December 11, 2018

Headwinds to Slow Production Growth in 2019

Stratas Advisors

Crude Oil and Condensate Production Overview

Global crude oil production in 2018 Q3 was around 76.9 million b/d, up by nearly 1 million b/d compared to the previous quarter. North America and Middle East are the major drivers for the jump, contributing around 544,000 b/d and 430,000 b/d of incremental production respectively. Russia and CIS and Africa have also increased production during this quarter (by 177,000 b/d and 118,000 b/d respectively). Meanwhile, the production loss in Latin America continued through Q3.

In our forecast, global oil production in 2018 Q4 will increase by about 705,000 b/d. North America and Africa together will boost productions by over 750,000 b/d. Latin America is expected to mitigate its production decline and start to stabilize production from Q1 2019 as new pre-salt projects are scheduled to come on stream in Brazil. Looking forward, global crude oil output is expected to increase to approximately 80 million b/d by 2020 Q4 mainly driven by production growths in North America and Middle East. The new IMO sulfur cap will start to impact the major heavy sour oil producing regions such as Middle East, Latin America, and Russia and CIS from 2019 Q4.

Global condensate production in 2018 Q3 reached around 7.1 million b/d, up by 84,000 b/d. The growth is mainly contributed by North America and Middle East. Looking forward, strong growths in the above 2 regions could push global condensate production up over 8 million b/d by 2020 Q4.

Global condensate production in 2018 Q3 reached around 7.1 million b/d, up by 84,000 b/d. The growth is mainly contributed by North America and Middle East. Looking forward, strong growths in the above 2 regions could push global condensate production up over 8 million b/d by 2020 Q4.

From 2018 Q4 to 2020 Q4:

Who is going up?

US: Strong growth in the Permian Basin will further boost US production by approximately 1.7 million b/d in the next 9 quarters.

Canada: Oil sands will continue to push total Canada crude production up by approximately 370,000 b/d though 2020 Q4 despite hefty WCS pricing discounts and pipeline capacity restrains.

Brazil: New pre-salt fields such as Buzios, Lula Extension, Sepia, and Atapu Sul Etc. are expected to substantially lift Brazil crude and condensate output by over 500,000 b/d in the next 2 years.

Iraq: New projects such as the Sheike Adi and Ber Bahr developments, production ramp up efforts at producing fields such as the Missan, West Qurna, Shaiken fields, and production resumptions from the fields that were previously controlled by the ISIS such as Qayara and Najmah will help Iraq to ramp up production by around 600,000 b/d through 2020.

Libya: In August and September 2018, Libya boosted oil production after the force majeure caused by military attack was lifted. Libya NOC is holding talks with international oil companies to bring them back. So far, BP and ENI are already planning to resume field development in Libya. We expect as security situation slowly improves, the North African country could further lift production by around 180,000 b/d during the next 2 years.

Who is going down?

China: China has long suffered production decline as producing fields mature and there being limited new discoveries to offset the decline. This situation will continue as a drop of over 330,000 b/d is expected for the next 9 quarters.

Mexico: As of 2018 Q3, Mexican oil and condensate production has dropped by over 520,000 b/d compared to 2015 Q1. Although the country has passed a new legislation that liberates the oil sector in 2013, the new president elect- Andres Manuel Lopez Obrador could post some challenges on the reform as he wants to “bring production back home” instead of “handing them to foreigners”. Even though he cannot revoke the previously endorsed contracts with IOCs, any quick production ramp up is unlikely as it takes years for new blocks to commence production. Therefore, the production decline in Mexico is expected to extend to at least 2020. Oil production could further drop to 1.5 million b/d by then.

Venezuela: In recent months, the continuous production loss in Venezuela has showed signs of slowing down. The country is planning to ramp up production in 2019. China could play a role in the process as Venezuela owes China billions of debt which could only be paid back by crude oil. However, given the current financial chaos, without material changes in the management regime in PDVSA and the government, the decline is likely to continue. The new IMO sulfur cap could further curb the country’s heavy sour dominated oil operations.

