Non-Opec: Daunting Obstacles Challenge Potential Output Gains

Oil producers not aligned with the Opec-plus alliance flexed some muscle in March, cranking out an additional 510,000 barrels per day in crude oil compared to February and reaching 31.57 million b/d, just shy of November’s level. There are still 2.5 million b/d shy of pre-Covid-19 levels of December 2019 (OMI Jan.21'20). They will not get there this year, and possibly not even in 2022. US output effectively constituted the bulk of the monthly nonaligned non-Opec gain given that the shale patch was hammered by the winter storm in February, reducing crude output by 650,000 b/d (OMI Mar.19'21). Energy Intelligence estimates that US crude oil production amounted to 10.9 million b/d in March, an increase of 425,000 b/d on February. But when it comes to pre-Covid-19 days, March was 1.9 million b/d short of December 2019. And now that capital discipline is the new vogue among producers, the US might never see pre-pandemic levels again. This will put the short-term swing barrel back in the Opec-plus camp (related). Natural gas liquids (NGLs) in the US are behaving differently. After a record eight consecutive months of output exceeding 5 million b/d up January, NGLs dipped by about 340,000 b/d in February and then recovered by 300,000 b/d in March, to 5.15 million b/d. After the cold winter throughout the world, demand for natural gas is robust, and US producers, even at just $2.65 per million Btu for natural gas at Henry Hub, are wasting no time in boosting output. Energy Intelligence now forecasts that NGL production in the US will average 5.35 million b/d this year, up by 140,000 b/d on 2020. Canada held strong in March and kept output at 4.4 million b/d to capitalize on the price rebound just ahead of maintenance season. At the current level, Canada is only 100,000 b/d, or 2.2%, off its record high posted in December 2019, which is infusing the industry with an air of optimism. “Our industry still has its best days ahead of it,” the head of the Canadian Association of Petroleum Producers told the Scotiabank CAPP Energy Symposium in early April. The burning question now is whether the country will acquire the necessary takeaway capacity to export both existing barrels and planned growth. But Alberta Minister of Energy Sonya Savage, speaking at the same forum, said that 980,000 b/d in near-term pipe completions -- Enbridge’s Line 3 to the US and TransMountain to the Pacific -- plus 500,000 b/d in rail capacity -- will “adequately serve [Canada] over the fairly significant long term.” These alternatives offset Washington’s nixing of Keystone XL. Brazil is at risk of buckling under a deadly coronavirus wave featuring a nasty strain that had shut in a number of rigs offshore and impacted crude production. March oil production was 2.9 million b/d and, according to the Energy Intelligence forecast, on track to reach an average 3.12 million b/d for the year. Covid-19 and sociopolitical instability could lead to further adjustments. Brazil’s government has forecast an average 3.3 million b/d this year. At the current pace, that volume can only be reached by the end of the year, the forecast shows. State-controlled Petrobras needs to divest assets to focus on big fields and keep its own production steady at 2.7 million b/d. NON-OPEC CRUDE OIL AND OTHER OIL PRODUCTION 2021 Chg. vs. 2019 2020 ('000 b/d) Jan Feb Mar Feb'21 Mar'20 2019 1Q20 2Q20 3Q20 4Q20 Americas 22,072 21,362 21,872 +510 -2,184 23,083 24,074 20,801 21,216 21,579 US 11,100 10,475 10,900 +425 -1,837 12,246 12,747 10,817 10,806 10,869 Canada 4,457 4,400 4,400 0 -81 4,242 4,417 3,632 3,772 4,284 Mexico 1,651 1,669 1,641 -28 -104 1,680 1,732 1,647 1,623 1,637 Brazil 2,873 2,819 2,900 +81 -73 2,786 3,038 2,912 3,024 2,785 Argentina 468 474 478 +4 -40 509 515 460 451 457 Colombia 745 760 765 +5 -92 886 873 753 742 757 Other Americas Crude 777 765 787 +22 +43 735 752 580 797 790 Total Europe 3,228 3,215 3,206 -9 +61 2,912 3,194 3,115 2,969 3,152 North Sea Crude 2,830 2,812 2,796 -15 +36 2,517 2,811 2,728 2,579 2,757 Norway 1,804 1,792 1,799 +7 +101 1,393 1,701 1,682 1,647 1,718 UK 953 950 930 -20 -39 1,003 1,012 963 851 958 Denmark 60 57 55 -2 -22 101 80 70 69 70 Other North Sea 13 13 13 -0 -4 20 18 13 12 11 Other Europe 397 403 410 +7 +25 395 383 388 391 394 Africa/Mideast 3,052 3,074 3,038 -36 -186 3,213 3,167 3,121 3,049 3,025 Oman 742 800 778 -22 -132 852 887 723 703 721 Qatar 603 523 598 +75 -9 597 583 591 605 599 Egypt 560 612 595 -18 0 623 606 599 595 566 South Sudan 167 152 133 -19 -56 158 144 152 157 156 Syria 140 140 140 0 +30 89 103 137 140 140 Yemen 79 76 76 0 +37 46 41 60 69 70 Ghana 183 185 174 -11 -9 230 203 229 240 203 Sudan 88 87 84 -3 -3 84 89 84 62 68 Chad 153 136 125 -11 +2 125 136 136 134 124 Other Afr./Mideast 337 363 335 -28 -46 410 376 411 343 378 Asia 18,117 18,177 18,242 +65 -1,472 19,678 19,718 18,197 17,806 18,073 Russia 9,223 9,170 9,329 +159 -1,068 10,390 10,394 9,225 8,919 9,118 Kazakhstan 1,429 1,550 1,529 -21 -165 1,636 1,697 1,507 1,377 1,447 Azerbaijan 593 593 592 -1 -83 674 671 596 581 589 Turkmenistan 93 84 78 -5 +2 82 83 77 86 92 Other FSU Crude 65 65 65 0 0 65 65 64 64 64 China 3,913 3,952 3,909 -43 -2 3,934 3,907 3,908 4,002 3,973 Indonesia 641 625 627 +2 -47 699 678 674 665 660 India 610 610 605 -5 -35 667 629 620 608 608 Malaysia 460 470 435 -35 -81 502 521 458 436 443 Australia 470 440 468 +27 +31 362 428 449 454 465 Vietnam 182 178 170 -9 -9 199 186 175 177 181 Thailand 130 134 131 -3 +3 126 128 118 133 132 Brunei 94 94 94 0 +3 99 96 96 77 82 Other Asian Crude 214 213 211 -1 -23 244 236 231 226 221 Non-Opec NGLs 11,422 11,091 11,376 +285 -147 10,918 11,459 10,977 11,407 11,527 Non-Opec Other 2,774 3,097 2,998 -99 -5 3,561 3,006 3,338 3,922 3,448 Total Non-Opec 60,573 59,922 60,646 +724 -4,021 63,366 64,619 59,549 60,370 60,806 Total World 91,372 90,299 91,075 +775 -7,954 98,008 98,007 90,206 89,395 91,167 Refinery gains 2,056 1,850 2,082 233 -84 2,342 2,244 1,869 2,005 2,004 Total 93,428 92,149 93,157 1,008 -8,039 100,349 100,250 92,076 91,400 93,171