A New Peak in Conventional Crude Oil Production

Since May 2005, global conventional crude oil + condensate production (C+C) has been constrained to a bumpy plateau of around 73.2 Mbpd. That limit was breached in December 2014 with a new high of 74.28 Mbpd (Figure 1, blue area is conventional C+C). This comes on the back of a prolonged period of record high oil price. It seems likely that the reason for the new high is OPEC abandoning constraint rather than an actual expansion of global conventional C+C production capacity.

Figure 1 The EIA report various categories of hydrocarbon liquids production including a category for combined crude oil + condensate. This category includes Canadian syncrude (tar sands) and light tight oil (LTO previously known as shale oil). Conventional C+C production is estimated by deducting the unconventional sources from the C+C total and shows a new peak of 74.28 Mbpd for December 2014. The chart is not zero scaled and is updated to December 2014, the date of the last report from the EIA. Data from [1, 2, 3, 4].

This short post is a periodic update on the compositional breakdown of the liquids that combine to make the global total hydrocarbon liquids number as reported by the Energy Information Agency (EIA) of the USA. The EIA report 4 categories of liquids as detailed below. I take the analysis one stage further by estimating the contributions made to C+C from Canadian syncrude production and N American LTO production to get an estimate of conventional C+C production.

1) Crude + condensate
2) Natural gas liquids (NGL) – C2 to C5 hydrocarbons produced with natural gas
3) Refinery gains – volume expansion of liquids that occurs during refining
4) Biofuels – bio ethanol and diesel. It is debatable that these liquids should be counted.

Canadian syncrude production is reported by Statistics Canada (Figure 5). LTO production is rather more tricky to estimate. Bakken production comes from North Dakota Drilling and Production Statistics [2] and Eagle Ford production from The Texas Railroad Commission [3]. Other US LTO sources are not accounted for. Canadian LTO is estimated from Natural Resources Canada [5] and other sources

Figure 2 In defiance of peak oil, global total liquids production just keeps marching upwards, aided and abetted by growth of conventional C+C production towards the end of last year. The EIA total liquids for Dec 14 was 94.60 Mbpd compared with the IEA figure of 94.62 Mbpd.

Figure 3 This chart shows the contribution made to total liquids growth by the non-conventional C+C components. Since 2005, these components have contributed the lion’s share of growth. Peak oil advocates argue that they have lower ERoEI and lower energy content per unit volume than conventional C+C which is true. Adjusting for net energy content will reduce the amount of volume growth but will not radically affect the bigger picture which is that liquid fuel production is still rising on the back of high prices. Notably, these categories of liquids are immune to the cyclical variations seen in conventional C+C that are affected by OPEC market intervention.

Figure 4 Same data as Figure 2 plotted as % of total. In 1994, conventional C+C accounted for 90% of global total liquids. In 2014 that figure had dropped to 79%.

Figure 5 The breakdown of liquid fuel production in Canada as reported by Statistics Canada [4]. Conventional crude production (light, medium and heavy) that includes LTO, has been effectively flat since 1985. All of the substantial growth has come from the tar sands. Synthetic crude is bitumen that has been upgraded to crude oil in Canada. Crude bitumen, I believe, is exported to the USA where it is upgraded to syncrude. 

Concluding Comments

A part of the Peal Oil story unfolded in the period 2002 to 2008 when the world ran short of easy to find and produce conventional cheap crude oil. This sent the price up to over $100 / barrel. The prolonged spell of high price has resulted in a greater number of men and machines and larger amounts of energy being expended on the quest for these highly prized C-H bonds.

There are a number of variables that need to be factored into future analysis and forecasts of global oil production. Amongst these are 1) time lags between price signal and new production, 2) tolerance of global society to higher energy prices, 3) technology developments, 4) political interference (that may be positive or negative) and 5) last but not least reserves depletion.

Data sources

[1] Energy Information Agency
[2] North Dakota Drilling and Production Statistics
[3] Railroad Commission of Texas
[4] Statistics Canada
[5] Natural Resources Canada

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41 Responses to A New Peak in Conventional Crude Oil Production

  1. Dave Rutledge says:

    Hi Euan,

    Great post. I am amazed that C+C has been so flat for the last ten years. We had high prices at times. I am getting the sense that part of the improvement in the production technology for conventional crude and condensate is just to allow people to maintain flat production over long periods of time. For national oil companies that are responding to governments rather than stockholders, this may be an appropriate goal.


