by Kenny » Wed 17 Mar 2004, 14:39:39
The January 2004 "Petroleum Review" offers what seems to be a very sensible look at the short-term oil supply and concludes that supplies will be able to meet demand through at least 2008.
$this->bbcode_second_pass_quote('', 'T')he year 2005 continues to be the peak year for new mega projects coming onstream. Some 18 projects with a potential peak capacity of 3mn b/d are due onstream in 2005. For 2006 the pace of development eases back a little to 11 projects, with a capacity of around 2mn b/d.
...However, the bottom line is that between 2003 and 2007 some 8mn b/d of new capacity will have been brought onstream to meet global oil demand growth and to offset the decline in oil production from those areas that are already in decline.
Currently 21.3 mn b/d or around a third of the world's oil production is already in decline, the best estimate of the likely decline rate going forward is about 4%, made up of a typical onshore decline rate of around 3% and an offshore one of around 5%. On the basis of a 4% decline rate for one third of the world's production, global capacity declines by over 1 mn b/d each year. Global demand growth is once again expanding at over 1 mn b/d...
As a rough calculation, by early 2007 production capacity will have declined by 3-4 mn b/d (2004-2006), offset by the 8mn b/d of new capacity - giving up to 4 mn b/d of new capacity to meet demand growth of around 3mn b/d. However, this is before the additional capacity created from the development of all the smaller accumulations and the expansion of production in existing fields. In short, supplying global oil demand up to 2007 appears to be well covered adn, depending on the timing of new capacity and economic conditions, there may even be periods of relative price weakness.
If we look beyond 2007, however, the outlook becomes rather more problematic. Only three mega projects are so far known for 2007 and a further three for 2008. For 2009 and 2010 only the later stages of existing projects are currently known about. Consequently, the volumes of new production for this period are well below likely requirements.”
The article assumes that the IEA's demand projections are correct, then lists all the projects under development and their expected production.
The only caveat would be if they are wrong about 1/3 of all oil production being in decline. For example if Saudi production started to falter, then that 1 million b/d new production surplus over demand might evaporate overnight.
In any case, if the Petroleum Review is credible, then it seems to me there ought to be cautious optimism that the sky won't fall before 2010 and genuine concern that there are no more big projects coming onstream after that.
My feeling is that we'll see steady upward price pressure on oil for the next five years, but that the U.S. economy will be able to absorb it. But if the ultimate downturn starts in 2010, you have to wonder when, if, and how we'll be able to do anything about it.