* Shale oil will contribute to lower demand for OPEC crude
* OPEC raises long-term global oil demand estimate
* Assumes oil price will average $110/bbl in medium term
(Previous LONDON, adds OPEC comment from para 10)
By Alex Lawler and Georgina Prodhan
LONDON/VIENNA, Nov 7 OPEC could lose almost 8
percent of its oil market share in the next five years as the
shale energy boom and other competing sources boost rival
supply, offering the exporter group little benefit from rising
The Organization of the Petroleum Exporting Countries has
been slower than some to acknowledge the impact that hydraulic
fracturing, or fracking, is having on supply. Earlier this year,
it decided to carry out its own research into shale oil.
In its annual World Oil Outlook, OPEC said it expected
global demand for its crude oil to average 29.2 million barrels
per day (bpd) in 2018, down 1.1 million bpd from 2013, because
of increasing supply outside the 12-member group.
Under another, upside supply scenario, OPEC sees an even
larger drop in demand for OPEC crude to 28 million bpd in 2018 -
7.6 percent less than this year and 2 million bpd below what it
is currently producing.
"There is no shortage of oil and resources are plentiful,"
OPEC Secretary General Abdullah al-Badri said in the foreword to
the report. "Increasing global oil demand is supported by an
expanding diversity of supply sources."
OPEC, which holds 80 percent of the world's conventional oil
reserves, wants prices to be around $100 a barrel, which in
nominal terms is almost four times their level a decade ago.
Higher prices have helped to make a wider range of supply
commercially viable, including fracking, oil extraction from tar
sands and conventional oil wells in more remote locations and in
harder-to-tap reservoirs like ultra deep waters.
The U.S. shale boom has redrawn the landscape of oil trade.
Nigeria and fellow OPEC member Algeria have felt the heat,
losing ground in their most lucrative export market as U.S.
output, once considered to have peaked, rises and approaches
that of No.1 oil producer Russia.
Despite this, OPEC in its reference scenario is not worried
about shale oil, saying output is expected to decline after 2020
citing challenges including a rapid output decline from wells,
environmental concerns and rising costs.
"It is a welcome newcomer," Badri said of shale oil at a
news conference in Vienna. "They are drilling in the sweet spots
and I think they are out of sweet spots maybe in the coming
But that scenario assumes shale oil has no impact outside
North America and that decline actually occurs. So far, U.S.
shale oil output has continued to grow, defying predictions that
it would peak.
Shale is prompting interest and activity worldwide -
including in OPEC's top oil producer Saudi Arabia which is
preparing to use shale gas for power generation - and OPEC
concedes shale oil could have a wider impact.
"In addition to the potential for a more rapid expansion of
supply from North American tight oil, there are also additional
tight oil resources in other non-OPEC countries, particularly
Russia, Argentina and China," the report said.
Output of other crude oil and natural gas liquids could also
prove stronger than expected in Brazil and Russia, it said.
Previous editions of the OPEC report saw no significant
supply addition from shale oil although last year's acknowledged
for the first time that the impact could be "significant".
While OPEC sees its market share under pressure, the
long-term global demand for oil is benefitting from a healthier
In its reference scenario, OPEC forecasts world demand
reaching 92.5 million bpd by 2016, some 400,000 bpd less than
its forecast in last year's report.
By 2035, it sees consumption at 108.5 million bpd, up 1.2
million bpd from last year's report. Demand was 88.9 million bpd
Supply from countries outside OPEC is seen at 57.3 million
bpd by 2016 - up from the 56.6 million bpd expected in last
year's report. It is seen reaching 58.6 million bpd in 2018.
As well as shale, oil extracted from tar sands in Canada,
crude from the Caspian and Latin America, and biofuels in Brazil
and Europe are expected to provide growth.
In the face of sharply higher non-OPEC supply, OPEC would
face a choice of cutting its own output to boost prices, or
accepting a lower price to drive some of the more costly
competing supplies out of business.
For now, oil prices are expected to be steady or higher than
expected last year. The report assumes OPEC's preferred measure
of oil prices will remain at $110 a barrel to 2020
and rise to $160 by 2035, up $5 from last year's forecast.
OPEC has a target to produce 30 million bpd and meets on
Dec. 4 in Vienna to decide whether to adjust it. Badri said
prices were expected to hold above $100 - a level that OPEC
delegates say makes a change in output unlikely.
"Our assumption for the remainder of the year is for $100,
$110," he said. "This is really suitable to producers and
(Additional reporting by Michael Shields in Vienna; Editing by