    • Euan Mearns says:

      Dave, the thing that strikes me about Fig 1 is how prior to 2005 we had 3 to 4 Mbpd production swings absorbed by OPEC. We then hit the plateau where peaks suggest everyone is pumping flat out.The troughs seem to be getting smaller with time suggesting that for whatever reason supply and demand are in greater balance and the need for swing production has declined. OPEC are now effectively defunct and perhaps it is that realisation that underlies the new policy.

      C+C staying flat means that new capacity has balanced declines. And declines are likely to not be constant. Much of the activity in the N Sea has been to fight the decline with infill drilling and well work overs etc combined with sub-sea tie backs.

  2. How about a similar plot, but for total net energy production from these same sources? It takes more energy to produce some of the non-crude sources, so can’t we measure that and see where the trend goes?

  3. Robert says:

    Would the fact that improved production methods have kept production flat mean it more likely for a sudden drop in production at some stage? If the U.S. Production boost has resulted in the majority of extra total production, could a peak in that combined with wells that were kept going with improved production starting to fail, combine to make a nasty sudden fall?

    The background to my question is that a shallow decline seems less unattractive to me than a sudden collapse. In my experience with chocolate milk, having to re position the straw keeps the dregs going a bit longer

    • Euan Mearns says:

      In my opinion a fast crash in oil will only happen with a major finance crash. Here, oil companies cannot raise funding to keep drilling and that is matched by a collapse in demand. Otherwise oil companies will continue to expand the drilling fleet and to innovate resulting in what I now see as a long, gradual process. Meanwhile, with high energy prices, energy efficiency and substitution will continue to at some point reduce our dependency on oil.

  4. Florian Schoepp says:

    In my opinion Saudi Arabia has made a serious mistake. Instead of trying to push out shale producers via a low price environment, they should have massively cut their own production, thereby forcing LTO producers “to drill baby drill” until in a few short years shale production would reach its natural limit. As we can see from your graphs, the USA has become the temporary swing producer with poor reservoir quality. With a sovereign wealth fund like KSA, they and Kuwait plus the Emirates could plug the fiscal whole until natural decline sets in and prices rise forever.

    • It is all politics.

      The USA are trying to damage Russia. The Saudi went along with it because it damaged Iran and US-fracking. The talk about “market share” is absolute BS – a red-herring for the MSM to chew over.

      Would you prefer a market share of 10% at $100/barrel or a market share of 15% at $50/barrel? Obviously, the correct answer is the second one – especially since the 5% is still underground and can be sold later.

  5. Last December in http://euanmearns.com/oil-price-wars-who-blinks-first/ I wrote: “OPEC wins. The US shale producers will shut down first.”

    The fat lady hasn’t quite sung yet, but the US shale producers are clearly a lot more resilient than the Saudis (and I) thought they would be. Barring another oil price collapse it’s beginning to look as if both will be able to maintain production at or close to current levels pretty much indefinitely.

    Peak oil continues to recede.

    • Aslangeo says:

      sorry but I don’t really agree about the US shale being indefinitely producible at current rates

      , shale and other tight wells decline very quickly and unless you drill more wells your production declines very quickly. A lot of the shale producers are in negative cash-flow and have been for some time. They had been kept afloat by asset sales to a “greater fool”, very cheap credit from banks (ZIRP) and hope of a better tomorrow. – please see Art Berman’s blog for details

      The one positive light is that cost do reduce and the Shale companies can drill wells cheaper and lose money slower

      The recent decline in rig count has been by producers stopping drilling wells which are likely to be marginal (> 100 BOPD), and sensibly concentrate on better wells. In the boom years the dogs (>100 BOPD initial rate!!) consumed 40% of the capital, 70 % of the well count and 16% of the production (source – proprietary report)

      David Hughes dis a very interesting report on US tight oil and tight gas which had been widely discussed it shows that the production from older wells in the Bakken and Eagleford declines quickly and new wells are needed to replace this. This is the main reason for the poor cash-flow – the CAPEX never stops.

