BP Denies oil's rapid decline

BP has denied warnings by the International Energy Agency (IEA) that global oil supplies are falling faster than expected, leading to a rapid decline in supplies.

In the report out this week, the IEA warned "oil looks extremely tight in five years time" with prospects not set to improve at the turn of the decade.

Despite four years of high oil prices, the report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012.

But while BP says it does not make forecasts about production, price or demand, oil production was up 0.4% last year, partly constrained by OPEC production cuts.

"Oil and gas reserves were largely unchanged in 2006 with the reserves-to-production ratio remaining above 40 years for oil and 60 years for gas. Technology is clearly a factor in this," a spokesperson told offshore-technology.com.

"Despite a small decline in 2006, oil reserves are still some 15% higher than a decade ago at 1208 billion barrels. Global gas reserves were slightly higher at 181 trillion cubic metres, with the US and several OPEC members showing increases."

The IEA report predicts an increase in biofuel production and a bunching of supply projects over the next few years. OPEC spare capacity is expected to remain relatively constrained before 2009 with supplies falling faster than expected in areas such as the North Sea and Mexico, while projects in new provinces such as the Russian Far East face long delays.

Yesterday BP was forced to shut down a large crude unit for maintenance at its Whiting refinery in the US which is estimated to process around 410,000 barrels a day. The shutdown has created concerns among traders that gasoline production would be hurt resulting in less demand for crude.