OUTLOOK 2004: International
Worldwide Production

Global output prospers despite Iraq

Predictions of a calamity in the global upstream sector caused by a meltdown in oil and gas prices failed to materialize. Much of that shaky theory was based on a couple of mistaken notions about Iraq's oil production infrastructure: 1) That wells and surface equipment were in better shape than has proved to be true; and 2) That US E&P personnel on contract to the Army Corps of Engineers could restore output much faster than has occurred since the official war period has ended.

Indeed, for much of second-half 2003, Iraqi output lingered anywhere from 250,000 to 500,000 bopd under the level that many industry and political analysts had predicted for the period. Meanwhile, the global economy has shown signs of recovery, so that recent increases in Iraqi output have been absorbed without too much concern.

What is remarkable is that oil prices have remained so high, despite the gains achieved in global output. World oil production increased 4%, to 69.22 million bpd. Furthermore, gains were posted in six of the eight regions tabulated by World Oil. The only losses were sustained in Western Europe and South America. The latter is due mainly to political problems within Venezuela.

NORTH AMERICA

Production of crude and condensate output was up 1.3%, to 10.821 million bpd. According to best data available, the increase came from gains in Canada and Mexico, at 1% and 5%, respectively. The largest loss was in the US.

Canada. Conventional crude and condensate output gained 0.9%, to 1.652 million bpd. Total producing oil wells rose nearly 3%, to 55,918. Whatever fear that producers had at the beginning of last year about oil prices falling after war ceased in Iraq proved to be groundless. Prices have remained high for oil, as well as for gas. Offshore output climbed to 336,200 bopd.

Mexico. Output of crude and condensate increased 5.0%, to average 3.37 million bopd. The share of total production contributed from offshore rose to 85%, averaging 2.873 million bopd. Producing oil wells rose 2.3%, to 3,136. About 12% of these were offshore. The gain in offshore production's share is indicative of the investment that state firm Pemex poured into the Cantarell heavy oil complex in recent years.

Others. Cuba chalked up another output increase last year, gaining 7.5% for an average 60,200 bopd. The Ministry of Basic Industry said that producing wells totaled 283, of which 83% were on artificial lift. Production is expected to go higher this year, perhaps reaching 65,000 bopd.

Meanwhile, Guatemala's oil production fell 15%, to 21, 096 bpd. The Ministry of Energy & Mines said that producing oil wells now total 42, all on artificial lift.

SOUTH AMERICA

For the fourth year in a row, South America registered an oil production decline. Output averaged 5.815 million bopd, down 5.6%. It should be noted that unusual political circumstances in Venezuela contributed to the decline, which otherwise might not have occurred. Argentina and Ecuador achieved moderate gains, but Colombia was down again, and Brazil was flat.

Venezuela. Effects from the strike of PDVSA workers a year ago lingered through most of 2003, and oil output suffered accordingly. Production of crude and condensate averaged 2.23 million bpd, down 14%. PDVSA President Ali Rodriguez has predicted that Venezuelan output will average 3.4 million bopd in 2004, including 2.8 million bopd or more produced directly by his company. Whether that happens remains to be seen. Rodriguez estimated domestic consumption at 400,000 bopd. Furthermore, there are rumors that PDVSA's production costs are as much as $4/bbl higher than two years ago. Some former employees allege that the country has lost 1 million bopd of productive capacity. This has been denied vehemently by the Chavez regime, but no one seems to know for sure, either way. Suffice to say, Rodriguez may have considerable tap dancing to do in future meetings with OPEC and the media.

Brazil. Preliminary data from state regulator ANP indicate that the continent's second-largest producer hit a plateau last year at 1.5 million bopd. This is despite the fact that Shell began output from Bijupira and Salema fields last August at 20,000 bopd. Shell is the first private company to produce oil from the Campos basin. About 85% of Brazil's output is produced offshore. Producing oil wells rose 1.5%, to 8,706.

Argentina. As the region's third largest producer, Argentina quietly achieved a 7.5% gain in oil output, to 845,714 bpd. Producing oil wells increased 7%, to 16,100. Of that total, 98.5% are on artificial lift. The Argentine Institute of Petroleum and Gas estimates that oil reserves have risen 13%, to 3.12 billion bbl.

