Chapter 2 - Liquid Fuels 

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Demand for liquid fuels and other petroleum⁹ increases from 85.0 million barrels per day in 2006 to 106.6 million barrels per day in 2030 in the IEO2009 reference case, despite world oil prices that remain above $100 per barrel (in real 2007 dollars) from 2013 through the end of the projection period. More than 80 percent of the increase in total liquids consumption is projected for the nations of non-OECD Asia and the Middle East, where strong economic growth is expected (Figure 25). The transportation sector accounts for the largest increment in total liquids demand, at nearly 80  percent of the total world increase.

To satisfy the increase in world demand, liquids production—including conventional and unconventional petroleum and nonpetroleum liquids—increases by 22 million barrels per day from 2006 to 2030 in the reference case (Figure 26 and Table 3). Sustained high world oil prices in the reference case allow for the economical development of unconventional resources and the use of enhanced oil recovery technologies to increase production of conventional resources. High oil prices also permit the development of additional conventional resources through technically difficult, high-risk, and very expensive projects, including those located in ultra-deep water and the Arctic. 

The countries making the most significant contributions to growth of non-OPEC production in the reference case are the United States and Brazil, as total non-OPEC production in 2030 rises to nearly 13 million barrels per day above the 2006 level and represents 59 percent of the total world increase. OPEC producers,¹⁰ in this case, are assumed to keep their investments in incremental production capacity below the levels that would be justified by high prices, providing only about 40 percent of the world’s total liquids supply over the 2006-2030 period. 

In 2006, world production of unconventional liquids totaled 3.1 million barrels per day. In 2030, unconventional liquids production in the reference case totals 13.4 million barrels per day and accounts for more than 12 percent of total world liquids production, as unconventional resources from both OPEC and non-OPEC sources become increasingly competitive. Although production of unconventional petroleum liquids, such as Canada’s oil sands and Venezuela’s extra-heavy oil, is limited somewhat by environmental concerns and investment restrictions, production of unconventional nonpetroleum liquids, such as biofuels, coal-to-liquids (CTL), and gas-to-liquids (GTL), is spurred by sustained, relatively high prices both in the reference case and in the high oil price cases (Figure 27). Development of nonpetroleum liquids production also will depend on country-specific programs or mandates. 

World Liquids Consumption 

World liquids consumption in the IEO2009 reference case increases from 85 million barrels per day (173 quadrillion Btu) in 2006 to 107 million barrels per day (216 quadrillion Btu) in 2030. Although world demand for liquids is dampened in the near term as a result of the global economic recession that began in 2008 and continues into 2009, a return to trend growth is expected over the long term as national economies recover. In particular, the developing economies of non-OECD Asia and the Middle East are expected to return to strong economic growth, accompanied by growing demand for energy to fuel transportation and industrial activity. 

The increasing cost-competitiveness of other energy sources causes many current users of liquids outside the transportation sector to switch to other fuels, and as a result the transportation share of total liquids consumption increases over time (Figure 28). In 2030, the transportation sector consumes 56 percent of total liquids supplied, with the increase in volume consumed accounting for 78 percent of the total increase in liquids consumption across all sectors from 2006 to 2030. 

Strong expansion of liquids use is projected for the non-OECD countries, fueled by a return to robust economic growth, burgeoning industrial activity, and rapidly expanding transportation use. The largest increase in regional non-OECD consumption between 2006 and 2030 is projected for non-OECD Asia, at 14.1 million barrels per day. By country, China (8.1 million barrels per day) and India (2.0 million barrels per day) show the largest increases in demand in the region, and the projected growth in China’s liquids demand is the largest for any country worldwide. Large increases in liquids consumption are also expected in the Middle East region (3.3 million barrels per day) and Central and South America (1.9 million barrels per day) (see Figure 25). 

Liquids consumption in the OECD region generally grows more slowly, reflecting expectations of slowly growing or declining populations and relatively slow economic growth in most of the OECD nations, as compared with the non-OECD nations, over the next two decades. In Japan and OECD Europe, liquids consumption declines by an average of 0.4 and 0.2 percent, respectively. 

The different growth trends projected for the non-OECD and OECD regions mean that total liquids demand in the non-OECD countries surpasses that in the OECD countries in 2021, when demand in non-OECD Asia exceeds that in North America. In 2030, the United States still consumes more liquids than China does, but the difference between the two is less than one-half the difference in 2006. 

