Non-OPEC oil producers are leaving OPEC behind

[MadImmortalMan]

http://finance.yahoo.com/news/u-oil-boom-leaves-opec-111316495.html

U.S. oil boom leaves OPEC sidelined from demand growth


LONDON (Reuters) - Rising U.S. shale oil production will help meet most of the world's new oil demand in the next five years, even if the global economy picks up steam, leaving little room for OPEC to lift output without risking lower prices, the West's energy agency said.

The prediction by the International Energy Agency (IEA) came in its closely watched semi-annual report, which analyses mid-term global oil supply and demand trends.

"North America has set off a supply shock that is sending ripples throughout the world," IEA Executive Director Maria van der Hoeven said on Tuesday.

"The good news is that this is helping to ease a market that was relatively tight for several years," she added. Oil on Tuesday traded near $103 a barrel, well below its peak of $147 in 2008.

The IEA said it expected global demand to rise 8 percent on aggregate between 2012 and 2018 to reach 96.7 million barrels per day (bpd) based on a fairly optimistic assumption by the International Monetary Fund of 3 to 4.5 percent global economic growth a year during the period.

That incremental demand will be met mainly by non-OPEC production, which will rise by more than 10 percent between 2012 and 2018 to 59.31 million bpd, the IEA said, increasing its estimate of non-OPEC supply in 2017 by 1 million bpd versus its previous report in October 2012.

The United States will overtake Russia as the world's largest non-OPEC producer as early as 2015, the IEA said.

That may leave OPEC, which had been long seen as the last resort for the world to meet rising demand, with output fluctuating around the current levels of 30 million bpd for the next five years.

The agency cut its estimate of the demand for OPEC crude in 2017 to 29.99 million bpd, down by 1.22 million bpd from its previous report six months ago.

It said OPEC's spare capacity will rise by over a quarter to reach 6.4 million bpd or 6.6 percent of global demand, giving an additional cushion to potential supply shocks, the report said.

The adoption of U.S. shale technology could help Russia and China boost production from unconventional reserves, but new projects may slow in other areas.

"Several members of the (OPEC) producer group face new hurdles, notably in North and sub-Saharan Africa. The regional fallout from the 'Arab Spring' is taking a toll on investment and capacity growth," the IEA said.

"Downward adjustments across the (OPEC) group are partly offset by substantially stronger growth in Saudi capacity than previously expected, reflecting newly announced development projects," it added.

Iran's sustainable crude production capacity is likely to fall by as much as 1 million bpd to 2.38 million bpd by 2018, the lowest in many decades, due to Western sanctions, the IEA said.


EUROPEAN REFINERS AT RISK

The IEA said the balance of global supply growth, until recently evenly split between OPEC and non-OPEC, was tilting towards the latter.

"North America thus increases its share of supply growth both within the non-OPEC group and more globally," it added.

In every other aspect of the supply chain, be it demand, refining, trade or storage and transportation, the fast rise of emerging market and developing economies is striking, it said.

These economies are projected to overtake advanced economies in oil product consumption from the second quarter of 2013. This lead will widen from 49 percent of global demand in 2012 to more than 54 percent by 2018.

The IEA said that beyond the well known story of growth in Brazil, China, Russia, India, Saudi Arabia and South Africa, many African nations were also on the rise on the global oil consumption map.

The IEA also predicted shifts in the global refining industry as countries such as India and Saudi Arabia build new refining capacity.

The expansion of global refining capacity will outpace upstream supply growth as well as demand growth, bringing refining margins under pressure. Higher-cost refineries will face stronger competition.

"European refineries are at particularly high risk of closure over the forecast period," the IEA said.

The IEA added that another consequence of the surge in U.S. production was a shift in natural gas pricing, which would challenge the conventional wisdom that products produced from oil will continue to dominate the market for transport fuels.

"Cheap and abundant natural gas has already facilitated the transition of the U.S. economy towards broader use of the fuel," the agency said. Natural gas will increase its share of road transport fuels to 2.5 percent in 2018 from 1.4 percent in 2010, it forecast.

You think it'll get cheaper?

I wonder what Putin is thinking about all this. The North Americans might be getting ready to break his hold on Europe's energy.

[Admiral Yi]

We should pay Tony Blair a billion a year to build a gas pipeline under the North Atlantic.

[Ed Anger]

Fuck Europe.

[Viking]

We should pay Tony Blair a billion a year to build a gas pipeline under the North Atlantic.

Too expensive and too long. Trans-atlantic gas shipments, when conceived, are done with LNG. Gas cooled to liquid and transported in large ships.

[MadImmortalMan]

We should pay Tony Blair a billion a year to build a gas pipeline under the North Atlantic.

Too expensive and too long. Trans-atlantic gas shipments, when conceived, are done with LNG. Gas cooled to liquid and transported in large ships.

Terminals for that are under construction as we speak. The Houston one may be done or near done by now. I'm not sure.

[Viking]

We should pay Tony Blair a billion a year to build a gas pipeline under the North Atlantic.

Too expensive and too long. Trans-atlantic gas shipments, when conceived, are done with LNG. Gas cooled to liquid and transported in large ships.

Terminals for that are under construction as we speak. The Houston one may be done or near done by now. I'm not sure.

I that is for central and south african gas.

The big north atlantic project Shtockman has been delayed and many partners have pulled out.

Though, if only Texas is capable of giving planning permission a few thousand extra kilometers won't be too much of an issue.

[The Minsky Moment]

Seems to me if OPEC was really devious, they would RAISE their quotas now.
Raise them a lot.

Prices would take a big hit but the principal immediate victims would be the higher cost producers: i.e. North American shale and the majors with big offshore projects.  Because they are private enterprises, a big price shock would force them to slash investment and even close existing projects.  A sustained quota hike would do serious damage.

Won't happen though.  Too many OPEC states rely on the revenues to bribe the populace to accept dictatorial rule.
And that is why they fail.

[Berkut]

I think we all kind of fail as a result, actually.

[Viking]

Seems to me if OPEC was really devious, they would RAISE their quotas now.
Raise them a lot.

Prices would take a big hit but the principal immediate victims would be the higher cost producers: i.e. North American shale and the majors with big offshore projects.  Because they are private enterprises, a big price shock would force them to slash investment and even close existing projects.  A sustained quota hike would do serious damage.

Won't happen though.  Too many OPEC states rely on the revenues to bribe the populace to accept dictatorial rule.
And that is why they fail.

I don't think that many OPEC states are capable of significant production increases even if they wanted to. Those that can have already fiddled with the OPEC system to increase their production already.