Friday, October 5, 2012

Predicting Global and Regional Petroleum Consumption Trends Part 4: Africa

I am back for the next installment of my series attempting to predict future petroleum consumption for nine different regions of the world—this time its Africa.

I have a little bit more time today so I will give a bit or background and review some of the findings so far in the series. 

A major feature of this series involves the use of what I call a “PIE analysis” to predict consumption for each region of interest.  PIE stands for the proposition that a region’s Petroleum Consumption rate equals, or is at least proportional, to: Production rate – Export rate + Import rate.  The PIE analysis is made possible because the BP review presents data that can be used to derive the production rate for the nine regions of interest AND to derive the absolute export and import rates between all nine of the regions.  To the best of my knowledge, no one has attempted such an analysis before. 
My PIE analysis has some interesting differences and contrasts to the global export land model analysis “ELM analysis,” that I performed about a year-and-a-half ago in a seven-region analysis (see Estimating the End of Global Petroleum Exports). 
The ELM analysis is driven by the assumption that the projected future consumption rates of any of the net exporting regions continues on their upwards path, unfettered, until disaster strikes. That is, for the ELM analysis, it is assumed that each of the net exporting regions will continue along their present consumption rate trend, unfettered, until consumption equals the region’s predicted production rate, at which point, all hell breaks loose.  At that point, petroleum exports stop entirely, and the consumption rate trend shifts to match whatever the rate of production is at that time.  And, usually at that point, production rates are in decline, so this means shifting from increasing rates of consumption to decreasing rates of consumption while at the same time exports hit zero.  Changing export trends for either net exporting regions or net importing regions was not considered in the ELM analysis.  Rather, predicted net exports from a region are given by the predicted future consumption rate trend minus the predicted future production rapid trend. 

In contrast, the present PIE analysis is driven by the assumption that the predicted future export rates of ALL of the regions continues along their present trends, until disaster strikes.  That is, for the PIE analysis, it is assumed that each of the regions will continue along their present export rate trend, as limited by the region’s, predicted production rate.  Consequently, each region’s predicted future consumption rate trend is subservient, and equal to, the sum of its predicted future production rate minus its predicted future export rate plus its predicted future import rate, those import rates being provided by the sum of all the export rates from all the other regions into the region of interest. 

We have already seen in this series one disastrous consequence of continuing along such a trend.  Part 3, showed how the former Soviet Union’s (FS) consumption rate would be driven to zero by about 2027 if its present export trend were to continue.  In contrast, my the ELM analysis for FS suggested that if its present consumption rate trend were to continue unfettered, then FS’s net exports would be driven to zero by about 2027.  This is somewhat similar to the ELM analysis for ME in part 2, which suggested that, if the ME’s consumption rate rates continues unfettered, then consumption would rise to equal production by 2033, at which point, net exports go to zero.  Unlike FS however, the ME’s exports are on a strong downwards trend, and by taking this trend into account, the PIE analysis predicted that by moderating its increase consumption, the ME can continue to export petroleum into the mid 2050s. 

The ELM and PIE analysis would then seem to be providing boundary conditions for ME’s and FS’s future petroleum consumption rate and export rate trends. 

More generally, I tend to think of the ELM analysis as a mainly regional consumption-, or, a demand-driven model, while the PIE analysis is mainly a regional production-import-export-, or, a supply-driven model.  When it comes to a finite material resource like oil, everyone, perhaps except economists and politicians, would understand that the resource’s supply will ultimately control the resources consumption rates.   Still, regional demand can influence regional consumption rates, and, I think of the existing export and import trends to and from each of the nine regions are representing that demand.  This is what attracted me to doing the PIE analysis in the first place.  However, you can probably already see from the analysis done on ME and FS that some future interventions into the analysis are likely warranted to avoid the apparently extreme trends of the present.  This is a point I will return to after finishing my nine-region survey.

Okay, enough background—read part 1 if you desire more details about the PIE analysis protocol. 

Africa’s production consumption and net export trends
Africa (AF) is presently the third largest net petroleum exporter of the nine regions, behind ME and FS, and as you will see, an important supplier of petroleum to North America (NA) and Europe (EU), and increasingly, to China (CH) and the remaining Asia-Pacific region (rAP).  But how long can this continue, given AF’s predicted production rate trend?

