World oil prices fell 4% last year,largely because of rising production from nations outside the organization of Petroleum Exporting Countries.
The same thing is likely to happen this year, with 1.3 million b/d of additional oil demand expected worldwide and more than 1 million b/d of new non-OPEC production likely to prevent strong price recovery.
That is the view of Ahmed Zaki Yamani, former oil minister of Saudi Arabia and now chairman of London's Centre for Global Energy Studies (CGES). He aired his views at the annual CGES conference Apr. 10 in London.
World oil demand is growing at more than 1 million b/d/year, driven by Far east demand that is rising 4%/year, Yamani said.
Even Organization for Economic Cooperation & Development is rising 2%/year, said Yamani,"...which cannot be bad, considering the environmentalist threat oil is under in the developed world."
Increasing demand of 1.1 million b/d last year, coupled with a decline of b/d in former Soviet Union production, led to an increased call for OPEC oil of 1.8 million b/d, all thing being equal.
"All OPEC had to do for the price of oil to rise quite steeply in 1994 was hold its output steady," Yamani said. "However, the price of oil did not rise because non-OPEC oil, excluding the F.S.U., increased by 1.4 million b/d.
"This year, it seems the story will be repeated, with 1.3 million b/d of additional oil demand expected. OPEC output should hardly rise, but non-OPEC supplies will once again grow strongly by well over 1 million b/d to prevent a strong recovery from materializing."
OUTLOOK TO 2005
CGES expects worldwide oil demand to rise by 7 million b/d between now and 2000 and a further 6 million b/d during the following 5 years.
The call on OPEC oil will rise by 6 million b/d from now to 2000 and by 13 million b/d from now to 2005.
Non-OPEC oil production will rise by 1 million b/d between now and 2000, then decline by 2 million b/d to 2005. Declines in U.S. and North Sea production will be offered by first by gains from the F.S.U. and countries such as Argentina, Brazil, Columbia, and Yemen.
Yamani said OPEC productive capacity, under present plans, can meet world demand increases, although oil price is expected to fall in real terms to 2000 and rise only to today's price again by 2005.
"We estimate OPEC will need to spend around $7.5 billion/year to keep producing at its present level of 25 million b/d," Yamani said. "OPEC's capacity expansion of 8.5 million b/d between now and 2005 will need a capital expenditure of $3.5 billion/year, giving total upstream spending of around $11 billion/year.
"Under normal circumstances this is not an exorbitant sum, representing 6% of the average, annual value of OPEC's oil production over the next 10 years. To put it into further perspective, consider that just one oil company, Royal Dutch/Shell, has an annual capacity expenditure of around $10 billion."
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