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Estimate for 2005: Non-OPEC supply in 2005 is expected to average 50.1 mb/d, representing an increase of 0.2 mb/d over 2004. Baseline revisions to the 2004
and 2005 estimates have resulted in a slight downward adjustment to the overall level, but not to growth.
Revisions to the 2004 and 2005 estimate
The full year estimate for 2004 has been revised down by 11,000 b/d as historical data for Peru and Bolivia indicates that the baseline for these countries was slightly
lower than previously assessed. For 2005, the level of non-OPEC supply has also been revised down 32,000 b/d due to the impact of historical revisions as well as
the inclusion of actual data for some countries for 2Q05, 3Q05 and 4Q05. Downward revisions to the full year estimate for the USA, Bolivia, and China have been
implemented. The December figure for the USA was revised down 200,000 b/d and this provides the basis for the sharp revision to the 4Q05 estimate. On a
quarterly basis, the first, third, and fourth quarters of 2005 have been revised down 6,000 b/d, 24,000 b/d and 126,000 b/d respectively, while the second quarter
has seen an upward revision of 29,000 b/d.
Forecast for 2006
Non-OPEC oil supply in 2006 is expected to average 51.5 mb/d, an increase of 1.4 mb/d over 2005, slightly lower that the last assessment. The impact of historical
revisions, recent performance, unplanned shutdowns as well as minor adjustments to the outlook for Mexico, Norway, Australia, Brazil, Egypt and Sudan have
resulted in some revisions on a quarterly basis and a downward adjustment of 60,000 b/d to the full year growth forecast. On a quarterly basis, non-OPEC supply is
expected to average 50.6 mb/d, 51.3 mb/d, 51.3 mb/d, and 52.6 mb/d in the first, second, third and fourth quarters, representing downward revisions of 129,000
b/d in the first, 153,000 b/d in the third, and 91,000 b/d in the fourth quarter and an upward revision of 108.000 b/d in the second. Major uncertainties remain the
expected path of recovery for US Gulf of Mexico (GoM) production, and the impact of prolonged shutdowns in Norway and in a handful of other countries, as well
as accidents. Preliminary data for January 2006 puts total non-OPEC supply at 50.3 mb/d, broadly unchanged from a revised December 2005 figure of 50.3 mb/d.
During the month of January a total of 1 mb/d was affected due to extreme weather conditions, US GoM losses, and unplanned shutdowns, but in February this was
reduced to 0.5 mb/d. During the first two weeks of March several unplanned shutdowns were announced, including 0.1 mb/d at Prudhoe Bay, 0.1 mb/d from the
Terra Nova and Muskeg River fields in Canada, losses in Ecuador, the shutdown of 0.4 mboe/d in the Greater Ekofisk area and 0.1 mb/d at the Troll C field in
Norway. The overall impact is not yet known, but these unplanned outages are likely to be short-lived and to be offset by new supplies elsewhere.
OECD
OECD oil supply is expected to average 20.5 mb/d, representing an increase of 140,000 b/d versus the previous year and slightly lower than last month’s report. The outlook for Mexico and Australia has been revised up, whilst unplanned shutdowns have led to downward revisions in Canada and Norway.
USA
US oil supply is expected to average 7.4 mb/d in 2006, an increase of 150,000 b/d versus 2005. GoM losses during February averaged 0.36 mb/d a slight
improvement from January; at the time of writing shut-in production was 340,000 b/d. However, additional hurricane-related losses in onshore Louisiana took total
losses higher. Preliminary data indicates that US oil supply averaged 7.18 mb/d in January-February, slightly higher than the current forecast for 1Q06. However, the
loss of around 100,000 b/d of production at Prudhoe Bay for up to 4 weeks is likely to affect total US production levels in March keeping total averaged US supply
at current levels. The greatest uncertainty/risk remains the expected path of recovery of GoM production. GoM production is expected to increase from 1.1 mb/d at present to 1.7-1.8 mb/d by the end of 2006 once current shut-in oil is brought back on stream and new projects start. Assumed GoM losses in 1Q06
and 2Q06 remain unchanged at 300,000 b/d and 200,000 b/d respectively, as well as 50,000 b/d of permanent losses; having said this, the assumptions are likely to
be adjusted slightly next month given that actual losses for January through March are running slightly higher than previously thought and this is likely to have
consequences on the estimate for 2Q06. However, as expected, high oil prices have resulted in small increases elsewhere partially offsetting some of the
losses.
