Estimating monthly oil production for most countries prior to the release of official statistics is challenging. It can require combining export cargo tracking with “well-placed sources” who can share “hard-to-get” information. Enter the problems. Cargo counting cannot capture production used for either domestic consumption or increasing inventory, and relying solely on cargos can overestimate actual production if previously built inventory is drawn-down and exported. Obtaining human intelligence seemingly helps to illuminate the actual situation, but human sources can be inconsistent, unreliable, and beholden to national (or other) agendas. These issues, among others, can result in significant divergence between available time series; among the most prominent are the IEA, OPEC Secondary Sources, and OPEC Direct Communication.
Further compounding the data disparity, some countries lose the ability or refuse to provide official enumeration of monthly crude production. For example, Libya no longer supplies monthly estimates to OPEC via the Direct Communication series (the last time they did was in March 2015). We suspect the data termination was originally due to Libya’s Civil War and the subsequent failure of a UN resolution to maintain the National Oil Company’s structure, which subsequently split into Eastern and Western halves. As the inevitable volatility of war reverberates, more fog sets upon the situation, and getting an accurate understanding of true crude oil supply becomes increasingly difficult.
Flare Signature Innovation
Recently, Genscape combined its proprietary flare signature evaluation methodology with liquids production data by field in Libya to create a high-frequency estimate of total oil and other liquids production. The goal was to generate accurate production forecasts ahead of other sources that do not rely on export measurements or human intelligence.
The methodology goes beyond a simple on/off flare indicator; instead, it also incorporates the magnitude and nature of the flares. Proper interpretation of the flare data is crucial given that the flare signature’s information content is not always static across time depending on each individual field’s operational facets and performance. And while certain environmental conditions can result in temporary signal loss, which subsequently causes some noise at the daily frequency level, Genscape’s proprietary modeling normalizes around the operational characteristics of each individual field to create smoother weekly and monthly estimates.
Exports, Not the Whole Story
As November 2017 ended and December sets in, the market races to triangulate data and convert it into actionable, useful information. As with every month-end, various sources have begun to share OPEC’s crude production estimates by country – a process that usually begins with waterborne barrel counting. And according to data from Genscape’s Vesseltracker TM (as shown in the graph below), it is clear that Libya has hit a new year-to-date export volume high.
Genscape’s High-Frequency Libyan Production Monitor indicates that Libya’s crude production level in November was higher than in all months other than July 2017, since Q3 2013. It also indicates that these high levels had the most consistency of any previous month since Q3 2013.
Unlike export cargo counting, the High-Frequency Libyan Production Monitor allows customers to get an advanced understanding of production trends and levels inside Libya, without waiting until month end or relying on anyone inside Libya to confirm volumes.
Lastly, aggregating the model’s daily estimates in a monthly output frequency and comparing them to the same production benchmark shows a strong correlation with minimal variance. Over 68 months, it has a correlation greater than 95 percent, with an average variance of 6 percent vs. the average of benchmarks.
Going forward, as Genscape expands its oil production forecasting from Africa, the U.S., and Canada to other continents (South and Latin America are next), it expects to continue applying its flare signals methodology to increase high-frequency insight into major oil producing nations.
Genscape’s African Crude Oil Supply Report provides the most valuable, comprehensive window available into the current state of African oil supply. Using Genscape’s proprietary monitoring, Government and publicly available data, and imagery, the report combines an academic forecast and data science to provide a unique view of the rapidly changing oil-producing continent, with details for 26 countries and a specific focus on the conflict states of Libya, Nigeria, and Sudan/South Sudan. Click here to learn more about the African Crude Oil Supply Report.