Declining oil production in areas outside the United States and OPEC may affect long-term supply growth, experts say.
The US and the Organization of the Petroleum Exporting Countries have flooded the world with crude oil. But as prices tumble, oil companies in other regions are delaying and canceling projects, the Wall Street Journal reported.
Citing a Deutsche Bank AG report, the newspaper said only six major oil projects were approved last year, compared with an average of more than 20 a year from 2002 to 2013.
The Paris-based International Energy Agency said supply growth in areas outside the OPEC would “grind to a halt” next year, with output due to fall in Russia, Mexico, Europe and elsewhere.
Oil companies need to replace between 5 percent and 8 percent of crude output each year just to offset shrinking production from old wells. That amounts to at least five million barrels of daily output.
Slowing output could send prices rising again in the near future, hurting consumers and damping economic growth, the Journal said, citing investors and industry officials.
“When you start cutting exploration budgets and you stop developing the next frontier … the seeds have been sown for the next bull market,” Virendra Chauhan, an analyst at London consulting firm Energy Aspects, was quoted as saying.
Global oil output grew 5.5 percent, or by 4.9 million barrels a day, from 2011 to 2014, according to IEA.
But that growth came mostly from US shale-oil fields. In much of the rest of the world, output was flat or declined, despite prices reaching nearly US$100 a barrel, the report said.
As oil prices hover below US$60, oil companies have cut their budget for exploration and drilling by about US$130 billion for this year alone, according to consulting firm Wood Mackenzie.
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