INTERNATIONAL PETROLEUM ENCYCLOPEDIA 2009 International Petroleum Encyclopedia is published annually by: PennWell Corporation 1421 South Sheridan Road Tulsa, Oklahoma 74112, USA Phone: 918-835-3161 Fax: 918-831-9555 www.pennwellbooks.com Chairman Frank T. Lauinger President and CEO Robert F. Biolchini Senior Vice-President, Finance and Administration, CFO Mark Wilmoth Senior Vice-President, Audience Development & Book Publishing Gloria S. Adams Director Mary McGee Managing Editor Marla Patterson Editor Joseph Hilyard Production Manager Sheila Brock Art Director Susan E. Ormston Copyright ® 2009 by PennWell Corporation 1421 South Sheridan Road Tulsa, Oklahoma 74112-6600 USA 800.752.9764 +1.918.831.9421 [email protected] www.pennwellbooks.com www.pennwell.com ISBN 9781593701901 All rights reserved. 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Printed in the United States of America 1 2 3 4 5 13 12 11 10 09 IPE2009.indb 1 5/12/09 12:08:22 PM Guest Essay ...................iv Bulgaria ....................... 148 Croatia ....................... 148 Chronology 2008 ..............ix Czech Republic ................. 150 Denmark ...................... 152 Encyclopedia & Atlas Finland ....................... 153 France ....................... 154 World Energy Markets: Germany ...................... 156 The Big Picture ................1 Greece ....................... 156 Hungary ...................... 158 North America Republic of Ireland ............... 158 United States .................... 10 Italy .......................... 159 Gulf of Mexico ................... 56 Malta ........................ 165 Alaska ......................... 67 Netherlands .................... 166 Canada ........................ 75 Norway ....................... 167 Poland. . . . . . . . . . . . . . . . . . . . . . . . .174 Latin America Portugal ...................... 175 Argentina ...................... 98 Romania ...................... 176 Belize ........................ 103 Slovakia ...................... 177 Bolivia ........................ 103 Spain ........................ 177 Brazil ........................ 104 Sweden ....................... 179 Chile ..........................114 Turkey ........................ 179 Colombia .......................115 United Kingdom ................. 181 Cuba ..........................118 Ecuador ....................... 120 Middle East Guatemala ..................... 123 Bahrain ....................... 190 Jamaica ...................... 123 Iran .......................... 192 Mexico ....................... 124 Iraq .......................... 198 Nicaragua ..................... 131 Israel ......................... 204 Peru ......................... 132 Jordan ....................... 205 Trinidad & Tobago ............... 135 Kuwait ........................ 206 Venezuela ..................... 137 Oman ........................ 207 Qatar ........................ 208 Europe Saudi Arabia ................... 209 Albania ....................... 144 Syria ......................... 211 Austria ....................... 146 United Arab Emirates ............. 212 Belgium ....................... 146 Yemen ........................ 215 IPE2009.indb 2 5/12/09 12:08:22 PM Africa Asia-Pacific Oil consumption, production, reserves, Algeria . . . . . . . . . . . . . . . . . . . . . . . 218 Afghanistan . . . . . . . . . . . . . . . . . . . . 300 and trade Angola . . . . . . . . . . . . . . . . . . . . . . . 224 Australia . . . . . . . . . . . . . . . . . . . . . . 301 World oil consumption . . . . . . . . . 431 Cameroon . . . . . . . . . . . . . . . . . . . . . 226 Bangladesh . . . . . . . . . . . . . . . . . . . . 312 World petroleum product Chad . . . . . . . . . . . . . . . . . . . . . . . . . 227 Brunei . . . . . . . . . . . . . . . . . . . . . . . . 313 consumption . . . . . . . . . . . . . . 433 Congo (Brazzaville) . . . . . . . . . . . . . . . 228 India . . . . . . . . . . . . . . . . . . . . . . . . . 314 World oil production . . . . . . . . . . 435 Congo (Former Zaire) . . . . . . . . . . . . . 229 Indonesia . . . . . . . . . . . . . . . . . . . . . . 321 Historical oil reserves . . . . . . . . . 439 Egypt . . . . . . . . . . . . . . . . . . . . . . . . 229 Japan . . . . . . . . . . . . . . . . . . . . . . . . 326 World oil imports and exports . . . 440 Equatorial Guinea . . . . . . . . . . . . . . . . 233 Malaysia . . . . . . . . . . . . . . . . . . . . . . 330 World oil trade movements . . . . . 441 Gabon . . . . . . . . . . . . . . . . . . . . . . . . 