Oil tapping out: Crude shortage looms
CALGARY - World oil production is set to peak in the next two years, at which point there will not be enough new projects coming on stream to offset global oilfield declines, according to a new study.
The report, by the London-based Oil Depletion Analysis Centre (ODAC), shows there are 73 major oil projects under development around the world -- 24 inside the Organization of Petroleum Exporting Countries and 49 outside, including Canada's oilsands. These projects will boost oil production to a peak of 85 million barrels a day in 2007 to 2008, from 82.5 million barrels a day in 2004, when world oil producers were running flat out and used up all excess capacity.
After that, "There are not enough new projects to offset declining production," said Chris Skrebowski, an ODAC trustee and the editor of the U.K. Energy Institute's Petroleum Review.
In an interview yesterday, Mr. Skrebowski said oil projects aren't being launched because there's been a decline in big discoveries, spending cutbacks in the past few years as oil companies focused on improving profits, and restricted access to oil development in many countries.
Mr. Skrebowski, who will present the study's results at a conference in Scotland next week, said world oil supplies and demand will also cross in about two years.
"On a reasonable business-as- usual demand growth, you can keep the [supply and demand] lines together until 2007/2008, and then you can't, and it's very difficult to see how you are going to fill that gap in.
"As of now, the system is under pressure. It could be that [the oil peak] could be as early as this year. I personally think it's much more likely to be 2007/2008."
The International Energy Agency has projected that world oil demand will rise to 121 million barrels a day in the next 25 years.
Mr. Skrebowski said obstacles to new oil development are such he can't see supplies rising to those levels.
"Unfortunately, we are going to meet demand the hard way," he said. Supplies will only meet demand through extraordinary price increases or conservation methods, he said.
Tight world supplies and rising demand in developing countries like China and India have pushed up oil prices to a record US$58.28 a barrel on April 4 in New York.
Mr. Skrebowski said a major world recession prompted by high oil prices could push back the oil peak, but delays in bringing oil projects on stream could accelerate it.
"Every time you get a producer country tightening the terms --which seems to happen with monotonous regularity now -- then there is a standoff, because the companies can't just accept the terms unilaterally being changed," Mr. Skrebowski said. "Nothing happens while they argue, and the projects slip by. So what I am definitely seeing when I tabulate these things is that delay is a major feature."
ODAC and the Petroleum Review have been tracking developing oil projects for many years to gauge future oil supplies.
Big oil projects coming on stream in 2006 include ExxonMobil Corp.'s Sakhalin 1 field in Russia, BP PLC's ACG Megastructure in Azerbaijan, Nexen Inc.'s Buzzard in the U.K. North Sea and ChevronTexaco Corp.'s Tengiz field in Kazakhstan.
Already, production is in decline in 18 countries, including the U.K., Norway, the United States, Venezuela, Indonesia, Oman and Yemen. Mexico and China are nearing the tipping point.
Mr. Skrebowski doesn't expect Saudi Arabia or Russia, the world's top producers, to fill the supply gap.
Saudi Arabia, despite promises it can significantly increase volumes, isn't granting allowing access to outsiders to assess the size of reserves, and there is rising concern production is over-reliant on a small number of fields that are struggling.
Russia has taken a more conservative approach to oil production and made investment terms unattractive, he said.
Canada is one of the few bright spots because of oilsands development, where production is expected to increase from the current one million barrels a day to 3.3 million in 2015.
However, "in a world where demand has been going up at chunky rates, and depletion is building up at chunky rates, either Canada has got to move faster, or it won't be big enough," he said.