Trends in Iraqi Petroleum Production and Consumption

Jonica Newby: So, peak oil, are we there yet?

Kjell Aleklett: Yes, we are there now, and production peaked really in 2008, and the only way to get it up to those numbers again is that the production in Iraq will start very soon because that is the last part with the big oil fields they put in production. So that's the situation now, so that means peak oil was 2008.

Peak oil - the slow slide down ABC science show interview transcript Nov 13, 2010

What do governments whose economics and citizens have become heavily dependent on imports of oil do when the flow becomes unreliable?  The intense attention of the developed world to Middle Eastern political affairs has always been critically tied to oil security....

And whatever their publicized angst over Saddam Hussein’s “weapons of mass destruction,”  American and British authorities were also concerned about violence in an area that harbors a resource indispensable for the functioning of the world economy.

I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.  Thus projections of world oil supply and demand that do not note the highly precarious environment of the Middle East are avoiding the eight-hundred-pound gorilla that could bring world economic growth to a halt. 

Alan Greenspan, The Age of Turbulence: Adventures in a New World, (Cp. 24, The Long-Term Energy Squeeze, p. 463)

Rare indeed is such frank talk from a former high ranking quasi-government official, especial one who is well known for his oblique announcements about the economy and the FED's activities. 

I believe that in this particular case, however, Alan might actually be right.  The US, and global, economy are precariously dependent on continued flows of petroleum from the Middle East.  Moreover, to compensate for the declining production rates from other countries, petroleum production rates from the Middle East no only has be maintained—they would have to increase dramatically in order to support economic growth. 

As Kjell Aleklett intimated, the story of Iraq’s oil production over the next two decades will play a significant role in determining the trajectory of the economy in world, including the USA.  Not necessarily economic growth mind you, but rather, the rate of decline for two pessimistic outcomes: a sharp economic contraction, or, a more gradual economic decline. 

Iraq's future production goals

As I noted in Where in the world does the USA import its oil from?, based on data from U.S. Total Crude Oil and Products Imports (“Total Imports”), I estimate that Iraq was ninth largest petroleum provider to the USA in 2009. However, if Iraq’s production comes anywhere near its planned expansion, this will increase dramatically.

According to the EIA’s Country Analysis Brief for Iraq, Iraq's proven oil reserves were estimated in 2001 to be 115 bbs, and, this may be a low estimate. About 70 to 80 percent of these reserves are in a cluster of super-giant fields in southeastern Iraq.

According to the EIA, Iraq’s Ministry of Oil has estimated that potential production could be as much as 13.3 mbd (~4.8 bbs/yr). This would be much greater than Russia's and Saudi Arabia’s current production rates which are both about 3.6 bbs/yr. There are some very ambitious plans afoot to expand production in Iraq:

... the Iraqi Ministry of Oil signed 12 long-term contracts between November 2008 and May 2010 with international oil companies to develop 14 oil fields. Under the first phase, companies bid to further develop 6 giant oil fields that were already producing with proven oil reserves of over 43 billion barrels. Phase two contracts were signed to develop oil fields that were already explored but not fully developed or producing commercially. Together, these contracts cover oil fields with proven reserves of over 60 billion barrels, or more than half of Iraq’s current proven oil reserves.

As a result of these contract awards, Iraq expects to boost production by 200,000 bbl/d by the end of 2010, and to increase production capacity by an additional 400,000 bbl/d by the end of 2011. When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bbl/d, or 9.6 million bbl/d above current production levels. The contracts call for Iraq to reach this production target by 2017.

EIA Country Analysis Brief for Iraq

Here’s what the Minister of Oil, Hussain al-Shahristani, forecasted in Dec 2010:

Iraq forecast[s] a 17 percent rise in oil output next year and invited companies from South Korea and Kazakhstan to sign immediately a delayed contract for the Akkas gas field, Oil Minister Hussain al-Shahristani said.

Iraq, holder of the world’s fifth-largest oil reserves, wants foreign investors to help it boost production of crude and natural gas. Output of both has suffered from insurgent attacks and a lack of investment since Saddam Hussein’s ouster in 2003. Seeking to end the stagnation, the government has awarded 12 oil contracts and three gas licences.

“Iraq’s oil production capacity will increase to 2.75 million barrels a day early next year,” Shahristani said in an interview in Baghdad yesterday.

