Asia-Pac oil on the decline

Up to 2020, Asia-Pacific faces a decline in oil output but is this a permanent trend? Regional production will decrease by over 1 million b/d by 2020, equalling an overall annual decline rate of around 4%. The fall will be greatest in China — followed by Indonesia, Thailand, India and others.

Capital cuts by the Chinese NOCs, shifting government policies and oilfield maturity are the key factors in accelerating the decline in China's liquids production. A rising oil price might encourage more spend, but this will not change regional fundamentals, and we expect companies to prioritise finances over marginal oil output.

From the NOC perspective, shutting-in uneconomic oil fields is offset by a growth in gas output through to 2020, which will lift revenues and relieve the need to re-start marginal oil wells. However, whether the Chinese NOCs continue to prioritise value over volume — and at which point the government in Beijing feels national output has fallen 'enough' — are the key questions going forward.