When Libya’s oil output slowed to a trickle several months go, OPEC’s Gulf members went far and beyond filling in the gaps, actually boosting production to its highest levels all years – around 30 million barrels per day in July. (image: electionsmeter.com)

Libyan rebels took control of Tripoli today, further solidifying beliefs that the country’s oil production will soon return to levels seen before the violent civil war began in February. However, OPEC’s Gulf members probably won’t reduce oil output for some time, since relying on Libya too early could be a mistake, Reuters reported.

Before political upheaval disrupted production, Libya pumped out more than 1.3 million barrels a day, nearly 2% of the world’s supply. Since that’s been out of commission, other Gulf members (mostly Saudi Arabia) have stepped in to make up the loss.

While strategists remain confident the Libyan rebels will successfully oust bizarre leader Moammar Gadhafi, restoring oil output and a more peaceful government, OPEC officials said there’s no reason to rush into anything.

“Let’s see when they completely come back with their output before the crisis. And then, OPEC will see whether it affects prices or stocks, and then it will take the right direction,” one Gulf delegate commented. “We can’t say now what OPEC will do. Are they going to take one month, three months, a year?”

In fact, the group likely won’t make a solid decision until their next meeting in December. The delegate noted any decision to slash output will depend on varying factors like oil prices and demand levels.

Last year, a U.S. Geological Survey determined Venezuela’s Orinoco Oil Belt holds an estimated 513 billion barrels of recoverable heavy crude. (image: topnews.in)

Venezuela’s leading energy officials announced the government is hammering out long-term plans to drastically boost oil output while diversifying its struggling economy, according to an Associated Press report.

Last month, OPEC’s latest study revealed Venezuela had overtaken Saudi Arabia as the country with the most proven crude oil reserves – yet it doesn’t even rank on the list of the world’s top ten oil producing and exporting countries. However, according to Venezuela’s Energy Minister Rafael Ramirez, that may be about to change. Last Friday Ramirez announced the country’s new goal is to raise production from its current 3 million barrels a day to 4 million by 2015.

The government seeks to boost output from the Orinoco Oil Belt, a rapidly developing region with huge deposits of extra-heavy crude, from 1.1 million barrels a day to 3.9 million. In the next 10 years or so, Ramirez anticipates an influx of around 100,000 new workers to the region, and with that will come expanding infrastructure of schools and housing, and hopefully, a stronger, more stable economy.

Venezuelan President Hugo Chavez commented that OPEC quotas will probably be adjusted to account for the country’s growing reserves. Ramirez said it’s too early to gauge OPEC’s reaction, but he’ll be ready to discuss it when the group raises the subject.

“It’s an issue that we aren’t going to discuss for now, as long as there is no need to discuss it. Now isn’t the time to do it still, because we’re determined to keep the price of oil stable,” Ramirez said. “It’s a new frontier that’s opening up.”

Venezuela's Angel Falls, considered one of the seven wonders of the world, is located not far from the country's biggest oil refineries. (image: vacationideas.me)

According to OPEC’s annual statistical bulletin, Venezuela has overtaken Saudi Arabia as the country with the most proven crude oil reserves, the Miami Herald reported this week. Between 2009 and 2010, Venezuela’s known reserves climbed by 40% to level out at 296.5 billion barrels of oil. OPEC estimated Saudi Arabia’s reserves weigh in around 264.5 billion barrels.

If Venezuela has so much oil, why isn’t it higher on the list of the world’s top oil producing and exporting countries? For starters, the South American country’s economy is weak – Venezuela’s annual inflation rate of 24% is the highest in its hemisphere. While neighboring countries Brazil and Colombia both saw substantial rises in crude production, Venezuela’s production rates have steadily declined in the past five years. One likely reason is that one-third of the country’s known reserves are extra heavy crude, which is difficult and expensive to extract.

“You can be sitting on the largest reserves in the world but if you do not have the capital and technology to recover them…they are worthless,” commented Jorge Pinon, former President of Amoco Latin America.

