World Oil Supply in April 2015

Source: OPEC_RP150407 4/16/2015, Location: Europe

Non-OPEC oil supply is estimated to have averaged 56.49 mb/d in 2014, an increase of 2.17 mb/d y-o-y and up by 0.13 mb/d over the previous Monthly Oil Market Report (MOMR). This constitutes the highest growth seen since shale oil emerged in the US and was driven predominantly by growth of 0.32 mb/d in 4Q14. In 2015, non-OPEC oil supply is projected to grow by 0.68 mb/d, indicating a downward revision by 165 tb/d compared to the previous assessment and offset by upward revisions in the UK, Malaysia, Brazil, Colombia and Russia to average 57.17 mb/d. It is expected that US tight oil and Canadian oil sands output in the coming months will decrease after the significant declines seen recently in rig counts. OPEC NGL production is estimated to grow by 0.18 mb/d to average 5.83 mb/d in 2014 and is expected to grow by 0.19 mb/d to average 6.02 mb/d in 2015. In March, OPEC crude production increased by 0.81 mb/d to average 30.79 mb/d, according to secondary sources. As a result, preliminary data indicates that global oil supply increased by 0.90 mb/d in March to average 94.52 mb/d.

Estimate for 2014
Non-OPEC supply
Non-OPEC oil supply is estimated to have averaged 56.49 mb/d in 2014, an increase of 2.17 mb/d over 2013 and an upward revision in absolute supply volume by 0.13 mb/d from the previous MOMR. Moreover, 2013 was also revised up by 30 tb/d to average 1.43 mb/d. Within the quarters, non-OPEC oil supply encountered upward revisions in the first to fourth quarters, by 0.15 mb/d, 0.13 mb/d, 0.10 mb/d and 0.32 mb/d, respectively. The upward revisions in all quarters of 2014 in OECD Americas, OECD Europe, Latin America and China led to this adjustment, as well as the minor downward revisions in OECD Asia Pacific and Other Asia.

In 2014, non-OPEC supply saw the highest growth since 2007, driven by significant growth in tight oil and unconventional NGL production in the US along with strong oil sands output in Canada. Two contrary developments were observed: strong growth was seen in OECD Americas and Latin America, as well as FSU, Africa, China, OECD Europe and Asia Pacific, while declines were recorded in other regions. OECD Americas’ oil supply growth estimate of 1.82 mb/d in 2014 was the highest on record, while a decline of 0.04 mb/d in Other Asia represented the largest contraction. At the same time, both growth and decline in output were registered in North America, with the US recording growth of 1.64 mb/d and Mexico a decline of 90 tb/d. Strong growth in OECD Americas was supported by tight oil and NGLs from unconventional sources in the US and oil sands in Canada, while declines in the other regions were driven mainly by political, technical and weather-related factors. Disruptions in 2014 mainly affected output from Mexico, Syria, Colombia, Indonesia, the UK and the Sudans.

According to preliminary and estimated data, total non-OPEC supply in 4Q14 increased by 2.35 mb/d over the same period a year earlier. During 2H14, non-OPEC supply increased by 2.21 mb/d compared with the same period of the previous year. On a quarterly basis, non-OPEC supply in 2014 is estimated at 55.76 mb/d, 56.07 mb/d, 56.36 mb/d and 57.74 mb/d, respectively.

OECD
Total OECD oil supply in 2014 is estimated to grow by 1.87 mb/d to average 24.12 mb/d, indicating an upward revision of 0.11 mb/d from the last MOMR. Output in 4Q reached 24.96 mb/d, with an increase of 2.35 mb/d compared with the same quarter in 2013. The upward revision came from OECD Americas and OECD Europe, while OECD Asia Pacific registered a minor downward revision compared with the last MOMR. On a quarterly basis, total OECD supply is estimated to average 23.49 mb/d, 23.90 mb/d, 24.10 mb/d and 24.96 mb/d, respectively.

OECD Americas
OECD Americas’ oil supply is estimated to average 20.00 mb/d, showing growth of 1.82 mb/d compared with last year’s increase of 1.43 mb/d. The US and Canada both recorded remarkable growth in oil supply by 1.64 mb/d and 0.27 mb/d, respectively, in 2014, while that of Mexico is estimated to decline by 90 tb/d. On a quarterly basis, OECD America’s oil supply in 2014 is estimated to average 19.21 mb/d, 19.86 mb/d, 20.17 mb/d and 20.72 mb/d, respectively.

US
US updated total oil supply production across 2014 is estimated to increase by 1.64 mb/d to average 12.88 mb/d, representing an upward revision of 50 tb/d from the last monthly report. The net growth of crude oil output is estimated at 1.22 mb/d, including 1.12 mb/d of tight oil, 0.14 mb/d from the GOM and a decline of 20 tb/d in Alaska. US NGL production (including NGLs from unconventional sources) and biofuels grew by 0.35 mb/d and 0.07 mb/d, respectively. US total liquids output in 4Q was revised up by 116 tb/d to average 13.56 mb/d. The largest increase in 4Q came from crude output, which rose to 9.32 mb/d, a record high in December, while NGL output remained unchanged at 3.12 mb/d. Unsurprisingly, crude output growth was not impacted by falling prices as hedging and commitments in drilling and lease contracts meant drilling continued.

