Wood Mackenzie’s Outlook for Supply: Non-OPEC Increases to Continue in 2007

Wednesday 7th March 2007

In its latest report titled ‘Outlook for Supply in 2007: Non OPEC Increases to Continue’ Wood Mackenzie presents a unique, global project-by-project build-up of the oil supply picture for this year.

The strong upward momentum for non-OPEC supply, seen in the fourth quarter of 2006 is expected to be maintained in 2007. The rate of increase is likely to accelerate in the fourth quarter of the year, when production is expected to be 1.6 million b/d higher than in the fourth quarter of 2006*.

Total non-OPEC oil/NGL production, including Angola, is forecast to average 50.2 million b/d in 2007 according to Wood Mackenzie, up 1.5 million b/d from 2006. Patrick Gibson, Principal Oil Supply Analyst for Wood Mackenzie said "Our analysis shows that there will be significant increases in the FSU states, North America and Africa.  The main areas that will experience decline are the North Sea and the Asia Pacific region. “ 

Gibson went on to explain “We have identified seven projects, led by BP’s Azeri Chirag Guneshli development in Azerbaijan, which will add an average of over 100,000 b/d each; all but one of which are already onstream.  With the top 25 projects adding an aggregate 2.1 million b/d of capacity there is a broad base to the production growth expected.  The bulk of the additional supply in 2007 will consist of light and medium grade crudes.”

"We have employed a risked approach in constructing our forecast which takes account of average levels of supply losses, but recognise the possibility for unexpected geopolitical events and technical failures to affect our projection," Gibson said.

"With little room in the market for OPEC member states to increase production, the non-OPEC supply serves to keep the pressure on OPEC to defend prices" added Ann-Louise Hittle, Head of Oil Market Analysis at Wood Mackenzie. "This points towards more OPEC 10 production restraint during 2007, which serves to increase the group's spare productive capacity. During 2007 this could be a source of downward price pressure, although the tension over Iran's nuclear enrichment program is an offsetting factor", Hittle added.

* Including Angola for the purposes of like-for-like comparison with 2006