As of 2010, OPEC estimated its member nations hold about 81% of the planet’s 1.46 trillion barrels of total known oil reserves. OPEC’s full report will be published in November.

An oil rig in Russia, which overtook Saudi Arabia as the world's number one oil producer two years ago. (image: tehrantimes.com)

This isn’t breaking news, since the top oil producing countries in the world have the most natural stores of oil and don’t change very often. However, fluctuation in output from any of these countries can affect the heating oil and gas prices that affect our everyday lives. Staying apprised of news and developments in these nations, from political upheaval to the discovery of new supplies, could be useful to heating oil consumers. So, here’s a refresher:

1. Russia produces 9.5 million barrels of oil every day. That’s around 12% of the world’s oil. Though they export slightly less oil than Saudi Arabia, fuel enthusiasts might be interested to know Russia is also the world’s largest exporter of natural gas.

2. Saudi Arabia produces 8.3 million barrels each day. The country contains approximately 100 major oil and gas fields, and is the world’s top oil exporter.

3. The United States is better known as the world’s number one consumer of oil, but the country also produces 5.4 million barrels a day. The U.S. is still struggling in the aftermath of the devastating BP oil spill off the Gulf Coast.

4. Iran produces 4 million barrels of oil a day, almost 4% of the world’s oil. Iran’s controversial nuclear program has been a source of concern for several countries, but they maintain the goal is to generate electricity with low-enriched uranium.

5. China produces 3.8 million barrels of oil every day. But, like the United States, they don’t even make the list of top 20 oil exporters and also experienced a catastrophic oil spill last year when a pipeline exploded.

6. Mexico produces 2.6 million barrels of oil each day. The country is still doing damage control from last year’s pipeline explosion that killed 13 children in San Martin Texmelucan.

7. Canada also produces 2.6 million barrels a day. Exportation could increase with the country’s development of tar sand extraction, but so far environmental concerns have prevented U.S. lawmakers from approving a huge pipeline from Canada to the Gulf Coast.

8. The United Arab Emirates produce 2.4 million barrels of oil daily, though they have the sixth largest oil reserves in the world. Climatically sunny, UAE is said to be looking into developing renewable energy sources, especially solar power.

9. Iraq produces 2.4 million barrels every day. The unofficial birthplace of OPEC, Iran continued to help meet world oil demands despite years of war, upheaval and sanctions.

10. Kuwait produces 2.4 million barrels of oil a day. The country has the fifth largest oil reserves in the world, which started being discovered and explored in the late 1930s.

OPEC secretary general Abdullah El-Badri will meet with IEA reps to mend the rift over tapped emergency reserves and discuss ways to improve coordination in the future. (image: daylife.com and Nicholas Whitaker for HeatingOil.com)

Last week’s controversial decision to tap 60 million barrels of emergency oil reserves hasn’t had the impact the International Energy Agency desired, as heating oil prices surged ten cents and crude climbed $1.88 to finish at $94.77 a barrel on the NYMEX on Wednesday.

Reserves were released in an effort to bring prices down and stabilize the market. Analysts believe the results were short lived because it wasn’t done in March when Libyan production first began to bottom out, and because 60 million barrels simply isn’t that much. Global oil demand averages over 89 million barrels every day.

OPEC officials unanimously criticized the IEA’s decision, saying they never want this situation to be repeated. However, they also expressed a conciliatory attitude and a desire for the partnership to move forward. OPEC secretary general Abdullah Salem El-Badri is scheduled to meet with IEA executive director Nobuo Tanaka soon to discuss improving coordination between oil producers and consumers.

In other factors, Tropical Storm Arlene had some traders concerned about production disruptions in the Gulf, and many believe prices will continue to climb while the U.S. and other oil consuming countries replenish their reserves. Worries over Greece’s debt trouble have calmed for now, but new estimations show steady exports from Libya likely won’t return to normal levels for another few months. And lastly, the Tuesday report that oil inventories dropped far more than expected last week kept prices up again today.