234 Myanmar . . . . . . . . . . . . . . . . . . . . . . 331 World oil balance . . . . . . . . . . . . 442 Ghana . . . . . . . . . . . . . . . . . . . . . . . 235 New Zealand . . . . . . . . . . . . . . . . . . . 332 Oil refining Ivory Coast . . . . . . . . . . . . . . . . . . . . 237 Pakistan . . . . . . . . . . . . . . . . . . . . . . 335 Summary of operating refineries Libya . . . . . . . . . . . . . . . . . . . . . . . . . 237 Papua New Guinea . . . . . . . . . . . . . . 339 worldwide . . . . . . . . . . . . . . . . 444 Madagascar . . . . . . . . . . . . . . . . . . . 240 Philippines . . . . . . . . . . . . . . . . . . . . . 340 World refining capacity . . . . . . . . 446 Mali . . . . . . . . . . . . . . . . . . . . . . . . . 241 Singapore . . . . . . . . . . . . . . . . . . . . . 341 World refinery throughput . . . . . . 450 Mauritania . . . . . . . . . . . . . . . . . . . . . 241 South Korea . . . . . . . . . . . . . . . . . . . 342 World refining margins . . . . . . . . 450 Morocco . . . . . . . . . . . . . . . . . . . . . . 242 Taiwan . . . . . . . . . . . . . . . . . . . . . . . 343 Natural gas consumption, production, and trade Mozambique . . . . . . . . . . . . . . . . . . . 242 Thailand . . . . . . . . . . . . . . . . . . . . . . 344 World natural gas consumption . . 451 Nigeria . . . . . . . . . . . . . . . . . . . . . . . 243 Vietnam . . . . . . . . . . . . . . . . . . . . . . . 345 World natural gas production . . . . 452 South Africa . . . . . . . . . . . . . . . . . . . 250 World natural gas trade movements: Sudan . . . . . . . . . . . . . . . . . . . . . . . . 250 pipelines . . . . . . . . . . . . . . . . . 454 Key Stats & Tables Tanzania . . . . . . . . . . . . . . . . . . . . . . 252 World natural gas trade movements: Tunisia . . . . . . . . . . . . . . . . . . . . . . . 252 LNG . . . . . . . . . . . . . . . . . . . . 456 Key Stats Uganda . . . . . . . . . . . . . . . . . . . . . . . 253 Petroleum prices Future energy supply . . . . . . . . . . . . . 349 Crude oil prices . . . . . . . . . . . . . 456 Former Soviet Union Reserves and production . . . . . . . . . . 360 Petroleum product prices . . . . . . . 457 Armenia . . . . . . . . . . . . . . . . . . . . . . 258 Drilling and exploration . . . . . . . . . . . . 367 Comparative energy prices . . . . . 457 Azerbaijan . . . . . . . . . . . . . . . . . . . . . 261 Investment and markets . . . . . . . . . . . 376 Price history of oil, gas, Georgia . . . . . . . . . . . . . . . . . . . . . . . 263 Trade and tankers . . . . . . . . . . . . . . . 381 and gasoline . . . . . . . . . . . . . . 458 Kazakhstan . . . . . . . . . . . . . . . . . . . . 265 LNG—Industry outlook . . . . . . . . . . . 386 International rig count . . . . . . . . . . . . 459 Kyrgyzstan . . . . . . . . . . . . . . . . . . . . . 270 LNG—Liquefaction and receiving . . . . 390 Lithuania . . . . . . . . . . . . . . . . . . . . . . 271 LNG—Carrier fleet . . . . . . . . . . . . . . 393 Information Sources Russia . . . . . . . . . . . . . . . . . . . . . . . . 272 LNG—Risks and opportunities . . . . . . 394 Tajikistan . . . . . . . . . . . . . . . . . . . . . . 279 Refining and products . . . . . . . . . . . . 395 National oil companies and energy Turkmenistan . . . . . . . . . . . . . . . . . . . 280 Gas processing and products . . . . . . . 407 ministries . . . . . . . . . . . . . . . . . . . . 461 Ukraine . . . . . . . . . . . . . . . . . . . . . . . 280 Petrochemicals outlook . . . . . . . . . . . .411 Glossary of abbreviations Uzbekistan . . . . . . . . . . . . . . . . . . . . 281 Pipelines . . . . . . . . . . . . . . . . . . . . . . 422 and acronyms . . . . . . . . . . . . . . . . 477 Climate change issues . . . . . . . . . . . . 425 Advertiser’s index . . . . . . . . . . . . . . . 485 China . . . . . . . . . . . . . . . . . . . . . .284 Index of contents . . . . . . . . . . . . . . . . 485 Statistical Tables World reserves and production . . . . . . 429 Fold-out Map Legend . . . . . . . .506 International Petroleum Encyclopedia iii ch00_FM.indd 3 5/12/09 4:02:16 PM Impact of the Financial Crisis on the Energy Industry Samuel A. Van Vactor, Ph.D. The four shockwaves To offset the macroeconomic impact, of the financial crisis Congress authorized a tax rebate for U.S. consumers, and the resulting bump in cash The global economy was slammed by a four- propped up the “real” economy through the wave economic tsunami in 2008. summer of 2008. The first shockwave concerned the U.S. However, the illness was bound to spread. sub-prime mortgage market and the housing As housing prices declined, the toxicity of bubble, where accumulating bad debt under- mortgages grew and the asset base of impor- mined a number of key banks. tant international banks dwindled. Major In the second wave, the demise of Lehman financial institutions—such as The Bear Brothers and anxiety over the creditworthiness Stearns Companies, Inc., and IndyMac Bank of banks and insurance companies led to a (Independent National Mortgage Corp.)