overall liquids supply a year between 2005 and 2010. And after that a 2% average decline. This means that the predicting of the actual peak is very difficult, practically impossible because the yearly changes will be smaller than the error margins of the notoriusly bad data.

Probably the curve ahead will be bumpy and there will easily be temporary declines, caused by storms, political events etc., before the overall top. This will mean volatile oil prices and - some more years guessing here about the timing of the peak...

I wouldn't be surprised to see NGL expanding faster than he is predicting since oil prices have risen. Probably see the date pushed back another year or two because of it. I wonder if he will include CTL eventualy.
Good thing this site wasn't around in 2000-2002 or we would have been hearing that the peak had already happened.

I'll bet the next sighting of "the" peak will be wrong too. (I.e. we will see a decrease in total world production for a year or two, then it will climb to a new record high, just as happened in 2000-2003.)

That is a hazard. Don't get too cocky though Halfin - no one believed Hubbert that US production would peak and never again equal it's production peak. Many disagreed with Simmons in claiming that the North Sea would decline after the late nineties. But just being right on the big picture doesn't make it easy to be right on the exact details when one is trying to extract signal out of morass of noise (bad data, economic fluctuations, natural disasters, etc, etc).

If you are correct that production is about to decrease and then go up again (and you may well be), one difference from 2000-2002 is that the events would clearly be coming from the supply side and not from the demand side.

And remember, all the "above ground" issues have to go right -- hurricanes, terrorism, wars, coups, competition with the Chinese, Russian oil politics, Nigerian rebels, Venezuelan policies, investment deals and decisions, you name it.

Why just this weekend, the Shiites and Kurds decided to change the ground rules for the referendum on the Iraqi constitution, a decision which basically disenfranchised the Sunnis. That can't be good for geopolitical stability in the Middle East....
Yeah. For a true oil supply nightmare, I've been imagining the scenario where the US gets sick of Iraq and pulls out and then the resulting civil war pulls in Iran on the Shiite side and Saudi Arabia on the Sunni side... Not a high probability event, but that would be over 15% of global supply fighting a war.
If Saudi and Russia's production starts slipping no amount of fresh oil from WAfrica is going to prevent the peak accuring. Where are the drilling rigs going to come from??? Since we are down a few. WAfrica will help but only on the back side of the slope.
OT, but... the article says we conducted a bombing campaign against a bridge. What kind of sense does that make, for occupiers of "friendly" territory to be blowing up bridges in order to root out transient enemies?

It's almost as though we thought destroying Iraqi infrastructure was our only hope to reduce enemy traffic. That's a very depressing thought...

Destroying oil producing countries infrastructure and economy makes a lot of sense. It is the domestic consumption - and heavily subsidized at that.

Simmons has some good points on the OPEC countries population and economy. Taken as a whole there lives well over 500 million people and they are on the average very poor. So they have good reason to develop their econmy, industrialize and add value to the oil they produce. This means increasing domestic oil use and diminishing exports.

Indonesia is a case in point. It is easy to calculate that a combination of increasing domestic consumption and depleting oil resources will have a significant effect on exports and the oil market prices. Iraq had an industralization policy based on energy-intensive heavy industry and petrochemicals. Not any more.

Ugh, that's even more depressing than what I was thinking.

I guess I shouldn't be surprised. New Orleans showed that Americans are now expendable to the U.S. government. Why shouldn't Iraqis be?

But Iraq uses only 1/2 million bpd (though it's climbing fast since the war). Infrastructure destruction could only take out a fraction of that. Is that really worth doing?

See the graph a few screens down from the top.


I don't recall anyone in 2000 or 2002 claiming that peak oil had arrived. In fact, Colin Campbell was projecting 2010 at that time, brought the date closer to 2007 for the last year or so, now has pushed it back to 2010. The data are just too inexact, unpredictable or unknown to be precise on the peak date. However, history does not always repeat itself - US never recovered production, nor has Russia or the North Sea, and never will. Caspian turned into a huge disappointment. Norway wildcats are striking out over 90% of the time in their new exploration regions (last I saw only 4 of 64 new wildcats found any oil - not clear if these were of commercial quality).
The wildcat success rate was just the sort of information I
asking for on the Monday open thread. Do you have a source
for this figure? Are there any figures for other countries
other than those for the UK I quoted?
Nick -
After I wrote that post I figured someone would like me to provide the source. Unfortunately, I'm having trouble tracking it down again. I haven't given up, but don't have it yet. I read about these issues in so many places. I recall it was a report out of Norway about challenges in (as I recall) their new Northern exploration region. The numbers were provided in a brief accounting of successes and failures in the area and really struck me at the time given how much Norway is relying on that area to produce. The article was 2 - 3 mos ago. I'll let you know when I get the specifics. Generally, Norway talks about around 30% success in wildcats over previous years, which is available in numerous documents if you Google Norway oil exploration.