In 2014, oil production from the GOM increased to average 1.39 mb/d, with maximum output being registered in December at 1.46 mb/d. New projects that started to come online in 4Q14 (peak production capacity of 0.26 mb/d) boosted GOM output at yearend. The Cardamom Project (50 tboe/d) came online in September, and mid-November saw the commencement of first oil at the Tubular Bells development, which is expected to produce roughly 50 tboe/d. Finally, Jack/St. Malo also started up in December with a peak capacity of 0.1 mb/d. Averaged across the year, GOM volumes grew by 0.14 mb/d as high decline rates at existing fields offset most of the new additions. The summary of the US annual supply breakdown in 2014. On a quarterly basis, US oil supply (excluding processing gain) is estimated to stand at 11.98 mb/d, 12.82 mb/d, 13.15 mb/d and 13.56 mb/d, respectively.

Canada and Mexico
Oil supply growth in Canada is estimated at 0.27 mb/d in 2014 to average 4.40 mb/d, an upward revision by 71 tb/d compared with the previous month. Preliminary data places 4Q Canadian oil production higher q-o-q by 0.13 mb/d at 4.43 mb/d. The actual production of conventional crude oil in December dropped m-o-m by 7 tb/d to 1.42 mb/d. The output of oil sands also declined by 26 tb/d to average 2.24 mb/d in the same month. On the other hand, NGL output increased by 41 tb/d to 0.77 mb/d. On a quarterly basis, Canada’s supply in 2014 is estimated to average 4.35 mb/d, 4.19 mb/d, 4.24 mb/d and 4.43 mb/d, respectively.

Mexico’s oil supply reached an average of 2.80 mb/d in 2014, showing a decline of 90 tb/d, unchanged from the previous month’s estimation. On a quarterly basis, Mexico’s supply in 2014 is estimated to average 2.87 mb/d, 2.85 mb/d, 2.77 mb/d and 2.72 mb/d, respectively.

OECD Europe
Total OECD Europe oil supply, which declined by 0.19 mb/d to average 3.59 mb/d in 2013, increased by 20 tb/d in 2014 from the previous year to average 3.61 mb/d, an upward revision of 20 tb/d from the previous MOMR. Although UK output was revised up in 4Q and production from Other OECD Europe was revised up in all quarters from 2012 to the end of 2014, there were no changes in the last estimation of OECD Europe’s oil production volume and growth. Updated OECD Europe oil supply indicates a quarterly supply of 3.76 mb/d, 3.52 mb/d, 3.41 mb/d and 3.74 mb/d, respectively. The UK’s oil supply registered an average of 0.86 mb/d, representing a decline of 10 tb/d in 2014 y-o-y, unchanged from the previous MOMR. Total UK production in 2014 consisted of 0.78 mb/d of crude oil and 0.06 mb/d of NGLs. On a quarterly basis, UK oil output in 2014 is estimated to average 0.97 mb/d, 0.90 mb/d, 0.71 mb/d and 0.88 mb/d, respectively. This reflects only the change in 4Q, when supply was 10 tb/d higher compared to the last MOMR.

OECD Asia Pacific
Total OECD Asia Pacific oil supply, which declined by 0.08 mb/d to average 0.48 mb/d in 2013, increased by 30 tb/d in 2014 from the previous year to average 0.51 mb/d. There was no change in growth compared to the last MOMR, but the absolute volume was revised down by 10 tb/d to 0.51 mb/d due to the 2013 base change. Australian oil production data was also revised down, reduced by 5 tb/d in all quarters from 2012 to the end of 2014. On a quarterly basis, updated Australia oil supply in 2014 is estimated to average 0.43 mb/d, 0.43 mb/d, 0.44 mb/d and 0.42 mb/d, respectively. Updated OECD Asia Pacific oil supply indicates a quarterly supply of 0.51 mb/d, 0.51 mb/d, 0.53 mb/d and 0.50 mb/d, respectively.

Developing countries
Total developing countries’ (DCs) oil output reached 12.36 mb/d in 2014, indicating an increase of 0.21 mb/d, revised up by 10 tb/d from the last MOMR. Growth in 2014 was provided by robust output from pre-salt reservoirs reaching more than 0.7 mb/d in deep offshore Brazil after a significant decline in 2013. According to preliminary data, supply averaged 12.63 mb/d in 4Q14, up by 0.35 mb/d from the same period a year earlier. On a quarterly basis, total oil supply in DCs is estimated to average 12.23 mb/d, 12.24 mb/d, 12.35 mb/d and 12.63 mb/d, respectively.

Other Asia
Other Asia’s oil production is estimated to decrease by 40 tb/d in 2014 to average 3.56 mb/d, representing an upward revision in growth of 10 tb/d from the previous MOMR. Other Asia’s supply was revised down in all quarters of 2013 as well as in 3Q 14 due to updated oil output, which was partly carried over to 2015.

On a quarterly basis, Other Asia’s supply in 2014 is estimated to average 3.56 mb/d, 3.55 mb/d, 3.48 mb/d and 3.64 mb/d, respectively.

The estimated oil output in Malaysia and Thailand was revised up by 10 tb/d each to average 0.75 mb/d and 0.40 mb/d, respectively, while oil production in Other Asia was revised down by 10 tb/d to average 0.23 mb/d.