Today’s average retail heating oil price in the Northeast is ten cents higher than Wednesday’s average price.

Iraqi oil workers at Beji refinery outside of Baghdad. (image: wn.com)

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History of Iraq’s Oil Industry

Discovery of oil in 1908 at Masjid-i Suleiman in Iran led to a subsequent search in Mesopotamia (later named Iraq by British mandate). When the Ottoman Empire (of which Mesopotamia had been a part since 1534) collapsed in the early 20th Century, Western powers jumped at the chance to become involved in the economic affairs of the region and gain access to its oil.

Foreign geologists visited Mosul (the northern province) disguised as archeologists. The Turkish Petroleum Company, TPC, (created to exploit oil in Mosul) was a joint English-German-Dutch venture, and despite its name did not include Turkish participation. During WWI, Britain converted its navy from coal to oil fuel, increasing the importance of Iraq’s oil on the world stage, and leading to Britain’s capture of Basra (1914), Baghdad (1917) and Mosul (1918). In 1916, the secret Sykes-Picot act partitioned the Ottoman Empire, assigning Baghdad and Basra to the British, and what is now known as Syria to the French. Post WWI, German interests in the area were confiscated by the British.

Also after WWI, American interests entered the scene in Iraq, as the US pursued a position of equal access for their capital and interests in what were previously English and French “zones of influence.” The American State Department supported American oil companies after experiencing fuel shortages and price increases during the Great War, and withheld support from agreements that effectively stonewalled American efforts to enter the Iraqi oil market. Though WWI ended in 1918, it was only in 1922 that a provisional agreement was reached to allow an American presence in the TPC. In 1924, the American oil syndicate (called the Near-East Development Company) acquired partial ownership of TPC, and America gained a foothold in Iraq.

During the Lausanne Peace Conference (1922-23), politics and oil mixed to determine whether Mosul belonged to Turkey, or whether it was part of the newly created Iraq. Britain’s voice was Lord Curzon, the British Foreign minister and head of the British delegation, and his statements regarding the status of Mosul stretched the truth. He claimed that England’s policies in Iraq had nothing to do with oil, but rather with protecting the interests of the Iraqi people. Though the hypocrisy involved in Lord Curzon’s statements was well documented, Britain (through diplomacy and veiled threats of renewed hostilities in Iraq) eventually managed to put the question before the League of Nations for arbitration. To no one’s surprise, the League of Nations (where the British Sir Eric Drummond held the position of General Secretary) ruled in favor of Britain.

With Mosul part of British-created Iraq, teams of geologists flooded the region. Oil was struck at Baba Gurgur in October 1927. The field was found to have reserves of 16 billion barrels, fulfilling the high hopes of the TPC partners. In 1929, TPC changed its name to Iraq Petroleum Company. The IPC managed to maintain a monopoly on Iraq’s oil supply until conflicts with the Iraqi government over oil development and profits led to nationalization. Nationalization of the oil industry occurred in 1972, with the Soviet Union supplying funds for oil expansion in North Rumalia.

Following nationalization, Iraq made a major effort to increase oil production capacity and exploration, as well as build new refining infrastructure. There was also a push in establishing petrochemical and other downstream industries, and a focus on nationwide aptitude in all aspects of the industry. The change in the industry was immediate—in 50 years of control of Iraq’s crude oil production, foreign oil companies had never made efforts to create any in-country refining capacity. Further, foreign investors had withheld technological information from locals and had ignored local downstream oil-based industry. Post-nationalization, Iraq’s oil output increased from 2 million barrels per day in 1973 to 3.6 million barrels per day in 1979. This output (in the midst of the 1979 energy crisis) marks the peak of Iraqi oil production. Investment in all areas of the oil industry showed substantial results, and Iraq was well on its way to becoming an oil producer on the national stage and achieving a stature that matched its substantial reserves.