Non-Opec oil field decline rates have accelerated to 5 per cent as a result of the impact on output from a 41 per cent or $285 billion reduction in global oil & gas capex from the 2014 peak, a Bank of America Merrill Lynch (BofAML) report said.

 

This figure is higher than the 4.87 per cent recorded in 2009, and it is also slightly higher than previous estimates for this year of 4.9 per cent, explained the report titled, “Global Energy Weekly: Oil decline rates speed up” authored by the Global Commodities team at BofAML.

 

On a country by country breakdown, larger than previous years’ decline rates have been recorded in countries like Australia, Netherlands, Canada, and even Russia. Regionally, decline rates are accelerating particularly in the Middle East and OECD Pacific, but are holding up better in Asia.

 

GCC, Iran, and Iraq will likely see higher output

 

“Looking at Opec, Venezuela is perhaps where we see most oil production at risk given the investment climate, but other countries like Algeria and Angola may be facing pretty steep production declines too,” the report said.

 

What countries could fill the oil supply gap? Naturally, Saudi and the rest of the GCC, coupled with Iraq and Iran will attempt to keep gaining market share. “In fact, much of the growth in global oil supplies in the past year has already come from GCC, Iraq, and Iran, and we project growth of 1.2 and 0.5 million barrels per day (b/d) from these three players this year and next, respectively . Even then, it will be hard to fill the widening supply gap on current investment trends,” the BofAML team said in the report.

 

 …but can these producers fill the widening gap?

 

The Iraqi rig count has dropped in half over the course of the last 24 months while Saudi Arabia has not really increased drilling activity to make up for the staggering 37 per cent drop in global rigs since the 2014 peak.

 

“True, the rig count in Abu Dhabi and Kuwait has increased, and that’s a relevant shift. Yet the geopolitical and legal risks involved in dealing with Iran and even Iraq will likely limit investments in other sections of the Persian Gulf, in our opinion,” the report said.

 

“Given this backdrop, we reiterate our estimates that global oil supplies will likely expand by just 0.2 million b/d year-on-year in 2017 against demand growth of 1.2 million b/d, and retain our view that Brent will average $61/bbl next year,” the BofAML report said. – TradeArabia News Service