Crude Quality Overview

Global crude quality has become increasingly light and sweet largely due to strong Shale performance in the US. Looking forward, this trend will continue through our forecasting period as the Permian Basin is expected to sustain a rapid growth. In 2019 Q4-2020 Q1, a noticeable dip of heavy sour oil production is expected as the new IMO sulfur cap will curb the demand for high sulfur fuel oil, hence constrain the production of heavy sour crude.

Major projects

No major oil projects came on stream in 2018 Q3. Looking forward, several medium to large oil fields are scheduled to be brought online within next year, such as the Khurais expansion project in Saudi Arabia with capacity of 500,000 b/d, the Jhohan Sverdrup phase 1 project in Norway with capacity of 325,000 b/d, and the Buzios 2 and 3 projects in Brazil with capacities of 150,000 b/d each etc. 

Table 1: Oil Production Projection Quarterly on Projects Start Between 2017.Q1 To 2019.Q4 (Mbbl/d)

   
No. Projects Region Country Operator Type Capacity Mb/d Situation Status Production Start 2017.Q1 2017.Q2 2017.Q3 2017.Q4 2018.Q1 2018.Q2 2018.Q3 2018.Q4 2019.Q1 2019.Q2 2019.Q3 2019.Q4 2020.Q1 2020.Q2 2020.Q3 2020.Q4
1 Fort Hills-Phase 1 - Mining NORTH AMERICA CANADA SUNCOR Oil 180 Onshore PRODUCING 2018.Q1 44.3 78.0 93.0 108.0 113.0 114.6 128.0 143.0 158.0 173.0 178.6 180.0
2 Stampede NORTH AMERICA USA HESS Oil 80 Deep PRODUCING 2018.Q1 3.0 11.0 31.6 58.6 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0
3 Sm71 NORTH AMERICA USA BYRON ENERGY Oil 5 Deep PRODUCING 2018.Q1 1.6 5.0 6.3 7.0 7.8 8.9 8.8 8.3 7.8 7.4 7.3 7.0
4 Ochigufu WEST AFRICA ANGOLA ENI Oil 80 Deep PRODUCING 2018.Q1 1.6 7.0 16.3 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0
5 Weizhou 6-13 ASIA PACIFIC CHINA CNOOC Oil 16 Shallow PRODUCING 2018.Q1 1.0 5.0 6.0 7.0 9.4 9.4 9.4 9.4 9.1 9.1 9.1 9.1
6 Ruche Marine WEST AFRICA GABON BW OFFSHORE Oil 50 Shallow PRODUCING 2018.Q1 1.0 5.0 6.0 7.0 9.4 9.4 9.4 9.4 9.1 9.1 9.1 9.1
7 Mt Providence GOM USA TALOS Oil 50 Deep PRODUCING 2018.Q1 2.6 8.0 8.0 8.0 12.1 17.3 18.0 15.2 14.8 14.8 14.8 14.8
8 BS-4 (Atlanta/Oliva) EPS LATIN AMERICA BRAZIL QGEP Oil 30 Ultra Deep PRODUCING 2018.Q2 15.6 21.9 21.9 21.9 21.1 21.1 20.3 19.2 18.5 17.9 17.5
9 Buzios 1 LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep PRODUCING 2018.Q2 21.6 86.6 110.0 114.0 122.3 133.0 140.5 142.5 142.5 142.5 142.5
