World Oil Supply More Diverse; Non-Opec Production Increasing

(PRESSI.COM 06/10/2003) World oil supply is becoming more diverse and world oil production capacity comfortably exceeds world oil demand, said BP chief economist Peter Davies today.

"As a result, producers were able to meet the needs of oil consumers during the Iraq war and during unplanned supply disruptions in Venezuela and Nigeria. Consuming nations were not required to tap their emergency reserves. This is good news for those concerned about energy security, but it should not lead to complacency," Davies said at the launching of the BP Statistical Review of World Energy 2003.

OPEC, while using spare capacity of almost 4 million barrels a day to keep the market supplied during the war, cut its average daily output by 1.87 million barrels a day in response to weak global oil demand and a 1.45 million barrel-a-day increase in non-OPEC production. OPEC production has declined in three of the last four years.

"The story is one of supply momentum that looks set to continue," Davies said. "Russian oil production is up 25 per cent in three years and Russia has been joined by a new group of oil producing basins, across several continents and regions, that have begun to grow rapidly."

Production from Russia, the Caspian, the deepwater Atlantic Basin and Canada is up 3.3 million barrels a day (26.5 per cent) in three years and has the potential to increase another 5 million barrels a day by 2007.

China accounted for 68.5 per cent of the increase in global primary energy consumption in 2002 and has become a major energy consumer and importer. Consumption of coal, which accounts for 66 per cent of Chinese energy use, grew a massive 27.9 per cent. Oil consumption increased 5.8 per cent or 332,000 barrels a day, accounting for all of the world's oil consumption growth in 2002. China replaced Japan as the world's second largest oil consumer.

Natural gas is the world's preferred non-transport fuel. Outside the Former Soviet Union (FSU) gas consumption has grown 3.4 per cent a year over the past decade and its share of total energy consumption is now roughly equal to coal at 24 per cent.

US gas consumption grew 3.9 per cent in 2002 as North American gas production fell 1.8 per cent. Imported LNG is filling part of the gap. Producers are now considering options for delivering new sources of pipeline gas and LNG to this growing gas market.

Commercial (non-hydro) renewable energies are growing rapidly, but their contribution to total world electricity generation remains small (1.7 per cent in 2000 versus 1 per cent in 1990).

Oil - Brent oil prices averaged $25.19 a barrel in 2002, up slightly on the 2001 average price of $24.77 and well above the post-1986 annual average of $19.40. Prices during 2002 ranged from a low of around $18 per barrel in mid-January to peak just before the end of the year at $32.

Global oil consumption was broadly flat, increasing 290,000 barrels a day from 75.5 to 75.7 million barrels a day. All of the increase is attributable to China where oil consumption increased 5.8 per cent or 332,000 barrels a day.

Global oil production declined 415,000 barrels a day, or 0.7 per cent, from 74.4 million to 73.9 million barrels a day. OPEC daily oil production fell to 28.2 million barrels a day, a drop of 1.87 million barrels a day (6.4 per cent). The steep fall resulted from a number of unplanned disruptions and because some OPEC producers, primarily Saudi Arabia, curtailed production in response to weak demand and to a significant 1.45 million barrel per day increase in non-OPEC oil output. Large daily production increases occurred in Russia (640,000 barrels), Kazakhstan (150,000 barrels), Canada (170,000 barrels), Angola (160,000 barrels) and Brazil (160,000 barrels).

Gas - World consumption of natural gas increased in 2002 by a relatively strong 2.8 per cent on the strength of a 3.9 per cent increase in US consumption and a 7 per cent increase in non-OECD Asia Pacific consumption. Growth in natural gas consumption outpaced growth in world primary energy and its share of total energy consumption is now roughly equal to coal at 24 per cent.

Global natural gas production increased 1.4 per cent, from 2,493 billion cubic metres to 2,527 billion cubic metres. North America was the only region to experience a production decline, falling 1.8 per cent from 779 to 766 billion cubic metres. A price-driven drop in drilling activity explains some of the production decrease, but the maturity of US and Canadian gas producing basins was also a factor.

Coal, nuclear and hydroelectric - Coal was the fastest growing fuel in 2002 with coal consumption increasing 6.9 per cent in 2002 on the strength of an extraordinary reported increase in China of 27.9 per cent. Excluding China, world consumption increased just 0.6 per cent.

Consumption of nuclear power increased 1.5 per cent, with most of the increase coming in Asia. World consumption of hydroelectric power increased 1.3 per cent from 2001 but was still less than in 2000. Nuclear and hydroelectric power each account for about 6 per cent of total world energy consumption.

Note to Editors:

This is the 52nd edition of the BP Statistical Review of World Energy.

The BP Statistical Review of World Energy 2003 is published on the internet at www.bp.com/centres/energy where data can be viewed and downloaded.

Press copies of the Review are available from the BP press office (tel: 44 (0)20 7496 4076).

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