LIQUIDS CAPACITY SET TO CONTINUE EXPANSION TO 2010 AND BEYOND

Despite recent concerns over tight liquids supply, CERA believes that worldwide productive capacity will expand significantly to 2010 and likely exceed demand by as much as 7.5 million barrels per day (mbd). Core to this analysis is the growing contribution from unconventional liquids (heavy oils, natural gas liquids, condensates and ultra deepwater) and the large number of major projects either approved or very likely to proceed. We expect markets and oil price to react to this expanding supply/demand differential, but major unpredictable events may be just around the corner that could affect our outlook. Key conclusions include

- Worldwide liquids productive capacity is set to rise as much as 16 mbd by 2010 from 2004, far outstripping likely demand increase.
- Both OPEC and non-OPEC show strong gains to 2010.
- The crude stream composition is evolving with greater proportions of light and heavy components and reduced medium gravity oils.
- Major deepwater projects show a strong increase to 2010, but this rate of increase is not sustainable.
- Post-2010 the challenges intensify with the dramatic slowing of the rate of increase of non-OPEC productive capacity from 2000 to 2010 and OPEC's attempting to make up the shortfall as demand expands.
- Although the concept of "peak oil" has become part of the lexicon both in the industry and in a larger public, the reality of "peak oil" remains out of sight.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.