Thursday, 2 January 2014 00:00
EDMONTON: OPEC nations are losing market share as North American supplies such from US tight oil and Alberta oilsands rise sharply and more than meet the slowly growing world demand.
But OPECâ€™s aces in the hole are an incredibly low cost of production and confidence from the fact that if prices fall dramatically, most of the new entrants in the marketplace will be losing money, according to the latest commodity report from Calgary-based Canadian Energy Research Institute (CERI).
The International Energy Agency (IEA) earlier noted that non-OPEC production would increase by 1.2 million barrels per day (mmbpd) in 2013 and 1.6 mmbpd in 2014, while global demand was due to rise at about one million barrels per day in both years.
The CERI report said some analysts believe that unless OPEC is willing to cut its production to tighten the market, the oversupply of crude would lead to a substantial build in global stockpiles and soften prices. However, others note the new sources of oil are hard-to-reach reservoirs such as deep water, light tight oil and the oilsands, where it costs much more to extract a barrel of oil.
It is estimated to cost between $ 10 and $ 25 to produce a barrel of crude oil in the Middle East and North Africa. Bitumen and tight oil need at least $ 50 a barrel, while some projects require about $ 80 to break even. And some of the largest and most challenging ultra-deep offshore fields need vast amounts of money for development before the first barrel can be produced.
The CERI report cited the opinion of a Wall Street research firm that calculated non-OPEC marginal production costs at $ 92 a barrel to $ 105 a barrel in the past year.