Resources and Energy Quarterly March quarter 2012

Energy outlook

Oil

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  The West Texas Intermediate (WTI) oil price is forecast to increase to an average of US$113 a barrel in 2013, assuming crude oil stocks in Cushing return to historic levels. The Brent oil price is forecast to increase to an average of US$119 a barrel in 2013, supported by strong demand from emerging economies. Over the medium term, further increases in oil prices are projected to be limited by higher OPEC spare production capacity and the exploitation of unconventional oil resources. In 2017, the WTI oil price and the Brent oil price are projected to average US$105 and US$104 (in 2012 dollars), respectively.
  
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  World oil consumption is forecast to increase in 2012 and 2013 by 0.9 and 1.4 per cent, respectively. Stronger consumption growth in 2013 reflects assumed improvements in world economic activity. For the remainder of the outlook period, world oil consumption is projected to increase at an average annual rate of 1.1 per cent, as the intensity of oil use within non-OECD economies falls.
  
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  In 2012, non-OPEC oil production is forecast to account for the majority of the increase in world oil production. Over the medium term, however, OPEC oil production is projected to constitute an increasing proportion of the world supply.
  
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  The value of Australian crude oil and condensate exports is forecast to total $12.6 billion in 2011–12. Over the following four years, export earnings are projected to decline, reflecting lower export volumes associated with falling production from maturing fields. However, in 2016–17, the value of Australia’s crude oil and condensate exports is projected to increase to $8 billion (in 2011–12 dollars) supported by condensate production associated with the Prelude and Ichthys projects.
  

The WTI crude oil price averaged US$95 a barrel in 2011, an increase of 20 per cent from 2010. As explained in Box 1: The Brent-WTI price differential (REQ December 2011, pp. 20–21) increases in the WTI price were constrained by higher stocks of crude oil in Cushing. Meanwhile, the Brent price averaged US$110 in 2011, an increase of 39 per cent from 2010. Higher prices reflected supply disruptions in both OPEC and non-OPEC regions and strong consumption growth in non-OECD economies. Price increases were amplified by low OPEC spare production capacity and lower OECD stocks.

OECD oil stocks declined during 2011, and are estimated to have averaged 2 per cent lower than stocks recorded in 2010. Lower stocks reflected the IEA’s decision in June 2011 that member countries would collectively release 60 million barrels over 30 days to replace lost Libyan production. OPEC spare production capacity is estimated to have fallen to an average of 4.4 million barrels a day in 2011, from an average of 6.1 million barrels a day in 2010. The reduction in OPEC spare capacity reflected production shut-ins in Libya during the civil war, which prompted other OPEC members to use a greater proportion of their capacity.

In 2012, OPEC spare production capacity is forecast to increase as Libyan oil production approaches pre-war output. This excess capacity and growth in non-OPEC oil production are forecast to limit increases in the Brent oil price over the short term. The Brent price is forecast to average US$119 in 2013, supported stronger growth in world oil consumption. The WTI price is forecast to converge to the Brent price, assuming pipeline constraints in the US are resolved and stocks in Cushing decrease (see Figure 2).

There are two significant risks to the short term outlook for oil prices. The first risk relates to potential escalations of tensions in the Middle East that could cause production disruptions, and put upward pressure on oil prices. The second risk is weaker than assumed world economic growth over the next 12 to 18 months, which may put downward pressure on oil prices.

For the remainder of the outlook period (2013 to 2017), OPEC spare capacity is projected to average 5.4 million barrels a day, supported by growing capacity in Iraq, the United Arab Emirates (UAE) and Angola. An increase in OPEC spare capacity is expected to limit the rise in oil prices over the medium term, as unexpected increases in demand will be met by increased utilisation of capacity. Between 2014 and 2017, the Brent and WTI oil prices are projected to average US$108 (in 2012 dollars), in line with moderating world oil consumption growth, and the increased viability of exploiting unconventional resources. By the end of the outlook period, the traditional WTI-Brent price relationship, typically characterised by US$1-3 dollar a premium of WTI above Brent, is projected to reappear.

Movements in oil prices over the medium term will depend on discoveries that expand economic demonstrated reserves, and ultimately world production. Investment in oil exploration, as measured by the Baker Hughes worldwide drilling rig count, reached 3751 in January 2012, the highest count recorded since 1985.