The country now produces about 2.35 million barrels of crude a day. Shahristani attributed the expected increase to investments by the international oil companies that have signed contracts to develop Iraqi fields.

Iraq's Crude Production to Advance 17% Early Next Year, Oil Minister Says

Other Iraqi government officials and independent analysts, however, have forecast slightly lower production rates:

LONDON (Dow Jones) NOVEMBER 29, 2010 Iraq is expected to increase crude oil production to around 8 million barrels a day from the current 2.35 million barrels a day in six-to-seven years, a senior Iraqi oil official said Monday.

"I expect Iraq to be one of the world's leading crude oil producers," Thamer al-Ghadban, Prime Minister Nouri al-Maliki's top energy advisor, told an Iraqi petroleum gathering being held in London.

Iraqi Oil Output Seen At 8 Mln B/D In 6-7 Years – Official

BAGHDAD, Dec. 9 (UPI) -- Iraq is concentrating its drive to quadruple its oil output on its six "super fields," which analysts say have the potential to produce in excess of 10.5 million barrels a day by 2017.

That's just short of the Oil Ministry's declared target of up to 12 million bpd in the next six years. There is a lot of skepticism in the global oil industry that Iraq will be able to meet such an ambitious target that would challenge Saudi Arabia's supremacy.

But in recent months, some of the foreign oil companies awarded 20-year production contracts at the Super Six -- Rumaila, West Qurna 1, West Qurna 2, Majnoon, Zubair and Halfaya -- in 2009 have generally reported production increases.

Iraqeyes 'Super Six' to boost oil output

The EIA country analysis brief pointed out several constraints that could prevent the planned 4 to 6 times increase over current production rates:

1) Limited refining capacity using antiquated infrastructures which cannot even meet Iraq’s modest domestic consumption.
2) Full export capacity in Iraq’s Persian Gulf ports in the south which are close to their maximum capacity (~1.5 mbd in 2009).
3) Exports from the Iraq-Turkey pipeline in the north (0.3 mbd) being restricted by sabotage. Iraq has made an agreement with Turkey to expand with Turkey to upgrade its capacity by 1 mbd.

4) There is a need for substantial increases in natural gas and/or water injection to maintain oil reservoir pressure and boost oil production. But gas is presently being flared off, fresh water is in limited supply, and sea water would have to be pumped in via pipelines that have yet to be built.

I think that Tom Whipple's commentary in a recent issue of Peak Oil Review nicely captures the skepticism about Iraq’s production goals:

Iraq, a country consisting of a highly unstable grouping of three separate religious and ethnic groups, has been in nearly constant political and military turmoil for fifty years – which is why it has so much easy-to-exploit oil left. In March the Iraqis held inconclusive elections, took nearly nine months to reach political accommodations and only recently formed a government.

During the past two year year Baghdad held several auctions which resulted in numerous foreign oil companies being allowed into Iraq to rework existing Iraqi oil fields and exploit new ones with the goal of achieving large increases in production. While Baghdad talks of becoming the world’s largest oil producer in the next five years with 12 million b/d of production, most foreign observers say that an increase from 3 million b/d to 5 million over the next five years is more realistic.

Foreign oil companies are already at work in Iraq and production increases have already been reported. The long term outlook, however, is more uncertain. US forces are scheduled to completely withdraw from the country by the end of the year. The centuries’ old conflict among the Kurds, Sunnis, and Shiites is a long way from resolution, and the nation’s infrastructure, water supply and agricultural prospects remain in shambles. For the time being, however, the prospect for growth in Iraqi oil exports remains one of the key factors that will determine the course of world production and the timing and pace of the falling global production.

Peak Oil Review, January 3, 2011

In summary, there is incredible potential but also significant barriers to Iraq's planned increase in production. It remains to be seen if foreign investors and private companies with the know-how will invest in Iraq, or, if Iraq will be just be able to keep up its present level of production. The price of oil over the next few years as well as it stability would likely strongly influence the rate of future production in Iraq.

As you will see, these uncertainties in Iraq’s near-future production potential, in turn, add uncertainties to my USA export analysis.

Iraq's present  petroleum exports

According to the EIA Country Analysis Brief, nearly half of Iraq’s oil goes to refineries in Asia (China, India and South Korea), the Western Hemisphere receivrd about 30% and Europe most of the remainder.

