The dramatic fall of Mexican oil production, and its largest field Cantarell, is often cited as a signature example of the problems facing Non-OPEC supply. Since the production highs of 2004-2005, Mexican production has lost over 800 kbpd (thousand barrels per day) which is fairly dramatic for a country that was producing around 3.4 mbpd as recently as 5-6 years ago.
But as accelerated as these declines have been in Mexico, another oil producing region has seen even quicker declines. The North Sea, which comprises “United Kingdom Offshore, Norway, Denmark, Netherlands Offshore, and Germany Offshore” has just lost 25% of its production in less than 24 months, falling over a million barrels a day. | see: North Sea Crude Oil Production in mbpd 2008-2010.
I mention this because as 2010 comes to a close, it appears that for the fifth year in a row the peak production year of 2005–in which the world produced oil at a rate of 73.718 mbpd–will once again not be exceeded. This is truly an astonishing result given that the new pricing era for oil began in 2004. For over five years national oil companies and publicly traded oil companies have been free to sell oil into an ever-rising price environment. What’s more intriguing is that OPEC–which currently accounts for about 42% of global supply– has been roughly steady in producing 30-31 mbpd while Non-OPEC, accounting for the majority of world supply at 58% has struggled with decline.
Another region in Non-OPEC that has disappointed is Canada. While Canadian oil production soared coming into the last decade, its production halted starting in 2006 and since then has oscillated around 2.6 mbpd. There is much hope for future increases from Canada and there is even a kind of mini-myth taking place in the US right now that Canada will be a strong source of future supply to the US. However, what has happened in Canada the past decade is that cheap conventional barrels of oil have been replaced with expensive tar sands barrels of oil. The result? Running in place in terms of supply, but at a much higher cost structure.
One of the methods EIA Washington and IEA Paris have increasingly relied on in recent years to obscure the very serious and now very real problem of oil depletion is to include biofuels and natural gas liquids in the accounting of global oil production. The technique that both agencies use to conduct this obfuscation is a familiar one, in which the key information is aggregated (buried) into a much larger barrage of data and presentations. For a scholarly look at the methods governments use to work around their obligations to inform the public, do watch the one hour lecture that Jay Rosen gave to the World Bank earlier this year. Rosen’s deconstructions of the media have been very helpful to me, over the past two years. See his blog here: PressThink.org. Rosen describes the use of opacity as a kind of hiding in plain sight, or secrecy by complexity.
In order to rebut this Secrecy by Complexity it’s the obligation of responsible energy analysts to explain the falsehood of adding biofuels and natural gas liquids to measures of oil production. The reason is simple: natural gas liquids are not oil, and they contain only 65% of the BTU of oil. Worse, biofuels are barely an energy source themselves and are the product of a conversion process of other energy inputs. Accordingly, the world is not producing 84, or 85, or 86 million barrels of oil per day. Nor will the depletion of oil be solved by the production of biofuels in the future.
When the EIA in Washington falsely composes such forecasts, aggregating future natural gas liquids and ethanol into a supply picture for “oil” as they do each year in The Annual Energy Outlook, this disables the public’s ability to accurately understand the true outlook for global oil supply. It’s not surprising that the government uses opacity and secrecy by complexity to handle this extremely important issue. The loss of cheap energy, the loss of the cheap BTU that oil has provided to OECD nations for the past 70 years, is a crucial factor in the dilemma the West now faces: a newly chronic economic restraint that refuses to go away.
Further Reading on EIA Secrecy by Complexity: The Ascent of Middle East Food and Energy Demand