Even so oil companies' reluctance to let current nine-year price highs lurethem into bigger spending plans will tether non-Opec growth and could take arenewed toll on new output from 2001, the analysts added. Growth in the USGulf of Mexico and North Sea fire the higher forecasts for this year asfields in development for the last couple of years rise to peak output.

"We see around 1.3 million BPD of new non-Opec output this year -- and wehaven't even factored in the new price highs yet," said Mike Barry ofLondon's Energy Market Consultants.

Gains of this order would be near non-Opec's mid-nineties peaks, althoughmost analysts, like London's Centre for Global Energy Studies (CGES), expectincreases to be nearer 1 million BPD from last year's output of around 42million BPD.

"The year 1999 saw a massive increase in non-Opec production capacity. Thisshould underpin this year's growth as new offshore and onshore fields reachtheir peak," said CGES in its Global Oil Report.

Deepwater plays lift supply growth
New deepwater provinces in Brazil and Angola will bolster the growth, aswell as rising flows in Australia and Sudan and a recovery in North Americanonshore heavy oil output. This would help fill the supply void likely ifOpec prolongs its year-long price rescue deal to hold off four million BPDof supply -- a strategy that has steadily worn down consumers' stocks of spareoil.

Recent signs that Opec and non-Opec ally Mexico will extend the cuts beyonda planned March expiry helped push benchmark Brent to a new nine-year peakof $26.30 a barrel on Wednesday. Solid non-Opec growth is vital if theprolonged curbs are not to inflict a supply shortfall approaching 1.5million BPD this year, said analysts. And some are less optimistic onpotential growth, warning that the oil industry's desire to keep spendingtight will hasten speedy declines from existing streams.

"Production is likely to plateau in the first quarter of 2000," saidWashington's Petroleum Finance Company (PFC) in a recent report, predictingthat non-Opec output will show a 7,00,000 BPD overall annual rise thisyear.

"Very little production outside the US Gulf of Mexico and the North Sea willcome online in the next two quarters." Oil companies have only increasedupstream spending by around 11 per cent this year, said a recent report bySalomon Smith Barney bank, not even erasing the industry's near 20 per centcapex cuts enacted after 1998's price crash.

Non-Opec supply might fall
Houston consultants Simmons and Co say the lack of spending means non-Opecproduction may not even rise at all this year. "There are depletion ratesworking against you the whole time and the effect of what spending increasethere has been will not show through until at least the second half of theyear," said Simmons and Co's Roger Read.

The industry's spending slowdown could take its real toll on non-Opec outputfrom next year as investment in mature regions like the North Sea fallsaway, some caution. "Without new investment non-Opec supply will certainlyfall in the longer run as the industry needs to add around two million BPDof new production capacity to stand still," said CGES.

Yet analysts also warn that if Opec fails to raise output soon then it willultimately just bring non-Opec supply flooding back onstream -- in a repeat oflast decade's pattern that finally sent oil prices below historic $10 lows ayear ago.

"It would be the biggest mistake Opec could make to keep these quotas beyondMarch," said Dresdner Kleinwort Benson's Mehdi Varzi. "There is nowhere inthe world with production costs higher than $15 and a stretch with pricesnear $25 will mean it's only a matter of time before everyone starts pumpingagain."

--(Reuters)