Latin America
Latin America’s oil supply is estimated to have grown by 0.26 mb/d to average 5.04 mb/d in 2014, revised up by 10 tb/d from the last MOMR. Latin America is another main driver of growth among all the non-OPEC regions. It is seen that Argentina, Brazil and Latin America others contributed to growth in 2014, while output from Colombia is likely to experience a decline of 20 tb/d in 2014 to average 1.01 mb/d, unchanged from the last estimation. Total liquids output in Argentina was revised up this month by 20 tb/d, resulting from upward revisions in biofuels production during all quarters of 2013 and 2014. On a quarterly basis, Latin America’s supply in 2014 is expected to stand at 4.86 mb/d, 4.92 mb/d, 5.10 mb/d and 5.23 mb/d, respectively.

Middle East
The Middle East’s oil supply in 2014 is estimated to have declined by 20 tb/d to average 1.34 mb/d, unchanged from the previous MOMR. On a quarterly basis, Middle East’s supply in 2014 is expected to stand at 1.34 mb/d, 1.34 mb/d, 1.36 mb/d and 1.33 mb/d, respectively.

Africa
Africa’s oil supply in 2014 is estimated to have grown by 20 tb/d to average 2.42 mb/d, unchanged from the previous MOMR. On a quarterly basis, Africa’s supply in 2014 is expected to stand at 2.44 mb/d, 2.41 mb/d, 2.40 mb/d and 2.41 mb/d, respectively.

FSU, other regions
FSU’s oil supply in 2014 is estimated to have grown by 20 tb/d to average 13.43 mb/d, unchanged from the previous MOMR. On a quarterly basis, FSU’s supply in 2014 is expected to stand at 13.48 mb/d, 13.36 mb/d, 13.39 mb/d and 13.48 mb/d, respectively.

Russia
Russia’s oil supply in 2014 was also unchanged this month, remaining at 10.58 mb/d, with growth of 70 tb/d. On a quarterly basis, Russia’s supply in 2014 is expected to stand at 10.59 mb/d, 10.55 mb/d, 10.52 mb/d and 10.65 mb/d, respectively.

China
China’s oil supply in 2014 is estimated to have grown by 30 tb/d to average 4.28 mb/d, revised up by 10 tb/d from the previous MOMR. CNOOC, the state-owned China National Offshore Oil Corp., produced 432.5 mboe last year, a rise of 5.1% from 2013, the company said in its annual results released recently. Total liquids output was up 4.7% at 348.8 mb, while gas production rose by 6.6% to 485.5 Bcf over the period. The company said 13 new projects came on stream last year, most of which were ahead of schedule and below budget. In terms of exploration, its success rate ranged between 50% and 70% for independent wells spudded offshore China. It achieved a reserve replacement rate of 112% last year. On a quarterly basis, China’s supply in 2014 is expected to stand at 4.26 mb/d, 4.28 mb/d, 4.21 mb/d and 4.36 mb/d, respectively.

Forecast for 2015
Non-OPEC supply
Non-OPEC oil supply is forecast to grow by 0.68 mb/d in 2015 to average 57.17 mb/d, a decrease of 165 tb/d, yet, a negligible increase of 10 tb/d in absolute terms from the previous MOMR. There were various upward and downward revisions applied to the output data of some non-OPEC oil producers during all quarters, and specifically in 1Q15. Non-OPEC oil supply growth in 2015 is expected to increase, mostly in IH15, on a y-o-y basis, but at a slower pace. The main factors for the lower growth prediction in this monthly report are still low oil price expectations, the declining number of active rigs in North America, the decrease in drilling permits in the US and the reduction in IOCs’ 2015 capex.

One of the most important indications of uncertainty in the production growth outlook in terms of non-OPEC supply in the coming months would be the number of active rigs around the world, particularly in higher cost regions. According to the latest report of Baker Hughes, the US rig count declined by 238 rigs over four weeks in March to 1,110 rigs, decelerating the pace from last month's 335 rigs taken out of service. This is the 17th consecutive week of total decline and the lowest reading since the week ending 31 December 2009, according to the latest survey from Baker Hughes.

Preliminary data for 1Q15 indicates that non-OPEC supply increased by 190 tb/d q-o-q and was revised upward by 150 tb/d to average 57.77 mb/d from the previous MOMR. This revision was driven by upward changes in OECD countries during 4Q that were partially carried over to 1Q15. These changes occurred in the US, Canada, Other OECD Europe as well as in Argentina and China. However, most of the changes came from downward revisions in 1Q15 from Canada, Mexico, Norway, Denmark, Indonesia, Yemen, Syria, Chad and FSU Others. On a regional basis, OECD Americas is expected to have the highest growth by 0.73 mb/d, followed by Latin America, China, Other Asia and OECD Asia Pacific, while FSU, the Middle East, OECD Europe and Africa are seen to decline. Growth is expected to come mainly from the US, Brazil, Canada, China, Malaysia, Other Asia and Australia, while oil supply from Mexico, Colombia, Russia, Azerbaijan, Yemen and the UK witnessed the biggest declines. The risk and uncertainties associated with the supply forecast due to the drop in oil price, that began in the middle of last year, remain high on both sides, especially for the US, Canada, Russia, Norway and the UK. On a quarterly basis, non-OPEC supply in 2015 is expected to average 57.77 mb/d, 57.13 mb/d, 56.82 mb/d and 56.97 mb/d, respectively.

