A report by the Oil Depletion Analysis Centre (ODAC) has taken the hard data supplied by oil producers and come up with some worrying conclusions.
During the next six years, global oil supplies will be constantly tight. Even with a minimum of demand growth and a series of fields ready on the day they are supposed to be, shortfalls will still occur.
“We took the development projects that are publicly announced by the producer companies and countries, over the next six years up to 2010,” said Jim Meyer, director of ODAC, speaking to Aljazeera from New York.
“This is the hard data that is announced publicly. It is a comprehensive list. It is announced in the press because, of course, it is good for business as far as oil companies go.
“But we wanted to find exactly where the oil will be coming from to supply the new demand. The prospects do not look bright.”
There are three sides to this oil equation.
Increase in demand may come
Firstly demand growth. The International Energy Agency (IEA) predicts that demand will rise by around 1.8 million extra barrels per day in 2005. That is growth of about 2.2%. Many analysts, such as Societe Generale in Paris, see the IEA’s forecasts as on the low side. They think the 2005 figure will be closer to an extra 2.5 million barrels per day. This works out at an annual increase of just over 3%.
“We took three different scenarios and worked from there,” continued Meyer. “We looked at a possible 1%, 2% and 3% demand increase. It could be from China, from India or from new SUVs on the streets of the US. What we wanted to find was how much of the extra capacity needed would come on stream in the period up to 2010.
“We looked at the 68 projects quoted. The estimates of their production mean they would add around 12.5 million barrels per day to the world total.”
The study looks at the biggest announced fields, or mega projects, right down to those who produce only 100,000 barrels per day.
“What is worrying in itself is that after 2007 the number of projects of any sort really starts to drop off. In general it takes six years to bring new fields online. Even if fields are announced today, they will not be producing any oil until at least 2010,” says Meyer.
Supply from 18 countries is in
“Even though we know that in general on-stream dates do tend to slip within the oil industry, after 2007 under all our scenarios we see negative capacity occurring.”
Because as well as finding fields and increasing demand there is another less mentioned factor in play.
“Depletion of oilfields is something that is not widely recognised. But we now know that a number of major producers are in decline.
“That lost capacity has now reached significant proportions. From the figures provided by BP we know that the world is losing an annualised one million barrels a day with 18 producer countries now in permanent decline.”
Vital new fields
Just in order to stay at the level we are at now the world needs new fields, let alone meeting increasing demand.
“By 2010 about half of the 12.5 mbpd which will come from the new projects, will be taken up by depletion. But in that time we can be fairly sure that more countries will tip over the edge and start to decline as well.
“Two of the biggest who appear to be heading that way are Mexico and China.”
However ODAC did not attempt to predict the exact dates, instead the three different scenarios give different pictures of the future of black gold. But with one shared factor, none of the scenarios produce enough oil.
“Under the 1% increase in demand, which is erring on the conservative side, then we may have a little excess capacity up to 2007 but after that we see a shortfall of over 1mbpd. The 3% scenario gives a shortfall of more than 3mbpd.
“There will not be spare capacity to maintain either growth or prices at current levels. Prices would soar”
Jim Meyer, director of ODAC
“Essentially these figures say that the levels of demand growth are unsustainable. There will not be spare capacity to maintain either growth or prices at current levels. Prices would soar.”
However, there is one possibility that could restrain demand, a recession.
“The only thing that could really change the equation is some kind of global recession that would dampen demand.
“Of course, that could be catastrophic and the effects of it could be felt all over the planet. Barring something like this, it is very hard to see any scenario in which demand could be met. That is worrying indeed.”