FAVERSHAM, UK – Douglas-Westwood (DW) data supports the view that the current crude oversupply situation will contract this year, but signs for 2017 are less positive.
DW’s World Drilling & Production Market Forecast reveals the first oil production decline in 2016 since 2009, when OPEC cut output in order to sustain prices.
The decline is due largely due to reductions in production from US shale plays as well and the impact of militant attacks in the Niger Delta.
However, the implementation next year of numerous offshore developments sanctioned before the oil price crash will lead to a 1.8-MMb/d hike in offshore oil output and a 2.1-MMb/d increase overall, DW predicts.
The re-started Kashagan project in the Kazakh sector of the Caspian Sea alone is set to contribute nearly 300,000 b/d in 2017, with further significant additions from the Middle East region in the form of condensate from Iran’s 24-phase South Pars development and around 300,000 b/d from the previously shut-in Khafji field overlapping the Saudi/Kuwaiti offshore sector.
Even mature plays in the North Sea and Southeast Asia will likely deliver increased output in 2017, the analyst believes, due to the lag effect of offshore developments (the years between project sanctioning and first oil).
DW points out that forecasts from BP, EIA, and IEA put 2017 demand growth at around 1.2-1.5 MMb/d, suggesting the oversupply will increase once again next year.
Although this may not push oil prices down, it will likely dampen the recovery until later this decade when the dearth of new project sanctions over the last two years will cause a significant drop in offshore oil output additions.
DW predicts offshore oil production will peak at 29.1 MMb/d in 2019 before slowly falling back in the 2020s.
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