OECD Americas
OECD Americas’ oil supply is predicted to average 20.73 mb/d in 2015, showing growth of 0.73 mb/d compared with last year at 1.82 mb/d. The US and Canada are both expected to see remarkable growth of oil supply by 0.74 mb/d and 0.11 mb/d, respectively, while that of Mexico is estimated to decline by 110 tb/d. On a quarterly basis, OECD America’s oil supply in 2015 is estimated to average 20.69 mb/d, 20.69 mb/d, 20.71 mb/d and 20.83 mb/d, respectively.

US
US liquids supply is predicted to average 20.73 mb/d in 2015, showing growth of 0.73 mb/d compared with last year at 1.82 mb/d. US oil production is estimated to average 13.44 mb/d in January 2015, indicating a decline by 0.37 mb/d m-o-m. Total crude oil decreased by 135 tb/d to average 9.19 mb/d in January 2015, and NGL output declined by 149 tb/d to average 2.98 mb/d. Crude output dropped in most regions and states, decreasing in North Dakota by 37 tb/d to 1.19 mb/d, in Alaska by 15 tb/d to 0.50 mb/d and in the GOM by 24 tb/d to average 1.44 mb/d. However, in Texas, crude output increased by a slight 3 tb/d to settle at 3.46 mb/d in January. In spite of the 6.5% tax break kicking in from June in Bakken and about 125 of the 1,000 uncompleted wells needing to be finished by the end of June to comply with state requirements, Bakken output is not likely to maintain the previous strong growth. Based on the latest EIA Drilling Productivity Report, although the monthly additions from one average rig in Bakken increased by 18 b/d leading to output of 610 b/d at a single well in April, total oil production at Bakken in April declined by 8 tb/d m-o-m because the decline at legacy wells has been more than the production volume produced by new wells. Moreover, based on the release of this new report, the EIA predicts that tight oil output in May 2015 at Bakken, Eagle Ford and Niobrara will decline by 23 tb/d to average 1,297 mb/d, 33 tb/d to average 1,690 mb/d and 14 tb/d to average 0.403 mb/d, respectively. However, the Permian basin is expected to see growth in oil production in May. Permian’s production is expected to grow by 11 tb/d to average 1,992 mb/d.

US oil rig count
The US rotary oil rig count generally experienced an uptrend in 2014, but that trend has reversed from 5 December 2014 when the oil rig count peaked at 1,575 until the end of the fourth week in March 2015. In the past four months, 16 consecutive weeks of falling oil rig counts show that US drilling activity is on a downturn by 762 rigs (-48.4%). According to oilfield service company Baker Hughes (BHI), rotary oil rig counts in March also saw active oil rigs decrease by 173 to 813 rigs during the last four weeks (27 Feb.-27 Mar.), declining at a slower pace compared with 237 rigs in Feb. 2015. The following tables and graphs reflect the monthly declines in the US and Canada rig counts as well as monthly changes in the six US major shale plays in March 2015. Oil production in the GOM in 2015 is being supported by the startup of the Tubular Bells and Jack/St Malo projects in 4Q14. It is expected that the GOM’s output, with the new Lucius project started up in January, will likely rise by 0.18 mb/d in 2015.

According to the EIA, 13 fields are expected to start up in the next two years, of which eight will come online this year and five next year. More than half the projects starting up during that time will utilize subsea tiebacks to existing production platforms. New projects, combined with continuing production from the developments brought online in last year's second half, are forecast to add 265 tb/d by year-end. Production estimates include adjustments to account for seasonal shut-ins from hurricanes. However, the current low oil price environment adds uncertainty to the timelines of deepwater gulf projects, with those in early development stages exposed to the greatest risk of delay. To reduce risk, producers are collaborating to develop projects more cost-effectively, to shorten the time necessary to reach the final investment decision and production launch, and to share development costs.

Notably, Chevron, BP and ConocoPhillips in January reported plans to explore and appraise 24 jointly held offshore leases in the northwest portion of Keathley Canyon. The EIA says the increase in fields that came online in 2014 and that are scheduled for production startup in 2015 and 2016 reflects a revival of interest and activity in the Gulf following the moratorium on deepwater drilling after the 2010 Deepwater Horizon incident. On a quarterly basis, US liquids supply in 2015 is expected to average 13.61 mb/d, 13.65 mb/d, 13.62 mb/d and 13.59 mb/d, respectively.

Canada and Mexico
Canada’s oil output is forecast to average 4.41 mb/d in 2015, the growth revised down by 35 tb/d due to lower-than-expected oil production, weakening after the heavy decline in rig counts and the postponement of several projects to the next years. An increase of 0.11 mb/d over the previous year is forecast, revised down compared with the previous MOMR. Despite the upward revision that raised 2014 supply estimates, Canada’s oil production outlook in 2015 is seen declining compared to last month’s forecast on expected conventional oil, but output from unconventional sources will be affected gradually by sustained low oil prices. Preliminary estimates place January Canadian oil output lower y-o-y by 0.1 mb/d at 4.35 mb/d, a decline of 80 tb/d m-o-m (20 tb/d of oil sands and 60 tb/d of conventional crude) as cold weather curtailed output. However, Syncrude production rose by 48 tb/d m-o-m as technical issues at the site’s sour water treater were resolved. Conventional output is declining in Canada due to the rig count data showing another 153 unit drop in March compared to February.

