Venezuelan Oil Stats War

[ Petroleos de Venezuela SA says the IEA is publishing erroneous Venezuela oil production figures.

Sohbet Karbuz, former head of the non-OECD energy statistics section of the IEA, does some number crunching, and discovers that while the missing barrels are fewer than some accounts when recategorised for proper comparison, they nevertheless amount to a hefty half a million barrels per day. Something is wrong here, but we don’t know what it is…
-AF ]

Stats war is the conflict over statistics.

On 20 November 2006, the International Herald Tribune run a piece entitled: PDVSA says IEA publishing erroneous Venezuela oil production figures.

According to the article Venezuela’s state oil company (Petroleos de Venezuela SA, or PDVSA) said the International Energy Agency (IEA) is “publishing erroneous Venezuelan oil production figures” and that the IEA “had an interest in deliberately underestimating Venezuelan oil production.”

Venezuela says it produces about 3.3 Mb/d, but the others (namely, the IEA¹, OPEC and the EIA) put actual production closer to about 2.5 Mb/d.

A day later another piece had the response in its title: IEA dismisses claims it incorrectly calculated Venezuela’s oil output

This blame game is not new. See a 20 May 2006 article by Michael Fox and Gregory Wilpert (International Energy Agency Increases Venezuela’s Oil Production Estimates, Maybe) for more details.

Definitions, Definitions, Definitions

Until its 12 July 2002 issue of Orinoco extra-heavy oil² was included in conventional crude in the Oil Market Report (OMR) of the IEA. Starting with that issue Venezuela’s upgraded Orinoco extra-heavy crude was reclassified as non-conventional crude oil.

The change in methodology was considered consistent with:

• the treatment of Canadian synthetic crude produced from oilsands mining projects;
• the apparent intent of the joint venture projects producing the Venezuelan syncrude and;
• a number of statements suggesting that heavy oil and/or synthetic crude production was not included for consideration towards Venezuela’s OPEC production quota.

Then in its 14 March 2006 issue the OMR announced another change in its methodology.

“Orinoco crude flows at reservoir temperature and pressure, whereas oil from the Canada’s oil sands do not….. there appears a clear rationale for classifying Venezuelan Orinoco production, prior to upgrading, alongside conventional OPEC crude supply….. Not least is the observation from the OPEC Secretariat that it treats Orinoco production in this way.” Orimulsion output is kept the same under nonconventional category.

That’s not all though. Orinoco crude in this new accounting “comprises feedstock to the four upgrading units and not the output of synthetic crude. Under the old methodology, the latter was included under the OPEC NGL and non-conventional oil category, whereas un-upgraded Orinoco supply was counted with conventional crude.”

No, not finished. “However, we have also taken the opportunity to revise historical monthly conventional crude supply estimates where appropriate.” Yes, a bit confusing.

From a technical point of view it may sound all right to add un-upgraded Orinoco to conventional crude. But from supply-demand balance point of view it is marketable production that should go counted in supply. Anyway.

What does PDVSA say?

There are several articles around giving PDVSA production figures. But I will rely on the company’s F-20 Forms filed with the United States Securities and Exchange Commission (SEC).

In its file (F-20 Form) for 2003 to SEC on October 7, 2005 the company stated that:

In 2003, its crude oil production averaged 2,451 kb/d (including 122 kb/d attributable to PDVSA’s participation in the Orinoco Belt projects³) with API gravity between 16° and 32°.

In 2004, its crude oil production averaged 2,733 kb/d (including 148 kb/d attributable to its participation in the Orinoco Belt projects) with API gravity between 16° and 32°.

Recently the company provided the SEC with F-20 Form, which is probably the only one that has the richest information. In its F-20 Form of 17 November 2006, the company states that:

In 2004, Venezuela’s total crude oil production subject to royalties amounted to 3,148 kb/d (2,733 kb/d from PDVSA’s own production, 38 kb/d from PDVSA’s own production of less than 8° API extra heavy crude oil, 62 kb/d from PDVSA’s participation in Petrozuata production⁴ and 315 kb/d from third party participation in the Orinoco Oil Belt Association).

In 2005, Venezuela’s total crude oil production subject to royalties amounted to 3,274 kb/d (2,785 kb/d from PDVSA’s own production, 61 kb/d from PDVSA’s own production of less than 8° API extra heavy crude oil, 60 kb/d from PDVSA’s participation in Petrozuata production and 368 kb/d from third party participation in the Orinoco Oil Belt Association.)

PDVSA gives the following table in its F-20 Form filed with the SEC.

On 7 November 2006, an article in Salon gives the following table, taken from the Financial report provided by the Venezuelan Ministry to the auditor (not necessarily audited).

Who is right?

There is no right or wrong. It all depends what you count and don’t ‘uncount’, and how.

Below is a chart comparing Venezuelan oil production data (in Mb/d) across the sources. All figures are for total oil production including non-conventional and NGLs. Refining gains from the EIA data are excluded. PDVSA (SEC) represents only PDVSA’s production and hence excludes the contribution by partners in Orinoco.

One interesting point is that OPEC figures are supposed to exclude NGLs as well as non-conventional oil. OPEC’s Annual Statistics Bulletin considers only PDVSA oil production as Venezuela. How come it is higher than PDVSA after 2003?

I did some number crunching using the Venezuelan official statistics I discussed above and produced the following table.

Notes: Part of Orinoco oil production is upgraded and included in conventional crude oil in Venezulea. Nonconventional refers to PDVSA’s own production of oil less than 8 API and part of production in Petrozuata. LPG/NGL figure for 2005 is my estimate and hence may be wrong.

The IEA says that it counts UN-UPGRADED ORINOCO as conventional crude. The difference between upgraded and un-upgraded is about 10%.

If we reshuffle the above given table to be consistent with the IEA methodology we would end up with the following table.

Note: Nonconventional here refers to oil produced in Petrozuata only. I am not sure whether this corresponds to Orimulsion. As far as I know Orimulsion plant which produces somewhere between 7 and 10 API oil is in Cerro Negro.

This means that the discrepancy between the IEA and Venezuelans in fact would be even bigger. The difference between Grand Total and IEA is almost the same as Un-upgraded Orinoco oil production. Is the IEA making a mistake there? I don’t think so. Then the difference should be in crude+condensate production. But if that is the case is PDVSA lying to the SEC?

The relevance to Peak Oil

The difference between un-upgraded and upgraded Orinoco oil is in the order of at least 10%. Therefore if production data used for Venezuelan Peak Oil analysis is upgraded (syncrude) Orinoco oil, then one should also make sure that its ultimate recoverable resources is adjusted accordingly.

Note that there is also a loss factor when upgrading Bitumen to syncrude of about 30% as mentioned in The Oil Drum, hence one has to be careful when comparing total production figures of bitumen and syncrude+non-upgraded bitumen.

Meanwhile, we see more and more Peak Oil analysis for all liquids. Most recently CERA, in his attack to Peak Oil, included CTL and GTL into global oil production. How do you add them to global oil resource base?

Remember the old saying: “Not everything that can be counted counts; and not everything that counts can be counted.”

Donald Rumsfeld’s comments at a Press Conference at NATO Headquarters in Brussels on June 6, 2002 lay out the fundamentals of stats wars, even if he was thinking of something else: “There are things we know that we know. There are known unknowns. That is to say there are things that we now know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know. So when we do the best we can and we pull all this information together, and we then say well that’s basically what we see as the situation, that is really only the known knowns and the known unknowns. And each year, we discover a few more of those unknown unknowns.”

Endnotes: