The overall pattern of oil supply in the next 10 years

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Jin Yun (Caitong Securities): I. The strategic importance of oil remains unchanged in the long term. As the most important fossil fuel in the world, oil forms the basis for a large and comprehensive industrial chain system. Specifically, the upstream sector comprises the oil and natural gas extraction industry, as well as the manufacturing of specialized equipment for oil drilling and extraction, and services related to oil exploration and extraction ； In the midstream sector, centered around the conversion and utilization of crude oil, there has developed a crude oil processing and petroleum products manufacturing industry aimed at producing gasoline and fuels. Additionally, there is a basic chemical raw materials production industry focused on processing petrochemical feedstocks, as well as a chemical industry engaged in the further processing of these raw materials. This includes primarily the manufacturing of synthetic materials, chemical fiber production, and the production of specialized equipment for oil refining and chemical manufacturing that supports these industries ； The downstream industrial chain primarily involves the trade, distribution, import, and export of refined oil products, fuels, and chemical products. In addition, as the most important non-renewable energy source in the world, oil has a profound impact on industries such as transportation, textiles and clothing, light industry and food processing, as well as the automotive retail sector. It can be said that, from production to daily life, almost all human activities in modern society are closely related to oil. Oil plays such an important role in human society, and it is not easy to find a substitute for it. Despite the rapid progress in renewable energy development, constrained by technical, financial, and other factors, its replacement of traditional fossil fuels cannot happen overnight; the path is tortuous and long, and it is fraught with great uncertainties. Firstly, the development of new energy sources requires a large amount of energy. Take the photovoltaic industry as an example. Although obtaining electrical energy from solar power seems to be a virtually inexhaustible and pollution-free resource, the process of manufacturing polysilicon—which is used to convert solar energy into electricity—requires a great deal of energy and results in severe pollution. Secondly, the conversion efficiency of new energy sources remains low, and the storage capacity is limited. For example, solar and wind power generation systems have a certain service life; their maximum designed lifespan is only 20 years. Moreover, environmental changes can affect these generation devices, ultimately reducing their service life. The “World Energy Outlook 2011” published by the International Energy Agency (IEA) shows that over the next 20 years, oil will remain the most important single fuel. Even under the Alternative Policy Scenario – where all policies currently under consideration around the world could be implemented – demand for fossil fuels would still increase significantly. By 2035, fossil fuels will account for 75% of primary energy demand. As a result, new energy will remain a supplementary role to fossil fuels in the long term. Globally, fossil fuels will still play a dominant role in the energy mix. This shows that oil, as one of the world’s most important energy sources, is unlikely to see its status change in the long term. II. Overview of International Proven Oil Reserves As a mineral resource formed through geological processes spanning hundreds of millions of years, oil reserves and their distribution exhibit distinct characteristics: First, due to the complexity of exploration and technical limitations, it is almost impossible to accurately determine the total amount of oil resources existing worldwide as well as the amount that can ultimately be extracted. Secondly, the distribution of world oil resources is highly uneven, and they are located far from consumption areas, which exacerbates the imbalance between supply and demand. The non-renewable nature of oil makes its reserves a subject of great concern, as its scarcity is related to its ability to continue supporting human activities in the future, as well as its role in the world’s energy system. The reserves mentioned in this article refer to “proven reserves,” which are the amounts of oil that can be extracted under current economic and technical conditions; these reserves are most closely related to oil production. By the end of 2010, the world’s proven crude oil reserves amounted to 135.418 billion barrels, an increase of 1.261 billion barrels from the previous year. Almost all of this additional proven reserve came from OPEC; in 2010, OPEC’s proven crude oil reserves were 119.3 billion barrels, accounting for 81.3% of the world’s total. In terms of proven oil reserves across the world, the Middle East accounts for 56% of the global total, holding an absolute leading position ； North America comes in second with 15% ； Africa, the Eurasian continent, and Central and South America also have relatively large oil reserves, accounting for 9%, 7%, and 9% of the global total respectively ； Reserves in Asia, Oceania, and Europe are relatively scarce, accounting for less than 5% of the total, which indicates that global oil reserves exhibit strong regional characteristics with significant disparities in distribution across different areas. Looking at the proven oil reserves around the world, the major oil-producing countries at present are mainly Saudi Arabia, Iran, Iraq, and Kuwait in the Middle East, Canada and Venezuela in the Americas, and Russia on the Eurasian continent. Some African countries**, such as Nigeria and Libya, also hold a certain share of the world’s oil reserves; however, Middle Eastern countries led by Saudi Arabia remain the main contributors to global oil reserves. The top 10 countries with the largest proven oil reserves in the world are Saudi Arabia, Canada, Iran, Iraq, Kuwait, Venezuela, the UAE, Russia, Libya, and Nigeria. By the end of 2010, the total reserves of these 10 countries amounted to 1,132.88 billion barrels, accounting for 83.66% of the world’s total reserves. Among them, oil reserves are relatively concentrated in the **Middle East** and developing countries in **Africa**. Due to the extremely uneven distribution of oil resources worldwide, as well as the mismatch between demand and production levels, oil trade is particularly active in international economic activities. It is therefore crucial to understand the economic and political conditions in the regions involved in oil supply and demand, as well as their future development trends. III. The International Oil Supply Landscape and Its Development Trends At present, the world’s oil industry has entered a globalized framework. The oil production capabilities of Middle Eastern countries, led by Saudi Arabia, have been steadily improving, enabling them to play a pivotal role in the global oil market ； With Russia and the former Soviet Union region re-entering the global oil market, the Caspian Sea region has become a new growth point for the world oil market ； Meanwhile, oil development in the North African Maghreb region and the Gulf of Guinea region is also becoming more active. The vast geographical region that stretches from the Maghreb region, through the Persian Gulf and the Caspian Sea area, to Russia’s Siberia and Far East constitutes the \"heartland\" of the world’s oil geopolitics today. The Middle East and the Persian Gulf region form the core of this heartland, while the Caspian Sea area as well as Russia’s Siberia and Far East are areas where oil exploration will be intensive in the coming years, and they are also focal points of competition among various interest groups. 1. International oil production is growing steadily. According to the latest monthly report on the oil market issued by the International Energy Agency (IEA), global oil supply increased by 600,000 barrels per day in April 2012, reaching 91 million barrels per day; OPEC accounted for about 70% of this increase in oil supply. Higher oil production in Iraq, Nigeria, and Libya caused OPEC’s oil output to rise by 410,000 barrels per day in April, reaching 31.85 million barrels per day. Meanwhile, Iran maintained its production level at 3.3 million barrels per day. The IEA estimates that in the third quarter of this year, OPEC’s sustainable crude oil production capacity will increase by 330,000 barrels per day, reaching 35.3 million barrels per day. As an important international organization in the global oil sector, OPEC’s influence on the world’s oil supply cannot be underestimated. OPEC, or the Organization of Petroleum Exporting Countries, is transliterated as “OPEC” in Chinese. Established on September 14, 1960, OPEC was registered with the United Nations Secretariat on November 6, 1962, thus becoming a formal international organization. Its purpose is to coordinate and harmonize the oil policies of member states in order to safeguard their respective and common interests. The current 12 member states are: Saudi Arabia, Iraq, Iran, Kuwait, the United Arab Emirates, Qatar, Libya, Nigeria, Algeria, Angola, Ecuador, and Venezuela. OPEC aims to ensure stability in oil prices in the international oil market by eliminating harmful and unnecessary price fluctuations, guaranteeing that its member countries receive stable oil revenues under all circumstances, and providing oil-consuming countries with a sufficient, affordable, and long-term supply of oil. Since its establishment, OPEC has had a significant influence on international oil supply and demand as well as the formation of oil prices. In 2011, the oil production of the 12 OPEC member countries accounted for 65% of the world’s total oil production. Saudi Arabia alone contributed 31% of all OPEC’s oil production, giving it a dominant position within the organization ； Furthermore, Iran, Iraq, Kuwait, and the UAE are key players in oil production in the Middle East, while Nigeria and Venezuela represent the main oil-producing forces in Africa and South America respectively; all of these countries play a crucial role in the world’s oil production landscape. Today, global oil production exhibits two distinct characteristics. Firstly, the regional distribution of world oil production is uneven. Currently, the world’s major oil-producing countries are concentrated in the \"heartland\" of the global oil geopolitics landscape, which is composed of a vast geographical region stretching from the Maghreb, through the Persian Gulf and the Caspian Sea region, to Russia’s Siberia and Far East. Of this, the Middle East accounts for over 30% of the world’s total, making it the largest oil-producing region in the world ； In addition, oil production in North America, Eurasia, Africa, Asia, Oceania, and Central and South America each accounts for about 10% of the world’s total. Europe has the lowest production level, making up only 4.9% of the global total. The second characteristic of global oil production is **uneven spatial distribution**. Of the 11 countries with the highest global oil production in 2011, five were OPEC members, accounting for 27.2% of the world’s total oil production, which illustrates OPEC’s influence in the field of world oil production ； Furthermore, among the non-OPEC countries, the United States, Russia, China, Canada, Mexico, and Brazil also produce large amounts of oil, accounting together for 39% of the world’s total oil production. This shows that the importance of non-OPEC countries in terms of oil supply cannot be underestimated either. Based on the above analysis, the current world oil-producing countries, ranked by their share of global oil production in 2011, are as follows: Saudi Arabia, Russia, the United States, China, Iran, Canada, the UAE, Mexico, Kuwait, Brazil, and Iraq. Calculating the ratio of oil exports to total oil production for the world’s major oil-producing countries in 2010 reveals that, except for the United States and China, most major oil-producing nations are also major oil suppliers. In contrast, the proportion of oil exports in the U.S. and China is less than 1%; essentially, they produce oil to meet domestic consumption needs, making them self-sufficient oil-producing countries. The other 12 countries, led by Iraq, account for over 30% of global oil exports and are major suppliers of oil to the world. In particular, Iraq, the UAE, Venezuela, Saudi Arabia, and Libya account for over 60% of such exports; their oil production is primarily aimed at meeting external demand, making them key sources of oil in the world. 2. The relationship between international oil reserves and production: To gain a comprehensive understanding of the world’s oil supply, it is far from sufficient to focus only on the current level of oil supply when trying to predict the trends in the world economy. As a non-renewable resource, oil’s impact on the global economic situation must be considered from a long-term perspective, by paying attention to the dialectical relationship between reserves and production. An important indicator that reflects this close connection between the two is the reserve-to-production ratio. The Reserve/Production (R/P) ratio – assuming that future production remains at the level of a certain year – is calculated by dividing the reserves at the end of that year by its production volume; the result thus obtained represents the remaining useful life of those reserves. Based on database resources and reports from authoritative organizations, we have compiled statistics on the reserves and production of oil-producing countries worldwide. Among them, the reserve-to-production ratio data were compiled based on the 2011 BP World Energy Statistical Yearbook. Given that reserve-to-production ratios are estimated using certain calculation methods and can only provide a rough indication of a country’s future oil production potential, we have added the relative reserve-to-production ratio as an additional indicator. This ratio is calculated by taking the proportion of a country’s reserves in the global total divided by the proportion of its output in the global total, and it serves to reflect a country’s oil production potential and significance. The higher this ratio, the greater a country’s future oil production potential. This article lists the above indicators separately for OPEC member countries and major non-OPEC oil-producing countries, and ranks them based on the share of each country’s proven oil reserves in the global total, in order to provide an overall understanding of the current oil exploration status and potential across countries around the world. It is evident from the results that OPEC member countries lead the way, not only in terms of reserves but also in terms of extraction potential. Countries such as Saudi Arabia, Kuwait, Iran, Iraq, and the UAE possess large oil reserves, and their production levels remain stable over time; they have thus been major forces in oil production. Based on their reserve-to-production ratio, they have the capacity to continue drilling, and it is expected that they will remain key oil suppliers for a considerable period in the future. In countries such as Angola and Algeria, the ratio of reserves to production is already relatively low, and their oil reserves are limited; it is estimated that at the current rate of extraction, it will be difficult for them to remain net oil exporters in the long term. It is worth noting that Venezuela not only has abundant oil reserves but also a high reserve-to-production ratio. However, its current oil production has not been fully utilized given its reserves, and there is great potential for further extraction, making it likely to become a key player in future oil production. Looking at the non-OPEC countries, Norway, as a oil-producing country in the North Sea, has for some time served as a key source to support Europe’s oil supply. As its oil reserves are limited and development has been largely completed, it will find it difficult to make significant progress in the future. As a long-standing energy powerhouse, Russia has seen a revival in its energy sector in recent years, with its position in the global oil landscape continuously strengthening. Currently, its energy industry, particularly oil extraction, serves as a vital pillar supporting the national economy. In 2010, its proven reserves accounted for 4.43%, yet its production accounted for 11.56% of the world’s total oil production, posing a risk of overexploitation; if it continues to develop at this rate, it may suffer from insufficient resilience due to excessive extraction. Taking into account both reserves and reserve-to-production ratios, we believe that future oil production should focus primarily on Canada and Kazakhstan, which have high reserves and great development potential. As an emerging oil-producing country, Kazakhstan has great potential for development. However, due to the presence of numerous former Soviet states in the Caspian region and the complex political situations there, the competition among these countries over oil resources will constitute the biggest obstacle to its future development. Another point of concern is that Canada, with its abundant oil sands resources, could become an important player in the world’s future oil supply. As a long-standing major energy player, Canada has always been the United States’ largest oil supplier; the vast majority of its oil exports go to the U.S. With the depletion of conventional oil resources, the extraction of oil from oil sands—a non-conventional method of oil production—is expected to become a significant global energy source. Of the oil sands resources that have been discovered worldwide to date, 95% are located in Alberta, Canada. Canada has 400 billion cubic meters (equivalent to 2.5 trillion barrels) of proven oil sands and heavy oil reserves, which elevates its oil reserves to second in the world, only behind Saudi Arabia. Currently, Canada’s oil sands resources have become a major source of new oil production worldwide, and almost all of the world’s major oil companies have invested in or plan to invest in the development of oil sands. Large companies such as ExxonMobil, Shell, and BP have long joined the ranks of those involved in extraction. Companies such as ExxonMobil and Shell have begun to develop oil sands in Canada on a significant scale ； Since 2006, Total has increased its investment budget by $1 billion each year for oil sands exploration and development projects in Alberta. 