World oil production peaked in July 2008 at 74.82 million barrels/day (mbd) and now has fallen to about 71 mbd. It is expected that oil production will decline slowly to about December 2010 as OPEC production increases while non-OPEC production decreases. After 2010 the resulting annual production decline rate increases to 3.4 percent as OPEC production is unable to offset cumulative non-OPEC declines. The forecast from the IEA WEO 2008 is also shown for comparison. World crude oil, condensate and oil sands production peaked in 2008 at an average of 73.78 million barrels per day (mbd) which just exceeded the previous peak of 73.74 mbd in 2005, according to recent EIA production data. Production is expected to decline further as non OPEC oil production peaked in 2004 and is forecast to decline at a faster rate in 2009 and beyond due mainly to big declines from Russia, Norway, the UK and Mexico. Saudi Arabia's crude oil production peaked in 2005. By 2011, OPEC will not have the ability to offset cumulative non- OPEC declines and world oil production is forecast to stay below its 2008 peak. The definition of oil used by the International Energy Agency (IEA) also includes natural gas liquids (NGL), biofuels, processing gains and other liquids derived from natural gas and coal. OPEC NGLs were supposed to cause a significant net increase in world NGLs but this has not happened yet as NGL production is struggling to exceed 8 mbd. According to the EIA NGL data, 2007 production was 7.96 mbd, 2008 was 7.94 mbd and 2009 year to date was lower again at 7.80 mbd. Although bio-fuels production has been growing exponentially, world liquids production has probably passed peak in July 2008 at 87.9 mbd as shown below. In 2008, US ethanol production was 0.6 mbd, Brazilian ethanol production was 0.4 mbd, and bio-fuels production outside the US and Brazil was 0.5 mbd. The average oil price should stay below $80/barrel for the remainder of the year as average demand is forecast to be only slightly greater than supply from July 2009 to December 2009. Furthermore, OPEC is unlikely to cut supply further which reduces the upward pressure on oil prices. Some recent evidence of increased demand is shown by US crude oil stocks dropping from a recent peak of 26.2 days at the end of April down to 25.5 days in early May. However, oil prices could exceed $100 in late 2010 as world liquids production drops further. High volatility of future oil prices is also expected due partly to delays in investment causing future oil capacity additions to decline sharply to 2012. There are many sources of future liquids production but it is highly unlikely that production from these sources will cause liquids production to increase above its July 2008 peak because the cumulative declines from existing crude oil production sources are too great. Key sources of future production are future discoveries. The arctic region is prospective for both oil and gas but quantities need to be estimated. A report by Wood Mackenzie and Fugro Robertson estimated that the Arctic will produce only about 3 percent of the world's oil and that Arctic oil production, at best, would peak at 3 mbd several decades from now. Future production from the arctic region should help decrease future oil production decline rates but will probably not change the peak oil production year from 2008. Other regions considered prospective are the US outer continental shelf (OCS) and Alaska's Arctic National Wildlife Refuge (ANWR). (Please note that the oil production potential of ANWR has also been included in the discussion above of the arctic). The American Petroleum Institute (API) was represented by its CEO at the panel and the API recently released this ICF report detailing potential reserves and future production from currently restricted areas in the OCS and the ANWR. The report concluded that an additional 1.1 (middle case) to 2.0 mbd (alternative case) of oil production, the majority from ANWR, might be possible by 2030 if drilling was allowed in these restricted areas. Canada often states that its oil reserves are almost 180 Gb. However, it is critical that 173 Gb of these reserves relate to oil sands which are not easy to produce. Oil sands production was 1.2 mbd in 2007 and the International Energy Agency (IEA) is forecasting 2009 oil sands production to be slightly greater at 1.34 mbd. David Hughes, a Canadian geologist estimates that oil sands production will stay below 2.5 mbd due to constraints on natural gas, water and diluents. Oil sands production may reach 2.5 mbd but will not change the peak oil year. A promising area of future liquids production is the Santos basin, offshore Brazil. There are technical challenges, explained during a Petrobras OTC.09 presentation, with the pre-salt discoveries such as very high pressures and temperatures but Petrobras is optimistic about the Santos basin, stating that this basin may almost double Petrobras' oil reserves. This implies that the Santos basin could hold as much as 15 billion barrels of recoverable oil. Iraq is perhaps the most promising country in the world for future potential oil production. In mid-May 2009, the former Iraq oil minister said that Iraq's output could reach 4 mbd by 2014 and 7 mbd by 2019 if satisfactory petroleum legislation is passed in 2010. – SG/agencies Oil prices above $60 Oil prices touched six-month highs above $60 amid buoyant stock markets. New York's main futures contract, light sweet crude for delivery in June, climbed to $60.48 a barrel – a level last seen on Nov. 10 – before ending 62 cents higher from Monday's close to $59.65 per barrel. With the June contract expiring Tuesday, trades mostly centered on the July contract, which closed at $60.03. Brent North Sea crude for July delivery touched a six-month high of $59.65a barrel before pulling back to $58.92, up 45 cents from Monday's close. The application of advanced technology on existing discoveries is often thought to have potential for increasing production rates and recovery factors.