Mexico and Canada
Mexican oil supply is expected to average 3.8 mb/d in 2006, flat from last year. The last data available (January) indicates that total oil supply averaged 3.82 mb/d;
we are now assuming that a similar level is expected to be maintained through March and, as a result, the estimate for Mexican oil supply in 2006 has been revised up
slightly to reflect a better than expected nearterm performance. Following a series of unplanned shutdowns, the outlook for Canada has been revised slightly down.
Oil supply is now expected to average 3.3 mb/d in 2006, representing an increase of 230,000 b/d versus 2005, and a revision of 26,000 b/d. Major unplanned
shutdowns include the 170,000 b/d Muskeg River mine and Scotford upgrading facility, which are both expected to operate at reduced levels in March before being
completely shutdown for 15 days. Elsewhere, the Terra Nova field, which produces 125,000 b/d, is also facing some unanticipated technical problems and has been
operating at reduced rates according to the operator. The expected repair time has prompted the operator to reduce the near-term production forecast of the field by
44,000 b/d in the first quarter and by 32,000 b/d in the second quarter at which time the field is expected to return to normal levels. Having said this, Canadian
production levels have been running slightly ahead of forecasts. In addition to the obvious price incentives for over 300 small Canadian producers, heavy oil projects
are ramping up in 2006, as well as the White Rose field which is expected to hit plateau in the middle of this year.
Western Europe
Total oil supply in Western Europe is now expected to average 5.4 mb/d in 2006, a drop of 290,000 b/d versus 2005. The three largest producers in the North Sea are expected to see their production drop this year. Norwegian oil supply has been revised down 55,000 b/d and is expected to average 2.8 to 2.9 mb/d in 2006, a drop of 120,000 b/d versus last year. Meanwhile, UK oil supply is expected to average 1.7 mb/d, which represents a drop of 160,000 b/d versus 2005, while Danish oil supply should average 360,000 b/d, a slight drop of 20,000 b/d from last year. A number of fields in Norway have been shut down for 3-4 days to make repairs, the impact of which is likely to curve output in the months ahead, and reduce the maintenance level later in the year. The latest repair will take place at the
Ekofisk area, where the operator plans a 4-5 day shutdown of around 400,000 b/d of oil and gas production. An additional 100,000 b/d of oil will be shut in at the
Troll C platform for a similar period. The latest forecasts take into account the impact of all recent events and production shutdowns, but further revisions cannot be
ruled out. Preliminary data indicates that Norwegian output in the first two months of the year is close to the 1Q06 estimate, but the forecast for the quarters ahead is
now expected to be slightly lower. Whilst no offshore or onshore oil operations are immune to unplanned shut-downs, their frequency in Norway appears to be
relatively high over the last few months.
Asia Pacific
Oil supply in the Asia Pacific region is expected to average 600,000 b/d in 2006 or 22,000 b/d higher than previously thought. Australian oil supply is expected to
average 540,000 b/d, an upward revision of 21,000 b/d versus last month. Australia’s Enfield project (100,000 b/d) is now expected to start in 3Q06 instead of
4Q06. The project is one of the largest to enter into production in the last few years. As a result, the estimate for 3Q06 has been revised up, as well as the full year.
January data indicates that Australian oil production averaged just below 400,000 b/d as the impact of cycle activity resulted in the shutdown of several fields for
safety reasons. However, preliminary figures for February suggest that oil production has bounced back above 500,000 b/d.
Developing Countries
Oil supply in the Developing Oil supply in the Developing Countries (DCs) is expected to average 13.3 mb/d, an increase of 0.7 mb/d over 2005. The outlook for Brazil, Egypt, and Sudan, has been revised to reflect recent changes in the start up schedule of some projects.
In Brazil, recent announcements by Petrobras indicate a change in the start up of the Jubarte field (60,000 b/d) from February to September. The start of Albacora Leste P 50 (180,000 b/d) was already delayed last month from February to April/May. The Golfinho field (100,000 b/d) is still expected to start in June/July, but test
production of 20,000 b/d has already begun. And the small Piranema field with 20,000 b/d of capacity is still expected to start in September. As a result, the forecast
reflects a shift in barrels from 1Q06 to 4Q06. The growth rate remains unchanged at 230,000 b/d which represents a 10% increase versus 2005. Brazil’s oil supply is
expected to average 2.2 mb/d in 2006, with this month’s data indicating that production is already just above 2 mb/d.