— global bailout of the financial industry. were forced into unappetizing mergers or In the third wave, cash hoarding, frozen dissolution, with the government accepting loans, and stock market panic led to a massive responsibility for much of the bad debt. realignment of expectations that dooms the The broad scale of the problem became developed world to a serious recession. apparent on September 7, when the federal In the final wave, the contagion has spread government was forced to seize control of fed- to emerging markets, leading to a global slide erally sponsored mortgage companies, Fannie reminiscent of the 1970s oil shocks. Mae and Freddie Mac. The first wave: The second wave: U.S. sub-prime mortgages The growing risk of systemic default In the first phase of the crisis it was discov- As the crisis wore on and mortgage defaults ered that many mortgages written during the mounted, a more serious problem emerged. housing boom were headed for default and that It turned out that insurance companies and the mortgages themselves had been repack- investment banks had sold trillions of dollars aged and resold as if they were secure assets. of credit default swaps (CDSs). These swaps Lacking transparency, the “toxic” assets could were not limited to the housing market or to not be valued and resold at any price. Moreover, sub-prime mortgage loans, but covered a broad the weak U.S. economy put commercial loans, set of financial instruments and institutions. credit cards, and other mortgages at risk. IPE2009.indb 4 5/12/09 12:08:23 PM Banks that had been weakened by sub-prime mortgage hold- guarantees, the international market would quickly pull cash ings were also involved in the CDS market, and the bankruptcy from any institution perceived to be under-capitalized. of Lehman Brothers Holdings Inc. on September 15 tripped a variety of credit obligations. The third wave: Recession in developed countries Within a few hours, the U.S. Treasury was forced to bail Despite the central bank infusion, it was obvious that the out major insurance company American International Group economies of developed nations were in for a hard time. The Inc. (AIG.) Almost immediately other dominos began falling IMF had pegged global economic growth at 3.8% for 2009, but around the globe. The resulting chaos set off a global panic a new forecast in early October dropped that figure to 3.0%. in stock markets, which further weakened the assets of many Within a few days, however, pessimism deepened, signaling financial institutions. the third wave of growing concern over the health of the real The U.S. was not the only country that enjoyed a significant economy. In response to the new pessimism, global stock increase in housing prices. In particular, the fastest growing and commodity markets plunged, as traders factored in the European countries had experienced housing price surges even lowered expectations. greater than those in U.S. Moreover, most European banks and The depth and length of the developed countries’ recession insurance companies had been involved in the CDS market. is unclear, but early indicators are decidedly negative. There Over the weekend of September 27, the credit crunch hit are also features of this recession that are significantly different Europe with full force. Within a few days: from anything experienced since the Great Depression. • The Dutch banking and insurance activities of Fortis were acquired by the government of The Netherlands, Most importantly, there is an asset deflation, in real prop- and its other banking activities were acquired by the erty, stocks, and commodities. This is in contrast to the oil Belgian state. price shocks of the 1970s. In that era stock prices dropped, but commodities and real estate values increased along with • The UK government nationalized British bank, Bradford & Bingley general price inflation. Most economists would agree that aggregate consumption is dependent on both income and • The Iceland government