China oil growth forecasts too bullish: Fesharaki
By John Kingston
June 10, 2010 - Forecasts of a never-ending rise in Chinese demand
growth are not taking into account a Chinese government that is
determined to rein in those increases, according to a leading analyst of
the Asia-Pacific region.
Fereidun Fesharaki, chairman and CEO of the FACTS Global Energy Group,
told an audience at the Asia Oil & Gas Conference that the Chinese
government plans on limiting demand to 12 million to 12.5 million b/d.
Current demand is estimated to be between 8 million and 8.5 million b/d.
Fesharaki was skeptical that Beijing will be able to cap demand at 12
million to 12.5 million b/d, but added that 13 million to 14 million b/d
was a more achievable target.
Fesharaki's repeated point in his presentation was that forecasts of
ever-increasing demand rarely take into account the reality of pinched
supplies.
He said non-OPEC output has peaked. OPEC output has not peaked,
but the world was looking at a peak between 2015 and 2020 of production
at 95 million b/d, compared to about 85 million b/d today, Fesharaki
said. He also said an additional 5% to 10% of non-conventional supplies
could be added to that figure.
That supply constraint means for every country, but for China in
particular, "the [demand] growth rates we see forecast today [don't]
have a chance of happening." Supply constraints and Chinese government
policies will ensure that, he said.
OPEC's 2015-2020 production peak at 95 million b/d will be more of a
"policy peak" than a geological peak. "It's not because there's not
enough oil, but because the ones who have the oil either don't want to
produce it or they want to use it for themselves," he said.
As for the current market, Fesharaki said OPEC spare capacity would not
be exhausted until 2012 or 2013, so he was not a bull on prices. But "in
the long term, everybody has to be bullish" because of the clash between
growing demand and the "policy peak."
His base case forecast is that after 2013 the price of oil in real terms
will move to $120/barrel, "stay there a few years, demand will fall and
the price will fall with it."
The more extreme case scenario sees oil at $200/b. But he said the
ability of the US to reduce demand by 3 million to 5 million b/d will be
a primary factor in determining whether oil will rise that high. Only
the US, he said, has the ability to significantly cut demand through
efficiency to help keep prices in check.
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