High oil prices over 2012 and 2013 are expected to encourage exploration activity and increase the economic viability of extraction from new oil fields. The majority of new oil field developments, particularly in non-OPEC regions, have higher development and production costs compared with existing fields. New offshore fields are generally further below the seabed and a greater distance from shore, while onshore oil fields increasingly exploit unconventional resources. As the technology and industry knowledge used to develop new oil fields improves and becomes more readily available, development and extraction costs of these oil fields are likely to fall, potentially limiting significant increases in oil prices over the medium term.

In 2011, world oil consumption averaged 89.1 million barrels a day, an increase of 0.8 per cent relative to 2010. Consumption growth in 2011 reflected robust consumption growth in non-OECD economies that was offset by lower consumption in the OECD. Demand for oil decreased in the US and Europe in 2011, reflecting weak economic growth and decreases in oil intensity of economic growth.

World oil consumption is forecast to increase marginally in 2012, reflecting an assumed weak world economic outlook. Beyond 2012, world economic growth is assumed to strengthen. In 2013, world oil consumption is forecast to increase by 1.4 per cent, with oil consumption in non-OECD economies surpassing consumption in the OECD (see Figure 4). Over the remainder of the outlook period (2014 to 2017), world oil consumption is projected to increase at an average rate of 1.1 per cent a year, to reach 95.4 million barrels a day in 2017. Increases in world consumption are projected to be characterised by moderating oil consumption growth in non-OECD economies and continuing falls in OECD consumption.

Figure 4: Oil consumption in OECD and non-OECD economies

Please refer to page 27 of the Resources and Energy Quarterly – March quarter 2012 PDF version.

Robust consumption growth in non-OECD economies

In 2012, oil consumption within non-OECD economies is expected to grow 2.7 per cent, relative to 2011, to average 44.6 million barrels a day. From 2013, stronger assumed economic growth in most non-OECD economies is forecast to support robust growth in industrial production, transport fleets and, therefore, oil demand. In 2013, non-OECD oil consumption is forecast to increase by a further 3.3 per cent to average 46.1 million barrels a day. Over the remainder of the outlook period (2014 to 2017), oil consumption growth in non-OECD economies is projected to average 2.9 per cent a year, as oil use intensity falls with projected persistent high prices. Non-OECD Asia is projected to account for the majority of total non-OECD consumption growth over the outlook period, with economic growth in Asia assumed to rise faster than elsewhere.

China’s oil consumption averaged 9.5 million barrels a day in 2011, an increase of 5 per cent from 2010. In February 2012, China’s National Development and Reform Commission increased the ceiling on China’s petrol and diesel prices for the first time in ten months, by 3 and 4 per cent, respectively. Nevertheless, the price of petroleum products remains low by international standards. In 2012 and 2013, China’s oil consumption growth is forecast to grow by 4 per cent and 5 per cent, respectively, to reach 10.4 million barrels a day in 2013. Consumption is expected to be supported by domestic price controls, strengthening economic growth and demand for China’s exports.

China’s oil consumption is projected to increase at an average annual rate of 4 per cent from 2014 to total 12.3 million barrels a day in 2017. Despite being the world’s second largest oil consumer, China’s per capita consumption of oil is around half of the world average. Strong assumed economic growth in China over the medium term is projected to result in rising income per capita, an expansion of both ground and air transportation fleets and a growing petrochemical sector. However, China’s economic growth is expected to become progressively less oil intensive, as high oil prices encourage energy efficiency and the substitution of residual fuel oil for natural gas in electricity generation. Under its current five year plan (2011–2015), China has targeted a 16 per cent reduction in the energy intensity of its economy that may even result in a decline in per capita oil consumption.

Oil consumption in India is projected to increase by an average annual rate of 3 per cent to be 4.2 million barrels a day by 2017. Projected growth in oil consumption is underpinned by a young population demographic and a growing middle class. Over the medium term, India’s working age population is expected to expand by an average of 1.6 per cent a year and support demand for consumption of petroleum fuels for transport.

Sustained economic growth in the Middle East is expected to support increases in the region’s oil consumption. The expansion of electricity generation capacity to support increases in economic activity, combined with limited availability of natural gas, is likely to continue to underpin consumption growth of residual fuel oil in power plants. Widespread end-user fuel subsidies are also unlikely to be dismantled during the outlook period and are expected to insulate consumers from high oil prices. In 2012, oil consumption in the Middle East is forecast to increase by 3 per cent, relative to 2011, to reach 8.2 million barrels a day. Over the remainder of the outlook period (2013 to 2017), oil consumption growth is projected to average 3 per cent a year to reach 9.7 million barrels a day in 2017.

