Non-OPEC oil production is expected to rise by just over 1 mbpd in 2000, despite the sharp downturn in upstream investment in 1999. Although drilling activity is still very depressed and company budgets have been slow to respond to higher oil prices, this year saw a massive increase in non-OPEC production capacity, which should underpin next year’s growth as new offshore and onshore fields reach their peak. Without new investment, non-OPEC supply will certainly fall in the longer run as the industry needs to add around 2 mbpd of new production capacity each year simply to stand still. In the short-term, however, the industry is set to reap the benefits of past investments.
Two clear trends emerge from this year’s review of non-OPEC supply prospects by the CGES. First, the swingeing cuts made to upstream capital expenditure have accelerated the rate of decline of the most vulnerable fields, especially in the US and North Sea. Secondly, the past eighteen months have seen a massive expansion in new non-OPEC production capacity as most of the fields that were planned in more propitious times finally came on stream. This year saw the start-up of over forty new non-OPEC fields with a combined capacity of nearly 3 mbpd, which is more than enough to overcome the underlying rate of decline in non-OPEC supply due to depletion at the older fields.
A year ago, the CGES was the first to suggest that there might be no growth in non-OPEC supply in 1999, using a ‘top down’ approach that tried to take into account the impact of low oil prices on oilfield depletion rates and investment plans. For next year, ‘bottom up’ forecasts may prove to be the better guide, as long as suitably pessimistic assumptions are made about decline rates at ageing fields. Next year’s forecast depends almost entirely on production growth from new fields that are already on stream. In fact, the list of new fields planned for next year is remarkably short and plays only a small role in the growth in non-OPEC supply expected for the year 2000.