Despite the anxiety over rising commodity prices and a lack of readily available oil and natural gas resources, a detailed analysis shows a “significant” expansion of liquids productive capacity in the next few years, according to Cambridge Energy Research Associates (CERA).
The report, “Worldwide Liquids Capacity Outlook to 2010 — Tight Supply or Excess Riches,” was released by CERA on Tuesday. It argues that “unconventional” liquids will play a larger role in the growth of supply than is currently recognized. These unconventional liquids include condensates, natural gas liquids (NGLs), extra heavy oils (such as Canadian oil sands), and the ultra-deepwater (more than 2,500 feet deep). By 2020, they could be almost 35% of supply.
“We expect supply to outpace demand growth in the next few years, which would take the pressure off prices around 2007-08 or thereafter and even lead to a period of price weakness,” according to the report’s authors, Peter M. Jackson, director of Oil Industry Activity and Robert W. Esser, director, Global Oil and Gas Resources. “Following development of the current worldwide inventory of major discoveries, we also foresee far more capacity expansion in the medium term from field upgrades than through exploration.”
The report notes that “there has been no shortage of factors contributing to the tightening balance of supply and demand — whether an unprecedented expansion in Chinese demand, supply disruptions in Nigeria and Iraq, the impacts of Hurricane Ivan in the Gulf of Mexico, and cold weather across the Northern Hemisphere, and continuing problems in the Middle East,” the authors state.
“It is hardly surprising that these should be manifested in anxious markets and higher prices…Add to all of this the often-cited concern in the market by the media that supply is peaking and that some of the major suppliers are on the verge of a steep decline, from which there would be no recovery.”
The report attempts to put some of the supply issues in perspective, suggesting that notwithstanding “geopolitical meltdown or supply shocks, overall supply should be able to comfortably outstrip demand through the end of the decade.” However, the authors note that “there will be major challenges in expanding productive capacity much above the 2010 level.”
A “large number of major new projects” have been approved, are under development or likely to proceed, especially in the deepwater, the Caspian, extra heavy oil and gas-related liquids from the natural gas boom. “These factors lead us to believe that our outlook is robust,” the authors state. “Assuming no major political upheavals, liquids capacity could expand by as much as 16.4 million bbl/d by 2010, to 101.5 million bbl/d.”
To learn more about the report, visit www.cera.com.
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