OECD oil consumption is forecast to contact 0.9 per cent to average 45.2 million barrels a day in 2012. Lower consumption in the US and Europe will be partially offset by increased consumption in the Pacific region (Japan, Republic of Korea, Australia and New Zealand). In 2013, oil consumption is forecast to fall marginally in all three OECD regions. For the remainder of the outlook period, OECD oil consumption is projected to decrease at an average annual rate of 0.7 per cent to average 43.8 million barrels a day by 2017.

Oil consumption in Europe has declined steadily since 2006, reflecting weak economic growth since the global financial crisis, continued efficiency gains in the transport sector and declining use of oil in electricity generation and heating. The declining trend is projected to continue over the outlook period. Short term falls in consumption are expected to be magnified by weak economic growth following market concerns related to sovereign debt. In 2012, European oil consumption is forecast to contract by 2.4 per cent to 13.9 million barrels a day. Between 2013 and 2017, oil consumption is projected to decrease at an average annual rate of around 1 per cent, falling to 13.3 million barrels a day by 2017.

North American oil consumption fell 1.1 per cent in 2011, relative to 2010, to average 23.5 million barrels a day, due to lower gasoline consumption in the US. In 2012, as economic growth remains weak, North American oil consumption is forecast to contract by a further 0.5 per cent to 23.4 million barrels a day. Over the medium term, North American oil consumption is projected to decline at an average annual rate of 0.5 per cent to reach 22.8 million barrels by 2017. Declines are projected to be underpinned by structural changes in the transport sector, including more stringent fuel economy standards, increasing sales of electric vehicles, and a growing share of flex-fuel vehicles, which will reduce oil-based gasoline demand and increase ethanol consumption.

Oil consumption in the Pacific region is projected to increase in the short term and decline over the medium term. Changes in oil consumption are expected to largely reflect developments in Japan, the largest oil consuming country in the Pacific region. In 2011, Japan’s oil consumption increased by 0.9 per cent to 4.5 million barrels a day, underpinned by increased use of residual fuel oil for electricity generation following the loss of earthquake damaged nuclear power generation capacity. Japan’s oil consumption is forecast to increase by an additional 0.8 per cent in 2012 supported by the continued use of oil-fired capacity as nuclear facilities remain shut for maintenance and stress tests, and industrial production increases associated with post-earthquake reconstruction.

From 2013 to 2017, oil consumption in Japan is projected to contract at an average annual rate of 0.6 per cent due to vehicle fuel efficiency increases and as a result of natural gas, coal or nuclear replacing high cost oil-fired electricity generation. Similarly, oil consumption in the Republic of Korea is projected to fall by around 1 per cent a year in line with efficiency gains and declining use of kerosene for heating. Oil consumption in the Pacific region is projected to fall from 7.9 million barrels a day in 2011 to 7.7 million barrels a day in 2017.

World oil supply growth to be underpinned by OPEC production beyond 2012

World oil production increased by 1.2 per cent in 2011, to average 88.5 million barrels a day. In 2012, production is forecast to increase by an additional 1.5 per cent to average 89.8 million barrels a day, with non-OPEC output accounting for around two thirds of incremental increases in production. Oil production growth in non-OPEC economies is forecast to stall in 2013, while OPEC production is forecast to increase by 4 per cent to average 37.5 million barrels a day. World oil production in 2013 is forecast to increase by 1.4 per cent to 91.1 million barrels a day.

For the reminder of the outlook period, world oil production is projected to increase at an average annual rate of 1.1 per cent to reach 95.4 million barrels a day in 2017. Non-OPEC production is projected to increase marginally, while OPEC production is projected to increase at an average annual rate of 1.8 per cent to reach 40.3 million barrels a day in 2017. Capacity increases in Iraq, Angola and the UAE are expected to support OPEC production growth.

Strong growth in non-OPEC production during 2012

Non-OPEC production remained relatively stagnant in 2011 as a result of increased production in North America that was offset by lower than expected output due to maintenance and unplanned outages in the North Sea, Canada and the Middle East. Non-OPEC production in 2012 is forecast to increase by 2 per cent, relative to 2011, to average 53.6 million barrels a day. Increases in non-OPEC oil production are expected to be concentrated in North America and Latin America.

Over the medium term, growth in non-OPEC oil production is forecast to slow. Between 2013 and 2017, non-OPEC oil production is projected to grow at an average annual rate of 0.5 per cent to reach 55.1 million barrels a day.

