World Energy Outlook 2007

sanctioned have been brought on stream. The prospects for oil demand are
inevitably uncertain because of uncertainty about future GDP growth: global
demand, particularly in China, could grow much more quickly than projected
in the Reference Scenario, as the High Growth Scenario shows (see below). In
view of these uncertainties, a supply-side crunch in the period to 2015,
involving an abrupt run-up in prices, cannot be ruled out.
OPEC countries have launched or plan to launch over 90 major projects that
will, in aggregate, add an estimated 11.4 mb/d of gross crude oil and NGLs
production capacity to 2006 levels by 2012. 5 We estimate that planned gross
capacity additions from new projects in non-OPEC countries (including nonconventional
sources, such as oil sands and gas-to-liquids) over the same period
will amount to 13.6 mb/d (IEA, 2007a). The bulk of this new capacity will be
in Russia, the Caspian region and in deep-water locations, such as the Gulf of
Mexico and West Africa. But much of this new capacity – especially in non-
OPEC countries – will be needed simply to replace the capacity that will be lost
as a result of the depletion and associated decline in production from existing
fields. Additional investment at existing fields will undoubtedly occur to
combat the natural rate of decline in output. But exactly how much is
extremely uncertain, because little information is made available by oil
companies on how much they plan to invest in existing fields and what the
impact of those investments is expected to be on production rates at each field.
In addition, slippage in the completion of projects currently in construction or
planned could slow the rate of gross additions to capacity. Slippage on projects
completed in the past year has averaged around six months.
The prospects for net installed capacity and, therefore, the oil supply/demand
balance are very sensitive to future decline rates, especially in the medium to
long term. 6 Worldwide, we estimate that a weighted average observed decline
rate from fields currently in production of around 3.7% per year would result
in a match between global oil-supply capacity and demand in the Reference
Scenario to 2012, based on current estimates of new gross capacity additions.
At this same decline rate, 12.5 mb/d of gross capacity would need to be added
between 2012 and 2015 to meet the increase in demand of 4.2 mb/d and make up
for the decline at existing fields of 8.4 mb/d. In total, 37.5 mb/d of gross capacity
(including that needed to compensate for natural declines) needs to be added
between 2006 and 2015. But decline rates may, in fact, turn out to be
somewhat higher. An increase of a mere 0.5 percentage points in the average
observed decline rate would lead to a cumulative shortfall in capacity growth
of 2.6 mb/d by 2015 – enough to eat up most of the world’s current spare oil
production capacity of around 3 mb/d.
5. The 90 projects include only those that had not been brought on line before the start of 2007,
according to national upstream investment plans listed on OPEC’s website (www.opec.org).
6. The 2008 edition of the Outlook will take a detailed look at the issue of decline rates.
84 World Energy Outlook 2007 - GLOBAL ENERGY PROSPECTS: IMPACT OF DEVELOPMENTS IN CHINA & INDIA