World Oil Outlook - Opec

30
again warranted. However, the current revision also focuses on sustainability issues,
taking into account the possible longer term responsiveness of oil supply and demand
to prices. The Reference Case oil price assumption has indeed been revised to be
consistent with cost perceptions, yet without portraying either an exaggerated escalation
of future costs or assuming minimal price responsiveness of supply and demand.
The assumption is that the nominal ORB price remains at an average of $100/b
over the medium-term, before rising with inflation to reach $120/b by 2025. Longer
term real prices rise slightly to reflect the effects of depletion, as well as increasing
dependence on oil from harsher environments, the impacts of environmental protection
on costs, and rising competition for capital and human resources. The extent to
which these costs rise is tempered by the effect of continued technological developments.
In real terms, this means that the ORB eventually reaches $95/b at today’s
prices by 2035. The ORB price typically lies somewhat below dated Brent (on average
around $4/b higher than the ORB in 2011). Comparisons with the WTI price are, at
present, misleading: while WTI traditionally has held a premium over Brent, growing
production in the land-locked US mid-continent from shale oils and the increasing
inflows from Canadian pooled oil in the US Midwest has created a glut and depressed
the price of the US benchmark. Over 2011, the average WTI price was more than
$12/b below the ORB. (The emergence of, and prospects for, these differentials is
explored further in Section Two.)
Figure 1.2
Figure 1.2
IHS CERA upstream capital and operating cost indices (UCCI and UOCI), 2000=100
240
220
200
180
160
140
120
100
80
Source: IHS CERA.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure 1.4
UCCI
UOCI