(EnergyAsia, April 30, Monday) — Non-OPEC peak oil, or the point of maximum production of oil, will not occur before 2014, said consultant Wood Mackenzie.
Disputing views that any pinnacle is within sight, Wood Mackenzie said its in-depth field-by-field research provides evidence that strong supply growth will prevail in the short term. In fact, barring unexpected disruptions to production, total global capacity is forecast to grow steadily from 86.3 million b/d in 2006 to 96.7 million b/d in 2010.
Kate Broughton, Wood Mackenzie’s Head of Oils Research, said that when global spare production capacity reached a low in 2004, largely driven by unexpectedly high oil demand in China, some observers felt that oil supply was unable to keep pace with demand and would imminently peak.
“Since 2004, however, investment in both non-OPEC and OPEC projects has opened up the spare capacity metric, according to Wood Mackenzie’s latest oil market analysis. This upstream investment has given us a clearer vision of medium term supply growth potential,” she said.
Ms Broughton expects Russia to provide the greatest supply growth in the period 2006-2012, followed by Canadian oil sands production, Brazilian deepwater production, Kazakhstan and Azerbaijan.
The most important projects, in terms of barrels/day (b/d) average addition in 2007, are Azeri Chirag Guneshli in Azerbaijan (255,000 b/d), Buzzard in the UK (140,000 b/d) and the Sakhalin-1 Area in Russia (130,000 b/d). Collectively, the top 25 individual projects which provide greatest non-OPEC growth are expected to add 2.1 million b/d of supply in 2007.
The picture in the Asia Pacific region is less bullish, with India being the only country here to make it to the list of top 10 contributors to non-OPEC oil/NGL supply growth to 2012. Like Malaysia, Vietnam and New Zealand, the country’s production will likely see growth in the short term, but this will not be enough to reverse the region’s gradual decline in output.
The situation is forecast to deteriorate further in the longer term. Production in the region will decline without exceptional levels of future exploration success, with China’s slide expected to accelerate to 6% per annum after 2020.
China is the region’s largest oil producer, putting out close to half of the region’s total volume. Overall, Asia Pacific’s contribution to global oil/NGL capacity will likely fall from 9% (some 8 million b/d) in 2006 to 5% (about 5.2 million b/d) in 2025.
“This means that exploration success is critical to Asia Pacific’s long-term oil production outlook,” said Ms Broughton, pointing out that “yet-to-find” oil production is expected to account for 17% of the region’s output in 2020, rising sharply to 28% in 2025.
Malaysia is the only country in the region that will buck this long-term trend. It produced about 750,000 b/d in 2006, and is expected to yield 825,000 b/d in 2025.
“In stark contrast to the outlook at the turn of the last decade, when production declines from core legacy fields were a major concern, a series of world-class deepwater discoveries have set the scene for a resurgence in output,” said Ms Broughton.
She added that Malaysian oil/NGL production beyond 2008 will be heavily determined by deepwater developments. With the 340 million barrel Kikeh and 400 million barrel Gumusut/Kakap fields expected onstream in the next five years, these deepwater oil discoveries will provide a welcome boost to declining legacy production.
“Should exploration success continue, we believe that Malaysia’s output will continue to grow until at least 2015,” she said.
Total world oil/NGL supply is expected to climb until 2025 at least, with expected capacity growth from OPEC countries and the development of unconventional sources such as biofuels, gas-to-liquids, coal-to-liquid and shale oil more than compensating for the decline from non-OPEC countries that will set in from the middle of the next decade.
“We firmly believe that peak oil is anything but imminent, while recognising that ground risks do remain. With global oil/NGL production capacity forecast to rise from 88.4 million b/d currently to 103.3 million b/d in 2015, we anticipate that oil consumers may well see some softening of the oil price in the medium term.”
However, although supply capacity is forecast to increase further to 110.2 million b/d in 2025, Wood Mackenzie forecasts OPEC’s spare productive capacity will become increasingly tight, with implications for significantly higher prices heading towards 2020.