Demand forecasts IEA forgets decline fields

The supply issue is clear, non-OPEC supply will be higher, not only due to new fields but largely caused by stringent OPEC production quota agreements. As long as OPEC members comply to this in full, new demand will have to be covered by other sources, largely Norway, Russia, FSU, Canada and new production regions. The IEA has raised its forecast for 2009 non-OPEC supply by 160,000 bpd, largely due to stronger than expected Russian output but also due to higher US NGL and Gulf of Mexico production and a rapid ramp-up at new Canadian oil sands mining operations.

Still, one main issue has not been covered. Due to lower global investments in upstream and still high costs of projects (deepwater, heavy crudes or sour crudes), the normal production levels of most fields could be under pressure. If no investments are being put in revamping existing production capacity, based on assessments production is expected to be decline by 6-10% per year. When taking the lower base line, this would mean a shortage of around 5 million bpd. […]

Gerson Lehrman Group