Incremental increases in non-OPEC oil production over the outlook period are projected to be greatest in North America. Production growth is projected to be underpinned by greater production in the US and Canada, offsetting falling production in Mexico.

Oil production in the US over 2012 and 2013 is forecast to increase at an average rate of 2 per cent a year to reach 8.4 million barrels a day in 2013. Increases in ‘tight oil’ (see Box 1) production primarily from the Bakken, Nicobara and Eagle Ford formations are forecast to offset lower production from maturing conventional fields in Alaska and California. Towards the end of the outlook period, continued expansion of the tight oil industry and additional production from the Gulf of Mexico are expected to contribute to increased US oil production provided that issues with the allocation of drilling permits are resolved. In 2017, US oil production is projected to grow to 9.1 million barrels a year, an increase of 13 per cent relative to production in 2011.

Canada’s oil production is forecast to increase by 6 per cent in 2012 and 4 per cent in 2013 to reach 3.8 million barrels a day in 2013. Production growth in the short term is expected to be supported by enhanced recovery of conventional crude oil in the Western Canadian Sedimentary Basin as a result of the recent success of horizontal drilling and multi-stage fracturing techniques.

Growth in Canada’s oil production over the medium term is attributed to increases in unconventional oil production, partially from oil sands projects. Increased production is expected from the expansion of existing oil sands projects such as CNRL’s Horizon project and Suncor’s Firebag project, and the commencement of new projects. Imperial’s Kearl Lake mining project is due to start operation in late 2012 at 110000 barrels a day and ramp up to 345000 barrels a day after 2017. Husky’s Sunrise Energy project is due to commence production of 60000 barrels a day in 2014, ramping up to 200000 barrels a day. Canada’s oil production between 2014 and 2017 is projected to increase at an average annual rate of 8 per cent to reach around 5.2 million barrels a day, with oil sands accounting for around two thirds of total production.

Oil production from Latin America is projected to be the second largest source of growth in non-OPEC over the medium term, largely supported by new projects in Brazil.

In Brazil, oil production in 2012 is forecast to increase by 7 per cent to 2.3 million barrels a day, underpinned by production from several of Petrobas’ new offshore projects that are due to commence in the second half of the 2012. These projects include Baleia Azul, Tiro Sidon, Roncador module 3 and Guará, which have a combined peak capacity of 480000 barrels a day. Growing production from these projects and other projects due to commence in 2013, such as Parque das Beleias, Papa-Terra and Roncador module 4, are expected to support a 2 per cent increase in Brazil’s oil production, which is forecast to total 2.4 million barrels a day in 2013.

For the remainder of the outlook period, Brazilian oil production is projected to increase at an average annual rate of 7 per cent. Production increases will be underpinned by the installation of additional production systems in several offshore oil fields including Baleia Azul, Guara North, Cernambi, Lula Central, Lula High and Maromba, which combined have a peak capacity of 760000 barrels a day. In 2017, Brazilian oil production is projected to average 3.2 million barrels a day.

Oil production in the Russian Federation is projected to remain relatively unchanged over the medium term, despite changes to its oil export taxes in October 2011 that enhanced the profitability of upstream projects. Production from the Russian Federation is projected to fall from 10.6 million barrels a day in 2011 to 10.4 million barrels a day in 2017. Decreased production from maturing fields in Western Siberia is projected to offset production growth from new oil fields in Eastern Siberia.

Box 1: Unconventional oil not so unconventional

Unconventional oil is set to play a growing role in world oil production. High oil prices over the medium term are projected to encourage exploration development activity by improving the economic viability of unconventional methods. Generally, the cost of producing unconventional oil is higher compared with conventional oil.

The IEA presently characterises unconventional oil as including extra-heavy oil (also known as natural bitumen or oil sands), kerogen oil, and derived liquids such as coal-to-liquid (CTL) or gas-to-liquid (GTL). Interestingly, tight oil, which is produced increasingly in the US, is considered conventional oil, but its producers face challenges similar to producers of unconventional oil.

Extra-heavy oil

The extraction of extra-heavy oil—or bitumen—from a deposit generally requires heat to reduce viscosity. The world’s largest deposit of extra-heavy oil is found as naturally occurring bitumen in Canadian oil sands at shallow depths. Canada’s largest oil sands deposits, which are located in Athabasca, Cold Lake and Peace River, contain an estimated 170 billion barrels of recoverable oil. These deposits can be extracted using two alternative methods: mining and in-situ. Mining is used to extract oil sands that are on or near the surface and the ore is treated with hot water to separate the bitumen. The in-situ method is used for deeper deposits. It employs steam-injection technology and solvents to reduce the viscosity of bitumen before extraction.

