OPEC Production Leaders and Laggards: Key Insights

Hello ?? and welcome to another edition of the Energy Business Analytics Newsletter. In this edition, we use the data in the Statistical Review of World Energy to examine individual OPEC member countries and their role in moderating oil markets.

KEY TAKEAWAYS

• Between 2010 and 2023, the contribution of the five founding members of OPEC (OPEC-5) to OPEC’s production has ranged between 60% to 70%.
• In 1970, OPEC-5 made up 84% of the group's reserves, which declined to 77% in 2000. As of end-2023, OPEC-5 contributed 82% to the group's reserves position.
• The top three OPEC member countries by production are Saudi Arabia, the Islamic Republic of Iran, and Iraq. The bottom three are Congo, Gabon, and Equatorial Guinea.
• The bottom three performers have all been producing a higher share of global production than their share of global reserves.
• Future OPEC supply will still be influenced by the five founding members of OPEC, who together possess enough reserves to last 116 years at their current production rate of 24 MMbbls/day.

INTRODUCTION

In a previous article, which you can find here, we showed the potential of OPEC to keep sustained oil production and the role it is expected to keep playing into the future.

But surely, not all members of the 12-member strong organization contribute equally to the organization's capabilities.

In this article, we cluster the members of OPEC into different groups to examine their performance. We will look at the original OPEC-5, the top 3 performing members and the bottom 3 members by production.

Let’s dive in!

OPEC’s ORIGINAL FIVE

Baghdad, September 1960: Five countries – Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – came together to form OPEC. These were the founding members of the OPEC, which I will refer to as OPEC’s original 5 (OPEC-5). ?As of the end of 2023, the organization had thirteen members – Angola, however, left the fold effective January 1, 2024.

These original five have continued to contribute to the production, reserves position and clout that the organization wields. As shown in Table 1, by 1970, the OPEC-5 accounted for 71% of production from the then 10-member group. By 1980, with the group expanded to 13 members, producing 27.62 MMbbls/day, the OPEC-5 accounted for 67%. Between 2010 and 2023, the contribution of the OPEC-5 to OPEC’s production has ranged between 60% to 70%.

The table does not show that in 2018, OPEC membership comprised 15 countries. OPEC membership climbed to 13 countries in 1975, having grown from 5 countries in 1960. ?

In terms of reserves position, the OPEC-5 made up 84% of the OPEC reserves in 1970, which declined to 77% in 2000. As of end-2023, the OPEC-5 contributed 82% to the group's reserves position.

As of the end of 2023, the R-P index for the OPEC-5 was 116 years, which is 16 years longer than the whole group. The disparity between the R-P index of the OPEC-5 and OPEC group had grown from 1970 when it was 8 years.

As shown, the original OPEC-5 is still a significant contributor to the position of OPEC on the global stage.

SIXTY YEARS OF OPEC: LEADERS AND LAGGARDS

Here, we look at the top 3 and bottom 3 OPEC members by their 2023 production levels. Table 2 shows the countries' rankings.

The top 3 OPEC member countries by production are Saudi Arabia, Islamic Republic of Iran, and Iraq. While the bottom 3 are Congo, Gabon, and Equatorial Guinea. It is noteworthy that the top 3 performing countries are members of the original OPEC-5, and further are all in the Middle East. Additionally, the bottom 3 countries are all in Africa.

We will employ two metrics to examine the performance trend of these groupings.

1. Reserves-Production ratio (R-P index): The R-P index (measured in years) is indicative of how long the proved oil reserves of a jurisdiction can last at the current oil production levels. It is obtained by dividing the reserves by production.
2. Equitable Depletion Index (EDI):The EDI compares the global share of a jurisdiction’s production relative to its global share of reserves. This measure shows how matched a jurisdiction’s global share of production is to its global share of reserves.

R-P Index of the Leaders

Figure 1 shows the R-P trend of the top 3 OPEC producers since 1960.

An outstanding feature of the graphic is the stratospheric R-P index of Iraq at 959 years in 1991. This is explained by the decline in production around the Gulf war. Iraqi production declined from 2.15 MMbbls/day which was 4.5% of global production in 1990 to 0.29 MMbbls/day in 1991 which was 0.44% of global oil production.

