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(In accordance with Title 17 U.S.C. Section 107, this material is
distributed without profit to those who have expressed a prior interest
in receiving the included information for research and educational
purposes.)
ODAC | The Oil Depletion Analysis Centre
140 Fortess Road London NW5 2HP England
+44 (0)20 7424 0049 odac@btconnect.com www.odac-info.org
NEWS RELEASE
For Immediate Release:
Tuesday, 16 November 2004
NEW OIL PROJECTS CANNOT MEET WORLD NEEDS THIS DECADE
World oil supplies are all but certain to remain tight through
the rest of this decade, unless there is a precipitous drop in demand,
according to the results of a study by the London-based Oil Depletion
Analysis Centre (ODAC).
The study found that all of the major new oil-recovery
projects scheduled to come on stream over the next six years are
unlikely
to boost supplies enough to meet the world’s growing needs.
ODAC analysed a total of 68 ‘mega projects’ with
publicly announced start-up dates from 2004 through 2010. In total,
these
projects would add around 12.5 million barrels a day to world oil
supplies by the turn of the decade.
“This new production would almost certainly not be sufficient
to offset diminishing supplies from existing sources and still meet
growing global demand,” ODAC Board member Chris Skrebowski
said.
More than half of the estimated new supply would simply replace
production declines elsewhere due to natural depletion, the study
found. A modest one percent annual rise in demand over the six-year
period would then leave little or no surplus capacity to cushion
against unforeseen disruptions in supply.
If demand were to increase by two percent annually,
available supplies could fall short of the total needed in 2010
by more than two million
barrels a day – roughly equivalent to losing all of Kuwait’s
current daily production.
“With most producers operating flat out to meet runaway demand
increases this year, the world’s immediately available spare
production capacity has virtually disappeared,” Mr Skrebowski
said. “This means that significant additional supplies in the
near-to-medium term must come from new projects already in the development
pipeline.”
“We now see those projects providing surprisingly limited
relief in terms of incremental supply in coming years, and indeed
physical shortages appear ever more likely if demand remains strong,” he
said.
“Even with relatively low demand growth, our study indicates
a seemingly unbridgeable supply-demand gap opening up after 2007,” he
said.
Mr Skrebowski, who is editor of the UK trade magazine Petroleum
Review, compiles and regularly updates the details of planned major
oil-development projects, as reported by the oil companies. The list
contains all announced projects with at least 500 million barrels
of estimated reserves and the claimed potential to produce 100,000
barrels a day or greater.
Using that list, ODAC examined three demand-growth scenarios of
one, two and three percent a year to illustrate the likely range
of outcomes. It also assumed that the combined annual rate of production
losses from those countries where output is now permanently declining
would remain constant each year, despite evidence that it appears
to be accelerating and the likelihood that more producers may go
into decline soon.
“The effect of depletion in mature oil-producing regions is
now becoming a much more significant factor in the supply-demand
equation,” Mr Skrebowski noted.
According to data from the latest BP Statistical
Review of World Energy, 18 major oil-producing countries are now past their peak
production, and their combined annual output dropped by over a million
barrels a day in 2003. This group of countries now accounts for almost
29 percent of total world production.
The ODAC study did not attempt to forecast when
other countries would peak and tip into decline, but experts agree
that several more
are likely to do so within the next few years. Mexico and China,
the world’s fifth- and sixth-largest producers respectively,
appear to be among the likely candidates.
Mexico’s national oil company, Pemex, has already announced
that production from Cantarell, the world’s largest offshore
oil field, is expected to peak in 2006 and then decline by 14 percent
a year. China, too, has confirmed that its two largest producing
regions are now in decline. It achieved only modest overall production
growth last year of 1.5 percent.
Of the 68 confirmed projects that ODAC analysed, 56 are due to come
on stream in the next three years. Seven are scheduled to start pumping
oil in 2008, three in 2009 and just two in 2010. Since it takes,
on average, six years from first discovery for a major project to
start producing oil, any other new projects approved now would be
unlikely to add further supplies until after 2010.
“It is disturbing to see such a dramatic fall-off of new project
commitments after 2007, and not more than a handful of tentative
projects into the next decade,” Mr Skrebowski said.
“This could very well be a signal that world oil production
is rapidly approaching its peak, as a growing number of analysts
now forecast, especially in view of the diminishing prospects for
major new oil discoveries,” he said.
Industry consultants IHS Energy recently reported that 85 percent
of all the oil ever discovered is now in production, and only half
the total produced last year was replaced by new field discoveries.
Annual consumption has now exceeded new discoveries every year since
the early 1980s. Overall, worldwide oil discoveries have been declining
steadily for the past 40 years.
For more information contact:
Jim Meyer (in New York City)
Tel: +1 718 784 1805
E-mail: odac@btconnect.com
Chris Skrebowski (in London)
Tel: +44 (0)20 7467 7117
E-mail: cs@energyinst.org.uk
Note to editors:
1. The Oil Depletion Analysis Centre (ODAC) is a
UK-registered educational charity working to raise international
public awareness
and promote
better understanding of the world’s oil-depletion problem.
Further information is available on its website: http://www.odac-info.org
2. Chris Skrebowski is one of seven members of ODAC’s
Board of Directors and editor of Petroleum Review, a monthly
magazine published
by the Energy Institute in London. He previously edited Petroleum
Economist and was an oil market analyst for the Saudis in London
for eight years. He started his career in the oil industry
as a long-term planner for BP, then joined Petroleum Times as
a journalist and edited
Offshore Services magazine in the late 1970s.
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