Oil supply crunch warning
"if we don't start seeing some large-scale final investment decisions on mega-projects – projects over $10 billion-$15 billion apiece – by the time we get around to the 2020s, we are going to be short oil."
IF producers do not fund major projects soon, an oil supply shortage and price spikes of between $US80/ barrel and $US100/B could hit the global oil market by the 2020s.
Securing America's Future Energy policy vice president Jonathan Chanis told Platts the market was at “a very perilous point” after two years of declining investment.
"If we don't start seeing some large-scale final investment decisions on mega-projects – projects over $10 billion-$15 billion apiece – if we don't start seeing them now and next year or shortly thereafter, by the time we get around to the 2020s, we are going to be short oil," Mr Chanis said.
Mr Chanis, a former vice president at Goldman Sach's commodities division, blamed OPEC policies for disrupted global investment cycles. The resultant lack of spend on future projects would set the world up for a massive supply crunch, he said.
The number of mega-projects approved in the next year to two years would determine if that shortage arrives.
"That's not to minimise the role of tight oil and shale because it's terribly important," he said. "But the takeaway on that is it's just not going to be enough."
Mr Chanis’ comments echo a March 2017 International Energy Agency (IEA) report, which warned that unless new projects were approved soon, global oil supply could struggle to keep pace with demand after 2020.
Oil demand would rise in the next five years, passing the symbolic 100 mb/d threshold in 2019 and reaching about 104 mb/d by 2022.
“The demand and supply trends point to a tight global oil market, with spare production capacity in 2022 falling to a 14-year low,” IEA’S Oil 2017 report stated.
More mega projects need to come online to avoid supply side pressures and resultant price spikes.