Oil cartel Opec acknowledged the growing importance of unconventional 'shale’ oil reserves for the first time on Thursday - as it cut its oil demand forecasts on fears over eurozone growth.
In its annual world oil outlook report, Opec - whose 12 members include Saudi Arabia, Iran, Iraq and Venezuela - said: “Shale oil represents a large change to the supply picture.”
While in previous reports “no significant shale oil contribution to liquids supply was envisaged,” this year “a rise in the importance of shale oil is expected”, Opec said.
Opec cut its forecast for demand for its own crude supplies, while forecasting that non-Opec oil supply would grow significantly.
Between 2011 and 2016 non-Opec liquids supply would be boosted by increased output “mainly from shale oil in the US, Canadian oil sands, and crude oil from the Caspian and Brazil”.
With Opec supplies also growing, Opec was expected to have crude oil spare capacity in excess of 5mbpd (million barrels per day) “as early as 2013/14”.
However it said that future shale oil production was “likely to be beset by several constraints and challenges, such as environmental concerns, questions over the availability of equipment and skilled labour, rising costs and steep well-production declines”.
With the “best shale oil plays tapped first”, Opec forecast modest shale oil growth beyond 2020, to 3mbpd by 2035.
Opec also used the report to return to a more bearish stance on the eurozone.
Having revised down its medium-term oil demand projections “as the recession unravelled and GDP forecasts were amended down”, it had, for the last two years, taken a more positive view of economic recovery due to the “extraordinary monetary and fiscal stimulus that were put in place”.
This year, however, there was “growing concern about immediate prospects for economic growth, particularly in the eurozone”, Opec said.
It cut 2012 demand forecasts by 820,000 bpd compared with its 2011 report, and cut its 2016 forecast by more than 1mbpd on last year’s prediction.
“Over the period 2011 2016, OECD oil demand declines each year, having peaked in 2005,” it said.