While most Americans know about BP (NYSE:BP) thanks to the Gulf of Mexico oil spill, the company also publishes a widely read tome that reviews the world energy scene. The BP Statistical Review of World Energy covers all the major sources of energy, including oil, natural gas, coal and nuclear power, and reports on supply and consumption trends broken down on a country and regional basis.
Although such macro data is not always critical to stock picking in a market with so many short-term players, the report does tend to contain interesting information, and this year did not disappoint.
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The study found that world energy consumption fell by 1.1% in 2009, the first decline since 1982. This decline in consumption was led by OECD countries, which saw a 5% decline in consumption in 2009. Emerging countries led by China and India grew energy consumption by 2.7%, but this was not enough to trump the much larger users in the OECD.
The statistics on worldwide oil demand mirrored the overall energy trends, with a large decline in OECD demand overwhelming the high demand growth regions of the world. Total oil demand fell by 1.7%, or 1.2 million barrels per day, in 2009. Oil demand has now fallen for two consecutive years, and is below the level of demand in 2006.
The United States is still the largest consumer of oil in the world, at 21.7% of the total in 2009. However, the United States consumed 18.6 million barrels per day in 2009, which is less than the nation used in 1999.
Natural gas was the hardest hit in 2009, with global demand down by 2.1%, the highest decline ever recorded. There are some signs that demand for natural gas has started to stabilize, as Exelon (NYSE:EXC), a utility in the Northeastern United States reported that it was starting to see a pick up in demand in its service area.
There were some surprises on the supply side of energy according to the study. Oil supply fell as expected due to lack of demand and cuts in production by members of the Organization of Petroleum Exporting Countries (OPEC). Total oil production fell by 2.6%, or 2 million barrels per day, in 2009 - the largest drop since 1982.
Russia also toppled Saudi Arabia as the largest producer of oil in the world, reaching 10 million barrels per day in 2009.
The surprise on the oil supply side was that non-OPEC production rose by 0.9%, or 450,000 barrels per day, in 2009, which seems to contradict a prediction that non-OPEC production had peaked several years earlier.
The increase in non-OPEC production was led by the United States, which produced 7.2 million barrels per day, up a stunning 7% over the previous year. This was the highest growth rate in domestic production since 1970, and suggests that the huge capital investments in U.S. production appear to finally be paying off.
Worldwide production of natural gas in 2009 also declined 2.1% over 2008, with Russia and Turkmenistan showing the largest declines.
Finally, the United States emerged as a leader in natural gas production in 2009, with a 3.5% boost over the previous year. This was also the fourth straight year of increasing natural gas production in the United States, making this country the largest producer in the world.
Unconventional Resources Lead the Way
The increase in domestic oil and natural gas production is being led by the development of many unconventional resource basins. These include the Bakken Shale on the oil side, and the Barnett Shale for natural gas.
Devon Energy (NYSE:DVN) is one of the leaders in the development of the Barnett Shale, where the company had average production of 1.1 Bcf per day of natural gas equivalent per day in the first quarter of 2010.
EOG Resources (NYSE:EOG) is developing many unconventional resource basins, including the Bakken Shale in North Dakota and Montana. The company estimates that its potential reserves here total 420 million barrels oil equivalent (BOE).
The Bottom Line
The BP Statistical Review of World Energy indicates a sharp fall in demand for oil and natural gas worldwide in 2009, along with a surprising increase in domestic United States production of these two vital energy sources. (For more, see Peak Oil: What To Do When The Wells Run Dry.)