Oil production in Mexico in February recovered compared to a month earlier, but output fell y-o-y by 0.19 mb/d to 2.69 mb/d. Mexico’s oil supply is forecast to average 2.69 mb/d in 2015, showing a decline of 0.11 mb/d, revised down by 10 tb/d from the previous month’s estimation. Crude output fell y-o-y by 0.17 mb/d, with heavy crude output lower y-o-y by 0.14 mb/d as declines continued to accelerate at the Cantarell field, where output eased to 0.25 mb/d. Issues with rising water-cuts in oil and a worsening oil-to-gas ratio present further downsides to Mexican production. All of the leading fields are in decline, including Ku, Maloob and Zaap (KMZ), which fell by 75 tb/d y-o-y to 0.79 mb/d in January, likely due to maintenance at a gas processor plant, forcing operations to be scaled back at the field for part of the month. Since then, KMZ output recovered to 0.87 mb/d in February, a level maintained in March. Mexican crude output was 2.33 mb/d in February. However, output from large fields generally continued to decline. Oil production in Chuc remains the exception with growth of 15 tb/d y-o-y. Preliminary March oil output is estimated to remain unchanged at 2.69 mb/d. On a quarterly basis, Mexico’s supply is seen to average 2.67 mb/d, 2.69 mb/d, 2.71 mb/d and 2.70 mb/d, respectively.

OECD Europe
Total OECD Europe oil supply, which increased by 0.02 mb/d to average 3.61 mb/d in 2014, is expected to decrease by 20 tb/d from the previous year to average 3.58 mb/d in 2015, revised up by 30 tb/d due to the base being changed from the previous MOMR. Output from the region is expected to continue on a downward trend from 1Q to 3Q15. OECD Europe’s 4Q15 forecast was revised up by 30 tb/d mostly due to oil volumes coming back from seasonal maintenance and higher-than-expected output from delayed projects in Norway, the UK and even Other OECD Europe at the end of 2015. OECD Europe is expected to see a quarterly supply of 3.70 mb/d, 3.54 mb/d, 3.44 mb/d and 3.66 mb/d, respectively.

Norway’s oil supply is predicted to decline by 10 tb/d from the previous year to average 1.88 mb/d in 2015, unchanged from the previous MOMR. Preliminary production figures for February 2015 indicate an average daily production of about 1.93 mb/d of oil, NGLs and condensates. This is flat compared to January. The average daily liquids production in February was 1.55 mb/d of oil, 0.33 mb/d of NGLs and 0.05 mb/d of condensates. Oil production is 0.3% above the level seen in February of last year. Production has begun at the deepwater Knarr oil field in the Norwegian North Sea. Operator BG Group didn’t report initial flow rates but said the Petrojarl Knarr floating production, storage and offloading vessel has a capacity of 63 tboe/d. The vessel, moored in 400 m of water about 45 km northeast of the Snorre field, can store 800,000 barrels of oil. BG estimates gross reserves at 80 million barrels of oil in the Lower Jurassic Cook formation. It expects the field to produce for at least 10 years. The field’s former name was Jordbaer.

The CEO of the new Norwegian Oil and Gas Association said while spending in the current year would be down from the previous year’s record levels, companies were still spending big and investing in future production. He acknowledged that there has been a drop in investments offshore Norway but said they are still at historically high levels. The conservative Norwegian Petroleum Directorate (NPD) has estimated that total industry capital expenditure on the shelf will fall 15% in 2015 to $19 billion against 2014 levels, but consultancy Wood Mackenzie has estimated cuts may total as much as 25%, and some analysts have warned capex could be cut by even more if the oil price does not recover. The NPD has also forecast that oil production in Norway will fall 8% from the 2014 levels of 1.51 mb/d to 1.39 mb/d in 2019. On a quarterly basis, Norway’s production in 2015 is seen to average 1.94 mb/d, 1.85 mb/d, 1.80 mb/d and 1.94 mb/d, respectively.

The UK’s oil supply is forecast to average 0.86 mb/d, representing a decline of 10 tb/d in 2015, and y-o-y, it has been revised up by 35 tb/d from the previous MOMR. UK liquids output was revised up by 50 tb/d in 1Q15 to 0.91 mb/d, but it is lower y-o-y by 60 tb/d. UK liquids production eased m-o-m and was lower y-o-y by 0.12 mb/d at 0.89 mb/d in February due to technical failures at the Buzzard field, which reduced output for around 10 days, and also due to maintenance at smaller fields. As a result, March loadings were lowered from a one-year high of 0.43 mb/d to 0.41 mb/d. The return of the smaller fields from maintenance meant April loadings were set to rise by 0.42 mb/d. In order to encourage investment in the North Sea, the UK government has reduced the supplementary tax rate from 30% to 20% on newer fields. On a quarterly basis, UK oil output in 2015 is forecast to average 0.91 mb/d, 0.83 mb/d, 0.80 mb/d and 0.89 mb/d, respectively.

