Non-OPEC Oil Production

Non-OPEC Oil Production

Non-OPEC oil producers, which turn out most of the world’s oil, are operating near capacity.

Last updated November 10, 2008 7:00 am (EST)

Current political and economic issues succinctly explained.

This publication is now archived.


Oil producers operating outside the Organization of Petroleum Exporting Countries (OPEC) are responsible for producing 60 percent of the world’s oil and face increasing production hurdles. Experts say many of the non-OPEC producers have older, less productive wells, rising costs for new projects, and in some cases rising demand at home that may cut into exports. Higher prices have made difficult oil projects more lucrative, leading to increases in unconventional oil production--but that could change. Declines in non-OPEC production come at a time when investment in new oil production is tougher because of tightening credit markets, oil price volatility, and resource nationalism. While a few producers are expected to offset some of these declines, new production is coming online more slowly than originally projected. A 2007 study by the National Petroleum Council corroborates projections by a number of experts that the world is entering a period of growing demand amidst tightening supplies.

Non-OPEC Production

The U.S. Energy Department’s Energy Information Agency (EIA) said seven of the world’s fifteen largest oil producers are outside of OPEC. As of 2006, those countries were Russia, the United States, China, Mexico, Canada, Norway, and Brazil. Britain had been on the EIA’s list as of 2004, but production has continued to decline significantly in the North Sea, said EIA energy analyst Matthew Cline. Overall in 2007, non-OPEC nations produced roughly 48 million bpd, comprising nearly 60 percent of total production for the year.

Many non-OPEC producers are faced with wells that are quickly depleting. Some major producers, such as the United States, Mexico, and Norway, have experienced a decline in production in recent years. However, overall numbers for non-OPEC producers are bolstered by the significant increases in production from Brazil, Canada, Russia, and a few other former Soviet states. A 2008 BP report on world energy shows that production among the Organization for Economic Cooperation and Development nations, which include four top independent producers-Canada, Norway, the United States, and Mexico-dropped by about two million bpd in the last decade. Meanwhile, the former Soviet states increased production by more than 40 percent over that same time period.

More on:

Fossil Fuels


Although there has been some new exploration and cultivation of oil sources, it takes time before such projects are ready for production. Cline said one of the biggest challenges for producers is skyrocketing costs for labor and steel, noting that costs for "everything that you need to build a modern oil project are rising very fast." In addition, some new projects lack infrastructure, such as pipelines, which help bring new oil to market quickly and cheaply. Landlocked projects in Kazakhstan, for example, face extremely high transportation costs.

Declines in Production

Once one of the fifteen-largest oil producers, Britain experienced a production decline of 10 percent in 2005, the largest (Independent) of any oil producer for the year--and has experienced further declines since then. Although production will be bolstered by new wells in the North Sea’s Buzzard Field, Britain’s overall production is expected to continue to decline, experts say. Overall production in the North Sea, which includes that of Norway, also is expected to continue to decline in coming years. Norwegian production fell by almost 800,000 bpd from 2000 to 2007. Mexico, a major exporter to the United States, experienced about a 300,000 bpd decrease in production during the same time period. The percentage of exports out of Mexico’s oil production rose slightly from 41 percent in 2000 to 45 percent in 2006, but there are doubts Mexico can sustain the current level of exports much longer.

D. Barry McKennitt, executive director of the U.S. National Association of Petroleum Investment Analysts, questioned Mexico’s ability to continue to export, noting that with domestic consumption going up and production going down, "They may not be able to export to anyone in five years." For the period of 2000 through 2007, the EIA puts U.S. production declines at about 700,000 bpd; the BP report estimates those declines to be closer to 900,000 bpd. The EIA includes gains in refining volume while the BP report does not.

Expectations for New Production

In total, non-OPEC production is expected to increase by 1.5 million bpd in 2009, up from the 900,000 bpd growth expected in 2008, according to the EIA. Huge drops in oil prices following the global financial crisis caused the EIA to downgrade global consumption figures considerably. In October 2008, the agency projected consumption growth of 300,000 bpd for the year, which is more than 50 percent less than projections given earlier in the year. EIA officials attribute lessening demand to slowing economic growth. World reserves are estimated at 1.2 trillion barrels, according to BP, with 75 percent of those reserves in OPEC countries. This figure only includes proven reserves where development is taking place. There is no independent verification of OPEC reserve figures, which has led some to question whether Saudi oil reserves might be overstated.

China, a net importer of oil and gas, has made slight increases in domestic production in recent years but the EIA’s Cline described China’s outlook for future production as "relatively flat." He said the biggest gains are expected in the United States, Canada, Brazil, and the former Soviet states of Azerbaijan and Kazakhstan. Of these, Azerbaijan and Kazakhstan are expected to be most significant. Azerbaijan’s production grew by 45 percent from 2005 to 2006 and grew another 30 percent between 2006 and 2007.

