US DoE Oil Report "World Areas to Watch" -- Major Oil Exporting Nations that are in Trouble without Y2K factorsgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
In regards to assessing the Y2K impact on oil, perhaps it would help to pick up some Dep't of Energy's Special analysis on what is going on inside certain key oil-exporting countries as it relates directly or indirectly to oil. This report is called
World Energy "Areas to Watch"
I'll just post only the most pertinent aspects for each nation and I'm not sure how many to post to a thread. We've already posted Venezuela separately because of the size of the report and its unique #1 status. It is at this URL on TB 2000.
Here are: World Energy "Areas to Watch"
The countries/regions listed in this report are: a) important from an energy perspective; and/or b) experiencing significant economic, political, or other problems which currently (or likely in the short-term) could affect their energy sectors. Click on the name listed below for a brief discussion/analysis of the main concerns regarding that particular country/region's energy industry.
Information contained in this report is the best available as of September 1999 and can change.
Main Concerns: Ethnic unrest and violence continue in the Niger Delta region of Nigeria, the largest oil producer and exporter in Africa. President Obasanjo took office on May 29, 1999, returning Nigeria to civilian rule for the first time since 1983. Oil production operated by the foreign firms in the region has also been disrupted on several occasions. Nigeria is one of the world's leading oil exporters, with production of over 2 million bbl/d of oil in the first half of 1999, and with exports of around 680,000 bbl/d to the United States. On July 6, 1999, President Obasanjo announced the cancellation of crude oil sales contracts and exploration agreements awarded by the previous government of President Abubakr. A majority of the awards (11 were in Nigeria's deepwater area) were granted to local firms, which were believed to have ties to active and former senior military officials. President Obasanjo has established a commission to examine the propriety of all government contracts awarded in 1999 prior to his administration's assumption of power. Obasanjo himself has been accused of favoring nominees from his native southwest.
In May 1999, Nigeria awarded a repair and refurbishment contract for its 125,000 bbl/d-refinery in Warri to a consortium of Canadian, Dutch and U.S. firms. The contract was awarded to Canada's Ramboil, Dietsman Comerint of the Netherlands and Litwin of the United States. --------------------------------------------------------
Iran is OPEC's second-largest oil producer, with average 1998 crude oil production of 3.6 million bbl/d. Iran's current sustainable production capacity is estimated as high as 4 million bbl/d, but this figure is controversial since Iran may have maintained production levels at some older fields only by using methods which have permanently damaged the fields.
http://www.eia.doe.gov/emeu/security/hot.html#COL Main Concerns: Colombia, a significant oil producer and exporter, faces serious problems, including guerrilla groups active in the country for the past 34 years and now in control of large swaths of the country, right-wing paramilitary groups, a major illicit drug trade, large fiscal deficits, and high unemployment. Despite these problems, Colombias oil production is at an all-time high, up from just over 100,000 barrels per day (bbl/d) in the early 1980s, to an estimated 844,000 bbl/d in the first quarter of 1999 (with net oil exports of over 470,000 bbl/d, largely to the United States). Colombia's government estimates that bombings of oil pipelines alone cost the country about $50 million annually.
On September 5, 1999, rebels ended a 5-day occupation of the Anchiclaya hydroelectric power plant in western Colombia and freed 145 hostages.. The plant is majority-owned by a consortium involving Houston-based Reliant Energy Inc. (REI) and Caracas Electricity company of Venezuela. The rebels initially had demanded a 30% reduction in electricity rates, but apparently settled for less.
Low world oil prices reduced Colombia's export revenues, despite an increase in the volume of oil exports from Colombia's Cusiana and Cupiagua fields. To deal with the resulting fiscal deficit, President Pastrana submitted a severe austerity plan to Congress immediately after taking office. He has also called for large scale investments in education, health, housing, and infrastructure in the countryside (where rebel groups exert significant influence).
Colombia has about 2.6 billion barrels of proven reserves of oil, and possibly 10 times this amount in potential reserves. Oil production is located mainly in the Cusiana and Cupiagua fields in the eastern Andes foothills, and in the Cano Limsn field in Arauca province near the Venezuelan border.