      The CEO of Schlumberger also gave a talk recently where he compared the production drilling and footage of the US lower 48, Russia and Saudi Arabia

      US = 11.7 MMBl/d, 35,669 wells, 297 million feet = mechanically recovered meat
      RU = 10.9 MMbls/d, 8688 wells, 83 million feet = stewing beef
      KSA = 11.4 MMBls/d, 399 wells, 3 million feet = Kobe beef fillet steak

      In terms of blinking by OPEC this will have more to do with their own national deficits and demands for cash to fund their populations. Saudi Arabia for example has to create 400,000 jobs each year due to their youth bulge and since 90% of Saudi Nationals work for the state this would demand a great deal of cash

      • Euan Mearns says:

        Yes, but the shale bubble just refuses to burst. Latest I heard from Art was that the shale operators are now funding with new equity. And remember, while rig count is way down, the US still has 642 rigs drilling oil.

        It doesn’t make sense I know, but that’s the way it is.

      • Those Schlumberger numbers are very interesting. The Saudis get 3.8 bpd per foot driiled and the US shale producers get only 0.039 bpd per foot drilled – almost a hundred time less. One would think that with such an enormous competitive disadvantage shale oil would have blinked long since.

        • Aslangeo says:

          I don’t think that shale producers can blink, many of them have heavy debts and the only way they can pay them off is through trying to get cash-flow positive through increased production, reduced expenditure or asset sales

          1. Increasing production is difficult as this can be done only by drilling new wells which costs money

          2. Opex can be reduced and is being cut to the bone, I was on a course with a bloke from Devon energy who told me that they were reducing the count on portable lavatories for their well sites – this shows how desperate these people are (and Devon has better cashflow numbers than the average) – be careful drinking the water in Southern Texas and North Dakota

          3. Capex is being cut as seen in the rig count

          basically they hope that OPEX and Capex cuts see you cashflow positive before production seriously falls

          4. Asset sales are being tried but nobody is buying at the prices needed. If a company that has an asset on its books for $1 billion sells it for $500 million it would have to take a $500 write down – none of these companies can really be seen to do this. It may breach debt covenants

          5. Rolling over debt – this is what they are all doing – with ZIRP it is possible and the banks cannot write off or call in loans which are hard to repay

          6. Shareholder pain, no dividends or buy backs and maybe rights issues (asking for money)

          The main problem I see with unconventionals is that the CAPEX never stops.

          In a conventional project there is a heavy CAPEX phase while the wells are drilled facilities installed etc. This is followed by a plateau production phase when you make your money (payback on some billion dollar projects can be as short as two years!) followed by a decline phase (with maybe some infill drilling, new compressors etc) and then decommissioning.

          In unconvetionals there is no plateau- instant decline from day one, Followed by a long slow downward slope- payback is often quiet late – 3 years or more down the line and tail end production is not fully known, hence the need to keep drilling to maintain pipeline capacity/ flow assurance, facilities processing throughput etc. You need to keep spending just to maintain throughput

          I don’t see a blinking but a slow motion train wreck which will take considerable time and tragically cause a lot of folks considerable pain

          • Aslangeo: I can’t fault your logic here, particularly when it agrees with my initial conclusion. The problem for the Saudis, however, is that victory will be temporary. As soon as prices recover – back comes shale oil.

            Unless of course the Saudi strategy is to keep oil prices permanently low (Al-Badri has said several times that the days of $100 oil are over), but I don’t see how that would benefit them.

  6. ristvan says:

    I don’t think the recent uptick in conventional C&C is from OPEC. It is more likely Brazil bringing on its deepwater subsalt production
    Given shale decline curves and reduced rig counts, I expect US production to start dropping by yearend. Both Bakken and Eagle Ford fracked oil wells decline by about 85% in 36 months, and we are not a year into decreased rig counts yet.

    • Euan Mearns says:

      Its not really possible to allocate where the extra oil has come from. But had OPEC cut production by 2 Mbpd it wouldn’t be there.

      I too think we need to wait till year end to see LTO production beginning a serious decline.

  7. Euan Mearns says:

    G7 leaders agree to phase out fossil fuels

    I just saw this on the FT:


    The Group of Seven industrial powers have agreed the world should phase out the use of fossil fuels this century in a move hailed as a historic decision in the fight against climate change. G7 leaders meeting in Bavaria, Germany, said that in line with scientific findings, “deep cuts in global greenhouse gas emissions are required with a decarbonisation of the global economy over the course of this century”.