3. International oil quality and extraction difficulty: In addition to assessing a country’s future oil production potential in terms of quantity, the quality of crude oil, as well as extraction technologies and feasibility, are also very important criteria for evaluation. Differences in crude oil quality directly lead to differences in crude oil prices. Because the quality of crude oil determines the difficulty of the processing steps as well as the composition of the resulting products. Specifically, compared to low-sulfur (low-acid) crude oil, high-sulfur (high-acid) crude oil requires additional desulfurization (deacidification) equipment during processing, the processing procedures are more complex, and it also causes corrosion to the smelting equipment and materials. Therefore, theoretically, high-quality crude oil should have a higher market price than low-quality crude oil ； Especially with the increasing focus on climate change within the international community today, agreements such as the Kyoto Protocol have led countries around the world, particularly developed ones, to advocate more strongly for energy conservation and emission reduction, thereby further enhancing their preference for low-sulfur oil. Therefore, the demand for lightweight, low-sulfur oil is bound to increase further in the future. According to the materials from the US NPRA annual conference, world crude oil is classified into three categories based on specific gravity (API grade): light crude oil (>31), medium crude oil (24.1–30.9), and heavy crude oil (<24) ； Based on sulfur content, it is divided into two main types: low-sulfur oil (<0.99%) and high-sulfur oil (>7.0%). Statistics show that heavy and medium crude oils account for the majority of the world’s proven oil reserves, while light and medium crude oils make up the bulk of crude oil production. Based on estimates of the world’s proven recoverable oil reserves and production in 2010, although the production of light sweet crude oil accounts for approximately 37.8% of the world’s total oil production, its reserves make up only 19.0% of the world’s total reserves ； Reserves of medium-quality low-sulfur/high-sulfur and heavy-quality low-sulfur/high-sulfur crude oils account for 51.0% of the world’s total crude oil reserves. Therefore, future additional crude oil supply will mainly consist of medium and heavy crude oils, with a clear trend toward heavier and lower-quality crude oil resources. This opposite trend between oil supply and demand further intensifies the contradiction between them. In addition to the quality of crude oil, the difficulty of extracting it and the level of advancement of the equipment are also objective factors that have a significant impact on oil development. Over the past five decades, the Arabian Peninsula has supplied fuel to the world through oil, and Saudi Arabia has become the world’s largest oil producer by leveraging its abundant, easily extractable, and high-quality light crude oil. However, as energy demand continues to rise, the easily accessible oil fields around the world are running out, forcing oil-producing countries in the Middle East, led by Saudi Arabia, to turn to oil sources with larger reserves but greater difficulty in extraction—heavy oil buried beneath deserts. According to estimates by the U.S. Geological Survey, global reserves of heavy oil amount to about 3 trillion barrels, and at the current global consumption rate, these reserves will last for approximately 100 years. However, with current technology, only a small portion of those, about 400 billion barrels, can be extracted. The high viscosity of heavy oil makes its extraction more difficult, and the cost of refining it into gasoline is much higher compared to light oil. All these factors contribute to rising extraction costs for both existing and new oil fields, which makes it particularly important to introduce advanced extraction equipment with high technological capabilities. However, the world’s major oil-producing countries have already completed or are committed to completing the nationalization of their oil resources. Through three waves of nationalization, countries such as Mexico, Middle Eastern nations led by Saudi Arabia, and Latin American countries represented by Venezuela have broken the tradition of Western oil companies earning huge profits by exploiting the human and material resources of oil-producing regions, by supporting state-owned oil companies in extracting oil from their own territories and by preventing Western oil companies from investing in those operations. At the same time, since most major oil-producing countries are developing nations, their extraction equipment and refining capabilities are relatively backward, with low levels of technological sophistication, which prevents them from meeting the increasing challenges associated with oil extraction as well as the higher standards required for refining. Rejecting funding from Western oil companies may effectively protect its own interests from being undermined, but in the long run, it is detrimental to maintaining its oil production and quality. Currently, as the difficulty of oil extraction increases, many oil-producing countries have gradually abandoned a fully state-owned oil system and turned to seek help from Western oil companies. Saudi Arabia and the U.S. company Chevron Corp. jointly extract Wafra heavy oil. Bahrain is extracting heavy oil from the Awali oil field with the help of Occidental Petroleum Corp. in California, USA ； In 2009, the UAE and Praxair Inc. of Connecticut, USA, collaborated on a pilot project to increase the production of heavy oil from the Zakum oil field. Oman has been particularly ambitious regarding its heavy oil projects, hoping to use them to compensate for the significant decline in light oil production. In 2007, Western Oil Company launched a steam injection project at the Mukhaizna oil field in Oman, and the output of this field increased by 15 times compared to when the company took control of it in 2005. Last year, Oman Oil Company, in collaboration with Royal Dutch Shell PLC and other companies, launched a $2 billion project aimed at using a similar technology to increase the production of the Marmul oil field. Furthermore, as mentioned in previous analyses, as oil reserves and quality continue to decline, oil sands have become the main source of new oil production worldwide. Apart from Canada, major oil companies are also focusing on all potential oil sands production areas. Three-fifths of the exploration and development projects that Chevron is carrying out are located in the Gulf of Mexico, Angola, and the deep seas of Nigeria. Shell has already begun operating in ultra-deep waters in the Niger Delta, and is pursuing plans to explore and develop oil and gas resources on the Arctic shelf, advancing into the Baffin Sea, 30 nautical miles off the coast of Alaska. Oilsand is also known as “tar sand,” “heavy oil sand,” or “asphalt sand.” It appears like black molasses, and its extraction method is completely different from that of conventional oil. Simply put, oil sand extraction involves “digging