LONG TERM OUTLOOK FOR THIRD WORLD OIL EXPORTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R002000020002-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 16, 2016
• Document Release Date: October 5, 2004
• Sequence Number: 2
• Publication Date: December 17, 1974
• Content Type: MFR

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17 December 1974
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MEMORANDUM FOR THE RECORD
SUBJECT: Long Term Outlook for Third'World Oil Exports
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The attached was prepared by
for the Camp David Energy Meeting at the request of the
Erc:rgy Resources Council. The paper was delivered to
Mr. James Reddington on 13 December 1974.
Attachment:
As stated
1 - William Bredo (Treasury)
1 - J. Foster Collins (Treasury)
1 - Peter Tocina (Treasury)
1 - Stephen Bosworth (State)
1 - Clement Malin (FEA)
Distribution: (S-6678)
30 - James Reddington (OMB)
1 - NIO/Econ -
1 - NIO/Econ -
1 - D/OER
Iwi st/P
1 - D/I
3 - I/IE
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' Executive' Summary
Long-Term Outlook' fog; Third- World Oil' Exports
As a group the non-OPEC countries of the Third World
probably will still be net importers of oil in the early
1980s. Their production is expected to grow from 3.1
million b/d currently to 8.3 million b/d by the early 1980s.
.Their consumption is expected to grow from 6.1 million b/d
to 9 million b/d during the same period, leaving a net
import requirement of 700,000 b/d for the Third World as
a vuhol2. Chinese output probably will rise over the same
period to 5 million b/d, of which an estimated 1.25 million
b/d will be exported.
Although the combined Third World-Chinese surplus is
expected to amount to only 500,000 b/d, several individual
countries will become large net exporters by that time.
They include Mexico, Peru, Bolivia, Malaysia, Brunei, and
Angola/Cabinda, as well as China and several Arab countries
not now members of OPEC. If all the exports of these
countries could be captured by OECD consumers, about one-
fourth of the anticipoted import needs of OECD nations
could be met from non-OPEC sources.
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Long-Term Outlook for Third World Oil Exports
As a group, the non-OPEC countries of the Third World
probably will still be importing a little oil in the early
1980s. Oil consumption as well as oil production will
increase substantially in these countries over the next
decade. We estimate that by the early 1980^ the Third World
nations will be producing 8.1 mi1livn b/d of oil and consuming
9.0 million b/d. Over the same period, Chinese production
is expected to rise to 5 million b/d, of which an estimated
1.25 million b/d will be exported.
The.projected net surplus of Third World countries
and China of 500,000 b/d in the early 1980s equals only
2% of OECD nations' anticipated net import needs of 23
million-b/d. Individual countries will become large net
exporters, however, and the bulk of this oil may well go to
OECD countries. Third World supplies could meet 11% of the
projected needs of OECD countries in the early 1980s, if
these countries had access to the expected surplus output
of Mexico, Peru, Bolivia, Malaysia, Brunei, and Angola/Cabinda.
Exports of another 1.2 million b/d, equal to 5% of projected
OECD import needs, are forecast for Arab countries that are
not presently members of OPEC -- chiefly Oman, Egypt, anti
Syria. In the aggregate, estimated surplus supplies in
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 individual Third World states plus China will come to 5.2
million b/d, or almost one-fourth of anticipated OECD imports
from non-OECD nations.,..
Production
Within the next decade, the crude oil output of Third
World countries is expected to expand by roughly 10% annually
from the present level of 3.1 million b/d. A small number
of countries will account for most of the increase. Mexico's
output will increase fourfold, to an estimated 2 million b/d.
Brazil, though remaining a net importer, probably will hike
production from about 200,000 b/d to 900,000 b/d. Production
in Egypt and in Malaysia is expected to reach the range of
700,000-750,000 b/d. Chinese production should rise to
about 5 million b/d.
Consumption
We project that oil consumption in Third World states
will grow at an average rate of 4/% over the next decade,
compared with the 7/% rate of the last five years..-This
projection reflects our belief that economic growth in the
LDCs will be less rapid in coming years than in the recent
past and that high prices will encourage conservation in the
use of oil and a small shift to other fuels. Chinese
consumption is projected to grow at an average rate of 15%
through the early 1980s, compared with 188 over the last decade.
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We expect energy consumption in Third World countries
to grow about 60% faster, relative to the expansion of GNP,
than consumption in developed countries. Moreover, only a
!ew developing countries have sufficient natural gas, coal,
or hydroelectric resources to reduce their dependence on oil.
In many countries, oil will become increasingly important
as modernization makes the traditional fuels of subsistence
economies impractical.