took control of its third largest perceived wealth. bank, Glitnir. The asset deflation is exacerbated by the fact that there is As the financial stress deepened, it became apparent that a huge debt outstanding against these assets. Many home-owners piecemeal approach was unworkable. The problem crystallized are “under water,” owing more on their mortgage than the value on September 30, when the Irish government announced that it of their home. Government treasuries are also depleted. would guarantee all deposits in its banks, amounting to €400 Hopefully, much of the cash infusion will be recovered as billion—twice its annual GDP. banks regain solvency, but some will be permanently lost. Although Ireland was a small country, it had adopted the Economic recovery will be burdened by excessive debt, which euro as its currency and it did not take central bankers in neigh- reduces flexibility for both governments and consumers. boring countries long to realize they faced the threat of interna- tional bank runs if they did not follow the Irish example. The fourth wave: A global recession In the meantime, U.S. officials groped for a strategy to save its banks. They had focused on pulling out the banks’ bad As of late 2008, China was forecasting economic growth on loans, rather than recapitalizing them by direct investment. The the order of 8% in 2009, and its leaders have announced infra- plan, however, looked too much like a bailout of Wall Street to structure investments intended to support it. However, legiti- Congress, and the House of Representatives quashed the idea on mate questions can be raised about the viability of such plans September 28. Finally, on October 3, a revised plan passed both when economies around the world are faltering. After all, China houses of Congress. has prospered by selling manufactured goods to consumers in Ironically, however, the Treasury later shifted strategies developed economies. and began investing directly in banks. Treasury officials had The swift rise in commodity prices, particularly crude oil, is little choice. Without a clear demonstration of government partially responsible for the meltdown. It was learned in the oil International Petroleum Encyclopedia v IPE2009.indb 5 5/12/09 12:08:23 PM Guest Essay price shocks of the 1970s that the sudden shift in cash from consumers to energy producers Dr. Samuel A. Van Vactor jolts the economy and provokes a combination of inflation and recession. Dr. Van Vactor is an energy Oil is not as important to the overall energy economist who has analyzed oil, market now as it was in the 1970s, but it is still natural gas, and electricity markets significant, particularly for America. In 1974, since 1973. the United States produced more oil than it Since 1981, he has been the presi- imported, so much of the money associated dent of Economic Insight, Inc. (EII), with higher prices re-circulated. The situa- in Portland, OR. tion is reversed today, and most of the money EII provides consulting services on a range of topics related to the petro- spent on oil flows out of the country. The rapid leum, natural gas, and electricity industries. The firm has undertaken a variety shift in funds withdrew liquidity from banks, of strategic studies for energy companies and government agencies on topics making it difficult for them to recapitalize. from market development forecasting and analysis of regulatory changes to The drop in demand for manufactured critique of public policies and evaluation of market and pricing structures. goods and commodities will reverse the finan- His consulting clients have included the American Petroleum Institute, cial trends of the last few years. Countries with the U.S. Department of Justice, the Bonneville Power Administration, huge pots of cash now may find the funds Pacific Gas & Electric Corporation, the Western Interstate Energy Board, rapidly depleted over the coming months, and the California Power Exchange, the Mitsubishi Research Institute, Tokyo the counter-shock could also be disruptive. Gas, Gaz de France, and the Government of India. He also has advised major oil and gas companies, including Texaco, Perspective on derivatives Chevron, Exxon, BP, ARCO, and Shell. He was an expert witness for the North Slope producers on Alaska tax and royalty issues. How could a relatively small set of low- Dr. Van Vactor holds a Ph.D. from Cambridge University; and both an grade mortgages cause a global recession and M.A. (University of Washington) and