"World Oil" Global Forecast | Russell T. Rudy Energy LLC
John Higgins, the publisher of “World Oil” magazine, was the speaker at the February meeting of the Houston Chapter of the American Petroleum Institute (API). Predictably, his comments were quite interesting and provocative. While they are not at great variance with what many other analysts have forecast, his are backed up by a wealth of experience and data. In previous posts I have dealt with several aspects of his remarks. This post is focused on “World Oil’s” predictions for the international market, in as much as they impact onshore U. S. prospects.
With a worldwide liquids surplus and low prices, drilling and other capital investments will be reduced. However, the impact will be less dramatic worldwide than it will be here in the U.S. Canada will see a significant reduction in oil sands projects and drilling might drop by 30%. Mexico will be less affected than many countries due to its recent legislation allowing foreign companies to invest in the energy sector. In fact, some observers predict that the country will enter into tax and royalty deals for deepwater projects in the Gulf, given the high costs and risks associated.
In South America, despite Brazil’s recent problems with corruption and management upheavals, pre-salt projects are still economically viable at current prices. Consequently, drilling there is expected to increase by 40%. The effect of low prices on Argentina will be partially offset by ExxonMobil’s second shale discovery in Neuquen province. Countrywide, drilling will decrease, but only by 8%.
Low prices and depletion will take a toll on North Sea activity. Conversely, Russian production reached a new post-Soviet high of 10.6 million barrels of oil per day (bopd) in January, 2015. However, economic sanctions as a result of the annexation of Crimea will impede efforts to reverse declines in mature fields, as well as development of Arctic projects.
Saudi Arabia still holds the world’s largest proved reserves of crude oil, but ceded its number one spot in liquids and crude production to the U. S. and Russia respectively. Ironically, the engineer of the recent price collapse is feeling the sting of reduced revenues. Consequently, the state oil company, Saudi Aramco, is asking suppliers and service companies for a 20% discount.
After years of upheaval, Iraq’s production rose to 3.5 million bopd surpassing Iran. The latter based its original 2015 budget on $100 oil and is feeling the effects of reduced production volumes and prices.
India and China are important for their influence on the global demand for oil. The former is the fourth largest importer of oil in the world and demand continues to increase faster than domestic production. In 2014 China surpassed the U. S. as the largest importer in the world. Currently imports are at 6.2 million bopd. Recovery of oil prices will depend heavily on the economic growth in these two nations to drive global demand.
Finally, Australia is on track to supplant Qatar as the world’s largest LNG exporter. This incremental increase in supply, and proximity to the lucrative Asian energy markets, could offer formidable competition to U. S. LNG export projects.
To learn more, please go to www.worldoil.com .
