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SpareCapacity

HSBC Peak Oil Report

Oil supply and demand along with available capacity  in 2017 will see a return to balance as the world’s available oil production capacity will be limited. This is expected to be caused by an increase in mature oil field decline rates which will likely reduce capacity by more than 40mbpd. The long term price on Brent Crude is being estimated at $75/bbl, according to a new report out by HSBC Global Research (download full 54 page report: HSBC peak oil report 2017)

 

Here is a summary of top 10 things to know, extracted from the HSBC:

1. The oil market may be oversupplied at present, but we see it returning to balance in 2017.

2. By that stage, effective spare capacity could shrink to just 1% of global supply/demand of
96mbd, leaving the market far more susceptible to disruptions than has been the case in
recent years.

3. Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently
assessed see oil demand peaking before 2040

4. 81% of world liquids production is already in decline (excluding future redevelopments)

5. In our view a sensible range for average decline rate on post-peak production is 5-7%,
equivalent to around 3-4.5mbd of lost production every year.

6. By 2040, this means the world could need to replace over 4 times the current crude oil
output of Saudi Arabia (>40mbd), just to keep output flat.

7. Small oilfields typically decline twice as fast as large fields, and the global supply mix relies
increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40
years ago to only 75mb this decade.

8. New discoveries are limited: last year the exploration success rate hit a record low of 5%,
and the average discovery size was 24mbbls.

9. US tight oil has been a growth area and we expect to see a strong recovery, but at 4.6mbd
currently it represents only 5% of global supply.

10. Step-change improvements in production and drilling efficiency in response to the downturn
have masked underlying decline rates at many companies, but the degree to which they
can continue to do so is becoming much more limited

DiscoveryRate-Declines

Watch the HSBC Video: “Will mature field declines drive the next supply crunch?”

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