IEA: There’s enough oil to meet demand, but for how long?
The growing global oil demand will be more than met by the increasing oil production in the U.S. Brazil, Canada and Norway through 2020, however this might change after 2020 due to the lack of investments in the oil and gas industry.
Over the next three years, the International Energy Agency said on Monday, gains from the United States alone will cover 80% of the world’s demand growth, with Canada, Brazil and Norway – all IEA members – able to cover the rest, according to Oil 2018, the IEA’s five-year market analysis and forecast.
According to IEA, despite falling costs, additional investment will be needed to spur supply growth after 2020. The oil industry has yet to recover from an unprecedented two-year drop in investment in 2015-2016, and the IEA sees little-to-no increase in upstream spending outside of the United States in 2017 and 2018, IEA said.
Losing one North Sea each year
“The United States is set to put its stamp on global oil markets for the next five years,” said Dr. Fatih Birol, the IEA’s Executive Director. “But as we’ve highlighted repeatedly, the weak global investment picture remains a source of concern. More investments will be needed to make up for declining oil fields – the world needs to replace 3 mb/d of declines each year, the equivalent of the North Sea – while also meeting robust demand growth.”
Boosted by economic growth in Asia and a resurgent petrochemicals industry in the United States, global oil demand will increase by 6.9 mb/d by 2023 to 104.7 mb/d, according to the IEA. China remains the main engine of demand growth, but more stringent policies to curb air pollution will slow growth. The increasing penetration of electric buses and LNG trucks will have a bigger impact on curbing consumption of transport fuels than the electrification of passenger vehicles, IEA said.
In the United States, fuel-economy standards for passenger cars will curb gasoline demand with growth coming from the petrochemical sector, which is thriving thanks to low-cost ethane. New global petrochemicals capacity will account for 25% of oil-demand growth by 2023. Meanwhile, a new marine fuel rule with lower sulfur content that will come into force in 2020 is creating uncertainty in the market.
Global oil production capacity is forecast to grow by 6.4 mb/d to reach 107 mb/d by 2023. Thanks to the shale revolution, the United States leads the picture, with total liquids production reaching nearly 17 mb/d in 2023, up from 13.2 mb/d in 2017. Growth is led by the Permian Basin, where output is expected to double by 2023.
The path is clear to get those additional barrels to world markets. As a result of new investments in pipelines and other infrastructure that ease the current bottlenecks, US crude export capacity reaches nearly 5 mb/d by 2020 and Corpus Christi solidifies its position as the primary North American crude-oil outlet.
In IEA’s projections virtually all of the OPEC output growth comes from the Middle East. In Venezuela, oil production has fallen by more than half in the past 20 years, and declines are set to accelerate. Sharply falling production in Venezuela will offset gains in Iraq, resulting in OPEC crude oil capacity growth of just 750,000 barrels a day by 2023. Unless there is a change to the fundamentals, the effective global spare capacity cushion will fall to only 2.2% of demand by 2023, the lowest number since 2007, IEA said on Monday.
Offshore Energy Today Staff