Somewhat similar to Angola, the percentage of Iraqi’s net exports to the USA, has been in decline for the past several years:

I generated the above plot from the data reported in “Total Exports” and from the EIA's Iraq Energy Profile. The plot illustrates a several year downward trend in the percentage of exports to the USA since 2003. For example, from about 56% in 2003 to about 26% in 2009.  Linear regression the data over this period gives an r² = 0.84 and with a slope of about -4 percent per year.  If this trend were to continue, then by 2016, Iraq would export no petroleum to the USA.  It is highly likely that the declining percent to the USA reflects the Asian countries taking an increasing amount of Iraq's production, and, likely be pushing to take more in the future.

Once again, similar to Angola, I think that having no exports to the USA in such a short timeframe is unrealistic.  On the other hand, I don’t see anything that would cause the return of the percentages of exports to the USA to the levels where it was at in the early 2000s. 

As a compromise between applying this linear downward trend versus just taking a 5-year average (i.e., 37.7±4.3%, which seemed too high to reflect the present reality), for the export analysis to follow, I have assumed that the percentage of Iraq’s exports to the USA will buck the downward trend, and just stay at its 2009 percentage (26.3%) going forward.     

Non-linear least squares (NLLS) analysis of total petroleum production

Although there are great expectations that Iraq will be able increase its petroleum production—this has certainly not been the past reality. 

Figure 1 shows total petroleum production for 1965-2009 as reported in the BP statistical review.

The undulations in production roughly mirror the major wars that Iraq has gone through over the past 30 years: the Iran-Iraq War (I-IW) from 1980-88, the First Gulf War (GW1) from 1990-91, and the Second Gulf War (GW2) in 2003.

With the exception of 1979, Iraq's production has never exceeded about 1 bbs/yr over this period.  Compare this with the above predictions of, e.g., 8 mbd in 6 years (2016) or 10.5 mbd by 2017—both of which I have marked in Figure 1 with an "x" and "*," respectively.

Figure 1 shows the best fit of the Hubbert equation to the 2003-2009 period (solid line best fit parameters: “a” = 0.175; Qo = 3.6; Q∞ = 21.9).

Based on the result of this fit, I can speculate on where the Ministry of Oil came up with a 17 percent rise in oil output for next year—17.5%/yr has been the trend for the 2003-2009 period.  The best fit Q∞ value of 21.9 bbs, does not reflect that 2001 estimate of Iraq's reserves equaling 115 bbs. However, 22 bbs might reasonably reflect production from the existing aging fields, if there was no further expansion and development. 

I did another fit using the Hubbert equation to the 2003-2009 period with "a" fixed to 0.175 and Q∞ fixed to 115.  The best fit result (long dashed line best fit parameter Qo=2.2) is in excellent agreement with the Iraqi analyst's estimates of 8 mbd in 6 years (2016) or 10.5 mbd by 2017.  My hunch is that the analysts probably did about the same thing as I just did in order to come up with those predicted production rates of 8 mbd and 10.5 mbd.  And probably a cursory look at such a plot caused the Minister of Oil to come up with that +13 mbd potential maximum in production.  According to my best fit that maximum would occur in about 2025.

So, Figure 1 depicts two dramatically different predictions: one based on the past 6 years of actual production data and one based on what could be if everything works out just right.  My hunch is that the reality will be somewhere in between these two scenarios, and, most likely a stable production at current levels of 1 bbs/yr.  Looking back at its history for the past 30 years, Iraq would be comparatively fortunate if they could just consistently maintain 1 bbs/yr production for the next few decades.

In the export analysis to follow, I will use the NLLS analysis from all three of these scenarios to illustrate the different outcomes that could be forth coming. 

Non-linear least squares (NLLS) analysis of total petroleum consumption

Figure 2 shows the Iraq’s petroleum consumption data as reported in the BP statistical review. 

The first thing to notice is that the vertical scale is an order-of-magnitude less that the production curve shown in Figure. 1.  The second thing to notice is that the undulations in consumption over the past 30 years pretty well match the periods of war in Iraq that I discussed in the context of Figure 1

The red line in Figure 2 shows the best-fit of the Hubbert equation to the most recent period of recovery, from 2003 to 2009 (“a” = 0.0855; Qo = 0.33; Q∞ = 9.89).  A yearly increase in  consumption of 8.5%/yr is a pretty strong, but, it is starting from such a small number that it takes at least a decade before this starts to substantially cut into production.