World Oil Prices 

A major factor in the IEO2009 projections is the assumption for future world oil prices. The impacts of world oil prices on energy demand are a considerable source of uncertainty in the projections. In the reference case, the average world oil price rises from $61 per barrel in 2009¹¹ to $110 per barrel in 2015 and $130 per barrel in 2030 ($189 per barrel in nominal terms) (Figure 29). In the low price case, oil prices average $50 per barrel in 2030 ($73 per barrel in nominal terms), compared with $200 per barrel ($289 per barrel in nominal terms) in the high price case. The projections for total liquids consumption in 2030 range from 90 million barrels per day in the high price case to 120 million barrels per day in the low price case, reflecting the substantial range of uncertainty in the projections. The three world oil price paths in IEO2009 are consistent with those in the Annual Energy Outlook 2009. 

The three oil price cases are distinct scenarios, each reflecting alternative assumptions about the sources and costs of world oil supplies. The reference case reflects an assumed decision by OPEC member countries to maintain the organization’s aggregate production at approximately 40 percent of world liquids supply. As a result, roughly 60 percent of the projected increase in liquid fuels consumption in the reference case comes from non-OPEC production, including high-cost projects and projects in countries with unattractive fiscal or political regimes. 

The high oil price case assumes that several non-OPEC countries further restrict access to or increase taxes on production from prospective areas, and that the OPEC member countries reduce their production substantially below current levels. Oil prices rise above the reference case levels, dampening demand for liquid fuels and enabling increased production from those high-cost conventional and unconventional non-OPEC resources that still are accessible and attractive for exploration and development. 

The low oil price case assumes greater access to, and more attractive fiscal regimes in, several prospective non-OPEC areas, including Russia and the Caspian region, as well as increased production from OPEC member countries. Consequently, oil prices fall below reference case levels, resulting in increased world demand for liquid fuels and decreased production from conventional and unconventional resources in non-OPEC countries that currently have attractive fiscal regimes. 

Recent events illustrate some of the ways in which supply of and demand for liquids affect oil prices. The first 6 months of 2008 saw a continuation of the previous 5 years of increasing oil prices, which spurred company commitments to relatively high-cost exploration and production projects, such as those in ultra-deep water and oil sands, even though high demand for steel, engineers, oil field services, and other inputs were driving up costs. An apparent lack of demand response to high prices in developing countries (China and India, in particular) led to expectations of continuing high oil prices. Rising demand and lagging supply led some analysts to believe that a price of $200 per barrel was plausible in the near term [1]. 

By July 2008, when world oil prices neared $150 per barrel, it had become apparent that petroleum consumption in the first half of the year was lower than anticipated and that economic growth also was slowing [2]. August saw the beginning of the current financial crisis and a further weakening of demand [3]. Since September 2008, the global economic downturn has reduced consumers’ current and prospective near-term demand for oil. 

In the second half of 2008, producer and consumer expectations regarding the imbalance of supply and demand in the world oil market were essentially reversed. Before August, market expectations for the future economy indicated that demand would outpace supply despite planned increases in production capacity. After September, expectations became so dismal that OPEC’s announcement of a 1.5-million-barrel-per-day production cut was followed by a drop in oil prices [4]. 

Although the impacts of the current economic downturn and financial crisis on petroleum demand are likely to be large in the near term, they also are likely to be relatively short-lived. National economies and oil demand are expected to begin recovering in 2010. In contrast, their impacts on oil production capacity probably will not be realized until 2010-2013, when current investments in new capacity, should they be made, will begin to increase oil production [5]. As a result, just at the time when demand is expected to recover, physical limits on production capacity could lead to another wave of price increases, in a cyclical pattern that is not new to the world oil market. 

Developments in the past year demonstrate how quickly and drastically the fundamentals of oil prices and the world liquids market as a whole can change. Within a matter of months, the change in current and prospective world liquids demand has affected the perceived need for additional access to conventional resources and development of unconventional liquids supply and reversed OPEC production decisions. Rather than attempting to forecast how supply and demand fundamentals and perceptions will change between now and 2030, IEO2009 uses the three oil price cases to reflect different assumptions about future liquids supply levels, sources, and costs. 

World Liquids Production 

In the IEO2009 reference case, world liquids production in 2030 exceeds the 2006 level by 22 million barrels per day. Increases in production are expected for both OPEC and non-OPEC producers; however, 59 percent of the total increase is expected to come from non-OPEC areas, with 44 percent from non-OPEC unconventional liquids production alone. In 2030, OPEC production totals 44 million barrels per day and non-OPEC production totals 63 million barrels per day in the reference case. 

The reference case assumes that OPEC producers will choose to maintain their market share of world liquids supply and will invest in incremental production capacity to maintain an approximate 40-percent share of total global liquids production through 2030. Increasing volumes of conventional liquids (crude oil and lease condensates, natural gas plant liquids [NGPL], and refinery gain) from OPEC members contribute 8.3 million barrels per day to the total increase in world liquids production from 2006 to 2030, while conventional liquids supplied from non-OPEC nations contribute 3.3 million barrels per day. 

