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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Oil Production Here Is Declining Faster Than Anywhere On Earth

Series of important warnings emerging in the oil sector this week. With several sources noting that production is taking a steep nosedive — in one particular part of the world.

Asia-Pacific.

Industry specialists Wood Mackenzie released data Monday showing that Asian crude output is falling notably. In fact, the decline is substantially greater than production pullbacks anywhere else in the world.

WoodMac’s Asia-Pacific upstream research director Angus Rodger said the region’s overall output is heading lower fast. With forecasts showing that Asia-Pacific crude production will fall by 1 million barrels per day, or over 13%, by 2020 — to 6.5 million b/d, from a current 7.5 million b/d.

That’s largely a consequence of declines in Asia-Pacific’s “big four” oil producers — China, Indonesia, Malaysia, and Thailand. Coming as big fields in those countries hit maturity — thus requiring higher levels of investment to keep them pumping.

Such capital investment however, has been severely cut back across Asia during the recent fall in crude prices. With all of China’s state-owned oil majors reporting double-digit declines in capital spending last year.

Those cuts mean Asia’s largest oil fields are now seeing an average production decline rate of 7%. Far above declines seen in other major producing nations.

The biggest impact is in China. Where the government this week admitted that domestic oil production is tumbling — with officials forecasting a 7% fall in national output by 2020, to 4 million barrels per day. Related: 5 Energy Stocks To Watch In 2017

Wood Mackenzie sees China’s production falling even further. With the consultancy forecasting Chinese production at 3.5 million b/d in 2020.

That jives with recent data, which show China’s oil output dropped 9% in November 2016 as compared to a year earlier. Suggesting that production declines may be setting in faster than the government is anticipating.

That means increased reliance on oil imports for China. And could accelerate the push by Chinese companies to secure newer and lower-cost fields in other parts of the world. Watch for new data on Chinese and Asian production, to see just how fast output is declining.

Here’s to a big tank running dry.

By Dave Forest

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  • EH on January 18 2017 said:
    Without even reading this,, DUHH! As G.W. stated; SUPPLY AND DEMAND, the consumer market place will control the PRICE! Demand is down do too past PRICING PRACTICES, people have either tappered there consumption when prices were high and found that it was fine to continue, or changed there mode of transportation and energy supplier to solar,wind and EV'S. Sometimes we shoot ourselves in the foot with our behaviour and the pain comes later too let us KNOW we MESSED UP!
  • RussRamey6 on January 19 2017 said:
    Government interference has been the norm, aka OPEC. Supply & Demand rarely gets to run it's course. When it does the market price clears the decks in a very short run.
    C'mon shale oil, new pipelines, revitalized coal and nuclear industries.
  • Greg Foreman on January 23 2017 said:
    The Austal-Asian countries have nothing to “fear”. The “good ole Yanks” with all their fracking technology will come to their rescue.
    That’s how it worked out in the boom of the early 80’s. The US oil industry exported the “latest, the greatest” technology overseas to help exploration and production in, at the time, third world countries such as Venezuela, Argentina, Brazil, Indonesia, Nigeria and Mexico. Never fear, history will repeat itself

    Cash strapped E&P’s will welcome the “opportunity”, and of course the money, to export and “upgrade” state of the art drilling technology to these countries, and that’s fine. Just make sure before exporting one iota of equipment or technology that your dealing with “irrevocable, confirmed, letters of credits” approved and deposited in your agent bank, in the US. After all, a sale is not a sale until it’s paid for.

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