Extra-heavy oil is also found in the Venezuela Orinoco belt, which is the world’s second-largest deposit of extra-heavy oil. The deposits are generally deeper than in Canada, and oil is extracted using in-situ methods.

Kerogen oil

Kerogen oil is often referred to as ‘oil shale’, but should not be confused with ‘shale oil’. Kerogen oil is derived from sedimentary rock containing kerogen, which when heated and processed releases hydrocarbons similar to oil. Deposits near the surface are mined in a similar way to oil sands and the environmental challenges are comparable. The costs of producing kerogen oil are high due to the amount of energy required to heat the shale to between 350°C and 450°C before oil can be extracted. Only around 15000 barrels of kerogen oil is currently produced worldwide.

Coal-to-liquid is a process of deriving oil from coal, usually via the gasification of coal into syngas. While the technology is well established, CTL is one of the most costly sources of unconventional oil. South Africa is the most notable producer of CTL, with a facility that produced 160000 barrels a day at capacity. Two commercial scale CTL projects are being proposed in Australia. The Amber CTL project, has an expected capacity of around 20000 barrels a day and is scheduled for completion in 2014. The Clinton project has a capacity of 15000 barrels a day and is scheduled for completion in 2015.

Gas-to-liquid technology is similar to CTL, uses the reaction of natural gas with steam and oxygen to create syngas. The Pearl GTL project in Qatar commenced in 2011 and is expected to ramp up to peak capacity of 140000 barrels a day in 2012. Currently low gas prices in North America have reignited interest in GTL, with a feasibility study underway for a GTL plant fed by shale gas in Louisiana.

Tight oil is also known as ‘shale oil’. It is conventional oil trapped in geological formations with low permeability (e.g. shale rock). Special techniques including horizontal wells and multi-stage hydraulic fracturing are used to extract tight oil. Growth in tight oil production is most prominent in the US, from the Bakken formation around the North Dakota, Montana and Canadian boarders, the Eagle Ford formation in Texas, and the Niobrara formation on the boarder of Wyoming and Colorado.

By 2017 unconventional and tight oil are projected to account for 7 per cent of world oil production, up from 4 per cent in 2010. However, growth in production could be limited by lower crude prices, increased extraction costs including specialist services, infrastructure constraints and environmental costs. The future of unconventional and tight oil production over the longer term will be increasingly shaped by market conditions and policy responses to infrastructural and environmental concerns.

OPEC oil production is forecast to increase by around 1.2 per cent in 2012 to average 36.2 million barrels a day. Increases in OPEC oil production are forecast to be underpinned by growth in the production of natural gas liquids (NGL), while OPEC crude oil production is expected to remain largely unchanged. In 2013, as non-OPEC production stalls, OPEC oil will meet any expected gap. OPEC oil production is forecast to increase by 4 per cent in 2013 to average 37.5 million barrels.

Between 2014 and 2017, OPEC oil production is projected to increase at an average annual rate of 1.8 per cent. Growth in OPEC NGL is projected to weaken towards the end of the outlook period, with OPEC crude oil production comprising an increasing share of additional OPEC oil production.

OPEC crude oil production is forecast to be underpinned by increased output from Iraq. By the end of 2012, Iraq’s oil producing capacity is expected to reach 3.1 million barrels a day, up 14 per cent from an average production rate of 2.7 million barrels a day in 2011. Oil output from the Rumaila, West Qurna-1, and Zubair oil fields, which together accounted for over two thirds of Iraqi production in 2011, is expected to support Iraq’s oil growth. Iraq’s national oil company plans to further expand these fields further over the medium term. Official production targets for Iraqi oil production are ambitious at 6.5 million barrel a day by 2015 and 12 million barrels a day by 2017. Export infrastructure and logistical constraints are likely to limit output growth to below official targets. Between 2014 and 2017, Iraq’s oil production growth is projected to increase at an average annual rate of 6 per cent to reach 4.3 million barrels a day in 2017.

Libyan crude oil production has increased significantly since the end of the 2011 civil war. Libyan production in the December quarter of 2011 averaged 550000 barrels a day, 12 times higher than it was in the September quarter. Libyan crude oil production is projected to rebound to pre-civil war levels of around 1.6 million barrels a day by early 2014. For the remainder of the outlook period, growth in Libyan crude oil production is projected to slow and reach 1.9 million barrels a day in 2017.