Unconventional liquids represent the largest share of growth over the projection period, because high oil prices make them more competitive economically. Unconventional fuels account for 47 percent of the increase in total production from 2006 to 2030, or 10.4 million barrels per day, of which 9.6 million barrels per day comes from non-OPEC sources. High oil prices, improvements in exploration and extraction technologies, emphasis on recovery efficiency, and the emergence and continued growth of unconventional resource production are the primary factors leading to the growth of non-OPEC liquids production in the reference case. 

The IEO2009 projections are based on a two-stage analytical approach. Projections of liquids production before 2015 are based largely on a project-by-project assessment of production volumes and associated scheduling timelines, with consideration given to the decline rates of active projects, planned exploration and development activity, and country-specific geopolitical situations and fiscal regimes. The extensive and detailed information available about such projects, including project scheduling and the investment and development plans of companies and countries, make it possible to take a detailed approach to modeling supply. There are often lengthy delays, however, between the point at which supply projects are announced and when they begin producing. In addition, many projects have been delayed recently as a result of lower expectations for growth in world liquids demand in the near term because of the global economic slowdown and the difficulty of obtaining credit to finance production projects during the global credit crisis. 

Because projects generally are not publicized more than 7 to 10 years before their first production, project-by-project analyses are unlikely to provide a complete representation of company or country production plans and achievable production volumes. Instead, production decisions made after 2015 are assumed to be based predominantly on resource availability and the resulting economic viability of production. Geopolitical and other “above-ground” constraints¹² are not assumed to disappear entirely after 2015, however. Longstanding above-ground factors for which there are no indications of significant future changes—for instance, the government-imposed investment conditions currently in place in Iran, or OPEC adherence to production quotas—are expected to continue to affect world supplies long after 2015. Moreover, even if above-ground constraints were minimized, expansion of production capacity still could be delayed, depending on technical difficulty and scheduling constraints for the types of projects likely to be developed in different countries. 

For some resource-rich countries it is assumed that current political barriers to increasing production will not continue after 2015. For instance, both Mexico and Venezuela currently have legislation that restricts foreign ownership of hydrocarbon resources. Their nationalization of resources has discouraged investment—both foreign and domestic—and hindered their ability to increase or even maintain historical production levels. In the reference case, both Mexico and Venezuela are assumed to ease restrictions at some point after 2015, allowing some additional foreign investment or involvement in their oil sectors that will facilitate increases in liquids production, including from deepwater prospects in Mexico and extra-heavy oils in Venezuela’s Orinoco belt. 

Iraq is another resource-rich country where currently there are significant impediments to investment in the upstream hydrocarbon sector. Liquids production in Iraq dropped substantially in 2003 after the U.S.-led invasion. From 2002 to 2003 production declined from 2.0 million barrels per day to 1.3 million barrels per day. Since then, Iraq’s production has recovered to approximately pre-invasion levels, although the recovery has been slow and inconsistent. Although Iraq’s production levels are not expected to increase substantially in the near term, it is assumed that current levels of infrastructure destruction and political, as well as legal, uncertainty will be diminished, leading to renewed investment and development activity and followed by fairly significant growth in production from 2015 through 2030. 

Non-OPEC Production 

The return to and maintenance of high oil prices projected in the IEO2009 reference case are expected to encourage producers in non-OPEC nations to continue investment in conventional liquids production capacity and increase investment in enhanced oil recovery (EOR) projects and unconventional liquids production. Non-OPEC production increases steadily in the projection, from 50 million barrels per day in 2006 to 63 million barrels per day in 2030, as high prices attract investment in areas previously considered uneconomical, and fears of supply restrictions encourage some net consuming nations to expand unconventional liquids production from domestic resources, such as coal and biomass. 

Despite the maturity of most non-OPEC producing basins, conventional liquids production in the reference case increases from 48 million barrels per day in 2006 to 51 million barrels per day in 2030, led by production gains in Brazil, Russia, Kazakhstan, and the United States. Among non-OPEC producers, the lack of many prospects for new, large conventional petroleum liquids projects and declines in production from existing conventional fields result in heavy investment in the development of smaller fields. Producers are expected to concentrate their efforts on more efficient exploitation of fields already in production, either through the use of more advanced technology for primary recovery efforts or through EOR. Those efforts are expected to allow most non-OPEC producers to maintain or slow production declines but not to raise production volumes. 