10 Lula Ext. Sul LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep PRODUCING 2018.Q2 20.6 88.0 116.6 130.0 134.2 137.8 140.3 142.5 142.5 142.5 142.5
11 Tartaruga Verde And Mestica LATIN AMERICA BRAZIL PETROBRAS Oil 150 Deep PRODUCING 2018.Q2 6.6 30.0 56.6 79.3 87.7 89.3 92.0 95.3 98.0 94.3 91.0
12 Penglai 19-3 Expansion Ph1 ASIA PACIFIC CHINA CNOOC Oil 30 Shallow PRODUCING 2018.Q2 6.6 22.0 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5
13 Kaikias GOM USA SHELL Oil 35 Deep PRODUCING 2018.Q2 12.0 13.0 18.0 22.3 23.9 25.6 27.3 28.0 28.0 28.0 28.0
14 Khurais Expansion MIDDLE EAST SAUDI ARABIA SAUDI ARAMCO Oil 500 Onshore EPC 2018.Q4    71.6 130.0 160.0 190.0 216.0 241.0 293.0 300.0 300.0
15 Big Foot NORTH AMERICA USA CHEVRON Oil 75 Ultra Deep EPC 2018.Q4 56.0 66.6 61.7 58.0 55.0 53.8 52.5 51.6 49.8
16 Buzios 3 LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep EPC 2018.Q4   46.6 128.3 135.1 138.0 141.1 142.5 142.5 142.5 142.5
17 Lula Norte LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep EPC 2018.Q4     63.0 116.6 142.5 142.5 142.5 142.5 142.5 142.5 142.5
18 Kaombo AFRICA ANGOLA TOTAL Oil 230 Ultra Deep EPC 2018.Q4   20.0 60.0 86.0 150.0 170.0 172.0 172.0 172.0 172.0
19 Egina AFRICA NIGERIA TOTAL Oil 200 Deep EPC 2018.Q4      23.0 89.0 108.0 135.3 140.3 150.0 159.0 156.0 146.0
20 Satah Al-Razboot (Sarb) MIDDLE EAST UAE ADNOC Oil 100 Shallow EPC 2018.Q4      46.0 93.8 93.8 93.8 93.8 95.0 95.0 95.0 95.0
21 Clair Ridge EUROPE UK BP Oil 120 Shallow EPC 2018.Q4 63.3 114.0 114.0 114.0 114.0 114.0 114.0 114.0 114.0
22 Breagh Phase 2 EUROPE UK RWE Oil 6 Shallow EPC 2018.Q4     1.6 4.2 5.7 5.7 5.7 5.7 5.7 5.7 5.7
23 Buzios 2 LATIN AMERICA Brazil PETROBRAS Oil 150 Ultra Deep EPC 2018.Q4   10.0 84.0 122.5 136.0 142.5 142.5 142.5 142.5 142.5
24 Orlando EUROPE UK IONA ENERGY Oil 5 Shallow EPC 2018.Q4 2.0 4.1 3.9 3.8 3.6 3.6 3.4 3.3 3.2
25 UZ750 MIDDLE EAST UAE ADNOC Oil 250 Shallow EPC 2018.Q4     40.8 80.5 110.7 110.6 110.4 110.2 110.2 110.2 110.2
26 Sepat Phase 2 ASIA PACIFIC MALAYSIA PETRONAS Oil 22 Shallow EPC 2018.Q4     1.0 9.2 10.3 10.3 10.3 9.8 9.1 8.5 8.1
27 Mender Phase 1 MIDDLE EAST UAE ADNOC Oil 20 Onshore EPC 2018.Q4
3.3 18.0 18.0 18.0 18.3 20.0 20.0 20.0 20.0
28 Amoca LATIN AMERICA MEXICO ENI Oil 35 Shallow FEED 2019.Q1 4.3 20.0 27.6 35.9 37.9 37.9 37.9 37.9
29 Long Lake South West NORTH AMERICA CANADA CNOOC Oil 30 Onshore EPC 2019.Q1 0.3 6.0 19.0 27.0 28.0 28.0 28.0 28.0
