Among the 11 OPEC members, Jackson said, "Really only Indonesia seems to be struggling to expand capacity."

The question is, does this new capacity make up for depletion and demand growth? ODAC says no, CERA says yes.

WASHINGTON (AP) -- Global oil production is not likely to peak anytime soon, contrary to talk that has helped propel prices close to $60 a barrel, although lower prices may still be a few years away, a prominent energy consultancy said Tuesday.

Cambridge Energy Research Associates said that, instead of a crest being reached sometime this decade, an inflection point in world oil output will occur sometime beyond 2020, after which production will plateau for several more decades.

In a report that builds upon earlier analyses by the Cambridge, Mass.-based consultancy, CERA said it believes that between now and 2010 there will be a substantial increase in worldwide oil production capacity. It said that "as a result, supply could exceed demand by as much as 6 million to 7.5 million barrels per day later in the decade" that will lead to an extended period of lower prices beginning as early as 2008.

The price of oil could "slip well below $40 a barrel as 2007-08 nears," CERA said.

Today, the supply cushion is only about 1.5 million barrels per day and that has markets extremely nervous about the possibility of a supply disruption. Oil prices are up more than 55 percent over the past year, in part because of the threat of hurricanes, terrorist attacks and labor strife in key oil production regions, such as the Gulf of Mexico, Iraq and Nigeria.

"Today's high prices are the result of an exceedingly tight and precarious supply-demand balance," CERA chairman Daniel Yergin said in a statement. "Yet significant new capacity will be coming on stream... The addition of that new capacity is what is required to improve the supply demand balance."

The CERA report is a counterweight to the predictions of some energy experts, who in recent years have been publishing books filled with charts and graphs that aim to prove that world oil production is about to peak, if it hasn't already.

The most recently published book to make that claim is called "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," which was written by Matthew R. Simmons, a Houston-based investment banker who is well-known in the petroleum industry.

Simmons argues that Saudi Arabia's best oil fields are aging rapidly and that the rest of the world needs to question the veracity of the kingdom's claim that it still has 260 billion barrels of petroleum left to pump.

The CERA report acknowledges that there will be fewer giant oil fields found and produced after 2010, but it argues that with new technology and multibillion dollar investments the petroleum industry has the ability to provide more than enough supply to meet rising demand.

"The main risks to our supply expansion scenario are above ground, not below ground -- changes in the political and operating climate that could delay expansion," Yergin said.

The debate about whether global output is on the cusp of an irreversible decline is not new -- petroleum engineers and executives have been hashing it out for decades. But it has garnered extra attention amid soaring prices and the revelation last year that Royal Dutch/Shell Group overstated its reserves, a key measurement of an oil company's future profit potential.

Lawrence J. Goldstein, president of PIRA Energy Group in New York, said he was present when Simmons met with Saudi officials to gather information for his book and that he remains an "agnostic" when it comes to the peak oil debate.

It isn't entirely clear, Goldstein said, whether today's tight global supply reflects a geologic limit that is being reached or if it merely signifies that the industry hasn't made the necessary investments to keep up with rising demand.

"The truth is, I don't know whether we're resource-constrained or effort-constrained, and neither does anybody else," he said.

On the New York Mercantile Exchange on Tuesday, July crude futures fell 32 cents to $59.05 per barrel.

Both men expect non-conventional sources of crude to play a major role in meeting demand. Those include condensates, natural gas liquids, Canadian oil sands, and the ultra-deepwater. Those sources could account for nearly 35% of supply by 2020, CERA said.
CERA said it doesn't accept the view that world oil production is close to a peak. Rather, the analysts see the so-called "inflexion" point materializing in the third or fourth decade of the century, and in contrast to a "peak", they expect an "undulating plateau" to persist for several decades.
"One of the biggest challenges will be to find the giant projects of the next decade, which will put great pressure on the search for high-quality, significant opportunities that in themselves meet the criteria of 'big," Esser and Jackson said.
After analyzing the data, CERA predicted that the capacity of the Organization of Petroleum Exporting Countries will rise to 45.6 million barrels per day in 2010 from 36.8 million barrels per day in 2004.
The analysts expect non-OPEC capacity to quickly increase by the end of the decade with additions of 7.5 million barrels per day to 55.8 million barrels per day.
Calling Saudi Arabia "underexplored," the analysts predicted that the kingdom's capacity for production would increase by 1.5 to 2 million barrels per day to 12.5 million barrels per day in 2010