Earlier this month, BP’s latest Statistical Review unintentionally reopened a debate into whether the US has regained the crown as the world’s top oil producer after decades of being out-gunned by Saudi Arabia and Russia.
Ostensibly a straight-forward measure of which country tops the leaderboard on oil output, BP’s widely-read yardstick has the US eclipsing both Saudi Arabia and Russia for the first time last year since 1975. Fueled by booming shale oil, BP said, US oil output hit 11.64 million b/d last year, a narrow but decisive margin over Saudi Arabia’s 11.51 million b/d.
The devil is in the detail, however, and BP’s numbers raise the long-standing and slippery issue of what actually counts as oil.
BP says its ranking includes crude, tight oil, oil sands and natural gas liquids and excludes liquid fuels from other sources such as biofuels and coal-to-liquids.
This is broadly in line with the accepted industry use of “oil production” as all liquid hydrocarbons pumped — or at least originating — from the ground. The International Energy Agency, for example, uses the same criteria for its own closely-watched oil supply estimates from non-OPEC producers.
But some pickier types take umbrage at that definition of oil and way it inflates the US’ stellar return to the world’s top oil producer spot.
They point out that not all hydrocarbon liquids, in particular natural gas liquids (NGL), can be lumped together, as they are not suitable substitutes for crude oil.
NGLs are a broad hydrocarbon group that includes condensates, a super-light form of oil that often becomes part of crude streams as a feedstock for refiners. But condensates only make up a small part of total NGLs.
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Separated from raw natural gas at processing plants, NGLs’ much larger components by volume include ethane, propane, butane, and pentanes. Some of these are direct alternatives to refined crude products in heating and transport but the petrochemical industry is the major beneficiary.
Those crying foul over BP’s rankings say the inclusion of all NGLs have unfairly favored the US’ oil figures as the country’s shale gas boom has seen its NGL volumes soar. Others also point to the lower energy content by volume of NGLs compared crude oil, another factor adding to the difficulty in NGLs’ read-across equivalent to barrels of oil.
So it seems to come down to whether NGLs can be deemed an equivalent or fungible in some way with crude. Strictly speaking, the answer is in the negative.
Crude is bought and sold globally under contracts with specific quality criteria, none of which allow for lighter liquids such as NGL or condensate to be delivered in their place.
That’s all very well, but using just crude trading criteria as a yardstick for oil production seems a bit harsh. After all, most condensate does join global crude flows at the refinery to make fuels.
So how about the rest of the NGL pool? Up to half of NGLs do get used as hydrocarbon fuels either directly or as refining blend stocks and can be seen as real-world substitutes for traditional oil products.
That leaves ethane — which makes up the other half of all NGLs — which is processed to make plastics and chemicals. As a liquid derivative of natural gas production, its inclusion in oil production figures certainty looks less credible.
BP does not break down its oil supply data into crude and NGLs but estimates from the US’ Energy Information Agency show just how much of a difference the split makes.
Based on crude and condensate output, the EIA believes the US pumped 8.65 million b/d of oil last year, putting it in third place behind both Russia and Saudi Arabia with 10.1 million b/d and 9.74 million b/d respectively.
But perhaps even going with BP or the IEA’s definition of oil production may not be enough to justify US bragging rights.
Arguably, the US’ 11.6 million b/d last year should be compared to volumes of oil that Saudi Arabia is able to pump rather than the amount which it chooses to as a swing producer.
With Saudi output capacity exceeding 12.3 million b/d, according to the IEA, Riyadh could out-pump the US decisively. What’s more, that’s just a figure for crude production and one which the US is unlikely to beat any time soon — even with its shale-led NGL bonanza.