Predicting future trends in Iraqi petroleum exports

Figure 3 shows the best fits obtained using the Hubbert equation NLLS analysis of the 2003-2009 time span of consumption data and to:

1) Hubbert equation NLLS analysis the 2003-2009 production data,

2) Assuming constant production at 1 bbs/yr, and

3) Hubbert equation NLLS analysis the 2003-2009 production data assuming continuing 17.5%/yr increases in the production rate (“a”) as a reserve (Q∞) of 115 bbs.

These predicted export curves (green lines: solid, short dashed, long dashed, respectively) are calculated based on the differences between the three production scenarios minus the consumption curve shown in the figure.  Additionally, I show the “measured” export data from 2003-2009 time period (i.e., the BP statistical review reported production minus the EIA reported consumption). 

For all three production scenarios, the domestic consumption rate is so small that it takes about a decade to have any substantially effects on exports. 

Under scenario 1, production peaks at 0.96 bbs/yr in 2012 and then declines until by 2030 it is equal to the consumption rate and hence net exports go to zero.

Under scenario 2, domestic consumption slowly cuts into the assumed constant production rate of 1 bbs/yr so that export are down about 10% to 0.9 bbs by 2020, down 17% by 2030 (0.83 bbs/yr) and down about 21% (0.79 bbs/yr) by 2040.

Under scenario 3, the production rate increases dramatically to its peak in 2025 (5 bbs/yr) with an export rate that is nearly the same (4.9 bbs) as the production rate. Production is so large that domestic consumption doesn't affect exports much until after 2040.

Impact on USA

Figures 4(1)-4(3) reproduces the USA production and consumption trends, plus the top eight export’s measured and predicted future petroleum exports presented from the previous article, Trends in Angolan Petroleum Production and Consumption. 

Because there are three different production outcomes considered above, I have produce three versions of this plot with the addition of Iraq’s exportable petroleum to the USA, which equals the predicted total exports (the green lines corresponding to scenarios (1), (2) or (3) multiplied by a fraction corresponding to the percentage of exports from Iraq to the USA (26.3%) as discussed above.

The dark plum circles show my estimate of Iraq’s measured exports to the USA, based on the production and consumption rates, as reported in the BP statistical review multiplied by the fraction correspond to the actual year-by-year percentages to the USA, shown in the earlier graph in this article (titled, “Percent of Iraqi Oil Exports to USA”). 

It is apparent that the first and second scenarios do not change the overall trend in the story, of declining imports to the USA, that I have been telling and retelling for the past several articles.

Under the first scenario, in 2010 USA production plus the top nine importers are providing about 76% of the USA’s predicted consumption. By 2015 this sum is down to 64% and by 2020 down to 54%. Iraqi exports end in 2030, the USA is left with getting exports from Canada and Nigeria. Under the second scenario, the decline in imports are about the same in 2015 and 2020, but by 2030 the imports still coming from Iraq would exceed all countries, expect Canada.

The third scenario is quite a different matter. By 2015, USA production plus the top nine importers still provides 70% of the USA’s predicted consumption and by 2020, this is only down to 67%. From 2019 to 2027, Iraq would actually overtake Canada and become the number one exporter to the USA. By 2030, instead of only 48 to 52% of the prediction consumption being met in scenario 1 or 2, 65% is met in scenario 3.

If the Iraq war was largely about oil, as Alan Greenspan stated, there is at least the potential here for Iraqi petroleum to provide about 10 to 15% of the USA’s predicted consumption needs in the 2020s. However, for this to occur, Iraq’s production rate would have to undergo one of the most incredible decade-and-a-half-long sustained increases in history. Specifically, an average 17.5 %/yr increase in the production rate for 15 consecutive years would be needed to push production to about 5 bbs/yr by 2025.

Can this kind of increasing production rate be sustained year after year, plus all of the infrastructure issues resolved, in the next few years? Personally, I doubt it. I think something like scenario 2 more likely will occur, at best. In the coming years, however, an important thing to keep an eye on will be Iraq’s production rate.

Also keep in mind that even if scenario 3 works out and Iraq managed over the next 20 years to pump out substantially all of their oil, the USA is still looking a decline in exports.

