Oil production growth in US, Brazil will likely reduce world’s dependence on Middle East
Monday, November 25 2013 @ 02:00 AM AST
Contributed by: DeoBhagan
Photo by Jonah G.S., Flickr
In the 2013 edition of the “World Energy Outlook”, published this month, the IEA raised its forecasts for non-OPEC supply and lowered its ‘call on OPEC crude’ estimates. It highlighted that the growth in oil production in North America and Brazil will likely reduce the world’s dependence on Middle Eastern oil in the near term, but OPEC is expected to play a more dominant role after 2020. Elsewhere, it left its forecasts for global primary energy demand growth unchanged, with China, India and the Middle East expected to largely contribute to the increase.
Stronger growth in Non-OPEC supplies led to lowering of ‘Call on OPEC crude’ forecasts…
The IEA forecasts global oil supply, net of processing gains, to increase by 11 mb/d from 2012 to reach 98 mb/d in 2035, ~1.2 mb/d higher than the previous World Energy Outlook 2012 (WEO-2012) forecast. It raised its non-OPEC supply forecasts by ~2.0-2.5mb/d during 2020-35, primarily on the back of higher contribution from the United States, Brazil and Canadian oil sands. Hence, it lowered its estimates for the ‘call on OPEC crude’ by ~1.3 mb/d during 2020-2035, with OPEC’s share of global production declining to 46% in 2035 from 48% forecasted previously.
Upward revisions to US resource estimates, compared with WEO 2012, meant that the agency now not only forecasts a higher plateau for light tight oil production, but also one that is sustained for longer. It now estimates that the US will displace Saudi Arabia as the world’s biggest oil producer in 2015, two years earlier than it had estimated just 12 months ago, retaining this status until the beginning of the 2030s. In addition, Brazil is expected to deliver more than one-third of the net global growth in oil production – growing by more than double the increase in the United States – and become a net exporter around 2015.
As a result of rising output from North America and Brazil, OPEC will likely lose influence over the oil markets in the next decade, the IEA said.
...but, OPEC is still expected to play a far greater role after 2020
Despite an increase in long-term non-OPEC supply forecasts and a decrease in the share of OPEC production, the IEA expects the market to remain more dependent on OPEC crude from the mid-2020s. It forecasts non-OPEC production to decline gradually from mid-2020s and as a result, low-cost OPEC oil production growth, driven primarily by growth in the Middle East, is expected to meet all of the growth in global demand. OPEC’s share of global production declines marginally from 43% in 2013 to 41% by 2020 but increases to 46% in 2035.
Iraq is expected to be the biggest contributor to OPEC production growth, accounting for two-thirds of the total growth and growing at 4.3% p.a. between 2012-35. Oil production in 2020 is expected to be 5.8 mb/d, which is marginally lower than previous IEA forecasts of 6.1 mb/d.
Marginal upward revisions to oil demand forecasts – to grow by 0.6% CAGR till 2035
World oil demand is now expected to grow from 87.4 mb/d in 2012 to 101.4 mb/d in 2035, higher than the WEO-2012 forecasts of 99.7 mb/d. The growth in oil demand is expected to be non-linear, with the pace expected to slow down from ~1.1% p.a. to 2020 to ~0.4% p.a. thereafter. It is also concentrated in two sectors: transport, where oil usage grows by 12 mb/d to ~60 mb/d in 2035, and petrochemicals, which sees an increase of more than 3 mb/d.
China is expected to overtake the United States as the world’s largest oil consumer around 2030, primarily due to the combination of rapidly increasing oil demand in China and the decreasing demand in the United States post-2020. Total oil demand growth in developing Asia is forecasted to be 13.9 mb/d to 2035, with India becoming the largest single source of growth after 2020.
No major surprises in global energy demand forecasts
The IEA has left its previous forecasts of global energy demand, growing by over one-third from 2011 to 2035, unchanged. It reiterated that the global energy map continues to evolve, with the weight of energy demand shifting towards non-OECD countries. Emerging economies will account for more than 90% of global net energy demand growth, with China, India and the Middle East largely contributing to the increase. The Middle East, in particular, is expected to emerge as a major energy consumer, becoming the second-largest gas consumer by 2020 and the third-largest oil consumer by 2030.
SOURCE: Morgan Stanley Research (Europe)