OECD Asia Pacific
OECD Asia Pacific’s oil supply is predicted to grow by 0.01 mb/d to average 0.52 mb/d in 2015, revised down by a minor volume of 5 tb/d from the last MOMR. The revision is due to the downward revision in 1Q15 of Australia, whose actual output was lower than our expectation. The revision was thus carried over to all quarters in 2015. On a quarterly basis, OECD Asia Pacific’s oil supply in 2015 is expected to stand at 0.50 mb/d, 0.53 mb/d, 0.54 mb/d and 0.52 mb/d, respectively.

Developing countries
Total developing countries’ (DCs) oil production is anticipated to stand at 12.38 mb/d in 2015, indicating an increase of only 20 tb/d, one-tenth of the level achieved in 2014, and a downward revision by 56 tb/d from the last MOMR. If the growth in 2014 was provided by the robust output of Brazilian pre-salt reservoirs in Latin America, this year, the shut-in wells in Yemen and lower production in Latin America have stunted the growth. Nevertheless, according to preliminary data, supply averaged 12.69 mb/d in 1Q15, up by 60 tb/d q-o-q and by 0.46 mb/d from the same period a year earlier. 400 tb/d came from Latin America, and the rest originated from Other Asia.

Other Asia
Other Asia’s oil supply is predicted to grow by 0.03 mb/d to average 3.59 mb/d in 2015, revised down by 20 tb/d from the last MOMR. The revision is due to the downward revision in 1Q15, when the actual output was lower than our expectation, and hence the revision was carried over to all quarters in 2015. Nevertheless, Other Asia will be another driver of growth among all the non-OPEC regions in 2015. It is expected that Malaysia and Other Asia’s production will grow by 40 tb/d and 30 tb/d, respectively, while India and Indonesia are expected to decline.

On a quarterly basis, Other Asia’s supply in 2015 is expected to stand at 3.65 mb/d, 3.61 mb/d, 3.58 mb/d and 3.53 mb/d, respectively. In Indonesia, the peak production target for the Cepu block has been raised by the Indonesian upstream regulator by 40 tb/d to 205 tb/d and expects operator ExxonMobil and its partner, state-owned Pertamina, to attain this target in 4Q15. Cepu, which has been critical to Indonesia in hitting or missing its annual oil production targets, is currently producing 40 tb/d. The existing wells at the block are producing better than the company had expected, and thus, the peak production volume has been raised. The Energy Minister said that if everything precedes smoothly, Indonesia should be able to meet its 2015 oil production target of 825 tb/d. The block, which straddles the border between Central Java and East Java, is estimated to contain about 600 million barrels of oil and 1.7 Tcf (Trillion Cubic Feet) of gas.

Latin America
Latin America’s oil supply is forecast to grow by 0.08 mb/d to average 5.12 mb/d in 2015, revised up by 20 tb/d from the last MOMR. However, the oil supply in Argentina was revised down by 10 tb/d. On the other hand, the proposed production from Colombia and Brazil was revised up by 20 and 10 tb/d, respectively. Latin America will be another main driver of growth among all the non-OPEC regions in 2015. The y-o-y growth in 1Q15 is estimated at 400 tb/d, but the q-o-q growth stands at 40 tb/d. On a quarterly basis, Latin America’s supply in 2015 is expected to stand at 5.28 mb/d, 5.12 mb/d, 5.10 mb/d and 4.99 mb/d, respectively.

Brazil
Brazil’s annual liquids supply growth in 2015 is set to slow to 0.16 mb/d this year, down from 0.26 mb/d in 2014. This indicates an upward revision by 10 tb/d to 3.06 mb/d. Liquids production in Brazil in 1Q15 increased q-o-q by 20 tb/d to 3.10 mb/d, although crude oil production fell seasonally m-o-m by 40 tb/d to 2.53 mb/d in February and for the second consecutive month as maintenance continued at the P-58 platform. Oil output was also lower at the Lula (Brazil’s second largest) and Marlim (Brazil’s fourth largest) fields. Moreover, it is expected that the declining trend will continue in March as the 0.1 mb/d P-58 platform was shut down due to safety concerns. Therefore, while 1Q15 will still register impressive y-o-y growth of 0.38 mb/d supported by record high pre-salt production, which hit 0.74 mb/d in February, production growth from 2Q15 will likely slow towards the end of the year.

Petrobras has started up the P-61 tension-leg platform at the Papa Terra field on the southern tip of the Campos basin, 110 km offshore Brazil. Thirteen production wells will be interconnected to P-61, and production from P-61 is transferred via flexible lines to P-63, which is capable of processing 140 tb/d of oil and 1 mcm of gas, as well as injecting 340 thousand barrels of water. The presence of reservoirs with 14-17° gravity oil and the project’s large water depths have made the development of the Papa-Terra field one of Petrobras’s most complex projects, According to the exploration news announced by Petrobras, a large column of crude oil was discovered in the second extension well at the subsalt Libra Field in late March 2015. The C1 well, which was drilled in the Santos Basin about 220 kilometres off Rio de Janeiro state, is about 18 kilometres from the first extension well drilled at Libra. Petrobras earlier confirmed two other oil discoveries in this field previously announced in 2014. The drilling results confirmed the presence of a column of hydrocarbons approximately 200 meters thick and reservoirs with good permeability and porosity. The well, which the Schahin Sertao drillship started on 27 September, reached a final depth of 5,780 meters in waters that were 2,160 meters deep. Libra is estimated to hold 8-12 billion barrels of recoverable crude. Brazil’s total output in 2015 on a quarterly basis is predicted at 3.10 mb/d, 3.03 mb/d, 13.07 mb/d and 13.03 mb/d, respectively.