Figure 12 presents the reported production, consumption and calculated net exports rates (dark blue, bright red and dark green open circles respectively) and the corresponding nonlinear least squares analysis (NLLS) best logistic equation best-fit curves (solid lines with the same respective colors ). 

Production rates in AF follow three distinct trend periods, which I modeled using three separate logistic equation fits to 1965-82, 1983-2002 and 2003-2011, respectively.   Similar to ME, consumption rates in the AF are well-modeled using a single logistic equation fit to the entire 1965-2011 time span

The best fit parameters of Qo, Qand the rate constant "a" are summarized in Table 4 below:

Table 4 summary of best fit parameter for production and consumption for AF

Qo (bbs)
Q (bbs)
a (yr-1)
Production 1965-82
Production 1983-2002
Production 2003-2011
Consumption 1965-2011

The logistic equation best fit for the 2003-2011 time range suggests that production rates peaked in about 2007 and is now in a fairly steep decline, if production rate trend continues to follow the logistic equation for this time range.

Because of the steep decline in predicted production (blue line) and increasing rates of consumption (red line), it doesn’t take long for consumption to equal production—about 2018.  This is actually right on pace with my older ELM analysis done in “Estimating the End” using only the production and consumption rate data up to 2009.   According to either my older, or the present, ELM analysis, at this point, net exports (green line) go to zero and the consumption rate would either reverse its trend and start dropping dramatically, in accordance with the predicted declining production rate, or, AF would have to become a net importer of petroleum.

What does my PIE analysis do with the data for AF? 

Predicting Petroleum Export Rates from AF to other Regions
Figure 13 shows the relationship between petroleum production rates and export rates for the AF, as already worked out in my previous study from a few months ago.   This is actual the same as Figure 5 in Part 2 the “Relationship between Petroleum Exports and Production.”

AF’s total export rate, expressed as a percentage of it production rate, is in a fairly flat to slightly increasing trend (black Xs and black linear regression trend line, r2=0.17).  The proportion of AF’s production that gets exported is very high, in a range from 72 to 82 percent of total production. There is a weak increasing trend for the proportions of those exports to go to NA (r2=0.15 dark green line), a strong trend for increasing proportions to CH (r2=0.96 pink line), and, for declining portions going to EU (r2=0.73 blue line) and to rAP (r2=0.25 blood red line), with smaller proportions going to the remaining regions.

Figure 14 shows predicted regional exports from AF to the other regions, based upon the combining the production rate trends shown in Figure 12 with the export trend lines shown in Figure 13.

Because AF’s production rate appears to have peaked in 2007 and decline thereafter, AF’s total exports are also predicted to peak about the same time (2008) and also decline.  More specifically, exports to the major destinations of EU, NA and rAP are predicted to have peaked around 2006-2008, and in 2011, for CH.

The upward export trend to CH is similar to that of FS’s exports to CH in that, like FS, AF’s absolute petroleum exports to CH never get much higher that they are now because AF’s production rate is predicted to rapidly decline.  Still, this trend means that by the early to mid-2020s, AF’s exports to CH equals or exceeds AF’s exports to NA or EU.   But, by 2028, AF’s total exports are less than 0.2 bby, and so, the absolute amount of petroleum being exported to any of these regions is much lower than today.

Predicting Petroleum Rates to AF from other Regions
Unlike ME and FS, AF does have imports from other regions that are significant enough to be documented by the BP review.   This is accounted for as, part of my PIE analysis, as imports into AF corresponding to the exports from the other eight regions to AF.  For instance, the brown curves in Figure 3 of Part 2 and Figure 11 of Part 3 show the predicted trend lines of ME’s and FS’s exports to AF.   For each of the other regions, there are analogous curves, which add up to correspond to AF’s total imports.   Figure 15 shows the predicted regional imports to AF from the other regions.