Iraq’s R-P index declined from 234 years in 2003 to 91 years in 2023 even as its oil production ratcheted up from 1.34 MMbbls to 4.52% of global oil production in 2023 representing 4.35 MMbbls/day.

In 2023, Saudi Arabia’s R-P index was 64 years, a decline from 88 years in 2002. Iran, however, has witnessed an increase in its R-P, which was 120 years in 2023—in 2001, it was 71 years.

R-P Index of the Laggards

The R-P index of the bottom 3 OPEC producers – Congo, Gabon and Equatorial Guinea – is captured in Fig 2. As of 2023, Congo’s reserves could support its production for another 18 years, Gabon’s reserves would support another 25 years, and EG’s reserves would support another 34 years.

While Figure 2 shows the R-P index for the bottom 3 going back to 1960, it should be highlighted that Congo only became a member of OPEC in 2018, Gabon in 1974, and EG only in 2017.

Congo’s R-P index declined by 7 years since it joined OPEC in 2018 when its R-P index was 25 years. This is due to production increase and corresponding decline in reserves. EG’s R-P index increased from 15 years in 2017 to 34 years in 2023 on account of rapid decline in her production. Production declined from 195 kbpd (2017) to 88 kbpd (2023). You may want to check out this detailed country profile of EG by Dr Carole Nakhle writing in Geopolitical Intelligence Services . When Gabon joined OPEC in 1975, her R-P index was 9 years, however this has increased now to 25 years. This increase was driven by the increase in the country’s reserves.

EDI of the Leaders

We will now turn our attention to the Equitable Depletion Index. We will look at each member of the top 3’s share of global production compared to their share of global reserves. An “equitable” depletion is characterized by a value of 1.

Figure 3 charts the share of global production and share of global reserves of OPEC’s top 3.

See that amongst the top 3 producers, their share of global reserves is higher than their share of global production. Saudi Arabia’s share of global reserves has declined from 25% in 1990 to 15% in 2023, while its share of global production has remained just below 15% since 1990. This indicates that Saudi Arabia, OPEC’s leading producer, is approaching an EDI of 1 – a situation where, on a market share basis, it produces as much as its reserves position suggests. This wasn’t the case for much of OPEC’s history.

While Iran’s share of global reserves climbed to 12% in 2023, the country’s share of production was at 4%. This suggests that, unlike for Saudi Arabia, Iran is not producing as much as its share of global reserves position suggests. In 1974, however, Iran produced 10.3% of the global production of 59 MMbbls/day.

In 2023, Iraq’s share of global production was 4.2%, up from 2% in 2002. Meanwhile, Iraq’s share of global reserves stood at 8% in 2023, down from 11% in 1989.

Let’s turn our attention to the bottom 3.

EDI of the Laggards

Figure 4 captures the market share of production and reserves of OPEC’s bottom 3 producers.

Congo, Gabon and EG all have their share global production higher than their respective shares of global reserves. This indicates that these three countries are producing at an EDI above 1.

Take Congo. In 2023, Congo’s share of global production was 0.28%, while it’s proven reserves contributed 0.10% to the global reserves. Since 1981, Congo’s share of global production has progressively exceeded its share of global reserves.

Gabon’s share of global production peaked at 0.52% in 1995 but declined to 0.23% in 2023. In 1997, the country’s share of global reserves peaked at 0.25% of global reserves of 1.15 trillion bbls. By 2023, Gabon’s share of global reserves had declined to 0.11%.

Equatorial Guinea’s share of global production was at a peak of 0.46% in 2005, but by 2023 this share declined to 0.10% in 2023. The country’s share of global reserves peaked at 0.13% in 2005 but declined to 0.06% in 2023.

PUTTING IT ALL TOGETHER

Oil and gas is still expected to contribute significantly to the global energy mix by 2050. Given the substantial size of OPEC’s resources, we can expect the OPEC group to be relevant in that future. The top 3 performers of the group are also members of the original 5 founders of the organization, and still drive the production and reserves position of the group.

The top 3 performers of the group have been conservative of their oil production viz a viz their reserves, producing below their share of global reserves. However, the bottom 3 performers have all been producing a higher share of global production than their share of global reserves.

In 60+ years, OPEC’s centre of gravity hasn’t shifted from the five founding countries.

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