up” oil, rather than “extracting” it. As a non-conventional oil resource, it has large reserves, but its extraction cost is higher compared to traditional oil sources. In recent years, as international oil prices have continued to rise, competition for oil resources has intensified, and oil sands have gained increasing attention. Currently, in addition to technical challenges, the environmental consequences associated with oil sand extraction also need to be given serious consideration. The process of separating crude oil from asphalt requires a large amount of water and energy, and it generates the notorious \"tailings\" – residues composed of leftover sand, residual asphalt, water, clay particles, and pollutants – which cause severe damage to the local ecosystem. Canada, a country with large reserves of oil sands, is making various efforts to achieve economic benefits from their extraction while protecting the environment. The most feasible approach at present is for the entity that carries out the extraction to be responsible for its environmental protection, and to minimize environmental damage by improving the efficiency of the extraction processes. However, the extent of actual implementation remains to be seen. 4. Potential future supply-side projections: Based on the above analysis of the reserve-to-production ratio, crude oil quality, and extraction difficulties, we believe that the potential global oil supply in the future will mainly come from two categories. Firstly, it is one of the major net oil suppliers in the world that possesses relatively high reserves and still has significant production potential in the future. Due to the inertia in oil production, as well as the fact that its extraction technologies, equipment, and supporting infrastructure are difficult to change, the supply structure will not be easily disrupted in the medium term. Therefore, to determine its development trend in the long term, it is necessary to assess its ability to maintain rapid growth. Based on this, such categories are further **divided into two types. Countries that currently have a strong net oil supply capacity and high reserves and production levels, and are capable of achieving accelerated growth in oil production in the future; in the long term, they will become major oil suppliers, including Saudi Arabia, the United Arab Emirates, Iran, Kuwait, Iraq, and Canada. Among them, Middle Eastern oil-producing countries led by Saudi Arabia possess large oil reserves and stable production levels over the long term; they have always been major forces in oil production. Considering their reserve-to-production ratio, they have strong capacity to continue drilling, and it is expected that they will remain major oil suppliers for a considerable period of time to come. Canada, with its abundant oil sands resources, has become a major source of new oil production worldwide. As traditional oil reserves continue to decline, this type of oil field is likely to become the new focus of the oil industry in the future. Due to international political factors, there are significant uncertainties regarding Iran’s future oil production capacity. Iran is located between two major energy hubs: the Persian Gulf and the Caspian Sea. This geographical location not only endows Iran with vast energy reserves but also provides it with natural geopolitical advantages. Currently, Iran ranks third in the world in terms of proven oil reserves and fifth in terms of oil production, boasting abundant oil resources and strong extraction capabilities. At the same time, Iran controls the eastern coast of the Gulf of Persia, which enables it to easily block the Strait of Hormuz in times of war, take control of the Gulf of Oman, and prevent energy-producing countries in the Gulf of Persia from transporting their energy to the rest of the world by sea. Current international political issues have become the biggest threat to Iran’s oil production. Given Iran’s tough stance toward the West and the nuclear issue, the United States and the European Union have taken measures to impose sanctions on it; the U.S. D’Amato Act imposes economic sanctions on Iran, while the EU plans to impose a oil embargo on it as well. Iran’s energy exports to the West have been constrained by various factors; as a result, cooperation with Asia has become a key focus of Iran’s energy strategy. Over half of Iran’s crude oil exports are destined for Asian countries such as Japan, China, India, and those in the ASEAN region. Admittedly, once Iran’s international political issues are resolved, its oil production capacity could be limitless. However, there are currently no signs of any easing in the issue of Iran’s nuclear weapons; instead, the situation is worsening, and the possibility of war is increasing. Therefore, it is difficult to be optimistic about Iran’s future oil production capacity. Among the net suppliers with relatively high reserves at present, the second category **currently shows a trend of over-exploitation in terms of oil production relative to its reserves; due to production inertia, they will be able to remain major oil producers and play an active role in the world oil market in the short term, but they do not have strong capacity for sustained growth, such as Russia. Currently, Russia’s domestic economy is highly dependent on the energy sector, and it has regained momentum thanks to its abundant energy exports. If there is a shortage of energy supply in the long term to come, it could deal a severe blow to economic recovery, and this issue must be given serious attention. The second category to be discussed regarding the supply side in the future should be those with a very high reserve-to-production ratio, but currently low net supply capacity. Venezuela and Kazakhstan fall into this category. The biggest problems in Venezuela’s oil production stem from international politics, oil quality, and extraction technology. On the international political front, Chávez’s tough stance toward the West since he came to power has restricted Venezuela’s oil export options; Venezuela’s main oil fields are located in the eastern Orinoco River basin, and the oil produced there is mainly heavy crude. Fully exploiting the crude oil resources in this region requires substantial funds, advanced technology, and specialized personnel. After coming to power, Chavez worked to nationalize the oil industry; following the major strike in 2003, Venezuela **dismissed a large