Non-OPEC oil production is expected to rise by around 900,000 bpd in 2001, according to CGES estimates. Underlying decline rates remain high, but there are signs that companies have started to undo the damage caused by last year’s swingeing upstream expenditure cuts. However, there is a shortage of big new projects to give output a strong boost; this year saw only a few new projects coming on stream and the list for next year is similarly short. Upstream spending is now on the increase again, with companies planning to boost exploration and production expenditure by 18% next year, but many of the currently planned new fields will not come on stream until after 2001.
Like this year, most of the growth in non-OPEC production is expected to take place in North America and the former Soviet Union (FSU). Small increases are also expected in Latin America, Africa, the non-OPEC Middle East and Asia Pacific. North Sea production, though, is expected to show a small decline, as output from a small number of new projects fails to overcome the underlying decline rate at mature fields. Output is rising strongly in the FSU as oil companies plough back rising export revenues into upstream investment, reversing the general downward trend of the past two decades.
Although oil prices surged to over $30/bbl this year, most companies appear to believe that the current strength is temporary and continue to plan their investments around a ‘mid-cycle’ price of only $15/bbl. There seems little doubt that last year’s massive upstream investment cuts accelerated oilfield depletion rates and companies are now trying to catch up again. Investment in new upstream projects remains low-key, though. Companies are concentrating on big fields that can deliver a low unit cost of production in order to ensure good rates of return to satisfy a sceptical stock market which is penalising the oil industry for ‘destroying value’ after the 1996 price boom. However, it has to be acknowledged that, since there are only a limited number of big oilfields still left to be developed outside the Middle East, companies will eventually run out of opportunities unless OPEC opens the door further to foreign investment.