30 Atapu Sul LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep EPC 2019.Q2 36.6 80.0 105.0 117.6 126.8 132.0 137.3
31 Berbigao LATIN AMERICA Brazil PETROBRAS Oil 150 Ultra Deep EPC 2019.Q2 21.6 88.3 115.0 124.0 130.2 137.0 141.1
32 Nasr Phase 2 MIDDLE EAST UAE ADNOC Oil 43 Shallow EPC 2019.Q2 6.8 33.6 40.8 40.8 40.8 40.8 40.8
33 Umm Lulu FFD MIDDLE EAST UAE ADNOC Oil 100 Shallow EPC 2019.Q2 30.0 70.0 90.0 95.0 95.0 95.0 95.0
34 Trestakk NW EUROPE NORWAY STATOIL Oil 200 Deep FID 2019.Q2 5.0 18.3 22.0 21.6 19.4 18.3 17.3
35 Constellation (formerly Hopkins) GOM USA ANADARKO Oil 100 Deep EPC 2019.Q2 10.0 18.3 36.6 41.6 38.7 36.6 35.6
36 Lancaster EPS NW EUROPE UK HURRICANE Oil 35 Shallow EPC 2019.Q2 5.3 11.0 15.6 16.0 16.0 16.0 16.0
37 Oda (Butch) NW EUROPE NORWAY CENTRICA Oil 50 Shallow FID 2019.Q2 3.3 28.3 40.0 37.0 34.2 32.8 30.6
38 Ratna and R Series ASIA PACIFIC INDIA ONGC Oil 25 Shallow EPC BIDDING 2019.Q2 8.2 17.0 21.3 22.6 20.7 19.3 18.0
39 Huizhou 32-5 Redevelopment ASIA PACIFIC CHINA CNOOC Oil 20 Shallow EPC 2019.Q2 6.3 11.0 14.0 17.0 16.6 16.5 15.8
40 Gbetiokun Phase I AFRICA NIGERIA ELAND Oil 40 Onshore FID 2019.Q2 5.3 12.0 13.0 12.8 11.6 11.1 10.3
41 Mariner EUROPE UK STATOIL Oil 55 Shallow EPC 2019.Q3 19.0 25.0 25.0 26.0 34.3 44.0
42 Buzios 4 LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep EPC 2019.Q3 104.3 117.6 123.6 127.1 130.0 133.3
43 Greater Enfield ASIA PACIFIC AUSTRALIA WOODSIDE Oil 120 Deep EPC 2019.Q3 12.6 21.0 21.0 21.0 21.0 21.0
44 Huizhou 33-1 ASIA PACIFIC CHINA CNOOC Oil 30 Shallow EPC 2019.Q3 15.6 24.7 25.3 25.3 25.3 25.3
45 Rabab And Harweel Integrited Project MIDDLE EAST OMAN PDO Oil 65 Onshore EPC 2019.Q3 36.6 57.6 51.0 51.0 51.0 51.0
46 Gbetiokun Phase II AFRICA NIGERIA ELAND Oil 10 Onshore FID 2019.Q3 2.6 6.0 6.0 5.9 5.7 5.4
47 Asab Phase 2 MIDDLE EAST UAE ADNOC Oil 100 Onshore EPC 2019.Q3 50.0 70.0 70.0 75.0 81.6 93.3
48 Forouzan Phase 2 MIDDLE EAST IRAN NIOC Oil 65 Shallow EPC 2019.Q4 15.0 24.0 32.3 39.3 47.6
49 Johan Sverdrup Phase 1 NW EUROPE NORWAY STATOIL Oil 325 Shallow EPC 2019.Q4 76.6 230.0 296.1 304.6 304.6
50 Ca Rong Do (Red Emperor) ASIA PACIFIC VIETNAM REPSOL Oil 30 Deep EPC 2019.Q4 3.0 14.7 14.7 14.7 14.7
51 Appomattox GOM USA SHELL Oil 150 Ultra Deep EPC 2020.Q1 13.3 26.6 40.0 60.0
52 Lula Oeste LATIN AMERICA BRAZIL PETROBRAS Oil 150 Ultra Deep EPC BIDDING 2020.Q1 3.3 40.0 71.6 110.0
53 Sepia LATIN AMERICA BRAZIL PETROBRAS Oil 180 Ultra Deep EPC BIDDING 2020.Q1 5.0 43.3 75.0 105.0
