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Oil price will bounce back soon: BHP

Business News, 18 May 2015

Oil prices could soon spike higher because of a lack of new discoveries, BHP Billiton's petroleum boss says. Just as the US shale industry's growth by 3 million barrels a day in the past four years had been staggering, to which BHP is a significant contributor, so too had the decline in new oil discoveries, Tim Cutt says.

Oil prices dived from more than $US100 per barrel a year ago to as low as $US46 in early 2015 amid an oversupply in the global market. But Mr Cutt said that, on average during the past two decades, the industry had been finding less than half the 30 billion-plus barrels a year that it currently consumes, meaning prices could begin to climb. "In the past four years discoveries were less than 10 billion barrels per year and in 2014 they amounted to less than six," he told the Australian Petroleum & Exploration Association conference today. "That's only a fifth of current consumption.

"This is a staggering trend and represents an opportunity and responsibility."

That opportunity was to find new sources around the globe, with US production likely to peak within the next decade, Mr Cutt said.

Projected future demand for energy is high, up by as much as 70 per cent in the next two decades.

He said demand for petroleum liquids was expected to grow by more than 1 million barrels a day but with the resource base declining by 3 million to 4 million barrels a day, there was a 4 million to 5 million barrel gap that had to be filled.

Prices had similarly declined for more than a decade before a rapid leap in Chinese demand in the 2000s.

The industry struggled to meet demand then and might this time too with energy companies cutting investment, but Mr Cutt predicted the recovery would happy far more quickly.

"In addition to looking inward to simplify and become more productive, we must also push for policy and regulatory frameworks that enable our industry," he said.

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