Large increases in non-OPEC production of conventional petroleum liquids are expected to come from the relatively few regions with recent large discoveries or high undiscovered resource potential. Significant gains in conventional production are projected for the Caspian area (Kazakhstan) and South America (Brazil) (Figure 30). Canada is expected to be a major non-OPEC supplier of liquids, with its unconventional bitumen (oil sands) production more than compensating for projected declines in its conventional oil production. 

In the reference case, unconventional liquids production from non-OPEC suppliers rises to 6 million barrels per day in 2015 and 12 million barrels per day in 2030. In the high oil price case, non-OPEC unconventional liquids production rises to 17 million barrels per day in 2030, as significantly higher prices encourage the development of alternative fuel sources, up to the limits imposed by expected environmental protection measures and industry expansion in general. In the low oil price case, fewer unconventional resources become economically competitive, and non-OPEC production of unconventional liquids in 2030 totals only 9 million barrels per day. 

The most significant decline in non-OPEC liquids production is projected for the North Sea (which includes offshore production from Norway, the United Kingdom, the Netherlands, and Germany), where there are diminishing prospects for new discoveries capable of compensating for the decline of existing fields. All the countries currently producing North Sea oil are expected to continue encouraging investment and providing open access to development. 

The second-largest decline in non-OPEC liquids production is projected for Mexico, where liquids production drops to approximately 1.9 million barrels per day in 2020 before rebounding slowly to 2.3 million barrels per day in 2030—still 1.4 million barrels per day below the 2006 production volume. The projected rebound depends entirely on the development of potential resources in the deepwater Gulf of Mexico, which must begin some years in advance of any increase in production. 

The outlook for Mexico’s liquids production is markedly different from the projection 2 years ago in IEO2007, which had a low point of about 3.0 million barrels per day in 2012 followed by a long-term recovery from 2013 to 2030. The lower projection this year is based on declines in production from the Cantarell basin that have been more severe than expected, along with more pessimistic assumptions about future investment, both foreign and domestic, in Mexico’s deepwater production. It is assumed, however, that Mexico will have the resources to support a long-term recovery in its total liquids production, primarily because of the potential for new resource discoveries in the Gulf of Mexico. The extent and timing of the expected recovery will depend on the level of economic access granted to foreign investors, because the national oil company, PEMEX, currently does not have the technical capability or financial means to develop potential deepwater resources in the Gulf of Mexico. 

Canada’s production of conventional liquids declines by just over 1.0 million barrels per day from 2006 to 2030. Unconventional petroleum liquids from oil sands are expected to more than offset the decline, however, so that total production increases by 2.1 million barrels per day in the reference case, to 5.4 million barrels per day in 2030. 

The largest increase in non-OPEC total liquids production is projected for the United States, where conventional production increases from 7.8 million barrels per day in 2006 to 10.0 million barrels per day in 2030. Although U.S. production of conventional liquids has been in decline for many years, it is expected to grow in the projection, both as a result of deepwater offshore projects that are scheduled to begin producing in the near term, and because application of enhanced oil recovery (EOR) technologies will increase production in the long term. Thus, total U.S. production of crude oil offshore increases from 1.4 million barrels per day in 2006 to about 2.0 million barrels per day in 2010 and 2.7 million barrels per day in 2030 in the reference case, as oil production using EOR increases more than fivefold, from 0.3 million barrels per day in 2006 to 1.7 million barrels per day in 2030. 

Unconventional liquids also are projected to be an increasingly important source of domestic supply in the United States. In 2030, liquid fuels production from unconventional sources includes 257 thousand barrels per day from CTL, 1,880 thousand barrels per day from biofuels (ethanol and biodiesel), and 144 thousand barrels per day from oil shale. 

U.S. ethanol production alone is projected to increase to 1.4 million barrels per day, in part because of the Federal renewable fuels standard (RFS). Progress toward meeting the RFS is complicated, however, by slowing growth in U.S. petroleum consumption through 2030. The push for more fuel-efficient automobiles, which slows the increase in motor gasoline consumption in the reference case, also slows progress toward meeting the RFS, because more efficient gasoline motors and the growing penetration of hybrids reduce the demand for ethanol in gasoline fuel blends. In addition, a 10-percent limit on ethanol in gasoline for most of the current fleet of passenger vehicles delays further market penetration until  more E85-compatible vehicles are in use and the market infrastructure for E85 and other biofuels is expanded to accommodate the distribution and sale of larger volumes. 

U.S. crude oil production is sensitive to projected oil prices. In 2030, offshore crude oil production is 3.0 million barrels per day in the high oil price case and 2.1 million barrels per day in the low oil price case. Similarly, onshore crude oil production is 4.8 million barrels per day in the high oil price case in 2030 and 3.0 million barrels per day in the low oil price case. 

