Last week the Cambridge Energy Research Associates (CERA) produced a report claiming that by 2010 world oil production will reach 101.5 million b/d. This increase is expect to create a cushion of 7.5 million barrels as the group projects world demand to be 94 million b/d.
The Oil and Gas Journal has a very good article discussing how CERA reached their projections. We have already suggested that a debate between Dan Yergin, the Chairman of CERA and Matt Simmons, author of Twilight in the Desert should occur as they have diametrically opposing opinions on the subject of oil production in the future.
Here are some takeaways from the CERA report:
- OPEC production should increase by 8.9 million b/d in the next five years
- Nigeria +1.27 million b/d
- Iran +1 million b/d
- Iraq +1 million b/d
- Saudi Arabia +3 million
- non-OPEC production should increase by 7.6 million b/d
- Caspian Sea +2.5 million b/d
- Russia +1.15 mm b/d
- Brazil +1.16 mm b/d
- Angola +1.35 mm b/d
- Canada +1.32 mm b/d
- Norway -.330 mm b/d
- UK -.300 mm b/d
- Mexico -.200 mm b/d
- US -.470 mm b/d
- Unconventional resource plays will play a greater role going forward, contributing 30% of total production from 16% in 2000.
They feel comfortable with their assumptions deriving data from:
20-30 new major projects (>75k b/d) projects coming on stream every year to 2010.
Much of this increase is already approved and under development, and much of it happened at relatively low oil price.
My guess is that as price remain strong in the near term the idea of even more projects coming on line should increase. However, the unconventional plays that CERA is calling for need high prices to be economically viable. Can a massive Canadian Oil Sands project achieve a decent return at $35/b of oil? Unconventional plays are large consumers of natural gas, was this taken into consideration?
Nigeria, Iran and Iraq are going to be saviors. Sounds a little sketchy to me. If you look at the assumptions that CERA projected they are looking for a 26% increase in production from 2004 to 2010. Going back six years (1998-2004) world oil production increased 11%. Aggressive? On the demand side CERA is predicting a 17% increase (2004-2010) versus a 10% increase in world consumption from (1998-2004).