5 Nov 2019 17:08

OPEC boosts 2040 oil supply outlook for non-OPEC states by 3.8 million bpd, principally driven by U.S., OPEC forecast reduced by 4.9 million bpd

MOSCOW. Nov 5 (Interfax) - OPEC has significantly boosted its outlook for oil supply to the global market from non-OPEC countries, as production, especially shale oil output in the U.S., has again exceeded expectations, the company said in its annual long-term outlook.

The cartel's analysts believe that even despite talk of more economic calculations at shale oil sections, there are still growth prospects, since effectiveness and technological indicators have, in any case, increased.

A comparison of this report and the preceding one indicate that the outlook for oil shipments from non-OPEC states by 2040 has been revised up by 3.8 million bpd to 66.4 million bpd, while the forecast for supplies from OPEC states has, to the contrary, been reduced by 4.9 million bpd to 44.4 million bpd.

Expectations of renewed output growth in several key producing countries, such as in Norway, significant new projects in Brazil, Guyana, and others assume that supply from other non-OPEC countries is also likely to have a substantial impact in the medium term, the report said.

OPEC highlights that the OPEC+ deal limiting oil production, which has been maintained over the past years, is even more desirable in the face of significant risks and uncertainty regarding the global economy, including threats of trade wars, increased debts, unstable economies in a number of key countries and concerns over Brexit.

Global crude and condensate trade is expected to remain relatively stable in the 2018-2025 period at 38 million bpd, then growing to 42 million bpd by 2040. While the U.S. and Canada are expected to boost their gas and condensate exports in the medium term, on the long term horizon, supplies from the Middle East to Asia will remain the principal trade routes.

Tight oil supplies will rise significantly in the U.S. in the medium term, by 6.7 million bpd, but will then decline. The peak of 17.4 million bpd will be reached in 2029. In the mid-2020s, the U.S. will also attain peak production of liquid hydrocarbons - 22.8 million bpd. By 2040, OPEC expects the U.S.to reduce production from 20.3 million bpd in 2018 to 18.5 bpd in, while shale oil production will rise from 13.8 million bpd to 14.5 million bpd. Last year's forecast envisaged the U.S. reducing production nform 18.4 million bpd to 16.9 million bpd in the period under consideration.

As a whole, non-OPEC countries are expected to supply 72.6 million bpd of oil in 2026, while by 2040, supply will decline to 66.4 million barrels, compared to the earlier forecast, which envisaged non-OPEC supplies by 2040 of 62.6 million bpd.

After the mid-2020s, only two non-OPEC nations will be able to significantly ramp up production - Brazil and Kazakhstan, the cartel said in its report.

In the coming five years, Russia could boost liquid hydrocarbon production by a modest 100,000 bpd to 11.5 million bpd in 2024. In particular, a slight growth in tight oil production volume is likely to be offset by slightly reduced production of traditional oil, while gas condensate output will rise by 100,000 bpd.

OPEC expects that few greenfield projects will come online in Russia in this period. New projects starting up, or where ramp-up continues, include Kuyumbinskoye, Tagulskoye and Lodochnoye in Eastern Siberia, and Russkoye, Spilmana, Vinogradov and the Erginskiy cluster of fields in Western Siberia, the latter of which is expected to add 175 tb/d.

A key determinant for longer-term Russian supply will be how upstream and other taxes are applied. The implementation of a new tax, the so-called Excess Profit Tax (EPT), began this year on a trial group of fields with collective output of around 440,00 bpd. A positive evaluation of this new tax might see it progressively extended to more fields, which, in addition to other incentives for remote, expensive or difficult-to-produce fields, could result in higher liquids production than projected in this outlook. The Russian government has spoken about the need to open new frontier areas, including tight oil, offshore production, and Arctic acreage - so far all largely untapped, OPEC analysts said.