Oil production growth from the U.S., Brazil, Canada and Norway can keep the world well supplied, more than meeting global oil demand growth through 2020, but more investment will be needed to boost output after that, according to the International Energy Agency's (IEA's) latest annual report on oil markets.
Over the next three years, gains from the U.S. alone will cover 80 percent of the world's demand growth, with Canada, Brazil and Norway -- all IEA family members -- able to cover the rest, according to "Oil 2018," IEA's five-year market analysis and forecast.
But the report finds despite falling costs, additional investment will be needed to spur supply growth after 2020. The oil industry has yet to recover from an unprecedented two-year drop in investment in 2015-2016, and IEA sees little to no increase in upstream spending outside the U.S. in 2017-2018.
"The United States is set to put its stamp on global oil markets for the next five years," said Dr. Fatih Birol, executive director of IEA. "But as we've highlighted repeatedly, the weak global investment picture remains a source of concern. More investments will be needed to make up for declining oil fields -- the world needs to replace 3 million barrels per day [mb/d] of declines each year, the equivalent of the North Sea -- while also meeting robust demand growth."
Boosted by economic growth in Asia and a resurgent petrochemicals industry in the U.S., global oil demand will increase by 6.9 mb/d to 104.7 mb/d by 2023, according to IEA. China remains the main engine of demand growth, but more stringent policies to curb air pollution will slow growth. The increasing penetration of electric buses and LNG trucks will have a bigger impact on curbing consumption of transport fuels than the electrification of passenger vehicles.
In the U.S., fuel-economy standards for passenger cars will curb gasoline demand growth coming from the petrochemical sector, which is thriving thanks to lowcost ethane. New global petrochemicals capacity will account for 25 percent of oil demand growth by 2023. Meanwhile, a new marine fuel rule with lower sulfur content that will come into force in 2020 is creating uncertainty in the market.
Global oil production capacity is forecast to grow by 6.4 mb/d to reach 107 mb/d by 2023. Thanks to the shale revolution, the U.S. leads the picture, with total liquids production reaching nearly 17 mb/d in 2023, up from 13.2 mb/d in 2017. Growth is led by the Permian Basin, where output is expected to double by 2023.
The path is clear to get those additional barrels to world markets. As a result of new investments in pipelines and other infrastructure that ease the current bottlenecks, U.S. crude export capacity will reach nearly 5 mb/d by 2020, and Corpus Christi, Texas, will solidify its position as the primary North American crude oil outlet.
Virtually all of the OPEC output growth comes from the Middle East. In Venezuela, oil production has fallen by more than half in the past 20 years, and declines are set to accelerate. Sharply falling production in Venezuela will offset gains in Iraq, resulting in OPEC crude oil capacity growth of just 750,000 barrels a day by 2023.
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