Unexpected growth in non-OPEC crude output and rising non-crude production from both OPEC and non-OPEC countries are changing the structure of global oil supply as the world economy recovers, opening up a wider margin of spare capacity for OPEC crude. But there is no sign yet that unused capacity is exerting any significant downward pressure on crude oil prices although it may help to restrain price rises while it lasts.
The share of OPEC crude in world oil liquids supply (excluding biofuels and processing gains) fell sharply last year to just over 35% compared with 38% in 2008 its lowest level since 2002. Non-crude supplies from both OPEC and non-OPEC sources now account for nearly 13% of world oil liquids supply up from 10% in the late 1990s. And non-OPEC crude supplies are staging an unexpected recovery after a long period of stagnation that lasted from 2004 to 2008.
Although the FSU especially Russia remains the key to sustained growth in non-OPEC crude supply over the next few years, there is no doubt that current oil prices are helping to slow output decline rates in mature areas and to support investments in the deepwater frontier areas that now provide the majority of the remaining opportunities for conventional crude producers outside OPEC countries. But these pose immense technical and environmental challenges as the Deepwater Horizon rig blowout in the US Gulf of Mexico demonstrates and the industry faces much tougher scrutiny that may well slow the pace of development even if oil prices remain favourable
Non-OPEC production rose by 640,000 bpd last year as output not only bounced back from the previous years multiple set-backs but also received a strong boost from the start-up of big new projects in Russia and the US Gulf of Mexico. Many analysts were sceptical about the prospects for growth in 2009 as they feared that the sharp fall in oil prices during the deep global recession and cutbacks in investment would undermine non-OPEC supply. At present, the prospects for non-OPEC supply growth in 2010 look at least as good as last year. Overall, the CGES expects total non-OPEC oil liquids supply (excluding biofuels and processing gains) to increase by around 650,000 bpd on average in 2010. Further large gains are expected from the US Gulf of Mexico assuming no major restrictions are imposed on deepwater activity.