The world is already reacting to high oil prices, but the reaction is not smothering demand for new supplies. The U.S. Energy Information Administration's (EIA) new short-term energy outlook (to 2007) shows the growth rate for oil slowed in 2005 relative to world gross national product, Guy F. Caruso, EIA administrator, said at the Cambridge Energy Research Associates conference in Houston recently. The impact of that softening isn't great. The forward strip on futures contracts on the New York Mercantile Exchange for oil stretches to more than $63 per barrel to 2012. The price hasn't had an impact on projects because those that will come onstream by 2010 are already well under way, he said. In addition, people already are building inventories for 2006. A lot of uncertainty limits the accuracy of the forecast. Production-decline curves are difficult to estimate and geopolitical, economic and natural disasters are major uncertainties. Among producers, Saudi Aramco's plans are clear, but other countries and regions, such as Venezuela and the Caspian, are hazy, he said. The EIA expects daily oil consumption will grow by 1.5 million barrels each year for the next five years, or by a total of 7.5 million by 2010, and much of that demand will continue to come from China. Caruso is confident that Saudi Arabia will meet its commitment to raise production by 2 million barrels per day to a total of 12.5 million by 2010, but Iraq probably won't reach its pre-war production level of 2.8 million per day until 2010. OPEC countries will add 4- to 5 million barrels per day by the end of the decade in spite of a continued decline in Southeast Asia, he added. The U.S. will add 1 million barrels per day of oil, but that figure comes off a 2005 base crippled by two major hurricanes, he added. BP's Thunder Horse Field in the Gulf of Mexico will add up to 300,000 daily barrels of production. In all, non-OPEC countries will have to come up with 2.5 million barrels per day by 2010 to meet anticipated demand. Overall, he said, OPEC, non-OPEC, conventional and nonconventional supplies will more than keep up with the 1.5-million-barrel demand increase. He expected 3- to 5 million barrels per day of spare capacity in 2010, up from average daily spare capacity of 3 million in recent years. Some 700,000 to 800,000 daily barrels will come from Canadian oil sands at the end of the decade, he added. Margaret Byl, vice president of strategy and development for Suncor Energy Inc., a major Canadian oil-sand producer, said Suncor plans to increase production from a current capacity of 260,000 barrels per day to 500,000 shortly after the end of this decade. The oil-sands industry should grow from producing 1 million barrels per day now to 2 million by 2010 and then grow by 1 million per day every five years, but it will need US$70 billion to reach the 2- to 3-million-barrel-per-day level. Helge Hove Haldorsen, president of Norsk Hydro Gulf of Mexico LLC, said the Norwegian company is exploring in the Gulf because it still has plenty of potential. The Minerals Management Service estimates 56 billion barrels remain to be found in the Gulf and research firm Wood Mackenzie estimates 40 billion, he said. A lot of undeveloped Gulf blocks are returning to the bidding process between 2006 and 2008, he added. Another reason for optimism in the Gulf is a 43% industry success rate in deep water. There were nine discoveries last year. Frontiers are being stretched as well. Chevron Corp. recently drilled the deepest well in the Gulf of Mexico-below 34,000 feet. One barrier to active exploration is higher costs for services. Now, he said, the dayrate for a deepwater rig is around $400,000. That probably will peak in 2009 around $550,000 a day.