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OPEC Featured Article - ‘Non-OPEC oil supply development’, Released May 12, 2022


OECD Composite Leading Indicators News Release, Paris, May 10, 2022:
https://www.oecd.org/sdd/leading-indicators/composite-leading-indicators-cli-oecd-05-2022.pdf


FEATURED ARTICLE: Non-OPEC Oil Supply Development

In 2021, non-OPEC supply increased by 0.59 mb/d. US liquids production increased by 0.15 mb/d y-o-y, mainly on the back of increased NGLs output from non-conventional basins and a few project start-ups in the Gulf of Mexico. At the same time, US tight crude and condensate production decreased by 70 tb/d, with all major US shale basins showing drops, except for the Permian. Output in the Permian increased by 0.2 mb/d y-o-y, supported by a lower breakeven price and higher drilling rig activities. Cumulative production in Canada rose by around 0.3 mb/d as production from oil sand basins hit a high of 3.3 mb/d in October 2021. China, Guyana, Argentina and Norway also contributed to production growth in 2021. This was offset by a cumulative supply decline of 0.6 mb/d, mainly from the UK, Brazil, Colombia and Indonesia.

Spending for oil and gas exploration and production (E&P) in non-OPEC countries increased by US$16 bn in 2021 to US$350 bn, and is expected to rise by around 14% in 2022. On a country level, E&P spending for 2022 is forecast to increase in Brazil, the US, Canada, and Norway by 36%, 28%, 15%, and 11%, respectively.

However, the overall level remains below pre-pandemic levels and significantly below the high of US$749 bn seen in 2014. Upstream spending by major international companies has increased in response to higher oil prices and world oil demand growth, but remains lower than the level seen in 2019, as major shale producers continue to focus on capital discipline to improve their balance sheets.

For 2022, non-OPEC liquids supply is forecast to grow y-o-y by 2.4 mb/d, a downward revision of 0.3 mb/d from the previous month’s assessment. This is on the back of geopolitical developments and the impact of sanctions on Russian oil imports.

Liquids output in the OECD is expected to increase by 1.6 mb/d, on the back of production increases in the US, Canada, and Norway. US crude oil production is anticipated to grow by 0.9 mb/d, y-o-y, with NGLs and biofuels production set to rise too. In the US, the oil rig count has rebounded from 287 units in January 2021 to 552 units in the last week of April 2022. Moreover, US core oil frac operations continue to show steady increases.

Canadian oil production, particularly Alberta’s oil sands, is forecast to grow by 0.16 mb/d y-o-y. Production growth in the North Sea and OECD Europe countries is projected at around 0.1 mb/d, supported by the start-up of the second phase of the Johan Sverdrup field development in 4Q22, which is projected to add 0.22 mb/d to Norway’s output.

In the non-OECD region, total liquids output growth is forecast at 0.7 mb/d y-o-y. Latin America is the key driver of this supply growth. It is forecast to increase by 0.27 mb/d y-o-y in 2022, mainly from two offshore start-ups of Mero-1 and Peregrino Phase 2 in Brazil and Liza-2 FPSO in Guyana. Kazakhstan and China’s liquids output are also expected to rise, by 0.14 mb/d and 0.08 mb/d, respectively.

Uncertainties to the forecast remain large, especially given recent geopolitical developments in Eastern Europe. Moreover, high inflation levels, coupled with labour shortages and tighter monetary policies by major central banks may also impact the cost of oil production and investment levels in the upstream beyond the short term. Ineede OPEC Member Countries and countries participating in the DoC will continue to closely monitor market developments over the course of the year and safeguard a stable and balanced market for the benefit of all oil market participants; consumers and producers alike.