The second-largest contribution to non-OPEC liquids production in the reference case comes from Brazil, where total production increases by 3.7 million barrels per day from 2006 to 2030, with 3.0 million barrels per day of the increase coming from conventional liquids production. This strong growth in Brazil’s conventional liquids production results in part from expansions at producing fields that currently are either in progress or planned. In addition, recent discoveries in the Campos and Santos basins, including the massive Tupi and related Guara and Iara subsalt discoveries,¹³ add to production in the mid- and long term and suggest the presence of other large fields in the same formation. The vast size of the subsalt potential in Brazil, and the shortfalls of the current licensing and bidding structure associated with block boundary issues created by the geographic distribution of each of the subsalt deposits, have caused Brazil to consider restructuring its licensing and bidding process and the terms for foreign investment. 

Although Petrobras has repeatedly proven itself as a leader in deepwater development and is known to have the technical capabilities to develop subsalt prospects, it is not expected to have the resources (financial, labor, etc.) or ultimate inclination to develop them on its own. The IEO2009 high and low oil price cases assume different investment terms offered by Brazil to foreign investors and hence different rates of subsalt development, with the high price case assumption of tighter terms of access resulting in average annual growth in conventional liquids production of 3.2 percent and additional production of 2.1 million barrels per day in 2030. The low price case assumes very open terms of access, resulting in average annual growth of 5 percent and additional production of 4.1 million barrels per day in 2030. 

In addition to the expected growth in Brazil’s conventional liquids production, its ethanol production increases to 1.0 million barrels per day in 2030 in the reference case, as a result of steady increases in yields and expansion of crop production. Brazil’s major ethanol production is derived from sugar cane, which currently is the highest yielding and least expensive feedstock for ethanol. Brazil also has a large amount of previously cleared but underutilized pasture land available for sugar cane cultivation. The country’s domestic consumption is not expected to keep pace with its expanding ethanol production, making Brazil a net ethanol exporter; therefore, its production will depend largely on other countries’ policies and demand for ethanol. The current U.S. tariff on imported ethanol makes imports from Brazil prohibitively expensive. 

In the high oil price case, Brazil’s ethanol production totals 1.3 million barrels per day in 2030, reflecting higher demand for ethanol both at home and abroad and reduced import tariffs in other countries. The low oil price case assumes reduced domestic and international demand for ethanol, resulting in 0.8 million barrels per day of production in 2030. The projected reduction in Brazil’s domestic demand in the low price case is relatively small, however, because ethanol currently accounts for almost 50 percent of the fuel used by its gasoline-powered vehicles, and because Brazil has a mandatory minimum of 25 percent ethanol in gasoline blends. 

Russia and Kazakhstan are the other prominent sources of growth in non-OPEC liquids production in the IEO2009 reference case. Both are located in non-OECD Europe and Eurasia, a region prone to territorial disputes, transportation blockages, contractual changes, and political intervention. Russia’s production is expected to decline in the near term because of tax policies that have caused companies to operate at a net financial loss—a large disincentive for investment in resource development. After declining to less than 9.2 million barrels in 2011, Russia’s liquids production begins a slow increase to 9.5 million barrels per day in 2015, as cautious investors, who are continuously dealing with adjustments in taxation levels, respond to an expected stabilization of taxes and a rising world oil price. As a result, production increases to 10.9 million barrels per day in 2020 and 11.9 million barrels per day in 2030 in the reference case. 

Russia’s production varies significantly across the oil price cases, according to different assumptions about the levels of economic access granted to both foreign and domestic investors in the long term. Production increases from 2015 to 2030 are projected to be less than 0.5 million barrels per day in the high price case and 4.7 million barrels per day in the low price case. Although exploration in eastern Siberia is expected during the projection period, exploration in the Arctic is not expected. 

Mid-term growth in Kazakhstan’s liquids production will depend predominantly on the resources of the Kashagan and Tengiz oil fields and the ability of investors to transport production from those projects to the world market. Although known and potential resources are sufficient to support production growth, a current lack of easily accessible export routes could hinder their development [6]. Currently, exports are limited to five routes. The two primary transportation modes are by pipeline (operated by the Caspian Pipeline Consortium) and by rail, which together allow for a total of 0.8 million barrels per day to be shipped to Russia. In addition, a pipeline from Kazakhstan to China currently has a capacity of 0.2 million barrels per day, and barge shipments to Azerbaijan and to Iran provide a combined export capacity of approximately 0.1 million barrels per day. Over the next few years, pipeline capacity to Russia and China and the capacity of barge shipments to Iran are expected roughly to double. 

