Global oil supply capacity is growing so rapidly that it might outpace consumption, according to a discussion paper from Harvard University’s Belfer Center for Science and International Affairs.
The oil market will remain volatile and prone to extreme movements until 2015. After that, most of the projects considered in the report will advance significantly and contribute to a strong buildup of the global production capacity, the report predicts. Such a dynamic could lead to a glut of overproduction and a steep dip in oil prices, according to “Oil: The Next Revolution: The Unprecedented Upsurge of Oil Production Capacity and What it Means for the World.”
The paper takes a field-by-field perspective of most oil exploration and development projects that anticipates a targeted additional production of more than 49 million B/D of crude oil and natural gas liquids by 2020. That is about half of the current world production capacity of 93 million B/D.
When adjusted for prohibitive risk factors, the additional production that is feasible by 2020 is about 29 million B/D. When further adjusted for projected depletion rates and reserve growth of the currently producing fields, the net additional production capacity by 2020 could be 17.6 million B/D, amounting to a world production capacity of 110.6 million B/D. For example, the US Geological Survey yesterday announced increased domestic conventional reserves estimates.
Other points in the discussion paper include
• There is no peak global oil production in the near future
• Setbacks to additional production in the United States, Iraq, or Canada would have a strong effect on the global market
• The shale and tight oil boom in the United States is the most important development in the oil industry in decades and will likely trigger similar trends globally
• Conventional production is growing at an unexpected rate around the world, although some areas such as Canada, the United States, and the North Sea are experiencing an apparently irreversible decline in conventional production
