Issue link: http://resourceworld.uberflip.com/i/1190748
D E C E M B E R / J A N U A R Y 2 0 2 0 www.resourceworld.com 67 And while the number of new wells drilled has declined during 2019 as E&P companies show a 5% decline in capital expenditures, oil output has continued to increase, in part because productivity of the existing rigs has increased in most US shale basins. Amidst the struggles there are positives to be found. The International Energy Agency (IEA) says oil and gas provide about half of the world's energy today and will continue to do so for decades to come, notes Gordon Ballard, Executive Director of the International Association of Oil and Gas Producers, in a November report. "In a world making progress along a lower car- bon emission path, oil and gas remain the leading energy sources," said the London, England-based Ballard. "Currently we see natural gas demand increasing in most places in the world. Demand for oil is increasing as well." Industry needs to invest to keep up with a rising demand which saw the global oil supply in 2018 surpass 100 million barrels per day for the first time in his- tory, he said, but it faces the challenge of field depletion, now hitting 6% annually outside the OPEC group, which stands at 2%. "Investments in enhanced recovery in depleting fields and the discovery and development of new fields can keep such production losses at bay." His words are echoed by Pat Gibson, international consultancy Wood Mackenzie's research director for global oil supply, who in a report on decline rates stressed the need for continuing industry investment. "Oil and gas do not simply flow to the surface at a constant rate. They need a boost," he said. "The older a field is, the more effort is required to maintain flow rates. Such effort depends on con- tinuing investment." Gibson said while the industry has expe- rienced a few years of "somewhat lower" oilfield decline rates, Wood Mackenzie is expecting a reversion to at least the 6% norm after 2020. That can have a consider- able impact on the market, he explained, as even a small 1% shift either way would increase or decrease the supply gap by two million barrels per day by 2021. "While field output depletion is set to return to 6% per year, demand for oil and gas is growing, as is the world's popula- tion. Come what may in terms of meeting the world's climate change goals, oil and gas will still be needed to meet 48-53% of energy demand between now and 2040, the IEA says." Oil prices are likely to be pressured through 2020 as low demand as a slowing global economy along with the surge in US shale output offsets OPEC production cuts and Middle East supply risks. The International Monetary Fund has warned that the US-China trade dispute will result in a reduction in 2019 global growth to its slowest pace since the 2008 financial cri- sis. Analysts expect growth in global oil demand to range from 1-3 million bpd. A Reuters survey predicts that Brent crude will average US $62.38 next year, a drop of almost $3 from previous projections. Likewise, the outlook for West Texas Intermediate crude sits at $56.98. Crude futures could trade below US $55 a barrel in 2020 and $52 in 2021. Independent pro- ducers were expecting to spend 11% less in 2019 while major oil companies plan to spend about 16% more – a total drop of about $4 billion. Meanwhile, natural gas at the Henry Hub could fall below $2 per million British thermal units in 2020, a level not seen in decades, due to persistent oversupply. Back in Canada, experts differ on 2020 projections. The Petroleum Services OIL & GAS CRUDE OIL 1YEAR NATURAL GAS 1YEAR