Colombia. For a third straight year, Colombian production decreased, losing 6.9%, to 538,000 bopd. The final average was off just 2,000 bopd from the prediction made by state firm Ecopetrol a year ago. Much of the decline came from losses in the BP-operated Cusiana-Cupiagua fields, the country's largest source of crude. To protect oil production infrastructure, the government has beefed up military security around field sites, and the US even contributed 70 Special Forces personnel to train local troops.

WESTERN EUROPE

Another year of mixed oil production results occurred in the region, with small gains in Norway, Italy, Germany and Denmark being offset by the UK's losses, alone, not to mention a few other countries. Output averaged 5.798 million bopd, down 2.4%.

Norway. Preliminary data show that Norwegian oil production increased 1.5%, to average 3.05 million bpd. Three new fields went onstream during 2003, including Frame, Grane and Mikkel. The latter is a gas/ condensate field. For 2004, the Norwegian Petroleum Directorate expects output to average higher than last year. NPD also expects that in the five-year period ending in 2008, oil production will be slightly lower, but increased condensate output may make up the difference.

United Kingdom. The growing maturity of the North Sea, plus some reluctance on the part of operators to invest in the region has brought yet another decline in British production. Last year's average was 2.1 million bopd, down 8.3%. In an effort to prop up output and encourage new field developments, the central government has introduced “promote” licenses, to encourage smaller independent operators to exploit 300 undeveloped discoveries. These tracts can be obtained for 10% of the normal E&P licensing cost. Officials estimate that there are 20 billion boe of reserves waiting to be discovered, developed or produced on the UKCS.

EASTERN EUROPE/FSU

The Former Soviet Union's impressive restoration of oil output continued for a fifth straight year. FSU production jumped 10% higher, to 10.2 million bopd. Outside the FSU, in the smaller Eastern European countries, output was down 6.4%, to 211,800 bopd.

Russia. Operators added another 832,000 bpd back to Russian oil production. Last year's average was 8.39 million bopd, up 11%. About 7.63 million bopd, or 91% of the total, was produced by the integrated Russian companies. Among these firms, LUKoil produced 1.6 million bopd (up 4%), Yukos averaged 1.65 million bopd (up 18.6%), and Surgutneftegas achieved 1.06 million bopd (up about 10%).

Other FSU countries. Outside Russia, the other FSU republics improved 6%, to 1.82 million bopd. Kazakhstan gained 8.6%, to 1.02 million bopd, while Azerbaijan produced 308,726 bopd for a 1.2% improvement. Turkmenistan achieved a 7% increase, to 207,743 bopd.

AFRICA

A strong gain was posted by African oil production, which rose 6.5%, to nearly 8 million bopd. Most of the increase was contributed by OPEC members Algeria, Nigeria and Libya. Equatorial Guinea surpassed Gabon and Sudan, but whether that gain in stature holds remains to be seen.

Nigeria. Output of crude and condensate grew 8% and averaged 2.18 million bpd. More than a third was produced by the largest operator, Shell. ChevronTexaco has roughly a 500,000-bopd capacity, and ExxonMobil can produce up to 750,000 bpd of crude and condensate. The latter firm announced plans to boost oil recovery by 110,000 bpd via the $1.7-billion, East Area Additional Oil Recovery project. The site is 20 mi offshore, in water depths ranging from 85 to 100 ft.

Angola. Production took a “breather” last year, gaining 2,500 bopd, to average 902,500 bopd. This plateau will not last long, as a number of field projects are underway to add more capacity. ExxonMobil's Kizomba A development is slated to go onstream this year. ChevronTexaco remains the leading producer at about 60% of country output. The government has predicted a rise to 1.6 million bopd by 2005, but that goal appears unachievable at the rate that field projects are slated to go onstream.

Other countries. Sudan's Ministry of Energy and Mines has plans to allow the Greater Nile Petroleum Operating Co. to increase output to 300,000 bopd from last year's 240,000-bopd average. The CNPC-Petronas consortium will begin producing 165,000 bopd in 2005

In Chad, first oil was achieved last October, and output averaged 110,000 bpd initially, enroute to 250,000 bpd.

