America dethrones OPEC at oil export market

• ExxonMobil finds substitute to Nigeria’s light sweet crude in Guyana

Sopuruchi Onwuka

The American continent is projecting strong outlook for oil output in the year, claiming the status of swing producer from non-American members in the multilateral Organization of Petroleum Exporting Countries (OPEC), including Russia which is suffering trade and diplomatic isolation on account of its invasion of Ukraine.

Analysts at the International Energy Association and industry investment advisory firms agree at the weekend that the role of market leadership is set to change hands from OPEC and its allies, also called OPE+, to American continental producers.

The Oracle Today reports that from the Canadian oilsands through the United States’ conventional and shale oil industry to world class discoveries offshore Mexico, Brazil and Guyana; the new stream of oil flow from the American continent will dominate global supply outlook in the immediate to long term.

The growth of production from America comes at a period output from African members of OPEC+ is falling below projected quotas mainly due to security and political instability in Libya, the Sahel and Gulf of Guinea where pocket of new oil development is also ongoing.

However, whereas new oil plays are opening in Ghana, Guinea and Cameroon to augment traditional volumes from Nigeria, Angola, Libya, Algeria and Equatorial Guinea; the new and traditional plays in America boast of massive lodes of reserves.

For the first time in at least two years, the IEA declared weekend, the Americas will be the world’s biggest driver of oil production growth, while OPEC cuts back.

The IEA stated that the expected 1.6 million barrels of new supplies from the Americas would come mainly from new discoveries in South America and Canada where production economics are strong against vagaries of price fluctuation.

The production growth from American oilfields will continue into 2024 when Western hemisphere producers will add another 1.0 million barrels a day of crude supply, according to the EIA.

The IEA admitted that OPEC’s lack of growth is deliberate and doesn’t mean the group would wield any less power. It however maintained that new production from the Americas would trigger other shifts in the global market.

The expected surge in American supplies topples declining oil production  in Africa were leading producers like Nigeria, Libya, Algerian and Angola suffer production declines due to low investments associated with insecurity and fiscal turmoil.

Nigeria which leads Africa’s oil and gas output currently struggles with investment flight as traditional multinational firms including Shell, ExxonMobil, Chevron, TotalEnergies and Eni embark on withdrawal from mature Niger Delta.

The firms which control global investment capital and technology are also in their final recovery activities in the Nigerian deepwater play where they still hold significant reserves.

Political instability and security challenges associated with banditry in the Sahel region of Africa constrain industry operations in Libya and Algeria where output has taken a dive due to low attraction to investments.

Angola which is smarting from an inglorious civil war is yet to lay credible destination profile for international petroleum investments even though the country has achieved fragile stability in the past decade.

The Oracle Today reports that production from other African countries like Gabon, Ghana, Cameroon, Equatorial Guinea, Guinea, South Africa and Kenya struggles to meet domestic demand does not project strong supply propositions to the global oil market.

In the Middle East where Qatar has walked out on OPEC and Iran battles western trade sanctions, production rebound from Iraq boosts strong but stable output from Saudi Arabia, United Arab Emirates and Kuwait to maintain a stable outlook from the region.

The Oracle Today reports that rigid output from the Middle East is majorly controlled by OPEC and its allies through structured production quotas.

The IEA which keeps market intelligence for the industrialized nations hosted in the Organization for Economic Cooperation and Development (OECD), an arch enemy of OPEC, gloats over the ctrumbling capacity in the OPOEC+ coalition.

The agency pointed out in the weekend that the Western hemisphere producers will add more than 1.6 million barrels a day of new supply this year, shifting the balance of growth away from OPEC which has, until this year, led global production gains.

“And that growth won’t just come from US shale producers, who have long vied with OPEC for market share, but from fields across South America and even Canada that can’t be easily turned off when prices slide,” the agency stated in a new market outlook.

In pointing at large production increases will come from the Americas, the IEA boasted that the new production “will almost completely offset the output cuts OPEC — and even ally Russia — are undertaking from May as they seek to shore up global oil prices.”

Industry advisory firms agree that “the Western Hemisphere is the secure supply source the world needs in the medium term to keep oil prices from shooting through the roof.”

Head of Latin America at Rystad Energy, Schreiner Parker, said “Brazil, Mexico, Guyana, Argentina and even Venezuela will see production increases this year that will help shore up supply in the face of continued OPEC cuts.”

Most of the growth in the region will be in oils of light and medium density, which could raise the price of heavy crudes that many refiners are optimized to process, according to Antoine Halff, a former chief oil analyst at the International Energy Agency now with the Center on Global Energy Policy at Columbia University.

Mr Parker noted that the automated nature of offshore production means that interrupted 20 percent new output coming from the region present possible glut scenario if demand fails to match up with supplies.

In pointing at the new sources of supply, the IEA stated that the Permian basin in the United States would add the equivalent of Iran’s total output through 2030 and would grow more than any other region through to 2024.

The shale oil industry, according to IEA, is however driven by commercial viability outlook. So the sustainability of production would demand that market price maintains a supporting level.  

The IEA expects Brazil to add 300,000 barrels a day of medium grade of crude oil this year from deep-water fields including Tupi, Buzios and Mero. Abd as a result, the IEA noted, Brazil could be either providing relief to strained oil consumers, or swamping a weak global economy with surplus barrels.

From Canada, the IEA said, refineries in the US Midwest which are tooled to handle the sludgy crude produced in the oil sands would now get sufficient feedstock.

Canadian oil supply, the agency stated, some incremental new production would be supported with the expansion of the Trans Mountain pipeline to shift flows of heavy Canadian oil from the US Midwest to Asian markets.

In Canada, the world’s fourth-largest oil producer, output is currently at an eight-year high and producers are starting to invest in new production again. Cenovus Energy Inc. plans to pump an additional 120,000 barrels a day over the next four years while International Petroleum Corp announced plans for an $850 million oil sands project, which is scheduled to start producing in 2026 and ramp up to 30,000 barrels a day by 2028.

Goldman Sachs Group projects that ExxonMobil would replenish its light, sweet crude oil grade from Guyana where, it predicts, output could reach as high as 1.6 million barrels a day by 2030. The oil produced from Guyana’s Liza field is a light, sweet grade similar in quality to Nigeria’s Bonny Light.

The Oracle Today reports that ExxonMobil is farming out interests in joint venture assets it operates with Nigerian National Petroleum Company (NNPC) Limited. The Qua Iboe crude oil grades from the shallow water fields are light and sweet. Its Greenfield Guyana operated assets offer same grades of crude oil which are prized for high yield of transportation fuels.

The company will start its third Guyana offshore project earlier than expected in the fourth quarter of the year, bringing total production to 600,000 by 2024.

Guyana is a country of less than a million inhabitants which boats of one of the largest oil discoveries in recent years. The small South American nation is poised to become the region’s third-biggest producer by the end of the decade.