number of managers and employees from oil companies. This has resulted in a shortage of specialized talent in the field of oil production, which has not yet been resolved. Moreover, the complete nationalization policy has led to a lack of technical support for oil extraction in Venezuela. Venezuela’s **Petroleum Company (PDVSA) faces various difficulties, including financial, technical, and human resource issues. In the future, if Venezuela is able to ease its tensions with the West and open up its oil sector to enhance international cooperation, its oil production capacity will be greatly enhanced. But for now, it remains uncertain whether such signs of easing will appear. Kazakhstan is rich in oil resources, the majority of which are found in its Caspian Sea region. Currently, Kazakhstan has 223 oil fields, and its proven reserves rank among the highest in the world, at around 5 billion tons – accounting for over 2% of the world’s total proven reserves. Currently, the exploration risks and difficulties arising from the prolonged deadlock over the division of the Caspian Sea are the main obstacles to oil production in Kazakhstan. Kazakhstan’s future oil development relies mainly on the Kashagan, Tengiz, and Karachaganak oil and gas fields in its Caspian Sea region. However, the geological structure of the Kashagan oil and gas field is complex, making development difficult ； The Tianjiz and Karachaganak oil and gas fields have been in operation for many years; the degree of oil extraction there is high, the water content is high, and the development processes are complex. Incomplete supporting oil and gas processing facilities as well as transmission pipelines will all hinder an increase in production. Caspian Sea oil has now become a focal point of competition among various forces, and the ability to navigate through these complex interest dynamics effectively is key to the future development of Kazakhstan’s oil industry. Through the above analysis, we have a fairly good idea of the future development trends in the global oil supply side. Next, we will provide additional information on two cases in Latin America where oil production is currently high, but these regions will not be part of the future oil supply landscape. Mexico and Brazil currently have high oil production levels, ranking among the top ten countries in the world in terms of oil output. However, in terms of proven reserves and production capacity, its potential for long-term exploitation is insufficient. It must also be recognized that both Mexico and Brazil are developing countries with relatively rapid rates of development; they belong to the first tier of such countries. Their potential for oil consumption is huge in the future. Therefore, even if their oil production remains stable, a large portion of that oil will have to be used domestically, making it difficult for them to become major oil suppliers. Therefore, it was not taken into account when assessing the global oil supply side. Above, we have analyzed global oil production and reserves, crude oil quality, and the difficulties associated with extraction, in order to provide predictions regarding the future supply side of oil worldwide. The main suppliers of oil in the future world will be Saudi Arabia, the UAE, Iran, Kuwait, Iraq, Russia, Canada, Venezuela, and Kazakhstan. Among them, Russia faces the risk of over-exploitation; it is expected to maintain a considerable production capacity in the next five years, but its status as a major oil supplier in the long term is at risk. The main problems affecting Iran’s and Venezuela’s oil production capacity stem from the international political sphere, while in Canada they arise from environmental issues. Once these issues are resolved, the oil production capacity of the aforementioned countries will surely be fully utilized, providing strong support for the world’s oil supply. Based on the oil supply capabilities and risks faced by various countries, as well as their long-term equilibrium supply levels, we predict the global oil supply landscape over the next 10 years and make a rough estimate of the proportion of oil production contributed by each country. It is estimated that over the next 10 years, in the global oil supply side, **with the exception of a slight decline in Russia’s production share, the production shares of all other countries will increase to some extent. Canada is expected to see the greatest increase in oil production, thanks to its abundant oil sands resources, stable domestic environment, and well-developed infrastructure; whereas Iran’s oil production growth will be relatively modest due to its high political risks. The aforementioned eight countries together account for over 60% of the world’s oil production, a figure that is close to their share of total global reserves. For a long time to come, stable global oil supply will be able to provide strong support for the economic development of these countries. IV. The Pattern of International Oil Demand and Its Development Trends 1. Rising International Oil Demand According to the International Energy Agency’s (IEA) monthly oil market report of March 2012, it was predicted that the pace of economic growth would decline in 2011 (with global GDP expected to grow by 3.3% in 2012 compared to 3.8% in 2011), and high oil prices would also suppress the increase in oil consumption; yet the strong demand for international oil continued unabated. The new demand from developing **countries will offset the decline in demand from OECD countries**. In the OECD region, although the growth rate of oil demand has declined, its share remains substantial. Regionally, North America has the highest oil consumption, accounting for over 25% of the global total, followed by Europe and the Pacific region; the combined consumption of these three regions accounts for over 50% of the global total. Looking at it in detail, there are significant differences in oil consumption among the OECD member countries. Among them, the United States accounts for 1/5 of the world’s total oil demand, making it the world’s largest oil consumer – a status that is in line with its role as the world’s most developed country. Japan follows closely behind, with its oil demand accounting for 5% of the world’s total; other developed countries have relatively equal shares. The EU’s oil consumption in 2010 accounted for 16.4% of the global total, giving it a significant share in the world’s