Egyptian oil production is now expected to average 680,000 b/d in 2006, broadly flat from 2005. The 4Q06 estimate has been adjusted upward primarily to reflect a
new start date for the Saqqara project (50,000 b/d).
In Sudan, total oil supply is expected to average 490,000 b/d, representing an increase of 150,000 b/d from 2005 but a downward revision of 15,000 b/d. This
revision (and previous ones) reflects a lack of information and moving targets for the Adar Yale, Palogue, and Thar Jath projects. The ramp up of the Adar Yale
project has been affected by ongoing delays in the completion of Petrodar’s export infrastructure. Sudan’s oil production is expected to average 380,000 b/d in
1Q06, 460,000 b/d in 2Q06, 560,000 b/d in 3Q06 and 570,000 b/d in 4Q06. Current production is estimated at less than 400,000 b/d but even this is uncertain. Recent reports suggest that total production is likely to increase slowly rather than quickly, and that project delays at Petrodar’s terminal are likely to extend into
May/June, allowing for a partial increase in the country’s oil production in the first half of 2006 using the current infrastructure. More revisions are likely to be made in
the months ahead, the direction of which remains largely unknown.
FSU, Other Regions
FSU oil supply is expected to average 12 mb/d, an increase of 0.4 mb/d versus 2005, broadly unchanged from last month. The forecast for Other Regions (Other Europe and China) has been revised down slightly, with total oil supply expected at 3.7 mb/d in 2005 representing an increase of 40,000 b/d from 2005, but 21,000 b/d lower than the last assessment.
Russia
The outlook for Russia remains unchanged. Oil supply is expected to average 9.6 mb/d in 2006, an increase of 180,000 b/d versus 2005. Cold weather unexpectedly
curbed Russian output in January-February to 9.45 mb/d from a historical high in December. As a result, the 1Q06 forecast has been revised down slightly, but
positive adjustments of a similar magnitude to the 3Q06 and 4Q06 forecast keep full-year growth unchanged. Recent developments include an increase in crude
export duties to a record level of $25.5/bbl effective 1 April. The increase is unlikely to impact the current forecast as it is part of the operating environment and its
impact has already been factored in the assessment. Rising crude export duties combined with all other operating costs, particularly rail exports, have been responsible for a large portion in the slowdown of Russian growth over the last several months. Of more concern is the recent lawsuit against Yukos, which threatens
to throw the company into bankruptcy. While last month’s report indicated that Yukos was not likely to lose production in 2006 as capital investment was on the
increase in core remaining assets, this recent development could likely create additional uncertainties in Yuko’s investment programme and ultimately impact the
production performance of the remaining assets, which produced 433,000 b/d in January.
Caspian, China
The outlook for Azerbaijan remains unchanged. Azeri oil production is expected to average 0.6 mb/d in 2006, an increase of 180,000 b/d versus 2005. Kazak oil
production is now expected to average 1.3 mb/d in 2006, an increase of 40,000 b/d over last year, but a 10,000 b/d downward revision from last month’s estimate.
During the first two months of this year, Kazak oil production averaged slightly less than estimated and this provides the basis for the revision. Oil production in other
Caspian producers is estimated to have remained stable in January and February, despite the cold winter. Elsewhere, the forecast for China has been revised down
slightly to 3.7 mb/d, or 21,000 b/d. Total oil production averaged 3.6 mb/d in January and February, slightly below the 1Q06 forecast of 3.64 m/d, resulting in a
downward revision to the outlook for the year.
OPEC natural gas liquids and non-conventional oils
The estimate for 2005 and the forecast for 2006 remain unchanged. In 2005, OPEC NGLs averaged 4.3 mb/d, an increase of 200,000 b/d over the previous year.
In 2006, the forecast sees OPEC NGLs gaining 0.3 mb/d versus 2005.
OPEC crude oil production
Total crude oil production averaged 29.7 mb/d in February, according to secondary sources, an increase of 160,000 b/d from last month. Iraq’s oil production
recovered to 1.8 mb/d as loading and weather conditions improved. Nigerian oil production was affected by community disturbances in western parts of the Delta,
but losses were partly offset by increases elsewhere.
FSU net oil exports (crude and products)
The forecast for 2006 shows FSU net oil exports averaging 8.1 mb/d, which represents an increase of 0.3 mb/d over 2005. In 2005, FSU net oil exports averaged
7.7 mb/d, or 0.4 mb/d higher than the previous year.
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