Oil supply heading for record
Oil supply from outside OPEC is headed for a record next year after showing unexpected growth. The surprising forecast from the International Energy Agency (IEA), which advises 28 industrialised countries on energy, follows analyst predictions last year that the supply had already peaked, with some putting the production apex as far back as 2005.
Instead, countries outside the oil exporters' group pumped oil last year at a rate more than 200,000 barrels per day (bpd) faster than the IEA expected. The Paris-based agency has raised its forecast for this year by more than 500,000 bpd. It expects oil output from countries that are not members of OPEC to reach 52.6 million bpd next year. The oil spill in the Gulf of Mexico casts uncertainty on the forecast, with the IEA estimating the accident could result in US oil production being as much as 300,000 bpd lower in 2015 than currently projected. Nevertheless, in its latest medium-term oil and gas outlook, released yesterday, the agency predicted overall supply growth of 100,000 bpd over the next five years from countries outside OPEC. It noted this was "significantly stronger" than the 400,000 bpd decline it forecast a year ago.
"Concerns over imminent and irreversible peak oil supply seem to have faded for now," the agency said. It attributed the "more optimistic" supply outlook to steady, relatively high oil prices and lower industry costs over the past year spurring renewed investment in oil development. "Both these factors have prompted companies to reactivate upstream projects they had delayed," the IEA said. "Despite fears to the contrary one year ago, the main impact of the upstream spending dip last year was to postpone rather than cancel upstream projects."
Canadian oil sands, the development of Russian oilfields and new oil production from Colombia were three areas in which "recent rapid growth and field performance have exceeded expectations", it said. Just as significant is that output from mature oilfields has not fallen as steeply as expected. The IEA's latest calculations suggest that "implied levels" of decline in annual production from existing fields have lessened by as much as 0.9 per cent to average about 5 per cent.
"This would suggest that additional work is also being undertaken on mature assets or simply that evaluations of how long new fields can stay at plateau capacity have lengthened," the agency said. Biofuels production was also expected to rise, with a growth spurt expected this year and next. The IEA predicted global biofuel output, mostly from countries outside OPEC, would expand by 50 per cent over the next five years to 2.4 million bpd.
"The economic crisis damped but did not derail growth," it said. While OPEC's actual crude output would continue to be limited by global oil demand and the supply from other countries, the group was expected to boost its production capacity by nearly 2 million bpd over the forecast period. Half of that was likely to be realised by Iraq, the IEA suggested, despite "an array of problems" that could delay official oil development targets.
Beyond the special case of Iraq, Angola was seen increasing its oil production capacity the fastest while Saudi Arabia was expected to show the biggest absolute increase. Ranked next by both measures, the UAE was on track to lift its capacity by nearly 15 per cent to 3.1 million bpd in 2015, the IEA predicted. Elsewhere in the Gulf region, however, Kuwait's production capacity was forecast to "stagnate", despite a planned investment of US$10.4 billion (Dh38.19bn) in oil development over the next five years.
"That pales in comparison to its neighbouring countries in the Middle East Gulf. Projects underway essentially offset declines elsewhere," the agency said. In Iran, which is another special case because of the economic sanctions it faces, capacity was seen falling to 3.3 million bpd in 2015 from just under 4 million bpd last year. "The country's escalating isolation from the international oil community in the wake of global opposition to its nuclear programme is just one factor behind the projected capacity decline," the IEA said. "Equally, if not more, important are unattractive investment terms, based on a largely discredited buyback programme of service contracts."
An "ever-changing" management team at the state oil producer National Iranian Oil Company was also hampering development. email@example.com
Published: June 23, 2010 04:00 AM