oil consumption market as a whole. In contrast, in non-OECD countries, oil consumption accounted for 49.1% of the world’s total in 2011, an increase of 2.3% compared to 2010. The demand for oil there is growing rapidly, and these countries have become a force that cannot be ignored in the global oil market. Regionally, Asia and the Middle East have **high oil consumption, accounting for 22% and 9% of the world’s total respectively, and thus hold considerable influence on a global scale ； There are significant differences in oil consumption among various regions. Specifically, China has the highest oil consumption among developing countries, accounting for 10.6% of the global total; it is the world’s second-largest oil consumer, right after the United States. In addition, countries such as India, Russia, Saudi Arabia, and Brazil **see rapid growth in oil consumption, and they constitute the core of the global oil consumption market. Among those with high global oil consumption, they can be divided into three categories based on the proportion of imported oil in their total consumption. The first category consists of countries that are major oil producers and rely on self-production for their needs; the proportion of oil imported into these countries is small relative to their total oil consumption. Examples include Russia, Brazil, and Canada, where the share of imported oil in total consumption is less than 35% ； The second category **consists of countries that are major oil producers, but whose oil consumption is higher than their production capacity; the representatives of this category are the United States and China.** The third category **consists of net oil consumers, which import more than half of their oil needs and are highly dependent on global oil trade; examples include the five European countries as well as Japan, South Korea, and India in Asia. 2. In the future development of oil consumption, **it will play a key role. Looking at the overall situation of global oil consumption, the OECD countries and non-OECD countries are roughly equal in terms of volume. In terms of growth rate, **oil demand in developing countries is significantly higher than that in developed countries**; the growth rate of oil demand in the former in 2010 compared to 2009 was 5.5%, whereas in the latter it was only 0.9%, indicating a slow pace of growth. According to the IEA’s projections, the world’s four largest markets – China, the United States, Europe, and Japan – will continue to drive global oil demand in 2012. Of all products, diesel has the highest increase in demand, mainly due to the rapid growth in demand from non-OECD economies. Diesel, also known as oil residue, is a type of oil product obtained from the refining of petroleum. Due to their higher thermal efficiency, greater power output, lower fuel consumption, and improved cost-effectiveness compared to gasoline engines, diesel engines are being used more and more widely. It is primarily used as power for tractors, large vehicles, diesel locomotives, construction equipment, excavators, loaders, fishing boats, diesel generators, and agricultural machinery. Compared to gasoline engines, diesel engines have the advantage of cheaper diesel fuel, better efficiency, and no ignition system, resulting in fewer failures. However, due to the high operating pressure in diesel engines, the relevant components are required to have high structural strength and stiffness; as a result, diesel engines are relatively bulky and large in size ； Diesel engine fuel injection pumps and nozzles require high manufacturing precision, which results in higher costs ； Additionally, diesel engines operate roughly, with significant vibration and noise ； Diesel does not evaporate easily, making it difficult to start a cold engine in winter. Diesel vehicles with engines of the same displacement possess greater power. The growing demand for oil, particularly diesel, in developing countries, along with a stabilization in oil demand in developed countries, indicates that changes in a country’s oil demand are related to the stage of its economic development. We can use this to make predictions about the future development of oil demand. From the perspective of historical development patterns, the relationship between a country’s oil demand and its economic development mainly exhibits two phases. Firstly, with the rapid economic growth in emerging economies, particularly in heavy industry, energy demand is set to experience explosive growth over a period of time. For example, in the 1970s, South Korea began to focus on promoting the development of heavy and chemical industries. In 1973, South Korea announced and implemented the \"Heavy and Chemical Industry Development Plan,\" directing substantial investment toward these industries. This period was the dawn of industries such as shipbuilding, steel, automobiles, electronics, and petrochemicals in South Korea, and it was also when the process of urbanization in the country began to accelerate. With the rapid development of heavy industry, demand for oil, particularly diesel, in South Korea also increased sharply, reaching a peak in the mid-1970s. It then declined rapidly due to domestic political changes, before experiencing another wave of growth in the early 1980s. South Korea’s membership in the OECD in 1996 marked its official entry into the ranks of developed countries. The current pattern of oil demand in developed countries has shifted to the second phase, namely growth in oil demand driven by consumption. At present, all the major developed countries have shifted from being manufacturing hubs to consumer markets, and their oil consumption is driven primarily by domestic demand for durable consumer goods such as vehicle fuel. For example, the United States completed its heavy industry phase as early as the 1930s and remained the world’s consumer market for a long time. Therefore, over the past 30 years, its oil consumption has followed the same trend as its car sales. With a favorable domestic economic situation, residents’ purchasing power and expectations have increased, leading to higher demand for cars, and consequently an increase in demand for oil, particularly gasoline ； With the domestic economic situation being precarious, as during the subprime mortgage crisis in 2009, declining consumer purchasing power and pessimistic expectations led to a sharp drop in demand for cars, resulting in a steep decline in demand