Increases in crude oil production in the UAE and Angola are projected over the outlook period. Over a dozen new projects in Angola are expected to offset production declines in more mature offshore fields and support an annual growth rate of 3 per cent over the outlook period. By 2017, crude oil production in Angola is projected to average 1.9 million barrels a day. In the UAE, crude oil production is projected to increase 4 per cent a year to reach 3.1 million barrels a day by 2017. Production growth in the UAE is expected to be supported by increased output from the Upper Zakum and Lower Zakum fields, and greater production from mature onshore fields following the employment of enhanced oil recovery techniques.

Oil production in Saudi Arabia during 2011 averaged 9 million barrels a day, well below its capacity of 12 million barrels a day. Saudi Arabia’s production capacity is projected to fluctuate between 11.6 and 12 million barrels a day over the outlook period. Forecast falls in capacity during 2012 and 2013 reflect lower output from maturing fields. Projected increases in 2015 will be underpinned by the expected development of the second phase of the Manifa project. By 2017, Saudi Arabian oil production is projected to average 8.7 million barrels a day.

Iran’s crude oil production is projected to decrease at an average annual rate of 5 per cent over the outlook period. International oil sanctions recently imposed on Iran’s oil exports may have several effects. They are likely to lead to a redistribution of its oil trade with Iran’s exports being redirected from Europe to China and India, cause a discount in the price of Iran’s oil, contribute to the flight of foreign investment, and reduce the number of projects coming online before 2017. Production declines from maturing oil fields are projected to offset new production from several small capacity projects.

Production of NGLs by OPEC is forecast to increase by 10 per cent and 6 per cent in 2012 and 2013, respectively, as projects in Qatar, Saudi Arabia and the UAE ramp up to peak capacity. For the remainder of the outlook period, growth in OPEC production of NGLs is projected to slow to 3 per cent a year, and average 7.5 million in 2017. Production growth is expected to be supported by new projects in Iran, the UAE and Saudi Arabia including the Integrated Gas Development project and the Manifia project.

Box 2: Downside risk: the Strait of Hormuz

On 27 December 2011, the Iranian Government threatened to block the transportation of oil through the Strait of Hormuz, limiting trade of oil between producers in the Middle East and consumers in Asia. The threat was made in retaliation to proposed international sanctions designed to prevent the exportation of Iranian oil and to persuade the Iranian Government to cease its alleged nuclear weapons program.

Around one fifth of the world’s crude oil is transported by tankers from ports in the Persian Gulf through the Strait of Hormuz. The closure of the Strait would result in considerable increase in import prices throughout Asia and the Pacific due to the limitations of alternative transport routes and already constrained supply to the region.

In the highly unlikely event that Iran carried out its threat and was successful at blocking the Strait of Hormuz, oil import prices in Asia would likely increase, and result in lower than forecast growth in oil consumption. Price increases would depend on the length of the closure and the response by the international community.

According to the IEA, most military analysis believe that any closure of the Strait of Hormuz would be short term, as the US is unlikely to allow the Strait to be closed given its importance to global energy markets.

Australian production and exports declining until 2015–16

Australian production of crude oil and condensate is forecast to contract by 4 per cent in 2011–12 to 23.7 gigalitres. Lower production reflects planned shut-ins on the North West Shelf that occurred in the September quarter 2011 and declines from maturing fields. Output from the Kitan project in the Bonaparte Basin, which commenced in October 2011, is expected to partially offset these declines. In 2012–13, Australian crude oil and condensate production is forecast to increase by 1 per cent as a result of the commencement of crude production from the Montara/Skua project and condensate from the Kipper gas project.

From 2013–14 to 2015–16, Australian production of crude oil and condensate is projected to decrease at an average annual rate of 6 per cent. Declining production from maturing fields is projected to more than offset new production from several small fields including Coniston, Fletcher-Finucan, Turrum, Crux and Balnaves. In 2016–17, Australia’s crude oil and condensate production is projected to rebound by 8 per cent to 19.1 gigalitres, underpinned by condensate production associated with the Prelude and Ichthys projects.

Australian exports of crude oil and condensate over the outlook period are projected to follow a similar profile to production. Exports are forecast to contract by 4 per cent in 2011–12 and a further 1 per cent in 2012–13 to total 18.7 gigalitres, reflecting lower production from the north-west coast of Australia. From 2013–14 onwards, oil exports are projected to decline at an average rate of 6 per cent a year to total 13.9 gigalitres in 2016–17.