a B.S. (University of Oregon) in eco- require public funding of trillions of dollars? nomics. He also has done research at the London School of Economics. The answer, of course, is that derivatives can In prior years, Dr. Van Vactor served as an economist at the U.S. be used as leverage, and leverage magnifies Department of the Treasury, a senior economist at the International either profit or loss. Energy Agency of the OECD, and as head of energy planning for the State According to The New York Times, the deriv- of Oregon. ative market at the end of 2008 totaled $531 From 1983 to 1989, Dr. Van Vactor also was an associate of Dr. Arlon R. trillion—or about ten times global GDP. The Tussing and vice president of Tussing’s consulting firm, Arta Inc. (Seattle), market for CDSs has been about $55 trillion. regarding natural gas and Alaska energy issues. When market values change quickly, and During the 1980s, ARTA was deeply involved with issues regarding in unexpected ways, it disturbs normal com- deregulation of the North American natural gas industry. merce. The essence of finance is trust – to He has lectured on energy and economics at the University of Maryland make a loan in the expectation of repayment. (European Division), Portland State University, University of Southwest Trust in turn depends on confidence in the Australia, Cambridge University, Columbia University, and Victoria institutions and traders in the marketplace. University of New Zealand. Derivatives that are not transparent or not He has also conducted seminars for the Singapore Centre for Management adequately backed by assets have the power to Technology on gas pricing and contracting in Asia. undermine confidence and trust. Dr. Van Vactor is the author of numerous books and articles concerning energy industries. vi International Petroleum Encyclopedia IPE2009.indb 6 5/12/09 12:08:35 PM Guest Essay What Wall Street should have learned Banks simply did not keep the profits garnered in the from Enron’s collapse mortgage-writing frenzy, and when the paper and other ques- tionable assets turned toxic, liabilities grew, necessitating a Some important lessons from the collapse of Enron Corp. in public-sector bailout. Once again, the banking sector proved 2001 appear to have been lost in the din of good times. “too big to fail.” First, Enron misused derivatives and engaged in other There is no question that the global system of deriva- manipulations to move suspect assets from its balance sheet and tives trading must be carefully reviewed. There are two cover up losses. It completed these transactions through a series issues to be addressed: inadequate third-party clearing and of complex maneuvers, the purpose of which was to obfuscate, asymmetrical risk. rather than illuminate, their true liabilities. Third-party clearinghouses for commodities, such as It seems that no one on Wall Street learned much from the NYMEX’s Clearport, are already being offered by the market- Enron example. No one—including the bond rating agencies— place and volume is rising rapidly. In these arrangements an questioned the veracity of the sub-prime mortgage bonds, exchange manages and clears bilateral contracts between buyers despite the complexity of their packaging, their opaque nature, and sellers, providing objective valuation and minimizing the and the flimsiness of their credit credentials. risk of default. Second, sight was lost of the interrelationship between deriva- Commodity trading has a natural symmetry in that there is tives, mark-to-market accounting, and managerial bonuses. active hedging by both buyers and sellers. There may not be a Most derivatives are traded in the over-the-counter (OTC) perfect match, but financial derivatives offered by a bank can be market, but the concepts that underlie them are extracted from offset so that the net position is nearly balanced. futures exchanges. In a futures exchange, traders’ positions are Unfortunately, there is no natural offset for CDSs; they are marked to market at the close of each trading day. There is no akin to insurance. That is, insurance buyers want to hedge other way to treat a liquid and marketable asset; book value or against a catastrophe, but usually no one benefits from such an the price paid is irrelevant. Problems arise, however, when the event, so the activity is typically one-sided. Thus, issuers need asset cannot be easily sold and its value has to be estimated. to be sure they have adequate capital to cover all