Because of Kazakhstan’s geographical position, its export potential depends not only on resource availability and extractability but also on the construction of export routes—a task that will require regional cooperation. Although transportation of extracted resources is a significant concern that could possibly limit increases in production levels, it is not the only potential problem. Kazakhstan has previously demonstrated a lack of regard for contract sanctity and has forced renegotiation of investment returns. The high oil price case assumes that Kazakhstan will again change the terms of project returns and effectively discourage high levels of additional foreign investment. Thus, the country’s liquids production in 2030 ranges from 2.9 million barrels per day in the high price case to 3.9 million barrels per day in the low price case. 

OPEC Production 

Total liquids production from OPEC member countries increases at an average annual rate of 1.0 percent, resulting in the production of 43.8 million barrels of liquids per day in 2030, of which 29.5 million barrels per day originates in the Middle East (Figure 31). Throughout the projection, Saudi Arabia remains the largest liquids producer in OPEC, with production increasing from 2006 levels by 1.3 million barrels per day, to 12.0 million barrels per day in 2030 in the reference case. The increase in total production equates to an average annual growth rate of only 0.5 percent, based on the assumption that Saudi Arabia will continue with currently announced plans (albeit on delayed project timelines) and will seek to maintain spare production capacity above 2.0 million barrels per day. 

OPEC decisions regarding investment in additional production capacity are the primary difference between the three IEO2009 oil price cases. The low price case assumes that OPEC countries will increase investment either through their own national oil companies or by allowing greater economic access to foreign investors, depending on the country. OPEC is assumed to expand production capacity in an attempt to maximize government revenue through production levels rather than by price controls. In this case, production levels increase by 22.8 million barrels per day, to 57.4 million barrels per day in 2030, or approximately 48 percent of total world liquids production in the low price case. 

In the high oil price case, the cartel nature of OPEC is assumed to strengthen over time. In this case, OPEC member countries contribute to the maintenance of record high prices by further restricting their production targets each year. As a result, production levels decline by 6.4 million barrels per day, to 28.2 million barrels per day in 2030, or 31 percent of total world liquids production. 

Iraq is projected to increase its liquids production by an average of 3.9 percent per year in the reference case, for the highest annual growth rate in total liquids production among all producers. The projection is based on an assumption that the conflict in Iraq will be resolved in the long term, making resource availability the most important factor in its ability to increase production. Continued infrastructure disruptions and legislative uncertainty are expected to limit production growth in the mid-term to 2.8 percent per year, adding 0.4 million barrels per day between 2010 and 2015. In the longer term, if the country’s liquids production capability is stabilized as projected in the reference case, investment in oil production could increase by as much as 8.5 percent annually from 2016 to 2020 before settling to a more modest 1.8 percent annually from 2020 to 2030. The fact that Iraq has the resources necessary to support such growth in the long run, even though production was limited to 2.0 million barrels per day in 2006, shows the importance of political developments in shaping the future of Iraq’s oil sector. 

Qatar is projected to have the second-highest average annual growth in total liquids production from 2006 to 2030, at 3.3 percent, with total volumes increasing from 1.1 million barrels per day in 2006 to 2.5 million barrels per day in 2030. Only one-half of the increase is expected to come from production of crude oil and lease condensate, with NGPL production contributing 0.5 million barrels per day and GTL projects another 0.2 million barrels per day. Despite the current negative outlook for many previously announced GTL projects around the world, a return to, and persistence of, historically high oil prices in the reference case is expected to facilitate the delayed start of Qatar’s Pearl facility (0.1 million barrels per day) and expansion of the Oryx facility (adding another 0.1 million barrels per day). 

Angola, despite receiving a production target of 1.9 million barrels per day from OPEC in December 2007, is projected to have the third-largest average annual increase in total liquids production from 2006 to 2030, at 2.7 percent, almost entirely attributable to increasing production of crude oil and condensate from offshore projects [7]. Production targets established by OPEC are not expected to impede the development of projects in Angola, where total liquids production increases to 2.7 million barrels per day in 2030 in the reference case. Essentially the same assumptions apply to Nigeria, where a higher level of known resources enables production to grow by an average of 1.4 percent per year, to 3.4 million barrels per day in 2030. For both Angola and Nigeria, the projections for total liquids production in 2030 vary by approximately 2.0 million barrels per day between the low price and high oil price cases. 