Well well, rounding out the top ten exporters to the USA in 2009 is Brazil-they have a lot of oil, don’t they?

Let’s find out, in the next and final post in this series.

Trends in Angolan Petroleum Production and Consumption

As I noted in Where in the world does the USA import its oil from?, based on data from U.S. Total Crude Oil and Products Imports (“Total Imports”) I estimated that Angola is number eight of the largest petroleum providers to the USA in 2009.

Like Algeria, Angola has supplied substantial amounts of oil to the USA for at least the last 35 years. According to data in “Total Imports,” at least since 1985, Algeria has been among the top 10 of total petroleum importers to the USA.

Angola, after winning its independence from Portugal in 1975 fell into a 27-year civil war with the main two warring faction being the Soviet Union/Cuban-supported MPLA and the USA/South Africa-supported UNITA.

A third but important faction is the FLEC “Front for the Liberation of the Enclave of Cabinda.” Cabinda is important because that is the province where the majority of Angola’s petroleum comes from via off-shore oil fields. Cabinda province is isolated from the rest of Angola by the Congo. Although the civil war in Angola is officially over, the sub-factions FLEC are still an active militant force destabilizing Cabinda.

After a formal cease fire in 2002 Angola started to rebuild, largely supported by its revenue generated by its oil exports.  According to the EIA country analysis brief for Angola, oil accounts for over 90 percent of export revenue and over 80 percent of GDP. China has played a major role in the rebuilding of Angola’s infrastructure, no doubt in the hopes of gaining increased access to Angola’s nature resources, including its oil. (see e.g., Angola: China's African foothold).  Indeed, Angola may have just become China’s top import source in 2010, surpassing Iran and Saudi Arabia (see e.g., Angola becomes China's largest crude oil source).  It remains to be seen if this relationship between China and Angola continues to grow or wane.  For instance, there are signs that the relationship has cooled as indicated by Angolans protesting and attacking Chinese-imported workers, the non-payment of Chinese businesses and decisions by the Angolan state oil company, Sonangol, to block ownership interests by the Chinese-state owned oil company CNOOC.  (Hostility Toward Workers Cools Angola-China Relationship).  Its not clear to me if this is just posturing by Angola in order to get a better deal from China, or, a true change in attitude towards China since 2002.

In 2007 Angola became a member of OPEC and therefore, in principle, subject to OPEC-defined quotas on production.  The change in Angola’s estimated oil reserves after joining OPEC in 2007 gives a nice example of how OPEC members get around the quota system.  Here are yearly estimates of oil reserves from Angola (in billions of barrels), since 1990 as reported in the BP statistical review

I can see the jump from 2001 (6.5 bbs) to 2002 (8.9 bbs) as being due to the end of the civil war.  But the increase from 2006 (9 bbs) to 2007 (13.5 bbs) may include Angola’s joining OPEC and Angola wanting to give itself a higher ceiling under the quota system.

Nevertheless, the EIA country analysis brief points out that there are several up and coming off-shore projects in development and these projects, once online, should add substantially to Angola’s production capacity by about the mid 2010s:

Despite limitations imposed by OPEC, companies operating in Angola are on track to significantly ramp up their offshore developments in the short- and medium-term. Major projects summarized below represent tie-ins to support existing developments and also new developments that are underway. Industry analysts have estimated that Angolan production capacity could peak between 2.5 and 3 million bb/d by 2015 based on existing discoveries

Additionally, the EIA reports expected increased production in several existing fields which would push the production capacity even higher.  So, that jump in reserves in 2007 could be reflective of these new sources of oil—its not clear to me if all of these are figured into the 13.5 bbs estimated reserve or not.   Nevertheless at least to take advantage of this new capacity under the OPEC quota system, I expect to see Angola make new announcements of higher oil reserves in the coming years. 