Growth rates for oil consumption will differ greatly
among individual nations. Important producing countries
such as Mexico and Egypt obviously will not be under the
same constraints as certain nations that will have to import
a large part of their supplies -- for example, India, Taiwan,
and the Philippines. Other nations, including Brazil,
South Africa, and South Korea,. probably will have large
enough export earnings to pay for increasing oil supplies.
Exports
Por the Third World countries as a group, the rapid
growth expected in oil output promises only to reduce net
imports from the present 3 million b/d to perhaps 800,000
b/d by the early .980s. Nine or ten countries will account
for all Third World exports of oil. Most important will be
Mexico, with projected exports of 1.1 million b/d. Exports
from Egypt, Malaysia, and Oman probably will be in the 500,000-
600,000 b/d range. The other principal exporters probably
will be Brunei, Syria, Bolivia, Peru, and Angola/Cabinda.
We judge that China will be able to export about 1.2 million b/d
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by the early 1980s, compared with a mere 40,000 b/d in 1973
and 110,000 in 1974. Third World countries and China will
be able to satisfy a substantial part of the import needs
of OECD nations only if the surpluses of individual producers
are channeled to these nations, leaving the needs of other
LDCs to be satisfied by OPEC members.
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Latin America
Most of the most important Latin American countries
will be approaching self-sufficiency by 1980-85,.and Mexico,
Peru, and Bolivia will be important exporters. Exports
from Trinidad-Tobago will probably decline.
Mexico will'be one of the Western Hemisphere's major
exporters by 1980-85. The recent discoveries .n Tabasco
and Chiapas apparently have added some 14 billion barrels
to Mexican reserves. More oil is likely to be found in this
area. Other important discoveries have been reported in
Baja California, Tamalipas, Puebla, and-Chihuahua. From
the technical point of view, Mexico should be capable of
producing almost 3 million b/d of which 2.1 million b/d could
be exported.
We doubt, however, that Mexico will produce at such
rates. Whether or not Mexico becomes a nember of OPEC, it
will probably follow the OPEC line in most matters. More-
over, there is a strong and politically powerful, conservationist
sentiment within the country. Mexico, proud of its rising
industrial exports, has no desire to become another Venezuela.
Oil exports -- mostly in the form of refined products -- will
,be based on the country's foreign exchange needs. We
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Trinidad-Tobago, South America's only other major
exporter, may lose this status during the next decade.
Recent government actions directed at foreign oil companies
come at a time when most of the nation's producing fields
are being exhausted. If government policy is changed,
promising offshore areas might-be developed in time for the
country to maintain its export position.
Argentina, which now produces about 80% of its oil
requirements, will become nearly self-sufficient given domestic
peace and a reasonably agressive exploration policy.
Although prospects for additional large finds f.n older
producing areas such as Mendoza, Neuguen, and onshore
Comodoro Rivadavia are not good, Jujuy and Tierra del Fuego
show promise. The continental shelf off Comodoro Rivadavia
could become an important producing area by the mid ?.o late
1980s. The scarcity of offshore drilling equipment will
hamper rapid exploration and development of this area.
Oil consumption will. continue to expand but at a?reduced
rate as hydroelectric and nuclear plants now under construction
come on stream.and as rapidly increasing natural gas output
allows substitution.
Brazil, as a result of the spectacular oil discovery
near Campos, is now predicting production levels of 1 million
b/d by, 1980. This would supply some 751 of projected
Brazilian requirements. While we believe that the potential of
the Campos discovery has been exaggerated, other areas, such as
the Amazon basin near the area of Peruvian discoveries, will be
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increasingly explored and might add significantly to
Brazilian production by the mid-1980s. Completion of the
gas pipeline from Bolivia in the next few years and a steady
growth-of hydroelectric projects well into the mid-1980s will
help reduce dependence on imported oil.
The outlook is not so bright for other consuming
countries in Latin America. Prospects are perhaps best in
Colombia, Chile, and Guatemala. However, given the realities of
domestic politics and international shortages of rigs and
crews, we do not believe that any of these countries with the
exception of Coln-rbia will be self-sufficient by the end of
Africa
During the next ten years Egypt probably will become
a net exporter, Angola-Cabinda, Tunisia, and the Congo will
increase their exports. South Africa will continue attempts
to. slow its increasing dependence on-imported oil through more
extensive use of coal. The other nations' dependence on
oil -- most of which will be obtained from OPEC countries --
will increase.