Both Cusiana/Cupiagua and Cano Limsn are 50% owned by the state oil company, Ecopetrol. Cusiana/Cupiagua is also controlled by BP-Amoco (19%), Total (19%), and U.S.-based Triton (12%). The Cano Limsn field is operated by U.S.-based Occidental, and Shell. A relatively recent discovery is Emerald Mountain field, explored by U.S.-based Seven Seas Petroleum, where proven reserves could total about 150 million barrels. There has also been increased interest in Caribbean offshore sites; last year, Ecopetrol awarded four offshore contracts which effectively opened the entire Caribbean coast to exploration. The contracts are with Texas Petroleum, Shell, BP-Amoco, and Arco. About 75 foreign oil companies now operate in Colombia. BP-Amoco is the largest investor in Colombia, with annual investment averaging about $2.4 billion.
Although Colombia is now producing the most oil in its history, under current rates of investment, Colombia faces the prospect of becoming a net oil importer by the middle of the next decade. Exploration activity is at a virtual standstill. Colombias oil sector faces additional challenges, such as a difficult geology (deeper wells in the Andean steel-like rock), frequent terrorist attacks on its oil pipelines, and competition from other oil-producing nations offering better investment terms.
Colombia has about 38 wells in present operation (compared in over 400 in neighboring Venezuela). Only 17 wells were drilled in 1998, although it is hoped that this number will increase to 50 in 1999. Ecopetrol has been criticized for its inefficiency: in the last 10 years the state has had to infuse at least $8.8 billion into the company.
In April 1999, Ecopetrol announced a $600 million expansion and upgrade plan for Cartegena, to add 75,000 bbl/d of new capacity, to bring the total to 140,000 bbl/d by 2004. One private refinery operation in the most advanced stage of development is the Sebastopol refinery, located on the Caribbean city of the same name. U.S.-based Enron is managing the $270 million project. ---------------------------------------------------------
I won't take up the space to rehash the situation in Iraq. Gordon has been tracking this one. Suffice it to say that Iraq's oil infrastructure is 1980s vintage and boasts some of the earliest of the embedded systems. At least that which wasn't bombed back to the stone age during the war. Iraq admits it is not ready and will FOF.
http://www.eia.doe.gov/emeu/security/hot.html#RUSS Russian oil production, for instance, has fallen from its peak of 11.4 million bbl/d in 1988 to only 5.9 million bbl/d in 1998. Coal, electricity, and natural gas production also have declined. Meanwhile, Russia's net oil exports (including exports to other republics of the former Soviet Union), after reaching 4.9 million bbl/d in 1990, fell sharply before bottoming out at 3.2 million bbl/d during 1993 - 1995. Since then, net oil exports have increased somewhat -- to 3.5 million bbl/d in 1998. In 1998, total Russian oil production fell an additional (though small) 0.8%. A 2.2% decline in production by Russian oil companies was mostly offset by an increase in production by foreign/Russian joint ventures. During the first half of 1999, indications are that further declines in investment in Russia's oil sector have led to another small (0.9%) decline in production. A survey by the Russian Petroleum Investor found that Russia's economic/political problems are affecting smaller independent operators and energy service companies, which have been forced to layoff personnel and/or curtail their operations, the hardest. Canada's Fracmaster, for instance, laid off 75% of its Russian work force in 1998. Russia's downstream/retail oil sector has been affected as well, with plans to expand the number of gasoline stations shelved. Major international companies have been affected to a lesser extent by Russia's problems. A few projects have been cancelled, such as BP Amoco at Priobskoye and Occidental at Komi, but a number of factors were considered in these decisions. Elf Aquitaine has downsized its presence, and BHP has pulled out of Russia. However, most major international companies have stayed in Russia after reducing labor costs.