54 Valhall West Flank NW EUROPE NORWAY AKER BP Oil 20 Shallow FEED 2020.Q1 2.6 9.3 11.6 13.3
55 Hadrian North GOM USA EXXONMOBIL Oil 100 Ultra Deep CONCEPTUAL 2020.Q1 5.0 20.0 35.0
56 Baram Delta Eor Development ASIA PACIFIC MALAYSIA PETRONAS Oil 60 Shallow FID 2020.Q2 28.3 36.6 50.6
57 Martin Linge EUROPE NORWAY STATOIL Oil 100 Shallow EPC 2020.Q2 18.3 64.3 70.0
58 Buckskin GOM USA LLOG Oil 30 Ultra Deep FID 2020.Q2 6.6 22.6 30.0
59 Libra Pilot LATIN AMERICA BRAZIL PETROBRAS Oil 180 Ultra Deep EPC BIDDING 2020.Q2 33.3 80.0 110.0
60 Marlim I Revitalization LATIN AMERICA BRAZIL PETROBRAS Oil 150 Deep EPC BIDDING 2020.Q2 18.3 105.0 142.5
61 Liuhua 16-2, 20-2, 21-2 ASIA PACIFIC CHINA CNOOC Oil 65 Deep EPC 2020.Q2 7.6 53.3 60.0
62 Hanz NW EUROPE NORWAY DET NORSKE Oil 42 Shallow CONCEPTUAL 2020.Q2 7.6 17.6 18.9
63 Eirin NW EUROPE NORWAY STATOIL Oil 60 Shallow CONCEPTUAL 2020.Q2 7.0 13.3 16.3
64 Ande Ande Lumut ASIA PACIFIC INDONESIA SANTOS Oil 40 Shallow FEED 2020.Q2 3.3 21.6 25.0
65 Bul Hanine Redevelopment MIDDLE EAST QATAR QP Oil 100 Shallow EPC 2020.Q2 10.0 40.0 50.0
66 Apsara ASIA PACIFIC CAMBODIA KRISENERGY Oil 25 Shallow FID 2020.Q2 1.6 6.6 8.0
67 BSE-11 Block ASIA PACIFIC INDIA ONGC Oil 4 Shallow CONCEPTUAL 2020.Q2 0.3 1.0 1.0
68 Warrior GOM USA ANADARKO Oil 25 Deep DISCOVERY 2020.Q2 1.8 2.0 2.0
69 Vorlich/Marconi EUROPE UK BP Oil 15 Shallow FID 2020.Q2 2.0 7.0 8.4
70 Alligin EUROPE UK BP Oil 130 Deep EPC 2020.Q2 1.4 7.8 8.7
71 Penglai 19-3 Expansion Ph2 ASIA PACIFIC CHINA CNOOC Oil 30 Shallow CONCEPTUAL 2020.Q2 3.3 25.3 28.0
72 Atlantis East Phase 3 GOM USA BP Oil 200 Ultra Deep FID 2020.Q3 11.6 52.5 62.7
73 Liza Phase 1 LATIN AMERICA GUYANA EXXONMOBIL Oil 120 Ultra Deep EPC 2020.Q3 28.3 80.0
74 Nene-Loango WEST AFRICA CONGO ENI Oil 120 Shallow EPC BIDDING 2020.Q3 50.0 84.4
75 Bauge NW EUROPE NORWAY STATOIL Oil 25 Deep FID 2020.Q3 5.0 17.5
76 Santhal Redevelopment ASIA PACIFIC INDIA ONGC Oil 24 Onshore EPC 2020.Q3 4.3 7.6
77 Haliba MIDDLE EAST UAE ADNOC Oil 40 Onshore EPC 2020.Q3 6.0 12.6
78 Christina Lake-Phase G NORTH AMERICA CANADA CENOVUS Oil 50 Onshore EPC 2020.Q3 20.0 45.0
79 Njord Extension NW EUROPE NORWAY STATOIL Oil 25 Deep FID 2020.Q4 8.0
80 B-147 ASIA PACIFIC INDIA ONGC Oil 2 Shallow CONCEPTUAL 2020.Q4 1.2
81 NBP Phase 4 ASIA PACIFIC INDIA ONGC Oil 6 Shallow CONCEPTUAL 2020.Q4 2.8

 

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