Possible Oversupply

Peak oil will happen, eventually, but possibly not before the 2030s. In the meantime, we may be faced with oversupply, partly driven by increased production in Iraq.
This article appeared in Vol. 7, No. 1 - 2010


Jarand Rystad, who holds a M.Sc. degree in physics from the Norwegian University of Science and technology, founded the Norwegian company Rystad Energy in 2004. Later, he gained extensive experience in oil and gas strategy work through his long career with McKinsey & Company. His areas of expertise include exploration strategy, concession policies, asset transactions, corporate M&A, macro analysis, upstream technology and gas infrastructure. Photo: Rystad Energy as

Rystad Energy has just entered its seventh year of operation, meaning that establishing the company was a success. How did it happen in the first place?
I had conducted a lot of strategy work for international oil companies during my years with McKinsey. Often I felt that we spend too much time on data gathering and modelling, and thought that we could be even more efficient as consultants through reusing data through our own global information infrastructure. Must people thought that it would be totally unrealistic, so I decided to do it on my own. My old friend and x-DNV, Per Magnus Nysveen, was the first one to share this vision, and we started up in my basement six years ago.

So, what is the main product today? Or should we say products?
First and foremost, we are a consulting company providing advices on E&P strategy, transactions and oil service markets for our clients.

But you are not only offering consulting services. You are also marketing data bases?
Yes, and this is the new thing in 2010, namely that we are now officially launching our global upstream database – our UCube – with production profiles and financial profiles for all fields, exploration blocks and E&P companies globally.

Based on the number of people I can see around your office, you have grown into a substantial company. Tell me about your staff, locally and international!
We are 32 people here at Lysaker, just south of Oslo, including my six fellow partners, consultants, analysts and technology developers. We have been recruiting only top academic people from Norway and abroad – half of our staff are non-Norwegian. In addition we have teams in Asia and Trondheim supporting us on scouting, with focused scouting tasks for companies and geographies.

In this edition of GEO ExPro, we are focusing on the Middle East. How do you foresee the future for the international oil industry in this region?

In our field-by-field forecasts, we see that Middle-East growth might be 6 million bopd towards 2020. This is less than some other prognoses, but still more than any other region globally, just ahead of Brazil and North America. On the gas side, Middle-East growth is even stronger, and Russian levels could be reached in 2020 if markets and politics allow it.

Lately, Iraq has come into focus because of ten new contract areas. How will their efforts to boost production from 2.2 MMbopd today to possibly more than 6 MMbopd in 7 years affect the petroleum industry?

If they succeed in this aggressive ramp-up, despite security and political issues and oil service constrains, we might actually go from a tight supply situation to temporarily global oversupply around 2016-2018, since oil sands, Brazil, the Caspian and deep water also will come in with significant volume additions. Majors will control part of this ramp-up, and might be tempted to prioritize high profit projects elsewhere, while Chinese players would push for progress.

Finally, Mr Rystad, you sit on a huge data base concerning oil and gas reserves, what are your thoughts about Peak Oil and the future of fossil energy?  

Eventually we will see peak oil, and in our database this will be in the 2030s. New unconventional hydrocarbon resources will have more flexibility in terms of turning activity on and off according to the macro environment. Oil prices will see a long term increase in real terms, but we should expect large fluctuations given the dynamic forces in the economy. We will need 20 years of high oil prices to get sufficient investments and technological breakthroughs in renewable energy and “clean coal”, and this will gradually take over from the 2030s.  


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