MIDDLE EAST

Most of the region's OPEC members chalked up significant production increases. However, some of the gains were needed to offset a nearly 800,000-bopd drop in Iraqi output. Other than Iraq, the only nation in the region that posted a lower rate was Turkey. Regionwide, production averaged 20.98 million bopd, up 7.3%.

Saudi Arabia. By itself, the kingdom made up the losses in Iraqi production and then some. Saudi output gained about 1.2 million bopd, to average 8.45 million bopd, a 16.5% increase. Saudi Aramco officials claim an excess capacity of 2 mil-lion bopd, or a bit more than 10 million bopd of total capacity. They have stated that this 2-million-bopd buffer will be maintained while the company's overall capacity grows.

Iran. Production of crude and condensate jumped 10% higher, to 3.775 million bopd. Government officials in recent months have claimed a 4.2-million-bopd capacity, thanks to so-called “production maximization” projects. After going onstream at 20,000 bpd, output at Balal offshore oil field has risen to 40,000 bpd. Total has also transferred operatorship of the field's platform to state firm NIOC.

UAE. Output mounted a strong comeback in Abu Dhabi, gaining 16% while averaging 1.925 million bopd. Production appears to have also come up a bit in Dubai, where a similar percentage gain resulted in a 250,000-bopd average. Some of the Abu Dhabi gain can be traced to local operator ADCO's expansion project onshore, where the goal is to produce 1.4 million bopd by 2005. That would be a third greater than last year's 1.05-million-bopd rate. Based on new seismic work, state firm ADNOC believes that it can substantially increase output in Abu Dhabi's offshore fields in the next several years.

FAR EAST

The minor output loss sustained in 2002 has been reversed, if preliminary data prove to be accurate. Far Eastern production averaged 6.58 million bopd, a gain of 1.1%. This improvement occurred despite a nearly 100,000-bopd loss by Indonesia.

China. Miraculous is a word that comes to mind when describing the ability of Chinese engineers to edge the country's output ever so slightly higher. Last year, the country produced 3.22 million bopd, up 0.6%. Output was split between PetroChina (2.1 million bopd, up 0.6%), Sinopec (742,356 bopd, up 6.2%) and CNOOC (offshore at 353,425 bopd, up 1.2%). Sinopec's gain is more impressive when one considers that its Jiangsu Oilfield Co. unit sustained production losses last July, when about 1,000 wells were inundated by the flooding Huai River.

Indonesia. Mark down another sub-par year for Indonesian output. Increasingly, the country is looking like a gas province that just happened to have considerable oil reserves, much of which have been produced. Output fell 8%, to at 1.15 million bopd. Not everything in the oil sector was negative. Unocal put West Seno oil field's Phase 1 onstream last August at 14,000 bopd. By the end of 2003, output was between 35,000 and 40,000 bopd. In late 2005, Phase II will go into operation, hiking field output to 60,000 bopd.

India. Production rose 6.1%, to an estimated 673,500 bopd. Of that total, 77% was produced by state firm ONGC. The company reported that it produced more than 518,000 bopd, of which about two-thirds was offshore. ONGC late in 2003 was tendering an initial $500-million turnkey contract for work that is part of its $2-billion redevelopment of Bombay High offshore oil field. When work is completed, output will have been restored to more than 350,000 bopd.

SOUTH PACIFIC

A production loss sustained in 2002 was more than compensated for last year, when regional output gained 7%, averaging 796,300 bopd. Australia was up significantly, while New Zealand was down and Papua New Guinea was almost flat.

Australia. One of the more significant year-to-year hikes in oil output was achieved by Australia. Production averaged 705,000 bopd, up 9%. In recent years, Western Australia has become the runaway leader among the states, and its output last year exceeded 550,000 bopd. Victoria was a distant second at more than 127,000 bopd. Queensland contributed 12,900 bpd, much of it condensate. Geoscience Australia reported that oil reserves at the end of 2003 totaled 4.405 billion bbl. Of that amount, 4.177 billion bbl were offshore. Gas output was 1.21 Tcf, and gas reserves totaled 134.9 Tcf.  

 World crude/condensate production by countries, 2003 and 2002*