    The leaders of the US, Germany, France, the UK, Japan, Canada and Italy said they supported cutting emissions by 40 to 70 per cent by 2050 from 2010 levels — the first time they have backed such a precise long-term target.

      • Willem Post says:

        The 40% to 70% reduction goal from 2010 levels can be mostly done by building out nuclear.

        It would be much less expensive than forcefully turning society upside down trying to fit in renewables, as Germany is doing with its ENERGIEWENDE.

        Here are some costs:

        Other countries do not have the resources to do that.

        Where would various basket-case, non-G-7, countries, such as Spain, Ireland, Greece, Ukraine, Italy, etc., (the list is very long) get the money to do that; they are standing on top-toe with water up to their lips.

        • Willem Post says:

          Building out nuclear is alive and well. We need more of it.

          Note the standard sizes, which greatly reduces capital cost and increases reliability.

          Russian has sold a large number of nuclear reactors to various nations during the last half of 2014 and the first half of 2015.


          Country…… Qty…….Capacity, MW…..Cap. Cost, $billion

          South Africa…8…………1200……………….50

    • We support the enhanced use of energy efficiency and renewable energy as well as other domestic resources (including nuclear energy, which can work as a base load energy source, in those countries which opt to use it). We recognize that fossil fuels will remain an important part in the energy mix for some time …

      Who said that? The G7 energy ministers, in the “G7 Hamburg Initiative for Sustainable Energy Security” adopted on May 12, 2015.


      Maybe there’s hope.

  8. Ed says:

    Breaking news “G7 leaders make historic pledge to phase out fossil fuels”.

    The plateauing of easy to get oil production is obviously starting to spook our leaders. About time. They will not admit the real reason though, but are instead pretending it is about climate change. I sort of understand this strategy. To tell the truth that fossil energy is approaching its peaking phase is way too scary compared to that of climate change.


  9. PhilH says:

    It’s often said that the US’s LTO is now the world’s swing producer, but from your graphs, it looks like the same could be said of the similarly-sized contribution from the Canadian tar sands or biofuels or even refinery gains .

    It’s really the NGL contribution that’s the largest of the non-conventionals, and with the world’s likely continuing shift to NG, that’s probably going to continue growing, even if/when the other three’s production gets constrained by low prices.

  10. Richard Kerr says:

    I’m a bit of a novice in all this, but talk of “peak oil continues to recede” seems a tad misplaced. Conventional crude oil production–which is what both sides were arguing about in the ’90s and into the 2000s–did indeed peak in 2005, Although the breadth of the plateau is impressive and no doubt involves many above-ground issues, it seems that the peakists were right, conventional oil was soon going to peak. Arguments that new technology, new discoveries, field expansion, and EOR were going to extract ever more oil from conventional reservoirs were wrong. Or am I missing something?

    • Richard, when we look at it closely what peaked was the oil coming from low cost resource pools. The oil and other liquids developed to fill the gap between the already declining low cost resource pools happens to be difficult to reach and or extract. The oil price needed by the industry to keep the current rate from declining is higher than today’s price.

      As price climbs we can develop ever more expensive sources. Extra heavy oil, light oil and condensate from very low permeability rocks, and deep water oil are the main new sources. We are also squeezing the old reservoirs as hard as possible. I think we could work very hard to increase production up to a point, but this requires ever increasing prices.

      I wouldn’t be surprised to see $150 per barrel plus in today’s dollars by 2035. And I have a very hard time believing the EIA and other forecasts. Which by the way can be tainted by the inclusion of ngl, biofuels, and other liquids we really shouldn’t consider oil.

  11. Patrick R says:

    LTO on the turn, rig number catching up with production, finally:


  12. dolph9 says:

    I’ve looked at the data for going on 7 years now like many of you and my conclusion is that we face a pretty sharp decline coming up, but it’s nevertheless going to feel slow (in historical terms).

    How do you actually know when a system is over? How do you know when your marriage has failed, that you are old, that you are never going to be rich or famous? How do you know when inflation has destroyed your savings and quality of life?

