Venezuela oil output redux

Venezuela has achieved an important change in international estimates of its oil output. The International Energy Agency, an association of oil-consuming nations, has long been one of the groups with the lowest estimates of Venezuelan oil output. Plenty of observers have said the IEA number was too low, but as a very prestigious body, there wasn’t much anyone could do about it.

The IEA published June 16 the 2011 edition of Medium Term Oil and Gas Markets. I just got a note from the Ministry of Popular Power for Oil and Energy that includes a page of the book, which goes like this:

A baseline revision to Venezuela’s crude oil production capacity profile over the 2002-2011 period has been inciuded in this year’s MTOGM projections. Persistent concerns have surrounded the accuracy of production and export data emanating from official sources, following a debllltating strike at
Venezuela’s state oil company in 2002. With wide divergence between official and third-party indicators, we have undertaken a comprehensive review of data sources and decided to switch from a monthly estimate based on a proxy for wellhead production, to an assessment that combines observed international imports of Venezuelan crude with domestic refinery runs – a proxy for the broader measure of crude oil supply.

The previous production assessment combined industry and government reports on activity levels at the four main Orinoco heavy oil production facilities, with estimates on prevailing trends in wellhead output from conventional assets in the Maracaibo basin and elsewhere. Regular soundings taken with industry, government and analytical sources over broad levels of Venezuelan supply led to observations that export levels were potentially higher than those implied by this wellhead proxy, and prompted our review of methodology.

We now base our monthly assessments on publicly reported Venezuelan crude oil flows into both OECD and non·OECD importing countries, plus refinery throughput data submitted to the Joint Organisations Data Initiative (JODI). OECD data Is supplied by member countries to the IEA and non·OECD data for countries such as China come from official government publications. The Venezuelan government supplies monthly refinery throughput rates to JODI. As a result, we have made a baseline revision to data from 2002 to 2011, with supply over the 2002-04 period lowered on average by 100 kb/d and for the 2005-11 period increased on average by 300 kb/d.

Of course, questions over the completeness and veracity of the data for this new supply proxy remain. Official Venezuelan data continue to imply higher export levels than suggested here, but are not backed up by available import data. Moreover, the higher suppiy assessment we now incorporate for the 2006-2009 period sits in stark contrast to Widespread service company reports of significant conventional crude output decline around Lake Maracaibo and in ot her areas. Nonetheless, we believe there are clear transparency benefits in this new approach to estimating Venezuelan supply.

There’s then this table. If you want a nice clean version, the full report is yours for 150 euro.

The oil ministry also sent a comment from Energy Intelligence. It’s even longer, but here’s a DeLongian abstract:

…the battle over Venezuela’s oil data has taken an important turn … adds roughly 500,000 barrels per day to the IEA’s assessment of Venezuelan output … Both the IEA and Energy Intelligence remain significantly short of Caracas’ own official numbers, which are still viewed by most as inflated. At the same time, the Opec Secretariat has introduced its own change in methodology to include extra-heavy oil in figures for Venezuela …

Venezuela … started releasing monthly trade data … to convince the outside world that it was producing about 3 million b/d. Independent estimates used by the Opec Secretariat — the six “secondary sources” — were putting production roughly 700,000 b/d lower, based partly on a belief that upstream facilities had failed to recover from a major strike in 2002-03. Energy Intelligence began using the Venezuelan information as one source in calculating its monthly estimates, but only one other secondary source, consultancy IHS Cera, is believed to have followed suit. The two government-related secondary sources, the International Energy Agency and the US Energy Information Administration, remained skeptical, shunning the offered data and continuing to publish low numbers — causing frustration among Venezuelan officials (EC Apr.8’11).

The dispute had a political subtext, given tensions between Venezuelan President Hugo Chavez and the West, and exposed a general opacity of Opec data…

Opec Secretariat since the mid-1990s has been using the secondary sources for its own statistics … used as the basis for Opec members’ production targets… Venezuela rejected its allocation of 1.985 million b/d as too low, insisting it was based on false data.

The Venezuelan data lacks several important components… it remains hard to confirm the export data, which include vessel names, loading dates and volumes, but not vessel numbers or specified buyers or destinations — usually contained in other loading schedules…

The result is strikingly similar to Energy Intelligence’s estimates — the IEA puts last year’s production at 2.516 million b/d, against Energy Intelligence’s 2.491 million b/d. The difference for 2009 is even smaller, at a mere 5,000 b/d.