for oil, particularly gasoline. The economic development stages that developed countries have gone through may be or are currently being experienced by developing countries ； At present, the developing countries are in a period of rapid economic growth; the heavy industry sector, driven by investment, is growing strongly, which results in high demand for oil, especially diesel. It indicates that the current development is **mostly in the first stage of economic growth, which is consistent with its role as a global manufacturing hub. Taking Brazil as an example, it is following the same path that emerging economies must take; with rapid economic growth, there has been an explosive increase in energy demand. A few years ago, the discovery of deep-sea oil led to predictions that Brazil would become a major player in the world’s oil supply. However, over those years, due to the high time costs associated with developing deep-sea oil resources, along with its rapidly growing economy and increasing demand for fossil fuels, Brazil has turned into a net oil importer. As a result, Brazil is gradually becoming another major energy-consuming market in the world. Over the past three years, Brazil’s economic growth has accelerated, leading to a significant increase in demand for oil, particularly diesel, in industrial production. According to a report published in Rio de Janeiro on January 2 by Oil & Gas News, rising domestic demand in Brazil has forced Petrobras to seek alternative sources of supply; as a result, Petrobras recently signed an agreement with a Kuwaiti oil company regarding the purchase of diesel in 2012. As domestic refining capacity fails to keep up with the growing demands of Brazil’s industry, a diesel shortage in the country has forced it to increase its imports of diesel from Asia and the Middle East over the next two years. Based on the above analysis, we believe that world oil demand will increase steadily in the future, mainly falling into two categories. Firstly, developed countries have largely completed their industrialization process, and their oil demand is primarily driven by strong domestic end-use consumption. Especially driven by automobile sales. Its demand will remain relatively stable, with no significant surge, and it is in line with the domestic economic situation as well as residents’ expectations regarding future economic prospects ； The main source of growth in future oil consumption will be in developing countries. The oil there is primarily used to meet the rapid development of domestic industries, especially those in the heavy industry sector; as a result, there could be a sharp increase in oil demand, particularly for diesel, which will be the main driving force behind global oil demand in the future. V. Summary of Views This article provides an overview of the basic situation regarding global oil reserves, production, and consumption, and makes predictions about the future development trends in these areas. The main views derived are as follows. On the supply side, based on an analysis of global oil production and reserves, crude oil quality, and extraction difficulties, the potential sources of oil supply in the future will mainly fall into two categories. Firstly, it is one of the major net oil suppliers in the world that possesses relatively high reserves and still has significant production potential in the future. Among these, those based on a country’s ability for sustained rapid growth in oil production can be further divided into two types. Countries that currently have a strong net oil supply capacity and high reserves and production levels, and are capable of achieving accelerated growth in oil production in the future; in the long term, they will become major oil suppliers, including Saudi Arabia, the United Arab Emirates, Iran, Kuwait, Iraq, and Canada. The second case is that **currently, oil production in these countries tends to be higher than what their reserves would allow. In the short term, due to their production inertia, they can remain important oil-producing nations in the global oil market, but they lack the capacity for sustained growth, such as Russia. The second category to be discussed on the supply side in the future should be those with a very high reserve-to-production ratio, but currently low net supply capacity. Venezuela and Kazakhstan fall into this category. Based on an analysis of the oil supply capabilities and risks faced by various countries, we forecast the global oil supply landscape over the next 10 years. The main suppliers of oil in the future world will be Saudi Arabia, the UAE, Iran, Kuwait, Iraq, Russia, Canada, Venezuela, and Kazakhstan. The G8 countries account for over 60% of the world’s oil production, a figure that is close to their share of total global reserves. Overall, the world’s oil supply is expected to remain stable in the future, providing strong support for the economic development of various countries. From the perspective of historical development patterns, the relationship between a country’s oil demand and its economic development mainly goes through two stages. Firstly, with the rapid economic growth in emerging economies, particularly in heavy industry, energy demand is set to experience explosive growth over a period of time. Thereafter, once a country transitions from a developing to a developed state, oil demand will grow driven by consumption. At present, all the major developed countries have shifted from being manufacturing hubs to consumer markets, and their oil consumption is driven primarily by domestic demand for durable consumer goods such as vehicle fuel. World oil demand is set to increase steadily in the future, mainly falling into two categories. Firstly, developed countries have largely completed their industrialization process, and their oil demand is primarily driven by strong domestic end-use consumption. Its demand will remain relatively stable, with no significant surge, and it is in line with the domestic economic situation as well as residents’ expectations regarding future economic prospects ； The main source of growth in future oil consumption will be in developing countries. The oil there is primarily used to meet the rapid development of domestic industries, especially those in the heavy industry sector; as a result, there could be a sharp increase in oil demand, particularly for diesel, which will be the main driving force behind global oil demand in the future.