Guyana’s first offshore development reached peak output last December with production hitting 120,000 barrels of oil per day. These barrels, albeit modest at this early stage of Guyana’s offshore development, will nevertheless add to the global supply this year. This comes at a time when the CEO of Vitol says a potential oil supply squeeze is expected by year-end.
According to a report from S&P Global Platts, Russel Hardy told UAE Energy Forum 2021, organized by Gulf Intelligence, that OPEC and shale oil will need to rise if the potential supply squeeze is to be averted.
“The market is fast forwarding to a point where demand kind of catches up with where it was in 2019,” Hardy said. “With that catch-up, we are going to need more OPEC oil and we may need some more shale oil as well, so the market is anticipating that and it’s trying to ultimately get ahead of a potential supply problem later on in the year.”
OPEC+ members, excluding Kazakhstan and Russia, decided to keep their output in February and March steady from January after two days of contentious talks this month. Saudi Arabia, however, surprised the market by announcing a voluntary 1 million b/d cut for February and March that has helped buoy Brent prices to nearly touch $57/b, an 11-month high, the Platts report said.
Additionally, Platts said OPEC and its nine allies, led by Russia, decided in December after days of heated negotiations to ease their stringent quotas by a collective 500,000 b/d for January, instead of the originally scheduled 2 million b/d tapering.
Meanwhile, Vitol is forecasting oil demand will increase by 6 million-6.5 million b/d in 2021 — “an enormous change,” said Hardy.
“Demand, it is going to get covered by additional OPEC+ production,” he said. “Those increases are coming but are coming probably a tad more slowly than we might have anticipated a couple of months ago because of the virus effect here in Europe.”
OPEC said just a year ago that it expects demand for its oil will slide by about 7 per cent over the next four years, slumping to an average of 32.7 million barrels a day in 2023.
Experts have said a supply shortfall by the cartel could be supplemented by supplies from regions which had either seemed in decline or uneconomical in an era of constrained crude prices, such as offshore Norway and Brazil, as well as Canada, with newcomer Guyana expected to soon play a key role in Latin America output.
Oil production in the region is currently dominated by Brazil, Mexico, and Venezuela who combined are responsible for about 75% of the region’s total output.
Guyana is poised to rapidly increase production moving to well over 1 million barrels per day by the end of the decade.
“Depending on how Mexico and Venezuela perform the next five years, before the end of the decade Guyana could become the second largest producer in Latin America,” Luiz Hayman, Senior Analyst for the Latin American region at Wood Mackenzie has said.