OPEC on the Road to World Oil Dominance

Dick writes about Earth and planetary science for Science magazine.

Experts can't agree just when the world's production of precious oil will stop growing, but the authoritative International Energy Agency (IEA) based in Paris has made an ominous forecast. Those countries outside the well-endowed Organization of the Petroleum Exporting Countries (OPEC) will never produce more oil than they are producing right now. Alternatives for continuing the rise in the world's oil supply are out there, IEA says in a report released last week, but not all experts agree that countries like Iraq, Kazakhstan, and Venezuela will be up to the task.

For years, non-OPEC producers have been doing nothing to increase world oil production. Even with oil prices soaring over the past decade and drillers in a frenzy to cash in, non-OPEC production staggered through the past 5 years without an increase. In the IEA's "New Policies Scenario," the focus of this year's outlook, countries cautiously implement announced policies for reducing fossil fuel usage. Even so, the stable trend of non-OPEC production continues. "Total non-OPEC oil production is broadly constant [in the scenario] to around 2025 … thereafter, production starts to drop," the report says.

The IEA makes "a good argument" for a 20-year-long, flat-topped production peak or plateau for non-OPEC countries, says energy analyst Richard Nehring of Nehring Associates in Colorado Springs, Colorado. Such a plateau, all agree, would lead to an "increased dependence on a small number of [OPEC] producing countries," a dependence that "would intensify concerns about their influence over prices," as the report puts it.

While agreeing that non-OPEC production has likely peaked, Nehring and others have doubts about IEA's broader, optimistic outlook. The IEA scenario has the world increasing total production for the next 25 years in the face of the non-OPEC plateau and decline. To do that, three kinds of oil will have to perform well during the next quarter century, Nehring notes. Production of conventional crude oil—the kind that flows out of a well pretty much on its own—will have to remain constant. The IEA report says that big increases will make that possible—coming from places like Saudi Arabia, Iraq, Brazil, and Kazakhstan. Nehring questions the size of the projected Saudi increase and notes the difficulties major oil companies have doing business in Kazakhstan.

Production of natural gas liquids, the hydrocarbons that condense from natural gas, will have to expand, too. Nehring sees no innate obstacle there, as natural gas use is widely expected to increase. And unconventional oil production—mainly from Venezuela's heavy oil deposits and Canada's oil sands—will have to expand considerably. Developing Canada's oil sands is an environmentally touchy operation, and Venezuela has been unfriendly of late to the foreign oil companies that are needed to increase production, Nehring notes.

All in all, nothing in the IEA outlook dissuades Nehring from his middle-of-the-road view that it will be hard to avoid a peak in world oil production by 2030 or so, just 20 years from now. But whatever the fate of world production, OPEC and especially Middle East producers are quickly taking the driver's seat.

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