An Opec flag is seen during the presentation of Opec’s 2013 World Oil Outlook in Vienna yesterday.
LONDON/VIENNA: Opec could lose almost 8 percent of its oil market share in the next five years as the shale energy boom and other competing sources boost rival supply, offering the exporter group little benefit from rising world demand.
The Organization of the Petroleum Exporting Countries has been slower than some to acknowledge the impact that hydraulic fracturing, or fracking, is having on supply. Earlier this year, it decided to carry out its own research into shale oil.
In its annual World Oil Outlook, Opec said it expected global demand for its crude oil to average 29.2 million barrels per day (b/d) in 2018, down 1.1m b/d from 2013, because of increasing supply outside the 12-member group.
Under another, upside supply scenario, Opec sees an even larger drop in demand for Opec crude to 28m b/d in 2018 — 7.6 percent less than this year and 2m b/d below what it is currently producing.
“There is no shortage of oil and resources are plentiful,” Opec Secretary General Abdullah Al Badri said in the foreword to the report. “Increasing global oil demand is supported by an expanding diversity of supply sources.”
Opec, which holds 80 percent of the world’s conventional oil reserves, wants prices to be around $100 a barrel, which in nominal terms is almost four times their level a decade ago.
Higher prices have helped to make a wider range of supply commercially viable, including fracking, oil extraction from tar sands and conventional oil wells in more remote locations and in harder-to-tap reservoirs like ultra deep waters. The US shale boom has redrawn the landscape of oil trade. Nigeria and Algeria have felt the heat, losing ground in their most lucrative export market as US output, once considered to have peaked, rises and approaches that of No.1 oil producer Russia.
Despite this, Opec in its reference scenario is not worried about shale oil, saying output is expected to decline after 2020 citing challenges including a rapid output decline from wells, environmental concerns and rising costs. “It is a welcome newcomer,” Badri said of shale oil at a news conference in Vienna.
Shale is prompting interest and activity worldwide — including in Saudi Arabia which is preparing to use shale gas for power generation — and Opec concedes shale oil could have a wider impact.
Output of other crude oil and natural gas liquids could also prove stronger than expected in Brazil and Russia, it said.
While OPEC sees its market share under pressure, the long-term global demand for oil is benefitting from a healthier economic outlook. In its reference scenario, Opec forecasts world demand reaching 92.5m b/d by 2016. By 2035, it sees consumption at 108.5m b/d.
Supply from countries outside Opec is seen at 57.3m b/d by 2016. As well as shale, oil extracted from tar sands in Canada, crude from the Caspian and Latin America, and biofuels in Brazil and Europe are expected to provide growth.
Opec has a target to produce 30m b/d and meets on December 4 in Vienna to decide whether to adjust it. Reuters
