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.
Industry specialists Wood Mackenze 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.
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,