According to the EIA country analysis brief, Angola’s exports in H1 2009 were split between about one-third going to the Americas (mainly the USA and then Canada) one-third going to Asia (mainly China, India and Taiwan) and the remainder going to Europe and South Africa: 

The above figure depicts the USA as the biggest single country importer, taking about 31% of Algerian net exports.  However, the EIA’s own data shows that Angolan annual exports to the USA have been on a down-trend since the early 90s, as shown from data in “Total Exports” and the EIA's Angola energy profile:

The downward trend since 1992, from about 70% in 1993 to about 25% in 2009, follows a fairly stronger linear trend (r² = 0.86) with a slope of -2.6 percent per year.  If this trend were to continue then by 2019, Angola would export no petroleum to the USA!  I think that is unrealistic, but on the other hand, I don’t see anything that would cause the return of the percents of exports to the USA back to where it was in the 1990s.  China, India and probably others will be standing by to purchase any oil that the USA or Europe doesn’t take. 

As a compromise between applying this linear trend versus just taking a 5-year average, for the export analysis to follow, I have assumed that the percentage of Algeria’s exports to the USA will continue at its 2009 percentage (24.5%) going forward.   

Non-linear least squares (NLLS) analysis of total petroleum production

Figure 1 shows total petroleum production for 1965-2009 as reported in the BP statistical review.

After a fairly flat to declining low rates of production in the mid-70s to early 80s, probably due to being in the heights of the civil war, production picked up again from 1983 to 2001, and then shifted into high gear in 2002, with the end of the civil war. 

As I would expect by now with this sort of data, the Hubbert equation fit to the full data range blows up and looks essentially like an exponential fit (“a” = 0.0815; Qo = 0.22; Q∞ = 7124).  A Hubbert equation fit to the sub-period 1982-2009 also blows up and looks about the same (not shown; “a” = 0.0822; Qo = 0.85; Q∞ = 42082).  Extending this prediction curve out to about 2030 would put Angola’s production rate on par with Saudi Arabia, which I don’t think is realistic given what is presently known about the size of Angola’s reserves.

As shown in Figure 2, fitting the Hubbert equation to the sub-period 1982-2001 did not blow up (long dashed line; “a” = 0.158; Qo = 0.43; Q∞ = 7.23) and fitting the sub-period 2001-2009 also did not blow up (short dashed line; “a” = 0.240; Qo = 1.05; Q∞ = 11.47).  However, the sharp downturn in the fit to the 2001-2009 period, in my opinion, does not seem realistic given that there are several new projects about to come online in the mid 2010s, and, that will take the production up to about 3000 mbd (equivalent to about 1.1 bbs/yr).

Attempts to fit my modified Hubbert equation 9 to the 2002-2009 data range, using the best fit parameters from the Hubbert equation fit to the 1982-2001 range as the fixed values for “a” Qo and Q∞, did not give very satisfactory fits (not shown).  The fit where only fca was varied was poor; the fit where fcq was varied was a pretty close fit to the data but the best value of fcq of 1.14 rockets the production rate up to even higher values than the Hubbert fit. 

To produce a more reasonable model of production than an ever increasing exponential curve, I repeated the Hubbert equation fit to the full data range but with Q∞ fixed to the sum of annual production from 1965 to 2009, 8.3 bbs, plus the reported proven reserve of 13.5 bbs (i.e., Q∞ =21.8 bbs). It was apparent that using the sum of production to date plus 1x proven reserve value as the value of Q∞ doesn’t give a very good fit to the existing production data, as the best fit using this Q∞ predicts a peak production rate that is  less than the present production rate. 

In fact, as shown in Figure ,1 even setting Q∞ equal to 2x or 3x the reserve (i.e., 35.2 and 48 bbs, respectively) still doesn’t given a very good fit to the recent existing production data.  For instance as the best fit using the Q∞ at past production plus 2x the reserve value put the production rate lower than the EIA’s expectations regarding the upcoming projects and the total production capacity of about 1 bbs/yr .  The past production plus 3x the reserve value put production rates above 1 bbs/yr, but not until the mid 2020s which is a decade later than the EIA prediction.  Finally past production plus 4x the reserve value (Q∞ = 61.5 bbs) puts production at about 1 bbs/yr by 2016 which is pretty close to the EIA’s expectations regarding the timing of the upcoming projects and the added production capacity.

Therefore, for the export analysis to follow, I have used the best fit of the full time range to the Hubbert equation with Q∞ fixed to 61.5 bbls.  More on this assumption at the end of the article.

Non-linear least squares (NLLS) analysis of total petroleum consumption

The BP statistical review does not split out the data from Angolan petroleum consumption, so instead I used the consumption data from 1980-2009 as reported in the EIA’s Angola Energy Profile.  