The Egyptian petroleum supply situation should improve
substantially over the next several years. Past exploration
efforts have recently paid off. The Ramadan and July oil
discoveries are already being developed and are exrected
to more than offset output declines elsewhere. A massive
new exploration prom7tion effort could yield other discoveries
over the next several years, especially in previously
uncxp.Lored areas Delta, and the
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Western Desert bordering the., Mediterranean. On the negative
side, Egyptian domestic. consumption, which has been held down
artificially for almost a decade, is expected to soar,
especially if an ambitious new economic development plan is
fully implemented. Nonetheless, Egypt should become at
lease a modest net exporter in a year or so, even if the
Israeli occupied Simi.-fields are not returned.
Political. factors, including Egypt's membership in
OAPEC could complicate this scenario. The OAP':C charter
binds the member. states to follow OPEC pricing and other
policies. Moreover, Egypt would be naturally. reluctant to act
against its OPEC benefactors such as Saudi Arabia as dependence
on Arab subsidies lessens and membership in OPEC becomes
more diverse, Egyptian self interest will probably win out
over Arab or producer solidarity. In these circumstances,
Cairo can be expected to produce and export to the limit.
When Angola and Cabinda achieve their independence --
either as one state or as two -- they will probably join
OPEC. Although their production, which we expect to expand
to 250,000 b/d by 1980-85 on the basis of continued development
and exploration, is listed in our tables as Third World
production, it probably should go in the OPEC column.
Expansiofl of production -- be it within or without OPEC --
may be seriodsly delayed by civil strife and the Cabinda
sepera tist movement.
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Recent offshore discoveries have provided a new impetus
to Tunisia's petroleum industry. Offshore oil production
should at least cffset the expected decline in output from
older onshore fields during the rest of the decade. Additional
discoveries in the Gulf of Gabes area should assure some
growth in output through 1980. The government encourages
Western oil companies to explore and develop its resources,
and these companies are attracted by the good quality of
Tunisian crude and its.-. proximity to European markets.
The development of two new offshore oilfields in the
Congo could more than double oil production by 1977, and
growth may be sustained through 1980. Exploration of the
giant Emeraude offshore pool will be complicated by several
technical problems. However, the Loango pool, which is
smaller, should be much easier to produce.
Other attractive oil prospects are believed to exist
in Sub-Saharan Africa. This area is one of the last relatively
unexplored continental basins in the world.
South Africa is the region's major consumer, using
about 35% of all the oil imported into non-OPEC Africa.
Iran provides about one-third of its imports. Because of
Arab backing for Black African opposition tc. South Africa's
racial policies, Pretoria has been forced to obtain the rest
of its oil through a complicated evasion system. Although
oil is vital for highway transportation, bunkering, and
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the chemical industry, South Afric"s large coal deposits
provide 75-80% of its energy needs.
The other consuming countries are'unlikely to develop
major new energy sources. We believe, however, that, many
will be able to obtain oil under special arrangement: from
the OPEC countries. African and Arab producing countries
have been under increasing pressure from the African Oil
importers to help offset increased energy costs. The Africans
feel they are due special favors from the Arabs because of
their political support during the last Arab-Israeli war.
Nigeria a member of the OAS recently has reiterated its
willingness to provide some of the importers crude below market
prices.
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 The main non-OPEC Asiatic' exporters during the next
ten years will be Communist China, Malaysia, and Brunei, and a
few Arab states. The latter, however, will probably closely
follow the OPEC line. Although the long-term prospects of
Thailand, South Vietnam,. Cambodia, and Burma are promising,
it is unlikely that they will become substantial producers
during the period under study. While recent oil and gas
discoveries indicate improved prospects for such major
consumers as India., Pakistan,- and Taiwan, these countries
Asia (including Communist China)
will remain large net importers.
China's crude oil?.production over the next ten years
should continue to show rapid, although *possibly slowing
(after 1980) growth. Further development of existing onshore
fields should enable the Chinese to produce 4 -pillion b/d
by 1980, with exports of 1 million b/d. By the mid-1980s,
output from offshore fields should begin to play an important
of a 10 percent average annual rate of increase, 1980-1985,
role in China's production. ,Projecting output on the basis
gives a figure jtft under 6.5 million b/d for 1985.
Such production rates imply considerable imports of
petroleum equipment and the continued need (and desire) on
Kpcrts TV
whether those objecting to current practices could be
and equipment has been manifest over the past two years;
political resistance to current levels of imports of plant
sustain an accelerated industrialization program. Domestic
persuaded to accept the even higher levels implied by
projected petroleum production. and, exports-,foz.?~o 1980s 25X1
remains to be seen.