The first thing to note about Figure 15 is the vertical scale, which is about an order-of-magnitude lower than the vertical scale for exports shown in Figure 14.  That is, AF’s present import rate is almost an order-of-magnitude lower than its export rates, although by the late 2020s or 2030’s because exports decline so much, AF’s imports may exceed its exports—i.e., AF may become a net importer. 

Figure 15 also illustrates that AF’s largest import source has been the ME, but, imports from ME to AF also have been in steep decline from 2000 to 2011.  The extrapolation of this trend results in imports from ME hitting zero in about 2027.  This reflects the combination of the predicted tread for declining proportions of ME’s production being exported, and, the predicted trend of declining production rates from ME (see Figure 3 of part 2; the brown corresponding to imports to AF, which is just barely visible in this figure because of the larger scale).  Declining petroleum imports from ME to AF have been mitigated over the past decade by EU’s increasing exports to AF.  But, EU’s exports to AF are predicted to decline over the next decade, mainly due to the prediction of continuing declining production rates in EU.  By the mid-2020s, exports from NA, rAP, and CH become more important than EU, and these sources help keep AF’s imports between 0.16 and 0.2 bby out to 2065, which is the time-limit considered for the present study. 

Predicting Consumption Rates for AF based on the PIE analysis
First, a few remarks about normalizing the predicted consumption and net exports based upon a comparison of reported consumption rate versus the consumption calculated from PIE for the time range (2000 to 2011) where I have actual data.  For AF, the average calculated consumption rate was 0.119 ± 0.104 bby higher than the reported consumption rate reported in the BP review. Therefore my normalization for AF consisted of subtracting 0.119 bby from the predicted future consumption rate and adjusting total net exports upwards by this same amount.  For ME and FS, because they have substantially no imports, I felt justified in distributing this correction in exports proportionally among the individual absolute exports to each of the other regions so that they sum up to the adjusted total net export amount.  But, I am not comfortable doing the same for any of the other regions, like AF, that has both significant exports and imports.  That is, I don’t know how this correction could be proportionally distributed among both the absolute export and import amounts individually going to and coming from the other regions.  Therefore the absolute exports amounts shown in Figure 14 are not further adjusted to include this correction.  

Figure 16 shows the production, consumption and net export data, and corresponding best fit curves, the later two now shown as dashed lines.  Added is the predicted net export (light green solid line representing total absolute exports minus total absolute imports plus the +0.119 bby correction) and consumption (blood red solid line) prediction curves based on my PIE analysis (also with the -0.119 bby correction). 

Figure 16 shows that, if AF’s production rate follows the logistic equation best fit (solid blue line), and AF’s export and import rate trends continue along the lines shown in Figures 14 and 15, respectively, then the predicted total export rate curve (solid green line) is extended beyond 2018 into the 2030s before hitting zero in about 2033. 

But, now consumption for AF is seriously curtailed.  Instead of continuing increases in consumption to about 2019 as suggested by the ELM analysis, the PIE analysis suggests a continuing decline in consumption until the 2030s.  The consumption in the 2030 and on doesn’t go to zero, not because of continuing production, but rather because imports are predicted to continue (see Figure 15 black line). 

Similar to FS, AF’s production-export-import driven PIE analysis, in Figure 16, is suggesting quite a different consumption rate trend than the consumption-driven ELM analysis for AF, in Figure 12.  The consequent net export trends resulting for these two analyses suggest the boundary range for AF’s net exports assuming the two alternative predictions, of consumption trends verses production export and import trends, embodied by the ELM and PIE analysis  respectively. 

Regardless of which of these trends, or if something in-between, is followed, the next decade is predicted to see the continuing dramatic decrease in net exports to somewhere between zero bby (ELM) and 0.5 bby (PIE) by 2021.  This would represent a 2 to 1.5 bby loss in net imports to other regions of the world, most notably exports to EU, NA, CH and rAP (Figure 14). 

Although this would have varying degrees of negative economic consequences for these four regions, the economic consequences to AF would be even more devastating.  Because the governments of many of the petroleum exporting countries in AF are highly dependent on revenues from these exports, it is hard for me to imagine how there could be political or economic stability in these countries in light of the declining export trends revealed in these analysis.    
Next time, I will turn my attention to the final net exporting region of my nine-region analysis: South America

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