Colombia
Oil production in Colombia, which was expected to decline by 80 tb/d in 2015 due to the oil price slump in late 2014, has now been revised up by 20 tb/d to average 0.96 mb/d, compared with the last MOMR. Oil output in 1Q15 was revised up by 30 tb/d to 1.05 mb/d. The increase was due to a rise in output at the 100% Ecopetrol-owned Castile heavy oil field in eastern Meta province, where production reached 124 tb/d during the period. Output also reached a record 85 tb/d at Chichimene, which is also 100% owned by Ecopetrol. Colombian oil output in 2015 on a quarterly basis is predicted at 1.05 mb/d, 0.98 mb/d, 0.93 mb/d and 0.88 mb/d, respectively.

Middle East
Oil production from some non-OPEC producers in the Middle East faces considerable uncertainty and high risk. Syria and Yemen are on the verge of oil fields shutting down completely. It is expected that the Middle East’s oil output in 2015 will decline by 90 tb/d to a total average of 1.25 mb/d. No growth is expected in Bahrain, Oman or Syria, and oil production is predicted to decline in Yemen by 90 tb/d to average 50 tb/d in 2015. Middle East oil output in 2015 on a quarterly basis is predicted at 1.32 mb/d, 1.25 mb/d, 1.23 mb/d and 1.22 mb/d, respectively.

Yemen
Yemen is a relatively minor oil and gas producer, producing around 0.14 mb/d of crude oil last year, down from a peak of 0.44 mb/d in 2001, due to limited investment, natural declines and frequent supply disruptions. There are two main crude grades, the light sweet Marib (API 48.9, sulphur 0.07%) and the medium Masila (API 31.4, sulphur 0.54%). Amid the worsening security situation, international oil operators in Yemen’s oil projects have been halting operations since the start of the year. In January 2015, around 50 tb/d of oil production was shut down in the Shabwah province. Oil production of state-owned Safer Exploration & Production Operations Co., which produces around 30 tb/d of crude and also operates the gas fields around the country’s LNG plant is in process of shutting down. On 30 March, Total Co. shut down most of its 35 tb/d Block 10 when it evacuated expatriate staff. The other IOCs have also left Yemen, and their production was halted since the first week of April. It seems that there is only one operator left, PetroMasila, the operator of Block 14, which is pumping 30 tb/d of oil.

Africa
Oil production from non-OPEC producers in Africa is expected to decline by 10 tb/d to average 2.41 mb/d. This indicates a downward revision by 10 tb/d compared with the last monthly report. Some growth is forecast in Congo as well as Equatorial Guinea at 10 tb/d each. Oil output in Africa in 2015 on a quarterly basis is predicted at 2.44 mb/d, 2.42 mb/d, 2.40 mb/d and 2.38 mb/d, respectively.

FSU, other regions
Oil production in FSU is expected to decline in 2015 by 0.10 mb/d, including 30 tb/d in Russia, 20 tb/d in Kazakhstan, 40 tb/d in Azerbaijan and 10 tb/d in FSU others, mainly Turkmenistan. FSU’s output was revised up by 30 tb/d to average 13.33 mb/d in 2015. FSU total output in 2015 on a quarterly basis is predicted at 13.50 mb/d, 13.33 mb/d, 13.22 mb/d and 13.18 mb/d, respectively.

Russia
Oil production in Russia is forecast to decline in 2015 by 30 tb/d to average 10.54 mb/d, an upward revision by 30 tb/d due to higher-than-expected oil production in 1Q15. Despite lower oil prices and limited access to financing because of sanctions, Russian companies continue to grow crude oil production, which reached another post-Soviet record of 10.71 mb/d in March, a hike of 1.34% on the year, although NGLs and condensates supported output in 1Q15. Nevertheless, the production outlook for the coming months is uncertain.

According to preliminary data from the Russian Energy Ministry, the recently nationalized Bashneft and small independent producers demonstrated the biggest growth rates in March. Bashneft was 10.6% up on the year at 0.39 mb/d. Total production by small-sized independents grew so far by 12.3% from March 2014, up to 1.1 mb/d. Gazprom Neft also showed a healthy increase of 2.9%, up to 0.69 mb/d. It is expected that the oil arm of Gazprom will keep growing its output this year at rates similar to or higher than in 2014. Last year, the company's production of hydrocarbons rose by 6.4%, with the output of liquids increasing by more than 2%. This is partly the result of the application of advanced technology, including horizontal drilling and multistage hydraulic fracturing, which allowed Gazprom Neft to increase production from its mature fields in West Siberia.

