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The OPEC World Oil Outlook 2015 is now available
Dear Colleague,
As in previous years, EnSys is pleased to contribute to this thorough annual examination of developments in the global oil sector, working closely with the OPEC Secretariat to assess the downstream outlook and challenges from the medium term through 2040.
Top level highlights include:
- Global energy demand is forecast to increase by 47% from today to 2040 dominated by increases in developing world regions. The portion occupied by fossil fuels drops but only moderately, from 82% in 2013 to 78% in 2040. Within this though, the shares of coal and oil decline whereas that for gas rises.
- Oil 'liquids' demand is projected to grow from 91.3 mbpd in 2014 to 97.4 mbpd by 2020 and to just under 110 mbpd by 2040. This pattern reflects a deceleration in demand growth over the longer term.
- Oil demand in developing regions is expected to grow by nearly 26 mbpd by 2040, led by non-OECD Asia. In contrast, OECD demand drops by 8 mbpd.
- Non-OPEC liquids supply is projected to increase from 56.5 mbpd in 2014 to 60 mbpd in 2020 (1 mbpd less than what the WOO 2014 forecasted) and to 61.5 mbpd in 2025 before gradually declining to 59.7 mbpd by 2040. Still the outlook expects additions from oil sands in Canada and other non-conventional oil sources totaling 3.1 mbpd between 2014 and 2040.
- OPEC crude supply grows by 10 mbpd to reach a level of 40.7 mbpd by 2040. It is expected that OPEC's share of the total crude supply in the world would increase to 37% in 2040 from 33% today.
- The OPEC reference outlook assumes a long term crude price that rises from around $70 per barrel in 2020 to $95 per barrel by 2040 (both in 2014 dollars). These prices are not a forecast or prediction but an assumption needed to develop the Reference Case scenario. The assumption behind this scenario relies on the need to develop oil production in more expensive areas.
In this 400 page WOO 2015, downstream global and regional projections through 2040 cover: the make-up of oil demand, crudes and non-crudes supply, refinery crude runs, primary and secondary refinery capacity additions, related investments, inter-regional trade and sector challenges. This analysis is supported by EnSys' integrated WORLD Model.
Key indicators for the downstream landscape include:
- Total oil-related investments needed to meet future global demand for oil for the period between 2015-2040 are estimated at almost $10 trillion (2014 prices) of which downstream investments comprise $2.7 trillion.
- Over the analysis period, transport growth drives significant increases in demand for diesel/gasoil (8mbpd), gasoline (3.7 mbpd) and jet/kerosene (2.5 mbpd). As a result, combined distillates demand (diesel/gasoil plus jet/kerosene) comprises 57% of total product demand growth between 2014 and 2040, with implications for refining operations and investments.
- A detailed review of existing refinery projects shows that around 7 mbpd of new distillation capacity will be added globally from 2015 to 2020, the majority in the Middle East, China and other Asia-Pacific regions. The 2020 WORLD model case indicates a further 1.2 mbpd (mainly capacity 'creep') will be required by 2020 for total distillation capacity additions by then of 8.3 mbpd.
- Model projections are for an additional 11.7 mbpd of capacity needed between 2021 and 2040; thus an appreciable slowing in the rate of required refining expansion.
- The progressive lightening of the product slate and tightening of specifications calls for continued high levels of secondary processing additions relative to distillation.
- While the scale of projected medium-term refining capacity surplus has decreased over the past year, incremental refinery production potential to 2020 is still some 2 mbpd in excess of projected incremental refined product demand over the period; hence the outlook remains one of competition for product markets and a need for more refinery closures on a significant scale.
- The IMO MARPOL Annex VI regulation requires that sulfur content for global (non ECA) marine fuel be cut from the current 3.5% to 0.5% - or that ships install on-board scrubbing units. The uncertainty introduced regarding fuel type by allowing for scrubbers is compounded by uncertainty over the whether the implementation date will be 2020 or delayed to 2025. IMO aims to make a final decision by the end of 2016. However, that would leave refiners with little time to invest by 2020. Especially if scrubber penetration proves to be low, the refining system could be severely challenged by a 2020 implementation with implications for product pricing across all sectors. Complex refineries geared towards distillates could benefit but simpler refineries could be adversely affected with possible implications for closure.
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EnSys Energy is a specialized consulting firm focused on the Global Downstream oil industry. Our work is centered on the refining sector, and how that sector interacts with and is impacted by developments across the industry. Our goal is to deliver accurate quantitative analyses and modeling in support of strategic decisions for refiners, marketers, crude oil producers, financial analysts, government agencies and other petroleum industry stakeholders.
Martin Tallett President
EnSys Energy
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