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No, BP, the U. S. did NOT surpass Saudi Arabia in oil production
by
Kurt Cobb, originally published by
Resource Insights | JUN 14, 2015
Even the paper of record for the oil industry,
Oil & Gas Journal, got it wrong. With the release of the latest
BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in 2014.
If they had asked questions, they would have ended up with a ho-hum headline announcing that last year
Russia at 10.1 million barrels per day (mbpd) and Saudi Arabia at 9.7 mbpd were once again the number one and number two producers of crude oil including lease condensate (
which is the definition of oil). The United States at 8.7 mbpd remained in third place.
The most important question they could have asked is this: How is BP defining oil? It turns out that oil according to the BP definition includes something called natural gas liquids which includes lease condensate--very light hydrocarbons that come from actual oil wells and are included in the oil refinery stream--and natural gas plant liquids which come from natural gas wells and include such things as ethane, propane, butane and pentanes.
Only a small portion of natural gas plant liquids are suitable substitutes for oil.
Production of natural gas plant liquids in the United States has grown rapidly as a result of increasing exploitation of natural gas in deep shale deposits, so-called shale gas. These liquids are useful, but they are not oil and only displace oil in a minor way. Moreover, their energy content is around 65 percent that of crude oil and so counting barrels of natural gas plant liquids as equivalent to oil is doubly misleading.
The second question media outlets could have asked is whether natural gas plant liquids can be sold as oil on the world market. The answer is a resounding "no." In fact,
major exchanges accept neither natural gas plant liquids nor lease condensates as satisfactory delivery for crude oil. And, if we subtract lease condensate from each country's total, U.S. production will actually look relatively lower. It turns out that U.S. wells now produce a higher proportion of condensate as a result of growth in oil extraction from shale deposits (which tend to be rich in these condensates).
All of this leads my friend and colleague, Texas oilman Jeffrey Brown, to point out the following: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil. The implications are fairly obvious: The world has substantially lower oil production than widely believed, and growth in world oil supplies has slowed considerably in the last several years. Using the BP definition of oil, world production in 2014 was 88.7 mbpd. Using the stricter definition of crude oil including lease condensate,
the number was 77.8 mbpd. Big difference!