[Pops]

Matt at Crude Oil Peak has a good article on Russian exports. You'll remember Russia is the big reason we are not already in decline...

Conclusion:

Russia is at its 2nd and last oil peak. The easy oil is gone. The FSU export peak comes ahead of the production peak. Some oil importers can manage a 2-3% decline rate for some time. But watch out for those export decline rates when the many small green fields can no longer offset decline rates of legacy brown fields running at -4% pa and local demand still growing.

Lots of good info at the link...

http://crudeoilpeak.info/fsu-crude-oil- ... st-2-years

[dissident]

They were predicting the collapse of Russian oil production before 2010 at The Oil Drum for years. Something has gone wrong with their assumptions. The export decline has nothing to do with any production decline, it is due to rapidly growing domestic consumption (the Export Land Model of westexas). The streets of Moscow and St. Petersburg and in gridlock from cars which did not there 15 years ago. Car use is exploding in other places even though the gasoline price is about the same as in the USA (there are no subsidies like in Venezuela and Saudi Arabia).

[ROCKMAN]

dis – “The Oil Drum…Something has gone wrong with their assumptions.” I often made the same point during my days at TOD: what are the freaking assumptions you’re not telling us about? LOL. And I would make the same point: if you add those assumptions as part of your prediction then you’ll have a much easier job of explaining why you were wrong.

Lots of examples but I’ll offer the most obvious: the US shale plays. It would have been easy to predict in 2004 no potential for the boom IF you added the assumption of $35/bbl oil for the next decade. They might have been wrong about the price prediction but there’s no great sin there IMHO. OTOH if one had predicted $100+/bbl in a few years than any expectation of an upsurge in drilling and production would make sense.

This was my constant complaint at TOD: any prediction of recoverable reserves and future rates was absolutely meaningless if it didn’t include a pricing assumption. Yet with almost no exceptions such predictions were always being offered. It ain’t rocket science: the production of any commodity will be determined as much by pricing as any other parameter…and often completely determined by prices. And yet debates would rage for weeks over numbers which were never qualified with respect to pricing. A complete waste of time IMHO.

[SamInNebraska]

This was my constant complaint at TOD: any prediction of recoverable reserves and future rates was absolutely meaningless if it didn’t include a pricing assumption. Yet with almost no exceptions such predictions were always being offered. It ain’t rocket science: the production of any commodity will be determined as much by pricing as any other parameter…and often completely determined by prices. And yet debates would rage for weeks over numbers which were never qualified with respect to pricing. A complete waste of time IMHO.

So what is your opinion on organizations like the EIA, who publish both their estimate of future production and the price as well?

[Pops]

Think we could stay on topic for just a little while?

Of course it has to do with rising internal consumption, lol just like before the US stopped exporting and then peaked. It definitely does have to do with production and nothing to do with TOD, if you read the article you'll understand instead of me reposting everything here. Russia's old fields are going away and the new fields coming on-stream are not keeping up.

[Subjectivist]

So the USA and EU are using less oil because of the messed up economics but the Middle East, south Asia and east Asia plus the FSU are all using more than before. I have a good idea how the Middle East and east Asia, China can aford to grow their use, but the FSU needs the export income from its oil. How can thet keep losing all that income with internal use? Or do average people in the FSU have to pay market rates so the government stil makes the same income selling oil internally as externally?

[Pops]

This looks pretty good
http://www.aei.org/outlook/foreign-and- ... l-and-gas/

[SamInNebraska]

Think we could stay on topic for just a little while?

Of course it has to do with rising internal consumption, lol just like before the US stopped exporting and then peaked. It definitely does have to do with production and nothing to do with TOD, if you read the article you'll understand instead of me reposting everything here. Russia's old fields are going away and the new fields coming on-stream are not keeping up.

I suppose there is always following the US example as their fields age?

http://www.eia.gov/analysis/studies/worldshalegas/

Table 4 Page 8

75 billion barrels? Has the Bakken beat...time for them Russkies to get drilling.

[Pops]

LOL
Just Wait!

[ROCKMAN]

Sorry Pops…let myself get sucked into it.

Over the years I’ve seen one report after another as to how inefficiently the Russian oil industry operated. But when the Soviet Union began to break up some folks saw the potential for a more commercial focus to help Russian production reach higher levels. That didn’t appear to happen as Russian oil production dropped from almost 50% from 1989 to 1994. But it did eventually start climbing around 2000 before we saw oil prices begin to recover. But increasing prices by 2002 would seem to have helped Russian production to increase about 50% by 2009. But 2009 also marked the beginning of flat to slightly decreasing exports of Russian oil. So perhaps some free market democracy has helped grow the ELM beast in Russia. And maybe perhaps improved efficiencies also drove those old fields to depletion levels they would have reached long ago had they been managed properly from the start.

As far as the recent drop in Russian production forecasting their PO I thought I would look at how US oil exports changed as we hit our PO. Was a bit surprised:

http://www.eia.gov/dnav/pet/hist/LeafHa ... rexus1&f=a

While US oil exports dropped to nearly zero from 1959 to 1977 they boomed in 1980 and didn’t drop back close to zero until 2000. But the volumes were never huge compared to consumption: peaked around 330k bopd in 1982. Interesting that we are now exporting as much oil as we did in the early 50’s when the US was considered the Saudi Arabia of the time.

Check the chart out. I suspect it holds a few surprises for some.

[zaphod42]

Of course it's always been about price (and profit). So long as someone can afford to buy the product at the cost of production plus a profit, someone else will produce it. No matter what it is... oil, gas, coal, cocaine.

Price will ultimately win out, at least until the last two (wo)men die.

Craig

[westexas]

I had thought that Russian production was likely to start declining after 2007. Although 2007 marked a major inflection point, with production increasing at 5%/year from 2002 to 2007, versus 1%/year from 2007 to 2012 (EIA, total petroleum liquids + other liquids), they were able to manage a slow increase in production after 2007, albeit at one-fifth the earlier rate of increase. However, because of rising consumption, they have so far not exceeded the annual net export rate of 7.2 mbpd that they hit in 2007 (2012 came in at 7.1, EIA).

Note that their ECI ratio (ratio of production to consumption) fell from 3.7 in 2007 to 3.2 in 2012, on track to approach zero net oil exports in about 40 years. Note that this extrapolation assumes a continuation of 2007 to 2012 rates of change in production & consumption. As we have discussed, when we plug in the inevitable production decline rate, the net export rate tends to change dramatically for the worse.

Incidentally, note that I introduced the ELM (Export Land Model) concept in early 2006 when I focused on the top three net exporters at the time, Saudi Arabia, Russia and Norway (as noted then and hence, lots of other people addressed the net export situation before me, including Matt Simmons). In any case, we didn't even have the 2005 annual data yet in early 2006, but the combined top three net exports rose from 15.2 mbpd in 2002 to 18.6 mbpd in 2005 (EIA). At this rate of increase, they would be up to 30 mbpd in 2012. Their actual combined net exports were 17.2 mbpd in 2012.

Note that Norway's net exports fell continuously from 2002 to 2012. The change in the combined top three net exports was primarily due to Saudi net exports declining after 2005 and due to Russian net export growth stopping in 2007. The rate of change in top three net exports was +6.7%/year from 2002 to 2005 and -1.1%/year from 2005 to 2012, a swing of 7.8 percentage points, which reflects the "Gap" of about 13 mbpd between where we would have been in 2012 at the 2002 to 2005 rate of increase in top three net exports versus the actual net export data in 2012.