Russian Peak Oil

This, and the article which follows seem to contradict each other.  One constant in the history of oil is that countries have always lied about their oil reserves

Is Russian Oil Production Plummeting?

Forbes,

20 May, 2012

According to a recent Bloomberg story Saudi Arabia displaced Russia as the world’s largest oil producer, producing just about three thousand barrels a day more in March of 2012:

Saudi Arabia boosted crude production close to a 31-year high in March, overtaking Russia as the world’s largest oil producer for the first time in six years, according to the Joint Organization Data Initiative (JODI).

Saudi crude exports rose 3 percent in March, reaching the highest level in five years as Iran cut shipments, according to government statistics posted today on the initiative’s website.

Saudi Arabia, OPEC’s largest producer, increased daily output to 9.923 million barrels in March, up 0.7 percent to the second-highest level since at least 1980, according to the initiative. That topped output from Russia, which pumped 9.920 million barrels a day, for the first time since February 2006, according to the data.

When you think about the total production volumes of both countries you realize that a few thousand barrels is an incomprehensibly small amount: given the margin for error inherent in measuring such titanic amounts of oil it’s certainly possible that Russia actually produced more than Saudi Arabia in March even according to the numbers released by JODI.

But what was really interesting was not that the Saudis successfully boosted production, it’s long been known that they have significant excess capacity and can, if needed, rapidly put more oil on the market, but that Russian oil production through the first few months of 2012 was apparently sharply lower than it was at the end of 2011.  This would be a truly shocking development, as the Russians have reported that their production has been holding steady near a post-Soviet high.

I accessed JODI’s publicly available database and quickly threw together a graph of Russia’s monthly oil production figures for the past two years.

According to JODI, there was a roughly 5% decline in Russian oil production between December 2011 and January 2012, a decline that is all the more stark because it came after an extended streak of increases. A 5% monthly decline in overall oil production is a really big deal, the equivalent of the total production of a country like Argentina or Ecuador disappearing overnight. As you can very easily see from the chart, the magnitude of the December-January decline was substantially greater than any other monthly change in over the past two years.

I follow Russia and the Russian energy sector pretty closely, and I don’t remember seeing, hearing, or reading anything that would come anywhere remotely close to explaining such a huge drop in production. Indeed when I first looked at this chart I was completely shocked. What could possibly explain such a dramatic decline? Was there some large-scale terrorist attack on Russian oil infrastructure that went totally unreported? Did parts of Siberia just vanish into thin air? Did Greenpeace convince the Kremlin that it should be much more sensitive to the needs of our earth mother?

I would argue that a half million barrels a day of production can’t simply disappear, and that there has to be something seriously wrong with the data: either previous Russian production figures were artificially high, or the most recent production figures released by JODI are artificially low. It’s worth noting that the JODI folks aren’t some weird tinfoil hat wearers or conspiracy theorists, they are by all accounts a relatively boring and standard part of the oil world. Moreover, the gap between their data and that released by the Russians themselves is a very recent phenomenon. Let’s take a look at a few months from the late summer and fall of 2011 and the winter of 2012 (Energyministry figures from Reuters stories here, here, here, here, here, and here ).

The two figures match almost exactly until there is a dramatic and sustained divergence starting in January. If JODI has some sort of an anti-Russian grudge, it’s a very recently acquired one.

What does this tell us? Well, either Russia experienced a significant production loss that nobody noticed or reported or there is something dramatically wrong with the data supplied by JODI. The later seems to be much more likely, but neither of these are good options. Either we’re actually a lot more ignorant about Russia than anyone would have guessed or one of the main organizations in charge of gathering, storing, and disseminating information used to price one of the world’s most crucial natural resources is so badly flawed as to be almost useless.

As someone who has a keen interest in comparative demographics and economics, I’m consistently amazed by the lack of good data sources: even using a wide variety of internet search tools, finding basic information is a lot harder and more time consuming than I ever would have guessed, particularly if you’re trying to find anything from the past year or two. It would be very discouraging, and more than a little scary, if one of the few trusted data sources such as JODI turned out to have such serious flaws in its data. It would be even scarier if the oil market was even more opaque and confusing than was assumed to be the case.

Russia ramps up oil pumping

Russia has been pumping hundreds of thousands of barrels of oil a day more than Saudi Arabia

TVNZ,

22 May, 2012

Russia has been pumping hundreds of thousands of barrels of oil a day more than Saudi Arabia and is confident it can increase output year on year, Energy Ministry data showed, contradicting a report the kingdom has become the world's biggest producer.

Data from a Russian energy ministry presentation obtained by Reuters follow a report published over the weekend by the Joint Organisations Data Initiative (JODI) - a group set up by oil producers and consumers - showing a sharp drop in Russian output.

JODI data showed Russian production fell from 10.370 million barrels per day (bpd) in December to 9.920 million in March, marginally less than Saudi Arabia's 9.923 million bpd that month.

But the energy ministry's data showed daily average output was steady at about 1.41 million tonnes, or about 10.33 million bpd in early 2012, up from 10.31 million bpd in December.

The ministry's outlook for 2012, based on those production figures, says the country is on track to meet its target of averaging 10.31 million bpd for the year, higher than any month of last year.

"It looks like an issue with JODI methodology," a Russian source said.

JODI was set by oil producer bodies including the Organization of the Petroleum Exporting Countries (OPEC) and consumers such as the International Energy Agency (IEA) to improve the transparency of oil market data.

It relies on timely submissions of data from individual government agencies.

JODI officials did not respond to emails on Monday to comment on why the data differed so much from Russian figures.

JODI's data disclosure by individual countries says it includes output of condensate - light hydrocarbon liquids - from Saudi Arabia in crude production figures.

It does not say if it includes Russian condensate and adds that for Russia it "had changed the definition of crude oil stocks to exclude the so called "reserves" which was not explained further by Russia".

"At the same time, Russia also stopped reporting stock level data of total oil," JODI said without elaborating.

Russian officials were not available to comment on changes made by JODI.

Saudi Arabia says it has the capacity to pump about 12.5 million bpd if oil markets are hit by supply shortages, but it has never tested those levels.

Russia has little to no spare capacity and its government has been trying to re-engineer the tax regime to coax additional barrels out of its old fields in Western Siberia.

Western Siberia, which accounts for more than 60% of total Russian output, is in decline, though the rate has slowed to less than 1% last year, according to analyst calculations.

The rampup of new East Siberian fields such as Rosneft's Vankor and TNK-BP are offsetting those declines.

Russia has reported no major outages at its fields or pipeline infrastructure this year and refinery runs were up year on year