CERI: Even small oil supply disruption could cause problems this winter

Jim Stott
Special Correspondent

CALGARY, Jan. 28 -- World crude oil supply is already tight, and even a small additional disruption this winter could cause serious problems, senior industry analysts warn.

The concerns were raised Monday at a Canadian Energy Research Institute (CERI) World Oil Conference in Calgary.

Dr. Paul Horsnell, head of energy research for J.P. Morgan, London, and Guy F. Caruso, administrator of the Energy Information Administration, said supply disruptions in Venezuela and the possibility of war in Iraq are creating supply uncertainty and price volatility.

J.P. Morgan view
Horsnell said the tight market situation began in second quarter 2002 with production policy decisions made by the Organization of Petroleum Exporting Countries and was exacerbated by a strike and political unrest in Venezuela in December. He noted there were also demand side shocks in Japan tied to the loss of nuclear capacity related to safety issues. These, he said, shifted Japan's oil demand from a slow decline to an increase of 500,000-600,000 b/d.

Other factors, said the J.P. Morgan analyst, include the coldest winter in the US in 5-6 years and problems in replacing 1.4 million b/d of heavy crude Venezuela was shipping to specialized Gulf Coast refineries. He said Mexico does not have the capacity to compensate for that to any significant extent.

Horsnell said as much as 500,000 b/d of Venezuelan oil supplies might have been permanently lost, and that nation could face a long period of political instability based on societal problems, similar to the situation in Colombia.

Horsnell said the supply situation is not going to be comfortable, it may not be catastrophic, but a supply shock from even a small producer could worsen the situation. He noted other threats to supply are political instability in Iran and Nigeria.

Caruso also noted that some political instability in Iran and Nigeria are factors in the supply outlook. He said the challenge is getting through this winter without further price spikes. Caruso said the price of oil is likely to remain above $30/bbl (West Texas Intermediate) until the Iraq and Venezuela situations are resolved. He said if both Iraqi and Venezuelan production is out, OPEC could not make up the difference.

Long-term view
The EIA head said that oil prices are likely to average $30/bbl in 2003, but the market now changes so rapidly that it is hard to forecast where prices will be even 1 year from now.

Horsnell said that, in a long-term scenario to 2010, J.P. Morgan is looking at a price of $23/bbl (WTI) and $25-26/bbl to 2025. He noted there is now a large degree of political input in any price projection.

Carl Michael Smith, assistant secretary for fossil energy, US Department of Energy, said a major objective of his department is to increase US domestic supply. But, he said, Canada will play a significant role in meeting US demand for oil and gas. He noted the US now imports 3.7 tcf.of gas from Canada—16% of its annual needs—and 2 million b/d of oil. Smith said the massive oil sands deposits in Alberta constitute a rich asset for Canada, and the US will be a rich market for that production.

Smith said Canada and the US, along with other nations, are cooperating on research into unconventional gas sources, such as gas hydrates and methods of carbon sequestration. He said that gas hydrates are now at the stage where coalbed methane, which today provides 8% of US gas supply, was 10-15 years ago.

Contact Jim Stott at stottj@telus.net.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected