06 July 2008

Energy: On the Way to $200 Oil?

Just a couple of months ago, I heard T. Boone Pickens, Jr. call for $150 oil by the end of the year, but now that we're approaching that mark by mid-year, it may be time to revise the target.

Is $200 a possibility? Indeed, it may be too late to avoid it, says Jerome a Paris over at The Oil Drum.

Jerome cites an International Energy Agency (IEA) study released last week that claims the "oil market will remain tight during the next five years as production from non-OPEC countries stalls and demand growth remains relatively strong."

"This is one of the most important trends in current oil markets: the depletion of existing fields, and the decline in their production," Jerome adds. "It's long been discussed in specialised sites like this one but it's been ignored in the 'serious' media for too long. and yet, discussions of new fields coming into production cannot paint a correct picture of future production trends if these declines are not deducted to get net production increases.

"And the stark truth is that in most of the world, the declines are bigger than the new capacity additions. This is particularly true in 'friendly' production zones like the North Sea, Mexico or even Russia, where overall decline rates are dizzying and actually impact global production numbers significantly."

The comments are nearly as interesting as the post. In one SamuM makes the following observations after watching the presentation (embedded below):

* No obvious sign speculators behind high prices
* Global oil demand growth still 1.3% in 2007
* Producers operating close to flat out
* Global net decline 5% p.a. (2008-2013 avg?)
* OPEC mature field decline >10% p.a.
* More spare capacity by 2009, but then dip again, recovery by 2013?
* Non-OPEC supply slows to 2012, then picks up in 2013 [???]
* 48% of gobal demand growth in distillate
* Biofuels 2.8 Mb/d by 2013 (max capacity potential 3.3Mbpd), big downside risks remain
* OPEC condensates to grow from c. 3Mbpd to c. 5Mbpd by 2013
* OPEC NGL growth to be used by petrochemical industry
* Remaining GTL insignificant
* Increasing fuel oil demand from Middle East for power generation
* Non-OECD demand to oustrip OECD by 2015

Here is the presentation from the IEA:

Worth a look at the full presentation. (Thanks to Paul Kedrosky of Infectious Greed for the SlideShare link.)