On the other hand, other Russian companies saw production declines at their mature fields in West Siberia. For instance, Lukoil saw a slight drop in March production to 1.74 mb/d. State-controlled Rosneft, for the same reason, saw its production fall by 0.5% from March 2014 down to 3.81 mb/d. Rosneft’s Vankor field in East Siberia reached a peak of 0.44 mb/d and will start declining next year, but the company plans to launch the neighbouring Suzunskoye field to compensate for this decline next year, which is to reach peak output of 90 tb/d by 2018. Together with Tagulskoye and Lodochnoye, Suzunskoye has been included into the so-called Vankor cluster, which is slated to produce 0.5 mb/d. Drilling at Lodochnoye and Tagulskoye is to begin in 2018. Oil production from the production sharing agreement projects such as the Exxon Mobil operated Sakhalin-1, Gazprom-led Sakhalin-2 and Total operated Kharyaga was down 7.6% to below 0.3 mb/d. Moreover, Sakhalin-2's crude oil output could fall by 15% in 2015 because of depletion. Preliminary forecasts indicate that Russian oil output in 2015 on a quarterly basis will be at 10.70 mb/d, 10.56 mb/d, 10.49 mb/d and 10.44 mb/d, respectively.

Caspian
Oil production in Kazakhstan, Azerbaijan and FSU others, is expected to decline in 2015 by 20 tb/d to average 10.54 mb/d, 40 tb/d to average 1.61 mb/d and 10 tb/d to average 0.38 mb/d, respectively, unchanged from previous MOMR. The q-o-q growth in 1Q15 in Kazakhstan and Azerbaijan was -20 tb/d and 40 tb/d, respectively.

China
China’s oil supply is forecast to grow by 30 tb/d over the previous year to average 4.31 mb/d in 2015, revised down in growth by 30 tb/d from the previous month. Chinese crude oil output reached a record high of 4.36 mb/d in 4Q14 as well as 4.32 mb/d in December, but it declined seasonally m-o-m by 70 tb/d to 4.25 mb/d in January and then again decreased by 30 tb/d to average 4.22 mb/d in February. China’s largest oil field, Daqing, is expected to cut production by around 30 tb/d in 2015, with the slump in oil prices putting pressure on margins for refining crude from the ageing field.

Based on news received from CNOOC in January, the capital budget for this year would be set at Yuan 70-80 billion, and the reduced capex this year was primarily because of lower oil prices. The CEO has said the company would adjust high risk projects in terms of exploration but projects that are already under construction will not be halted. CNOOC’s net oil and gas production this year is targeted at 475 million to 495 million boe, which would be up to a 14.5% increase from last year. Nevertheless, last Friday, the former director of the National Energy Administration claimed Chinese output would fall by 14% y-o-y to 3.8 mb/d in 2015 from 4.2 mb/d currently as oil prices are far below the cost of production in the country.

Petro China reduced capex by 10%, but the company’s price assumptions are for Brent to average $75/b in 2015, which seems highly unlikely, and thus Capex will probably be cut further. The company has already announced a 10% output cut at Daqing, China's largest oil field. Sinopec is also set to reduce its 2015 capex by 12.1% following an 8.3% y-o-y reduction in 2014, and within that, there will be an increasing focus towards gas with a targeted output increase of 24%. Sinopec reduced its oil production target because the company believes that natural gas will be the biggest contributor to profitability going forward. They will revisit exploration and development of mature fields where costs can be more than $70/b once prices recover, but for now, they will shut down these high-cost wells. The company, therefore, expects production to be lower y-o-y by 3.5%. CNOOC will also reduce capex by 26-35%, although it sees output rising by 10-15% due to seven new fields coming online. This follows 13 new starts in 2014, mostly ahead of schedule and below budget. On a quarterly basis, China’s supply in 2015 is seen to average 4.32 mb/d, 4.30 mb/d, 4.28 mb/d and 4.34 mb/d, respectively.

OPEC NGLs and non-conventional oils
OPEC NGLs and non-conventional oils are estimated to grow by 0.18 mb/d to average 5.83 mb/d in 2014, unchanged compared to the previous MOMR. In 2015, OPEC NGLs and non-conventional oil are projected to average 6.02 mb/d, an increase of 0.19 mb/d over the previous year. OPEC’s forecast is very close to the average of seven other sources of 0.20 mb/d. Moreover, the OPEC forecast excludes the temporary cut of 10 tb/d of output capacity from the Pearl GTL project in Qatar due to maintenance, which is expected to come back online soon.

OPEC crude oil production
According to secondary sources, total OPEC crude oil production averaged 30.79 mb/d in March, an increase of 0.81 mb/d over the previous month. Crude oil output increased mostly from Saudi Arabia and Iraq, while Libya saw a return of about 165 tb/d from shut-in wells in active oil fields. According to secondary sources, OPEC crude oil production, not including Iraq, stood at 27.16 mb/d in March, down by 0.49 mb/d over the previous month.

World oil supply
Preliminary data indicates that global oil supply increased by 0.90 mb/d to average 94.52 mb/d in March 2015 compared with the previous month. The increase of non-OPEC supply as well as OPEC crude oil production in March caused the rise in global oil output. The share of OPEC crude oil in total global production increased by 0.6% to 32.6% in March, compared with the previous month. Estimates are based on preliminary data for non-OPEC supply as well as OPEC NGLs and non-conventional from direct communications, while estimates for OPEC crude production come from secondary sources.


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