World Oil Output Falls for First Time Since '02: BP

World oil production fell by 0.2 percent in 2007, the first decline since 2002, and proven oil reserves were flat, BP said in an annual review released on Wednesday.

Oil Refinery
Oil Refinery

Production fell by 130,000 barrels per day (bpd) last year to 81.53 million bpd and reserves were essentially flat at 1.24 trillion barrels, London-based BP said in its 2008 Statistical Review of World Energy.

The figures compiled by BP underline the world's challenge of boosting production to meet growing demand.

Oil prices have been rising since 2002 and last week hit a record $139.12 a barrel, partly because of supply concerns.

"The defining feature of global energy markets remains high and volatile prices, reflecting a tight balance of supply and demand," said Tony Hayward, BP's chief executive, at the launch of the review.

"This has put issues such as energy security and alternative energies at the forefront of the political agenda worldwide."

World production fell in part because of supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), source of about two in every five barrels of oil.

Supply outside OPEC stayed weak, rising by just over 200,000 bpd in 2007, while output in member-countries of the Organization for Economic Co-operation and Development (OECD) fell for a fifth straight year, BP said.

OPEC production dropped by 350,000 bpd following production cuts implemented in November 2006 and February 2007.

Barriers to Entry

Global oil reserves are sufficient to meet current production for more than 41 years, BP said.

While the world has enough fossil fuel to support growing production, politics, barriers to entry and high taxes reduce the reserves accessible to firms such as BP, the company said.

"Declining oil production in the OECD highlights the fact that, while resources are not a constraint globally, the resources within reach of private investment by companies like BP are limited," said Hayward.

"When it comes to producing more oil, the problems are above ground, not below it. They are not geological, but political," he added.

Countries such as Venezuela and Russia are grabbing more cash and control from firms that work their oil and gas fields, a trend dubbed resource nationalism by some analysts.

At the same time, some of the world's largest reserves, such as those of Saudi Arabia, are off-limits to foreign investment.

Sanctions, wars and violence have slowed progress in developing Iraq's oil industry.

BP's report also found growth in primary energy consumption had slowed in 2007 versus 2006, but at 2.4 percent it was still above the 10-year average for the fifth consecutive year.

Global oil consumption grew by 1.1 percent last year, slightly below the 10-year average.

Demand in the oil-exporting regions of the Middle East, South and Central America, and Africa accounted for two-thirds of world growth, BP said.

Global natural gas production rose by 2.4 percent to 2.94 trillion cubic meters (tcm) in 2007, BP said, while consumption grew by 3.1 percent to 2.92 tcm led by the United States.

Proven gas reserves stood at 177.4 tcm at the end of last year, an increase of 0.6 percent.

Coal consumption grew by 4.5 percent last year, making it the world's fastest-growing fuel for the fourth straight year.