eventualities. Enron frequently tied bonuses to the present value of future Obviously, the capital base has been inadequate for these types profits from freshly negotiated deals. They even claimed a of derivatives. portion of the present value as a current profit in their balance sheet. This is akin to mark-to-market accounting, except that the contractual commitment is unlikely to be resold; thus, valu- The consequence of the financial crisis ation is subjective. on the energy industry This incentive structure created two distortions. The com- Policy makers, traders, and investors are all trying to sort out pany’s managers focused on short-term deal-making rather than the depth and duration of the coming recession, but the impact that long-term planning. Moreover, the booking of theoretical on the energy industry is immediately obvious. Oil prices have profits was at variance with actual cash flow, so Enron had to dropped by more than two-thirds since their peak in July 2008. constantly borrow money to make ends meet. With lower economic activity comes less demand for oil, and One of the most troubling aspects of the 2008 financial crisis although the difference is not great, it is sufficient to completely is the way in which Wall Street financial firms followed the reverse the market. Enron paradigm and ignored its consequences. One striking feature of oil market developments in the last Large bonuses were paid out even if the firm retained the few years is the speed at which things can change. After the asset or a residual liability associated with it. Most financial price run-ups of the 1970s, seven years passed between the peak firms deal in paper and have limited physical assets. The basis of oil prices in 1980 and their collapse in 1987. for their profitability is having clever people who need to be The price drop observed from mid-July through November compensated if they are to be retained. So, as all the bad paper 2008 took only about 100 business days. rolled in, bonuses rolled out. International Petroleum Encyclopedia vii IPE2009.indb 7 5/12/09 12:08:35 PM Guest Essay Although the drop in oil prices provides consumers a well- Like it or not, the financial crisis will enhance the role of deserved break, it raises a pointed question. Is the relief short- NOCs and government-sponsored enterprises (GSEs). The or long-term? The primary reason that economic growth has movement of oil around the globe, like the smooth workings of stalled is that investment has dried up. Many energy develop- the international financial system, is crucial to economic growth ment projects are funded by cash flow. This is particularly the and prosperity. case for OPEC’s National Oil Companies (NOCs,) which have Many important private institutions collapsed in 2008, so it the greatest potential for developing new supply. For that supply will be argued that the new reality necessitates a much larger to be realized, however, investment must continue, and low oil role for government. prices will be a major inhibition to such investment. In contrast, consider Raymond Mikesell’s summary of the A variety of financial reforms have already been suggested, goals of the 1944 Bretton Woods conference and the post-war including: plan to restructure the international economy: “…free and non- • Greater regulation of banks discriminatory markets for currencies, capital, and goods.” The Bretton Woods system bestowed more than 60 years • An enhanced role for the Commodity Futures Trading Commission (CFTC) of economic growth and prosperity following the Great Depression. • A streamlining of regulatory bodies Viewed in that context, the 2008 financial crisis has been • An international clearing house only a minor setback. • Registration of derivative contracts. (Based on a presentation made by Dr. Van Vactor for a conference of the International Association for Energy Economics, Perth, Australia, Restrictions on trading will reduce the risk of default, but November 6, 2008.) that restriction will impose a cost: reducing the flexibility and liquidity of the market. Officials in some countries are even seeking a complete overhaul of the international system of foreign exchange and trade—a “Bretton Woods II.” It is important to recognize that there is a tradeoff between economic efficiency and stability, just as there is between risk and return, and it is hoped that the coming process will get the balance right. viii International Petroleum Encyclopedia IPE2009.indb 8 5/12/09 12:08:36 PM