Figure 3 shows the Angola’s consumption data from 1980 to 2009 as reported by the EIA. 

Note that the vertical scale is an order-of-magnitude lower than the scales shown in Figures 1 and 2—that is, like Algeria, historically, Angola has not used much of the petroleum it produces.  Of course, the quarter-century long civil war would explain this.

Around the late 90s there are some signs of increased consumption and then a substantial (about 50%) increase in 2001.   Thereafter consumption continues at this fast rate.

The Hubbert equation to the full data range (solid line in Figure 3) is not very good, so I performed another fit to just the data from 1996-2009 (long dashes best fit parameters: “a” = 0.0837; Qo = 0.11; Q∞ = 11.51).  This gives a much better fit, and it is this later fit that I used for my export analysis. 

Predicting future trends in Angolan petroleum exports

Figure 4 shows the production and consumption data from 1965-2009 and 1980-2009, respectively, the best fits obtained using the Hubbert equation analysis of the 1996-2009 time period of consumption data and the Hubbert equation fit to the 1965-2009 period of production data with Q∞ fixed at 61.5 bbls:

The predicted export curve (solid green line) is calculated based on the difference between the production and the consumption curves shown in the figure.  Additionally, I show the estimated “measured” export data from 1980-2009 (i.e., the BP statistical review reported production minus the EIA reported consumption).  Because the consumption rate is so low these measured export rates are nearly identical to the production rates.

If these predicted production and consumption trends continue, it suggests that Angola will continue to be a net exporter for several decades to come, due to combination of production not peaking until the late 2020s and domestic consumption increasing from a very low present value.  Eventually, by the late 2020s, production peaks and the yearly increase in consumption (8.4%/yr, based on the best fit value of “a”) starts to substantially cut into exports, but still, these curves predict that there would be net positive exports until at least the 2050s.

Impact on USA

Figure 5 reproduces the USA production and consumption data and predicted trends, plus the data from the previously discussed top-seven petroleum exporters to the USA measured and predicted future exports, as presented in my previous article, Trends in Algerian Petroleum Production and Consumption.

The indigo-blue line shows the addition of Angola’s exportable petroleum to the USA, which equals the predicted total exports (i.e., the solid green line shown in Figure 3) multiplied by 0.245, corresponding to the percentage of Algeria total exports sent to the USA in 2009. The indigo-blue circles show my estimate of Angola’s measured exports to the USA based on the BP statistical review and EIA production and consumption data and the percentages of USA exports, derived from the EIA data (shown in the above graph, “Percent of Angolan net Exports to USA”).


Based on the predicted export trend, Angola’s exports to the USA by 2015 are predicted to equal about 0.22 bbs/yr and 0.27 bbs/yr by 2020. That is 143% and 179%, respectively, of Algeria’s estimated exports to the USA in 2009 (0.153 bbs/yr). This upward trend continues until 2027-2030 when the exports peak at 0.32 bbs/yr and then declines as production goes past its peak and domestic consumption in Angola become relatively more significant.

If these trends are accurate, then by 2018, Angola will be second only behind Canada as the most important export source to the USA as Venezuela, Saudi Arabia, Nigeria, Russia and Algeria exports go into decline.

There is more speculation built into these export predictions than I would like, and I could imagine this being on the optimistic side. For instance if the reverse of 13.5 bbs turn out to be an accurate estimates of the present field and new fields about to come on line, then the production curve will follow more closely the curve corresponding to Q∞ = 21.8 bbs. That would leave far less exports, although Angola would still be an important exporter at least out to the early 2030s. Or, if the 15-year trend for steadily declining percentage of exports to the USA continues, then even if Angola had petroleum to export, the amounts going to the USA could become insignificant by the late 2010s. Although I would not discount either of these scenarios, I would like to see more evidence to support them before changing my prediction. 



Wednesday, December 29, 2010
I am not happy with the analysis I did of Angola's petroleum production. I describe below my second attempt at getting a more realistic prediction curve.

I was not happy with my previous analysis because I had assumed a Q∞ value that is 4x the estimated reserves, plus past production, to get the dQ/dt value up to level and time frame that the EIA had predicted based on the upcoming projects (e.g., at least ~1 bbs/yr by the mid 2010s) plus the added production capacity. However, there is no basis for my assuming a Q∞ of 61.5 bbs to get to that dQ/dt. Also, in retrospect I realized that it was incorrect to add past production to Q∞ for the purposes of this analysis because I am only trying to cover a time span from 2001 and on. So, Q∞ should have been fixed equal 13.5 bbs.