for more see this link: http://www.eia.doe.gov/emeu/cabs/russia.html
In 1997, foreign JVs produced roughly 360,000 bbl/d, or 6% of Russia's total oil output. This 1997 output represented a gain of 50,000 bbl/d, or 18%, from 1996 levels. The two largest JV's are Vanyoganeft (58,000 bbl/d) and Vatoil (52,000 bbl/d), with Polar Lights, LUKoil-Aik, Komiarcticoil, and Nobel Oil all producing over 20,000 bbl/d. While some JVs are involved in new field developments, many ventures are focused on rehabilitation and technical services activities at existing fields. Pipeline access to export markets is key to the profitability of the JVs. In 1997, only about 30% of JV output was exported and sold at world prices, a figure which is comparable to the amount exported by the larger companies as a whole. In September 1997, 6 JVs lost their privileged access to export pipelines - White Nights (Phibro), Polar Lights (Conoco), Chernogorskoye (Anderman-Smith), Petrosakh (Nimir Petroleum), Amkomi (Aminex), and the Siberian-American Oil Company. Of the 7 PSAs approved by the beginning of 1998, only Sakhalin-I involved active foreign company participation. The Sakhalin-I consortium has continued its exploratory drilling program and seismic work, as well as testing two productive wells which were drilled in 1997. The Sakhalin-II consortium (Mitsui, Marathon, Shell, Mistubishi - collectively known as MMSM) is even further along, and expects to begin producing oil at Piltun-Astokhskoye in 1999 after investing $500 million by mid-1998.
Most of Russia's oil exports are destined for European customers, including the United Kingdom, France, Italy, Germany , and Spain. Petroleum exports (except those that pass by rail, truck, and barge) must use the 31,000-mile pipeline network operated by state-owned Transneft.
The majority of Russian oil is exported via terminals in the Baltic and Black Seas. Black Sea exports must pass through the increasingly crowded Bosporus. Russian crude oil also is exported to Europe via the 1.2-million bbl/d capacity Druzhba (Friendship) pipeline.
Many Russian refineries are relatively unsophisticated, oriented towards heavier products, and operating well below capacity. Crude oil is delivered to refineries based upon sulfur content. Low-sulfur oil (less than 0.6% sulfur) is processed by eastern refineries and to the Krasnodar, Tuapse, and Volgograd refineries. High-sulfur oil (with sulfur content exceeding 1.8%) is processed by refineries in Novo-Ufa, Ufa, Ufa Neftekhim, Nizhnekamsk, Salavat, and Orsk. The remaining oil (0.6%-1.8% sulfur content) is processed by refineries close to the producing fields, although blended oil in this sulfur range is also processed by the central refineries such as Moscow, Ryazan, and Yaroslaval.
Several refineries have undergone modernization programs. The Yaroslaval 359,000-bbl/d refinery is undergoing a $416 million upgrade by 2002, and NORSI-Oil is undergoing a $350 million upgrade on its 438,000-bbl/d refinery by 2005. Russia's refined product exports in 1997 to countries outside of the Commonwealth of Independent States (CIS) totaled 1.2 million bbl/d, about one-third of total Russian oil exports, and went primarily to Western Europe.
Proven Oil Reserves (1/1/98): at least 50 billion barrels (varies depending on method used to calculate reserves) Oil Production (1997): 6.1 million barrels per day (bbl/d), of which 5.9 bbl/d is crude oil Oil Consumption (1997E): 2.7 million bbl/d Crude Refining Capacity (1/1/98): 6.9 million bbl/d Net Oil Exports outside FSU (1997): 3.2 million bbl/d Net Oil Exports within FSU (1997): 0.3 million bbl/d Major Oil Customers: CIS, Europe ===============================================================
There are a few other nations listed but small and not probably at all relevant to the US Y2K situation. These are Angola, Caspian Sea, Indonesia, Libya. These along with the ones we've already mentioned above + Venezuela are all on the DoE's Watch List. This "Watch" list does not even mention Y2K factors, though I suspect that it silently weighed upon the editors who put this list together.