Russia added about 3 million bpd in new production over the period between 2000 and 2006 and was projected to add several hundred thousand barrels per day in production by the end of 2008. However, new projections indicate Russia will produce about the same as in 2007 due to "an abrupt slowdown" (Bloomberg) in production. Estimates also show Russian production may go into a multi-year decline because of a lack of investment in new production. Of the more than 9.6 million bpd produced in the country in 2006, slightly less than 70 percent was exported to other countries.

There are concerns about Russia’s growth in domestic demand, especially in the natural-gas sector. BP’s report shows the country has increased consumption by about one million bpd in the last decade. Experts also expressed concern about the expansion of nationalized oil. "Russia doesn’t think it requires foreign investment," Edward Chow an energy analyst for the Center for Strategic and International Studies, said. "The question is whether they will do a better job than the Soviets."

More on:

Fossil Fuels


Kazakhstan is considered to have one of the most promising oil fields found in the last decade and highlights both the opportunities and troubles for non-OPEC producers. Even though it is not ranked among the top oil producers, in 2006 it was ranked by the EIA as one of the largest oil exporters, just above Canada. Between 2000 and 2007 the country nearly doubled its oil production, going from about 740,000 bpd to just under 1.5 million bpd. Experts said Kazakhstan’s production has run into some trouble due to mismanagement and the complexity of extraction for deep oil sources. Kazakhstan’s government has used cost overruns and delays at oil fields run by international oil companies to press for a bigger share of oil revenues.

Unconventional Sources

New production also will come from sources once deemed uneconomical. "New unexplored areas are opening up for the first time because of oil prices," Cline said. New Brazilian and Gulf of Mexico projects are being drilled in extremely deep water (WSJ), for example. Canada’s oil sands, once deemed too expensive to distill, are currently extracted from in growing quantities. Canada increased production by over 430,000 bpd between 2000 and 2006, and production is expected to rise in coming years. According to BP’s report, Brazil added about 600,000 barrels in increased daily production during the same time period. Brazil’s national oil company, Petrobras, has been deemed (WSJ) by some analysts a "rare success story among state-owned oil companies." Though production is expected to rise in coming years, Petrobras’ president, Sergio Gabrielli, said in October 2008 that some investments in the massive oil find off its coast would be slowed (Miami Herald).

There are other hurdles to unconventional projects. Some experts expressed concerns that Canada would follow through on calls to raise oil royalties (Calgary Herald) because such a step may dissuade investment in Alberta oil-sands projects. McKennitt of the U.S. National Association of Petroleum Investment Analysts points out that the energy-intensive process for extracting oil from tar sands has cut into natural gas exports to the United States because so much gas is being used in the extraction process. "So if we want the oil we don’t get the gas," he said.

A large portion of new production by the United States is predicted to occur in the Gulf, including from some deep-sea wells. Some analysts are concerned about the increasing concentration of U.S. oil in the Gulf and the area’s vulnerability to hurricanes. In 2005, Hurricane Katrina reduced production capacity by 8 percent. McKennitt said Gulf infrastructure remains vulnerable to another Katrina-type storm, and recommends that the United States open up other areas of drilling offshore. The United States has a moratorium on new offshore drilling except in the Gulf, but some lawmakers continue to push to lift the drilling ban. Another source of new production from the United States will be corn-based ethanol: Cline predicted about 40 percent of new U.S. production in 2008 will be from ethanol.

High oil prices provide an incentive to expand expensive unconventional oil projects. The sharp decline in oil prices in 2008 may make investment in unconventional projects unattractive in the short term. Some experts, including officials at the IEA, worry that wildly fluctuating oil prices and the inability for some firms to get financing because of the credit crisis will deter investment in any type of new oil production, leading to a supply crunch.

U.S. Demand and the Ethanol Factor

Some analysts say countries like the United States, which accounts for a quarter of the world’s oil consumption, need to work on limiting consumption to help ease world demand instead of focusing on new production. The next largest single country consumer is China, one of the fastest-growing energy consumers in the world. It, along with other large emerging economies, has added to the global strain on oil and gas supplies.

Chow contends that higher U.S. gasoline prices, perhaps via a gas tax, already used throughout Europe, could help curtail U.S. demand. He noted that China has less flexibility on consumption since its demand is more closely tied to its manufacturing. The U.S. Congress has long resisted such a step given the heavy reliance by Americans on gas-powered cars. A CFR Task Force report mentions the need for considering a gasoline tax amid a range of options, including expanding alternatives fuels, and it encourages the expansion of domestic oil production to improve energy security while the United States plots changes to strategy.

Many experts doubt U.S. ethanol production can help ease supply concerns. They argue that the use of corn-based ethanol is uneconomical since the market has been bolstered by subsidies and issues with distribution have not been ironed out. But others remain hopeful that non-corn-based ethanol, such as the sugar-based variety produced by Brazil and the still experimental cellulosic ethanol (derived from things such as grass and wood chips), will prove to be less expensive alternatives.


Top Stories on CFR

Immigration and Migration

Election 2024

Vice President Kamala Harris is seeking the 2024 Democratic presidential nomination in the wake of Joe Biden's exit from the race.


The closely watched elections on July 28 will determine whether incumbent President Nicolás Maduro wins a third term or allows a democratic transition.