Global crude oil production in third-quarter 2018 was about 76.9 million barrels per day (MMbbl/d), up by nearly 1 MMbbl/d compared to the previous quarter. North America and the Middle East are the major drivers for the jump, contributing about 544,000 bbl/d and 430,000 bbl/d of incremental production, respectively.
Russia and CIS and Africa have also increased production during this quarter (by 177,000 bbl/d and 118,000 bbl/d, respectively). Meanwhile, the production loss in Latin America continued through the third quarter.
In our forecast, global oil production in fourth-quarter 2018 will increase by about 705,000 bbl/d. North America and Africa together will boost production by more than750,000 bbl/d. Latin America is expected to mitigate its production decline and start to stabilize production from first-quarter 2019 as new presalt projects are scheduled to come onstream in Brazil.
Looking forward, global crude oil output is expected to increase to about 80 MMbbl/d by fourth-quarter 2020, mainly driven by production growth in North America and Middle East. The new International Maritime Organization (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 fourth-quarter 2019.
Global condensate production in third-quarter 2018 reached about 7.1 MMbbl/d, up by 84,000 bbl/d. The growth is mainly contributed by North America and Middle East. Looking forward, strong growth in the above two regions could push global condensate production above 8 MMbbl/d by fourth-quarter 2020.
Where is production rising?
U.S: Strong growth in the Permian Basin will further boost U.S. production by about 1.7 MMbbl/d in the next nine quarters.
Canada: Oil sands will continue to push total Canada crude production up by about 370,000 bbl/d though fourth-quarter 2020 despite hefty West Canadian Select pricing discounts and pipeline capacity restraints.
Brazil: New presalt fields such as Buzios, Lula Extension, Sepia, and Atapu Sul are expected to substantially lift Brazil crude and condensate output by over 500,000 bbl/d in the next two 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 such as Qayara and Najmah that were previously controlled by the ISIS will help Iraq to ramp up production by about 600,000 bbl/d through 2020.
Libya: In August and September 2018, Libya boosted oil production after the force majeure caused by military attack was lifted. Libya’s 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 about 180,000 bbl/d during the next two years.
Where is production falling?
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 bbl/d is expected for the next nine quarters.
Mexico: As of third-quarter 2018, Mexican oil and condensate production has dropped by more than 520,000 bbl/d compared to first-quarter 2015. 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 MMbbl/d by then.
Venezuela: In recent months, the continuous production loss in Venezuela has shown 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 United States. Looking forward, this trend will continue through our forecasting period as the Permian Basin is expected to sustain a rapid growth.
In fourth-quarter 2019 to first-quarter2020, 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 constraining the production of heavy sour crude.
No major oil projects came onstream in third-quarter 2018. Looking forward, several medium to large oil fields are scheduled to be brought online within next year. These include the Khurais expansion project in Saudi Arabia, with capacity of 500,000 bbl/d; the Johan Sverdrup phase 1 project offshore Norway with capacity of 325,000 bbl/d; and the Buzios 2 and 3 projects in Brazil, each with a capacity of 150,000 bbl/d.
This article was originally published by Stratas Advisors, which features detailed graphics and more information on global production on its website.
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