Clearly, these nations are already basket-cases or nearly basket-cases and it would not take much to tip these nations into serious oil production problems. As such, all (the above featured nations + Venezuela) but a Russian oil production problem would not affect US consumption directly. More on this will follow
-- R.C. (firstname.lastname@example.org), December 12, 1999
Thanks, R.C.! Your continuous efforts to give good, well documented info on the status of oil is much appreciated.
-- King of Spain (email@example.com), December 12, 1999.
What about Saudi? Wasn't there a report on TB referencing an E-mail from some worker in Saudi (I think from North's site) in which he asserted major problems on the ground there?
Just asking as you seem to have a better handle on this than anyone I've read in my parusing.
-- philosopher (firstname.lastname@example.org), December 12, 1999.
KoS, Thanks. I love your ribald comments and your royally punctual postings.
Well, I've just been posting the DoE stuff. I wasn't in touch with the Saudi source. That was either Dog Gone or Big Dog. I'm not sure which. I guess we need to put out a call on that and see if we can get a response. As I gathered, that source was posting on another forum (Free Republic, I think)... and one of our regulars picked it up and brought it over here. Of course, the reliability factor is low simply due to the 3rd or 4th hand status perhaps, BUT its all we have to work with. I think some other engineer confirmed much of what that Saudi remediator had been indicating though about the general status of Saudi remediation.
Why don't you post a thread asking for the Saudi report from Dog Gone who was in touch with the guy.
-- R.C. (email@example.com), December 12, 1999.
The person who posted on the Saudi situation is back in the US. He still posts on the Free Republic mailing list, but has not had anything to say about the Saudi situation in recent days. That list does have some good information on it, but much of it is duplicated on this forum and other mailing lists. To subscribe, send a blank email to: firstname.lastname@example.org
-- Danny (email@example.com), December 12, 1999.
Thanks for the info re: US oil providers. However, what happens if one or several major producers that do not supply the USA have major problems? Wouldn't that still reduce the total available world supply of oil and cause the price to rise here anyway? For example, if Europe or Japan have an oil shortage, but all of our providers are perfectly ok, the price of oil will rise there and our price will have to rise to match or our suppliers will ship to those markets with the higher price. So it seems to me that it does not matter whether it is our providers or "their" providers - if enough capacity goes off-line around the world, the effect on us is the same.
-- Bruce T. Dague (firstname.lastname@example.org), December 12, 1999.
Thank you R.C. for all your efforts and elucidation.
Another way that Y2K might play out is for example Indonesia to be unable to deliver petro-product to Japan causing Japan to bid higher prices on the open market. Or Libya to be unable to deliver to Europe.
With inventories at a multi-year low today, I suspect that demand is rather inelastic and reduction in supply will tighten to the point that global rationing is implemented along the lines outlined by I.E.A. This appears highly probable even if the refineries and distribution system in North America are 100% compliant. As 100% compliancy is very unlikely, it looks like oil will have probelms at every link of the supply chain.
With oil so integral to modern economies (Economics is a prelude to war as in politics by other means.), I wonder if we could see a TEOTWAWKI scenario even if the USA experiences 80-85% Y2K compliancy.
If so, when do you think such might become apparent? My guess is we should know by February 2000 how overseas are able to perform post rollover.
-- Bill P (email@example.com), December 12, 1999.
Bruce and Bill,
You caught me trying to keep it short and simple. Yes, if Indonesia went down or Libya, or another oil exporter (that doesn't do much oil exporting to the US) it would affect oil prices globally and thus indirectly affect the US from a price standpoint. I was trying to keep the focus more directly linked to actual physical product effects here in the US just to keep the post to a minimum. I should have clarified that I guess. Sorry about that.
-- R.C. (firstname.lastname@example.org), December 13, 1999.
Just a note about Saudi. I have a friend who worked for a large well known oil company who is now retired. He met another retiree from the same company who told him he had a 3 year contract to work for a consortium in Saudi. When he was there just recently he said the papers say everything is okay with Y2K but he didn't see any evidence of work being done and when he asked about Y2K the answer was "It is in the hands of Allah." I hope Allah can handle it.
-- Pete keber (email@example.com), December 13, 1999.