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The Chinese would be reluctant to submit to the
additional political (and perhaps economic) constraints
imposed by membership in'OPEC. It seems likely that they
would remain outside OPEC unless OPEC membership became a
vital aspect of their overall foreign policy. This would
depend the course of their relations with the Soviets, the
US, and.the success of their efforts to establish China as
a leader of Third World countries.
Malaysia's supply and demand currently are in balance.
Recent oil and gas strikes off Sabah in addition to similar
offshore finds off Sarawak and in the South China Sea perhaps
justify present government plans for crude output of 700,000
b/d and 1 to 3 million cubic feet per day of gas by the early
1980s. The recent formulation of a national petroleum
company PETRONAS, fashioned ;.,long the lines of PERTAMINA,
is indicative of an aggressive oil policy. It is probable
that Malaysia will attempt to join OPEC in mid to late 1975
when exports should be on the order of 150-200#000'b/'4.
Brunei is expected tc expand production of oil and
gas largely as a result of offshore developments along the
northwest coast of Borneo and some Zrom more extensive
exploitation of onshore pools. Crude production could
exceed 300,000 b/d and 750 million cubic feet daily in the
early 1980s.
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India currently produces about a third of its oil
requirements and obtains the remainder from OPEC countries --
some under concessional agreements. Recent discoveries
in the Arabian Gulf offshore Bombay seem promising. Further
exploration and development will be complicated by New Delhi's
mistrust of foreign oil cc.'panies, the world-wide shortage
of rigs and crews, and problems within the state oil company.
The nation's dependence on foreign oil is not likely to
decline by the mid-1980s.
Pakistan is expected to produce only about 15% of its
oil consumption in the next few years. However, it currently
is one of the leading gas producers on the Asian sub-continent
and possesses additional, largely undeveloped gas reserves.
Gas already is the country's most important commercial fuel
and is expected to continue at this rate. Current exploration
efforts could improve the outlook for oil. The government
has encouraged western firm's exploration efforts. A
concessionary financing agreement has been arranged with Iran
for about 60% of current crude requirements. Iran and other
Middle East oil producers also have been generous in supplying
loans on soft terms.
There is little hope that other large oil consumers
in Asia such as South Korea, the Philippines, or Taiwan
will be able to produce domestically a significant share
of their energy demand. Although currently there is exploration
activity going on, only Taiwan has positive results. An
unevaluated gas find has been found offshore thich may produce
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some oil. Taiwan and South Korea are hoping to use coal
and nuclear power to reduce some of their dependence on oil
and gas. The other net importers in the area have little
proppect fjr becoming even self-sufficient in the time
period covered.
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 Argentina
Brazil
Bolivia
Kexico
Chile
Colombia
Peru
Trinidad-"b'90
Others
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Egypt
Angola-Cabinda
South Africa
Congo-Brazzaville
Tti. risia
Other
Israel
Turkey
Syria
Bahrain.
031
India
::alaysia
South Norse
Taiwan
Philippines
Thailand
South Vietnaa i Caabodia
Brunei
Other
530
720
15
560
103
120
110
60
615
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Protected Change in Oil Supply Position of Non-OPEC LOCO and China
150
25
310,
10'
35
300
2,425
140
200
50
35
0
480
100
240
165
180
175
85
10
5GS
Gob Total, Nog-OPEC LOCI 6,085
China
1,020
. 7,105
Production Imports(-)
Consumption
Production
#ipor ts +
Imports(-)
1,565 :
-1,265
4,300
4,520
414
-194
650
600
900
-50
-400
L40
-550
1,300
+170
so
+35
30
200
100
+1
465
??~95
900
2,000
,
.-90
30
-70
140
50
0
N5
+6S
200
200
1
7U
-40
200
400
+200
165
+105
120
120
0
0
-61S
760
50
-710
445
-385
.1,21S
+55
165
?1S
250
750
+500
4130
50
250
+200
155
0
-430
0
-310
430
+85
40
+30
15
100
1
QS
+50
'
50
370
0
.
-300
420
5C
.1,110 -1,315
3,505 ?'
100
-40
270
0
-270
65
-135
2s0
100
-130
100
+50
130
250
+15n
70
+35
50
? 70
+20
+395
29`5
x,295
5
600
0
-330
670
300
-370
15
100
+ 0
140
700
+560
0
-240
335
0
-335
0
-165
230
0
-230
0
-180
250
0
-250
0 ?
-175
245
50
-195
0
-85
120
50
-70
220
+210
a
20
3()0
?? 50
+280
-740
10
-555
790
2.965
1,060
+40
3,750
?5,000
+1,250
-2,925
12,770
13,360
49C
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