Total liquids production in Iran is expected to be restricted in the mid-term by political factors, which are not limited to international relations but encompass a variety of factors, including the effectiveness of the national oil company’s operations and the ability of the government and foreign investors to agree on contract terms. In the reference case, Iran’s oil production declines through 2020 because of both financial and political constraints on the development of new oil and natural gas prospects. In addition, it is assumed that Iran’s domestic use of natural gas for electricity generation and for heating in residential and commercial buildings will limit the amount available for improving oil recovery through natural gas reinjection. In the long term, however, liquids production in Iran is projected to return to 2006 levels by 2030 in the reference case. In the alternative oil price cases, production in 2030 varies by 3.0 million barrels per day, from 2.6 million barrels per day in the high price case to 5.6 million barrels per day in the low price case. 

Recent history suggests that Venezuela’s national government reacts to high oil prices by tightening investment terms for foreign direct investment and limiting access to its reserves. As a result, in the reference case, with prices rebounding after 2012 and remaining at historically high levels through 2030, further mandated changes in contractual terms along with threats of energy sector nationalization are likely to hinder production potential in the near term and discourage investment in and development of additional projects in the long term. In the reference case, Venezuela’s production growth is projected to come mainly from extra-heavy oil production in the Orinoco belt and is limited to about 0.6 million barrels per day from 2006 to 2030. 

Unconventional Production 

Unconventional liquids play an increasingly important role in meeting demand for liquid fuels over the course of the IEO2009 projections. In the reference case, 12.6 percent of world liquids supply in 2030 comes from unconventional sources, including 1.5 million barrels per day from OPEC and 11.9 million from non-OPEC sources. Although the volume and composition of unconventional production vary between the IEO2009 oil price cases (from 17.8 million barrels per day in the high price case to 12.4 million barrels per day in the low price case), the geographic origin of each type of unconventional liquid does not vary by much, because their production usually is limited to countries where projects already have been announced or are under way. 

OPEC’s unconventional production consists predominantly of extra-heavy oil from Venezuela’s Orinoco belt and GTL production from Qatar. In the reference case, Venezuela’s extra-heavy oil production increases from 0.6 million barrels per day in 2006 to 1.2 million barrels per day in 2030, and Qatar’s GTL production increases from a negligible amount in 2006 to 0.2 million barrels per day in 2030. Although resources to support those production levels abound in the two countries, large investments will be needed to bring them to market, and the timing of such investment is uncertain. 

Outside OPEC, unconventional liquids production comes from a diverse group of countries and resource types. As a whole, non-OPEC unconventional liquids production is projected to increase by 9.6 million barrels per day from 2006 to 2030, with 65 percent coming from OECD countries. The countries that make the largest contributions to the increase in non-OPEC production of unconventional liquids from 2006 to 2030 are Canada (an increase of 3.1 million barrels per day), the United States (2.2 million barrels per day), China (1.0 million barrels per day), and Brazil (0.7 million barrels per day). 

Canada’s production of bitumen from oil sands makes up more than 35 percent of total non-OPEC unconventional production in 2030 in the reference, low oil price, and high oil price cases, ranging from 3.7 million barrels per day in the low price case to 6.5 million barrels per day in the high price case. The differences in production volumes across the price cases is determined mostly by limitations on economic access to both conventional and unconventional resources and the actions taken by individual consuming countries to lower dependence on foreign energy sources. Although price levels in the high and low price cases are each approximately 50 percent different from the reference case, the distribution of projections of unconventional liquids production does not necessarily vary by a proportionate degree. With world oil prices in the low price case still high enough to support Canada’s bitumen production, 2030 production levels are only 0.5 million barrels per day lower in the low price case and 2.3 million barrels per day higher in the high price case than projected in the reference case. 

The world’s total production of biofuels increases by 5.0 million barrels per day from 2006 to 2030 in the reference case, to 5.9 million barrels per day, for an average annual growth rate of 8.6 percent. The countries expected to provide the largest increases in biofuels production from 2006 to 2030 are the United States (1.5 million barrels per day) and Brazil (0.7 million barrels per day). In addition, production increases of 440 thousand barrels per day in China and 457 thousand barrels per day in South America (excluding Brazil) also are projected in the reference case. As is true for most renewable energy sources, government policies are the most important factor influencing biofuel production. In order to achieve national goals of reducing greenhouse gas emissions and bolstering energy security, many countries have mandated targets for biofuel use and provided tax credits to biofuel producers that are designed to be phased out over time as the cost of biofuel production falls and oil prices rise. 

Biofuels also become more economically competitive with conventional oil products in the high and low oil price cases, depending on the oil price assumed. In the low price case, only the least expensive and most cost-effective feedstocks and production technologies are competitive. In the high price case, prototype production processes are used more widely. Thus, world biofuels production in 2030 totals 4.8 million barrels per day in the low price case and 7.2 million barrels in the high price case. The growth of biofuel production slows in all the cases in the near term as current-generation crops reach their economic potential but picks up again around 2012 with the advent of new technologies using cellulosic feedstocks. 

