CERA: Crude production capacity to grow 25% in 10 years

Sam Fletcher
Senior Writer

HOUSTON, Dec. 12 -- Not only is the world not running out of oil soon, but widespread development of unconventional resources will boost global crude production capacity by 25% in the next 10 years, a representative of Cambridge Energy Research Associates, an IHS company, told a US House of Representatives subcommittee hearing.

"We see no evidence to suggest a peak [in crude production] before 2020, nor do we see a transparent and technically sound analysis from another source that justifies belief in an imminent peak," said Robert Esser, CERA's senior consultant and director of global oil and gas resources, to members of the House Energy and Air Quality Subcommittee. "It will be a number of decades into this century before we get to an inflexion point that will herald the arrival of an 'undulating plateau' of global hydrocarbon production capacity."

Based on a field-by-field analysis of global oil production and development, CERA estimates that world oil production capacity—including crude oil, condensate, natural gas liquids, oil sands, gas-to-liquids, and other sources—has the potential to increase from 87 million b/d in 2005 to as much as 108 million b/d by 2015, with further growth in capacity continuing after that point. That assessment is up from a teleconference report in June when CERA said a field-by-field study of productive capacity for crude and NGL, plus development plans among major international oil companies, indicated as much as 16.5 million b/d of additional production capacity for crude oil and natural gas liquids could come on stream by 2010, an increase to 101.5 million b/d from 85.1 million b/d in 2004 (OGJ Online, June 24, 2005).

"A detailed new audit of our own analysis and the enormous scale of reserve upgrades in existing fields, confirmed by the most extensive and complete databases on field production—the proprietary databases of IHS, of which CERA is now part—contradicts those who believe that peak oil is imminent," Esser told the House subcommittee Dec. 7.

In both the June and December presentations, CERA said the new production capacity initially would be almost evenly divided between the Organization of Petroleum Exporting Countries and producing countries outside of the cartel. At the subcommittee hearing, Esser said OPEC countries would produce a net gain of 12.2 million b/d with non-OPEC capacity rising 8.2 million b/d. In June, CERA had OPEC increasing by 8.9 million b/d and non-OPEC production up by 7.6 million b/d.

Moreover, in June Esser said, "Of the capacity additions in the next 5 years, 10 million b/d of it is light, only 4.5 million b/d is medium, with just 2 million b/d being classed as heavy, so it's predominantly light oil coming on in the next 5 years."

Esser testified at the hearing this month that US and North Sea production capacity will decline, while output from Canada, West and North Africa, Latin America, and the Caspian and Middle East will continue to increase. After 2010, he said, increases in capacity will shift more to OPEC countries.

Major projects
Production will increase as a result of a large number of major projects in both OPEC and non-OPEC countries, with the top 10 projects brought on stream each year adding a cumulative gross capacity of 2-2.5 million b/d/year until 2010. Many of these projects were approved under a much lower oil price regime and will proceed even if the current price of oil falls significantly, Esser observed.

In 1995-2003, global production of 236 billion bbl of crude was more than made up by exploration successes that added 144 billion bbl and field upgrades of 175 billion bbl, according to CERA. Production from unconventional sources will expand to 35% of total capacity in 2015 from 10% in 1990. Among the primary unconventional sources, many of which CERA expects to be considered traditional by 2015, are:

-- Continuing rapid expansion of ultradeepwater production from 3.4 million b/d in 2005 to over 9 million b/d by 2010, with growth in the "big four" deepwater areas: the US Gulf of Mexico, Brazil, Angola, and Nigeria.

-- More than 250% expansion of heavy oil production capacity from Canada and Venezuela from 1.8 million b/d in 2005 to 4.9 million b/d in 2015.

-- Condensate and NGL capacity expansion from 14 million b/d currently to 23 million b/d by 2015, with notable additions occurring in Qatar's LNG business and in Norway, along with NGL growth in many OPEC countries, including Saudi Arabia, Qatar, and Nigeria.

-- New gas-to-liquids developments likely to produce 1 million b/d by 2015, compared with 160,000 b/d currently.

Major risks to CERA's projected capacity increase include shortages of qualified people, rigs, yard space, and raw materials, as well as rising operating costs. Other risks involve political turbulence, abrupt changes in contract terms, controversy over fiscal terms, weather and environmental effects, creeping nationalization and reconsolidation, and potential violence and insecurity. All could limit exploration and slow the rate at which new projects will be sanctioned, Esser said.

Contact Sam Fletcher at Samf@ogjonline.com.

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