U.S. tight oil production should recover quickly as world energy demand recovers from Covid-19, but Lower 48 output may not again hit its previous forecasts, the Organization of the Petroleum Exporting Countries said Thursday.

Primary energy demand growth

The Saudi-led oil cartel, aka OPEC, in its flagship 14th annual World Oil Outlook (WOO), cited the “unprecedented scale and impact” from the coronavirus, which has crushed oil demand. Researchers assessed the medium- and long-term prospects for oil to 2045, providing alternative scenarios and sensitivities that could impact the petroleum industry in the years ahead.

Even with the sharp drop in oil demand this year, OPEC is predicting global primary energy consumption should continue growing in the medium- and long-term, increasing by 25% to 2045.

“All forms of energy will be needed to support the post-pandemic recovery and to address future energy needs,” researchers said. OPEC is forecasting oil will “retain the largest share of the energy mix throughout the outlook period, accounting for a 27% share in 2045.”

However, similar to previous forecasts by OPEC and other energy prognosticators, natural gas “will be the fastest growing fossil fuel between 2019 and 2045 and, after oil, will remain the second largest contributor to the energy mix in 2045 at 25%.” 

In addition, renewables, combining mainly solar, wind and geothermal, are forecast to grow by 6.6%/year on average, “significantly faster than any other source of energy.”

For countries that are not members of OPEC, including the United States, oil production is forecast to “decline again after U.S. tight oil peaks around 2030, while OPEC liquids will fill the gap, rising by around 10 million b/d to 44 million b/d by 2045.”

‘No 2020 Vision’

In launching the WOO, OPEC Secretary General Mohammad Sanusi Barkindo noted the publication comes  at a “defining moment,” as the cartel faces down the coronavirus and evolving global energy demand. OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, and today it comprises 13 member countries.

“I would like to stress that in this year of great uncertainty, there is no 2020 vision,” Barkindo said. The WOO “is not a book of predictions. Rather, it provides a helpful and insightful reference tool, one that underscores OPEC’s commitment to knowledge-sharing and data transparency.”

That said, “the pandemic has ushered in one of the greatest economic and humanitarian challenges of modern times. Lives have been upended. Livelihoods disrupted. Uncertainty abounds.

“Today, more than one million lives have been lost to this silent and persistent enemy, a tragedy beyond comprehension in peacetime. Years that test us, like this one, ultimately demonstrate our strength. This year, 2020, has been a defining one for OPEC.”

Before the pandemic swept across the globe, 2020 “began on a very positive note,” Barkindo said. “We projected global economic growth of around 3% in this year compared to 2.9% for 2019.  We expected the improving economy to lift global oil demand to 101 million b/d, a rise of about 1 million b/d from 2019. Then the world turned upside down.”

The deep recession “caused 20% of world oil demand to collapse in the second quarter of 2020, intensifying the market’s volatility. The oversupply could have added a further 1.3 billion bbl to global crude oil stocks, and hence exhaust the available crude oil storage in some parts of the world.”

Assuming the virus is “largely contained by next year, oil demand is expected to partly recover in 2021 and healthy demand growth rates are foreseen over the medium-term horizon,” said researchers. “Globally, oil demand is projected to increase from nearly 100 million b/d in 2019 to around 109 million b/d in 2045.”

Oil demand in road transportation is expected to continue to dominate, but the largest growth is seen coming from petrochemicals. Oil demand in the aviation sector, most affected by Covid-19 restrictions in relative terms, is projected to partly recover in 2021 and continue growing thereafter.

Meanwhile, the downstream sector may see a “wave of refinery closures, especially as new capacity comes online in the Asia-Pacific and Middle East and Africa regions.

To 2045, OPEC expects the global energy business will need cumulative investments of $12.6 trillion across the upstream, midstream and downstream sectors. Traded volumes of oil are predicted to grow “only modestly in the long-term, in line with supply patterns. However, the Middle East’s share of global crude and condensate trade will rise robustly during the second part of the forecast period.”

Crude and condensate flows between the Middle East and Asia-Pacific should “remain the most important oil trade link, with volumes increasing from around 15 million b/d in 2019 to nearly 20 million b/d in 2045. The Asia-Pacific region is forecast to remain the most important crude oil importing region throughout the forecast period, with imports rising by more than 6 million b/d.”

Researchers also expect technology to “shape the global energy landscape, while public policies relating to energy demand and supply are expected to become more stringent over the forecast period.” In addition, “enhanced global collaboration is vital to address the challenge of climate change.”