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First drop in annual oil production since 2002

Latest update : 2008-06-11

World oil output fell by 130,000 barrels per day last year to 81.53 million according to BP's 2008 Statistical Review of World Energy. The increase in prices reflects supply constraints as demand from emerging markets is growing strongly.

World oil production fell by 0.2 percent in 2007, the first decline since 2002, while consumption rose by 1.1 percent, BP Plc <BP.L> said on Wednesday, highlighting a tight supply/demand balance that has helped push oil prices to record levels.

 

Production fell by 130,000 barrels per day (bpd) last year to 81.53 million bpd and reserves were essentially flat at 1.24 trillion barrels, London-based BP said in its 2008 Statistical Review of World Energy.

 

The figures compiled by BP underline the world's challenge of boosting production to meet growing demand, particularly from developing economies such as China and India.

 

Oil prices have been rising since 2002, the steepest and longest rise since BP's records began in 1861.

 

The increase in prices, which reached a record last week of $139.12 a barrel, partly reflects supply constraints when demand from emerging markets is growing strongly.

 

"The reality is it's about fundamentals," said Tony Hayward, BP's chief executive, at the launch of the review.
He said a weak U.S. dollar and so-called speculators had been blamed for contributing to oil's rise, but it was more about a tight balance between supply and demand.

 

"We are not running out of hydrocarbons, but bringing them into production is a different matter," he said, pointing to political factors, such as resource nationalism, trade barriers and high taxes.

 

"When it comes to producing more oil, the problems are above ground not below ground and human not geological," Hayward said.

 

Countries such as Venezuela and Russia are grabbing more cash and control from firms that work their oil and gas fields.

 

At the same time, some of the world's largest reserves, such as those of Saudi Arabia, are off-limits to foreign investment. Sanctions and wars have slowed development of Iraq's oil industry.

 

SUPPLY RESTRAINT

 

World production fell, in part, because of supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), source of about two in every five barrels of oil.

 

Supply outside OPEC stayed weak, rising by just over 200,000 bpd in 2007, while output in member-countries of the Organisation for Economic Co-operation and Development (OECD) fell for a fifth straight year, BP said.

 

OPEC production dropped by 350,000 bpd following production cuts implemented in November 2006 and February 2007.

 

Russia, the world's second biggest oil producer, is set to see a year-on-year fall in output this year for the first time this decade, Hayward said.

 

Global oil reserves may have flattened out, but they are enough to meet current production for more than 41 years, BP said.

 

BP's report also found growth in primary energy consumption had slowed in 2007 versus 2006, but at 2.4 percent it was still above the 10-year average for the fifth consecutive year.

 

Global oil consumption grew by 1.1 percent last year, slightly below the 10-year average.

 

Demand in the oil-exporting regions of the Middle East, South and Central America, and Africa accounted for two-thirds of world growth, BP said.

 

Global natural gas production rose by 2.4 percent to 2.94 trillion cubic metres (tcm) in 2007, BP said, while consumption grew by 3.1 percent to 2.92 tcm led by the United States.

 

Proven gas reserves stood at 177.4 tcm at the end of last year, an increase of 0.6 percent.

 

Coal consumption grew by 4.5 percent last year, making it the world's fastest-growing fuel for the fourth straight year.

 

"More than 50 percent of the increment in global primary energy consumption is in coal and more than 70 percent of this increase is growth in China," said Christof Ruehl, BP's chief economist. "Almost 40 percent of global primary energy growth originates from one fuel in one country."

Date created : 2008-06-11

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