China is the largest CTL producer in all the oil price cases, with 2030 production levels ranging from 0.1 million barrels per day (48 percent of the world total) in the low price case to 1.2 million barrels per day (63 percent of the world total) in the high price case. Other major producers include the United States and South Africa, both producing about 0.3 million barrels per day in 2030 in the reference and high price cases and less than 0.1 million barrels per day in the low price case. 

GTL makes the smallest contribution to total unconventional liquids production in all the IEO2009 cases. In the reference and low oil price cases, GTL production is limited primarily to Qatar, although South Africa and Nigeria also produce small volumes in the reference case. In the high oil price case, the United States rapidly becomes the world’s largest producer of GTL, accounting for 0.4 million barrels per day to the world total of 0.7 million barrels per day in 2030. 

Tables G1-G9 in Appendix G show the ranges of production potential for both OPEC and non-OPEC producers of unconventional liquids. As discussed in detail above, geopolitical issues in a number of the OPEC countries, including Iraq, Iran, Venezuela, and Nigeria, make it difficult to estimate future production levels. As a result, there is a high level of uncertainty associated with the reference case assumptions and projections for OPEC production through 2030. 

Oil Reserves and Resources 

As of January 1, 2009, proved world oil reserves, as reported by the Oil & Gas Journal, were estimated at 1,342 billion barrels—10 billion barrels (about 1 percent) higher than the estimate for 2008 [8]. According to the Oil & Gas Journal, 56 percent of the world’s proved oil reserves are in the Middle East (Figure 32). Just under 80 percent of the world’s proved reserves are concentrated in eight countries, of which only Canada (with oil sands included) and Russia are not OPEC members (Table 4). 

Proved reserves of crude oil are the estimated quantities that geological and engineering data indicate can be recovered in future years from known reservoirs, assuming existing technology and current economic and operating conditions. Companies whose stocks are publicly traded on U.S. stock markets are required by the U.S. Securities and Exchange Commission (SEC) to report their holdings of domestic and international proved reserves, following specific guidelines. In 2008, the SEC revised some of its rules for reporting reserves (see "Recent Changes in SEC Regulations"). Country-level estimates of proved reserves are developed from the data reported to the SEC, from foreign government reports, and from international geologic assessments. The estimates are not always updated annually. 

Whereas proved reserves include only those estimated quantities of crude oil from known reservoirs, they are just a subset of the entire potential oil resource base. Resource base estimates include estimated quantities of both discovered and undiscovered liquids that have the potential to be classified as reserves at some time in the future. The resource base may include oil that currently is not technically recoverable but could become recoverable in the future as technologies advance. 

Readers may notice that, in some cases in the IEO2009 projections, country-level volumes for cumulative production through 2030 exceed the estimates of proved reserves. This does not imply that resources and the physical limits of production have not been considered in the development of the projections or that they assume rapid declines in production immediately after the end of the projection period as reserves are depleted. EIA carefully considers resource availability in all long-term country-level projections, the aggregation of which gives the total world production projection; however, proved reserves are not an appropriate measure for judging total resource availability in the long run. 

In order to construct realistic and plausible projections for liquids production, and especially for petroleum liquids production, underlying analysis must both consider production beyond the intended end of the projection period and base production projections on the physical realities and limitations of production. The importance of approaching an assessment of liquids production in this way is illustrated by the recent history of U.S. reserve estimates. Whereas the United States reported 22.5 billion barrels of proved reserves in 1998, proved reserves of 21.3 billion barrels were reported in 2008—a decrease of only 1.2 billion barrels despite the cumulative 22.2 billion barrels of liquids supplied from U.S. reserves between 1998 and 2008. 

Proved reserves cannot provide an accurate assessment of the physical limits on future production but rather are intended to provide insight as to company- or country-level development plans in the very near term. In fact, because of the particularly rigid requirements for the classification of resources as proved reserves, particularly by the U.S. SEC,¹⁴ even the cumulative production levels from individual development projects may exceed the initial estimates of proved reserves. 

EIA attempts to address the lack of applicability of proved reserves estimates to long-term production projections by developing a production methodology based on the true physical limits of production, initially-in-place (IIP) volumes and technologically limited recovery factors (RF). By basing long-term production assessments on resources rather than reserves, EIA is able to present projections that are physically achievable and can be supported beyond the 2030 projection horizon. The realization of such production levels depends on future growth in world demand, taking into consideration such above-ground limitations on production as profitability and specific national regulations, among others.

Notes and Sources
References