Also after re-considering this analysis, I realized that I could take a different approach to get the production rate up to the EIA predicted level and time frame: fix Q∞ equal to 13.5 bbs and fix "a" to the best fit value from fitting the sub-period 2001-2009 (short dashed line in Figure 2; “a” = 0.240). In other words assume that production continues at the same rate as it has been in recent years, and, assume that total recoverable oil equals 13.5 bbs.

Figure 6 shows the result of such a fit using the Hubbert equation (alternating two short and one long dashes), again using only the data from the sub-period 2001-2009. Also for reference, I put two "Xs" to mark the spots that would correspond to a production rates of 2.5 mbd (0.91 bbs/yr) and 3 mbd (1.095 bbs/yr) in 2012 which is the production range estimated by the EIA.

Since "a" and Q∞ are fixed, the NLLS analysis amounts to adjusting Qo to get the best fit to the data (best fit Qo = 0.68). That is, I have esstentially fixed the steepness and area of the curve and used NLLS to adjust the lateral position of the curve in the plot of dQ/dt vs time to best fit the 2001-2009.

Given these assumptions, the production rate would top out at about 0.8 bbs/yr.  That falls short of the range predicted by the EIA. That is, even if the production rate continues to increase at its present rate, for the given estimated reserves of 13.5 bbs, we can get to about 1 bbs/yr, which is mid-range of the EIA estimate.

After further reflection, I realized that I could use the "constraints" feature of the SOLVER function in EXCEL to help estimate what the rate of increase in production rate (i.e., what the value of the rate constant "a" would have to be to give a dQ/dt value of 1 in 2012. That is, in addition to constraining the value of Q∞ equal to 13.5 bbs, SOLVER allows me to constrain the value of dQ/dt equal to 1 specifically in 2012. Then I can perform the NLLS analysis with "a" and Qo allowed to vary to get the best fit to the production data for 2001-2009.

The results of this best fit are also shown in Figure 6 (solide line: "a" = 0.297; Qo 0.46; Q∞ fixed to 13.5; dQ/dt fix to 1 in 2012).

As I expected, the value of "a" has to increase to an even higher value ("a"=0.30) than the value of "a" for the best fit for the 2001-2009 period ("a"=0.24).  So, we are talking about a year-over-year increase in the production rate of about 30% in order to get to the mid-range predicted by the EIA by the mid 2010s. I suppose that that this is possible, since there an annual growth rate in production of 24% over the 2001-2009 period. But it would have to be one of the steepest petroleum production growth rates that the world has every seen.

Of course, as is inherent for any model based on the Hubbert equation, the decline side of the production curve is predicted to be just as steep as the growth side of the curve. That means that after peaking in 2015 production will drop steeply (i.e., 30%/yr) and as illustrated in Figure 6, by 2016, production will be back down to the same level as in 2009, and by 2021, down to about the level it was at in 2001.

So, in the absence of a further increase in reserves, Angola would have a decade of massive production and then just as rapid a return back to the same levels of production at the end of the civil war—would Angola's leaders really do that? Sure they would, there would be massive some profits to re-building the country's infra-structure, and, some profits for them to gain as well.

Figure 7 is a revised version of Figure 4, using this revised production curve (solid line) shown in Figure 6.

Once again, because the consumption rate is so low, the predicted export curve (solid green line) is nearly identical to the production rate at least until the mid 2020s when production decreases, and increased domestic consumption, causes net exports go to zero by 2025.

I think that this more realistic production curve gives a more realistic prediction of Angola's exports as it pertains to the USA.  This is shown in Figure 8, which is a revised version of Figure 5, above.

The curve still predicts that Angola will be an important petroleum exporter to the USA for the next decade. Based on the predicted export trend, Angola’s exports to the USA by 2012 peaks out at about 0.24 bbs/yr, which is higher than that predicted for Algeria or Russia but less than Nigeria. By 2015, exports are about 0.19 bbs/yr which is still higher than in 2009 (0.15 bbs/yr), but by 2020, down to about 0.06 or about 37% of exports in 2009, and then zero by 2025.