    Did the people who lived through WW2 or the collapse of the Soviet Union know what was going on, or did they just continue with life as normal?

    I know this sounds philosophical, but that’s the way I look at it. I’m an American physician and I can tell you that my life has declined, even though I’ve managed to get by. But I’m not supposed to be just “getting by”. I’m supposed to be enjoying an upper middle class life in the post powerful country the world has ever seen, treating happy, prosperous people who have plenty of money to spare. If you watch TV or Hollywood that’s the way it’s supposed to be.

    But that’s not how it is. I have just enough to keep my out of the bad part of town, not a penny more, and my patients are almost universally poor and in terrible health. Just reporting from the front lines.

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  14. Dana Gardiner says:

    Aslangeo: Can you post a link to the presentation by the CEO of Schlumberger you refer to in your post?

  15. Luís says:

    Thanks for this post Euan, I hope you can make it regular.

    Just to note that every coloured sleeve in these graphs is marketed at strikingly different prices and can be subject to very different market trends.

  16. Ralph says:

    It is important to remember that the primary energy content of ‘all liquids’ is sharply lower than that of crude oil. NGLs and ethanol have about 70% of the energy of oil, and ‘refinery gains’ are an increase in volume when oils are refined – with a net loss of total energy.

    Also, the utility to industrial civilisation of the different fractions and sources varies. Middle distillate and heavy oils produce diesel and aviation fuel, for which there are very few alternative energy sources we can substitute, whilst NGLs are primarily a chemical feedstock, and not used in transportation at all. NGLs are better considered part of the energy produced by natural gas industry than as part of the oil industry. Biofuels are an energy source of sorts, but why they are described as OIL production is a complete mystery to me.

  17. Robert Honeybourne says:

    Thank you. So effectively we can get better at extraction and efficiency of use for quite some time in your view. The thing that fascinates me is the ‘loop’ where finance and the money system effectively represent energy so that the increase in the cost of energy production reduces the amount of ‘money’ left over for other things. In a financial crash we could set off a ‘downward spiral’ of reduced investment and then increased energy price (or reduced ability of consumers to use the energy). It makes me think ‘We’d better not have a financial crash then’ – which presumably is the reason for all manner of schemes of ‘injecting money into the financial system’ – it’s the energy system that cannot be allowed to fail!

    • Euan Mearns says:

      Yes, there is a fascinating linkage between the financial economy and the energy economy. High energy prices were in part responsible for the finance crash of 2008. The real economy needs energy and if it runs short of sufficient affordable energy then the highly leveraged finance system might crash, bring the energy economy down with it.

  18. Bernard Durand says:

    Euan, a large part of condensates comes from gas pools. How a curve of crude alone look like?

  19. I did an incremental crude oil production graph with EIA data until August 2014. In that month global crude production was given as 76,969 kb/d. In the December 2014 statistics, August 2014 crude production was suddenly increased by 666 kb/d to 77,635 kb/d

    I then checked for previous months and found that all monthly data since Jan 2008 were increased, first by increasing amounts up to 200 kb/d until April 2009, then at around that level plus/minus until Oct 2013. From a low “adjustment” of around 100 kb/d in November 2013, this went up to 400 kb/d in March 2014 and then up to 666 kb/d in August.

    So that lifts up the whole production curve at an increasing scale, especially in 2014.

    The largest upward adjustments for Aug 2014 were:

    Canada: +139 kb/d
    US: + 109 kb/d
    Venezuela: +200 kb/d (since April 2009)
    Azerbaijan + 72 kb/d
    Angola + 73 kb/d
    Malaysia + 62 kb/d
    Pakistan + 35 kb/d

    Notwithstanding the adjustments, production increases between December and August (4 months) were:

    US +469 kb/d
    Canada +131 kb/d
    Brazil +171 kb/d
    UK +377 kb/d (seasonal)
    Kazachstan +132 kb/d
    Russia +141 kb/d
    Iraq +550 kb/d

    Notable drops were:

    Mexico -165 kb/d
    Azerbaijan -70 kb/d
    Kuwait – 150 kb/d
    Saudi Arabia and Qatar – 150 kb/d
    Angola -80 kb/d
    Nigeria -80 kb/d

    My latest graph is here:

    It shows the world outside the US remains on a bumpy crude production plateau

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