Diverse upstream mix

June 12, 2006
Oil and gas production includes a wide array of projects. Table 1 in the article beginning on p. 41 illustrates this diversity.

Oil and gas production includes a wide array of projects. Table 1 in the article beginning on p. 41 illustrates this diversity.

Included in the table are 242 major projects or phases of projects that will contribute substantial oil and gas production to the world’s growing energy demand. These projects are in 35 countries and would add more than 23 million b/d of oil and condensate and 46.5 bcfd (17 tcf/year) of gas if they all reached peak production at the same time.

Current production in the world is about 81 million b/d of total liquids and 96 tcf/year of gas, based on projections from the US Energy Information Administration.

Infrastructure needs

Many of these projects include investments in infrastructure besides the costs for drilling development wells and installing facilities to separate oil, gas, and water. This is especially the case where the project develops stranded gas and heavy oil-resources that may have been delineated decades ago but still await exploitation. Deepwater projects also require high-cost facilties and flowlines.

Stranded gas projects may include LNG liquefaction plants, GTL plants, or long pipelines, such as those proposed for bringing stranded Alaska North Slope and Northwest Territories gas to the US and Siberian gas to Europe or East Asia.

Some heavy oil projects incorporate upgrading plants that yield a transportable and marketable product.

Besides the infrastructure tied directly to a project, greater world production requires increased refining capacity and additional transportation networks. And such projects as the heavy crude projects in western Canada that do not include an upgrader may require deep conversion upgrades in US refineries.

The government of Alberta also has plans to build an integrated bitumen upgrading, refining, and petrochemical complex in Alberta, as discussed in a March 2006 study for Alberta’s Economic Development Department.

The study says, “With the large number of project proposals to develop the oil sands within the next 10-15 years, production of the bitumen and synthetic crude oil from the oil sands may exceed current refinery capacity resulting in the value of these products declining over time. Increasing Alberta’s capacity to produce finished products would mitigate this potential problem and serve the North American market better. In addition, the lower-cost bitumen-derived feedstocks would help sustain Alberta’s world-class petrochemical industry, which is currently based on higher-priced natural gas feedstocks.”

Demand projections

Even with new projects coming on stream, EIA’s Short-Term Energy Outlook for June does not expect significant improvement in the world petroleum supply and demand balance during 2006 and 2007.

EIA expects some growth during 2006 in US production as output recovers from last year’s hurricanes but only moderate increases elsewhere.

And it notes “Steady and continued growth in world oil demand, only modest increases in world surplus oil production capacity, and continued risks of geopolitical instability are projected to keep crude oil prices high through 2007.”

It notes that “although world petroleum consumption growth has slowed because of higher prices, projected growth nevertheless remains strong at 1.7 million b/d in 2006 and 1.9 million b/d in 2007.”

EIA expects non-OPEC petroleum production to grow by 800,000 b/d in 2006.

In 2006, it projects total US natural gas consumption to fall below 2005 levels by about 200 bcf then increase by 800 bcf in 2007. It says US dry natural gas production in 2005 declined by 2.7%, largely because of the hurricanes in the Gulf of Mexico, but it projects gas production to increase by 0.7% in 2006 and 1.2% in 2007.

EIA’s long-term projections in its 2005 outlook call for world oil demand to increase to 103 million b/d in 2015 and to 119 million b/d in 2025, while world gas needs climb to 128 tcf/year in 2015 and 156 tcf/year in 2005.

The projects listed in the article will go a long way to meet these long-term projected demands if all produce as expected.