(EnergyAsia, May 16 2013, Thursday) — Rising North American oil production over the next five years will inflict a “supply shock” that will prove as transformative of the global markets as Chinese demand over the last 15, said the International Energy Agency (IEA).

In its latest annual Medium-Term Oil Market Report (MTOMR), the agency predicts North American supply will grow by 3.9 million b/d from 2012 to 2018, to account for nearly two-thirds of total forecast non-OPEC supply growth of six million b/d.

World liquid production capacity is expected to grow by 8.4 million b/d to far exceed the projected demand increase of 6.9 million b/d. Global refining capacity will post even steeper growth, surging by 9.5 million b/d, led by China and the Middle East.

The IEA said these global shifts will cause oil companies to overhaul their global investment strategies as well as reshape the way oil is transported, stored and refined.

North America’s supply growth is being led by the surge in US light, tight oil (LTO) and Canadian oil sands supply that “is sending ripples throughout the world,” said IEA executive director Maria van der Hoeven at the Platts Crude Oil Summit in London this week.

Apart from boosting domestic oil and gas supplies, the North American shale boom has also led to the development and adoption of new technology in exploring and developing hydrocarbon reserves in mature and high-risk fields in other parts of the world.

“This is helping to ease a market that was relatively tight for several years. The technology that unlocked the bonanza in places like North Dakota can and will be applied elsewhere, potentially leading to a broad reassessment of reserves. But as companies rethink their strategies, and as emerging economies become the leading players in the refining and demand sectors, not everyone will be a winner,” said Ms van der Hoeven.

Despite continuing geopolitical risks, the IEA said market fundamentals suggest a more comfortable global oil supply-demand balance over the next five years.

However, the IEA expects OPEC production capacity to grow at a slower rate of 1.75 million b/d to 36.75 million b/d, compared with its previous 2012 forecast for an expansion of 2.5 million b/d.

The cartel’s production capacity growth will be adversely affected by growing geopolitical insecurity in northern and sub-Saharan Africa, said the IEA.

It expects OPEC capacity to rise 1.75 million b/d to 36.75 million b/d, about 750 kb/d less than forecast in the 2012 MTOMR. Iraq, Saudi Arabia and the UAE will lead the growth, but OPEC’s lower-than-expected aggregate additions to global capacity will boost the relative share of North America.

On the demand side, the IEA predicts non-OECD oil demand this quarter will overtake OECD’s for the first time.

The report noted that “massive” refinery capacity increases in non-OECD economies are accelerating a broad restructuring of the global refining industry and oil trading patterns.

“European refiners will see no let-up from the squeeze caused by increasing US product exports and the new Asian and Middle Eastern refining titans,” it said.

Rising non-OECD participation in the oil market will be associated with continued growth in commercial and strategic storage capacity, along with strategically located storage hubs to support long-haul crude and product trade.

African economies will play a larger role in the global market than previously expected. Although data leave room for improvement, there is strong evidence that African oil demand has been routinely underestimated, and may grow by a further one million b/d over the next five years.