Global oil output peak of 95m bbl/day to be reached by 2015-2020

08 June 2010 08:19  [Source: ICIS news]

KUALA LUMPUR (ICIS news)--A peak global oil production level of around 95m bbl/day is likely to be reached by 2015-2020 due to policy constraints rather than geological limits, said Dr Fereidun Fesharaki chairman of FACTS, the energy industry consultants on Tuesday.

Speaking at the 15th Asia Oil and Gas Conference (AOGC) in Kuala Lumpur, Dr Fesharaki said that the geological peak may actually be far away.

“No one really knows for certain. Reserves are simply guesstimates driven by politics in certain countries,” he added.

While non-OPEC (Organisation of Petroleum Exporting Countries) countries would face a supply peak by around 2015, the supply peak in OPEC was however, not real, he said.

Meanwhile, demand seemed to have peaked in the OECD (Organisation for Economic Co-operation and Development) nations while in the developing world it was still to be reached, he added.

In the coming years, OPEC would become more powerful as the sole source of supply growth and would be able to sustain price levels easily, he said.

However, even OPEC could have trouble meeting future supply requirements, Fesharaki added.

OPEC faces a natural decline of some 1.5m bbl/day every year while global oil demand is set to grow by 1.0-1.5m bbl/day each year, Fesharaki explained. 

OPEC would eventually have trouble adding the required 2.5-3.0m bbl/day due to political, legal and management problems which meant that it was unlikely to allow for capacity additions large enough to respond to demand growth, he said.

Commenting on forecasting demand, Fesharaki said theoretically it was a simple process requiring just GDP growth forecasts and elasticity data.

“However, what few analysts ask is where the supply will come from. There can be no demand if there is no supply,” he added.

Forecasting demand in China was a case in point Fesharaki said.

“The question often asked is what if everyone in China drives a car, the answer would be people in the US and Europe will have to walk” he said, adding that demand growth stories about China often ignored supply realities.

China has announced plans to control demand for oil at a peak of around 12.5m bbl/day in 2020, Fesharaki said.

“China is concerned that continued 10% per year demand growth is not sustainable as it will lead to increased prices and supply constraints,” he added.

Speaking about fears of a sharp rise in crude oil prices, Fesharaki said that prices would rise only when OPEC significantly reduced its spare production capacity, which was not expected to happen until 2012-2013.

In the short term he was not particularly bullish, but further out it would be impossible not to be bullish, he added.

While crude prices could rise to $120/bbl after 2012-2015, whether they would continue to climb towards $200/bbl or fall in subsequent years would depend on actions taken by the US, the world’s largest consumer, Fesharaki said.

If the US imposed higher taxes on gasoline and other oil products, demand would naturally fall, as has happened in Europe, and as a result prices would not go up, Fesharaki said.

“However, if the US government does not raise taxes, which is the more likely outcome, the market will impose its own tax in the form of higher prices,” he added.

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By: James Dennis
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