Issue becoming urgent as prices fall, investment decisions delayed: IEA report
Business Times 30 Oct 08;
(LONDON) Output from the world's oilfields is declining faster than previously thought, the Financial Times reported yesterday.
Quoting from a draft International Energy Agency report it had obtained, the newspaper said the IEA, which studied the biggest fields, showed that without extra investment to raise production, the natural annual rate of output decline was 9.1 per cent.
The findings by the rich consumers' energy watchdog are contained in its annual World Energy Outlook report.
The report suggested the world would struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and to meet long-term demand, said the Financial Times.
IEA said the issue would become even more acute as prices fell and investment decisions were delayed.
The IEA acts as policy adviser to 28 member countries, including the United States, Japan, Canada and leading European nations.
It forecast that China, India and other developing countries' demand would require investments of US$360 billion each year until 2030, said the newspaper.
'The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,' the IEA was quoted as saying.
The watchdog said the world needed to make a 'significant increase in future investments just to maintain the current level of production'.
The battle to replace mature oilfields' output could even offset the decline in demand growth, which had given the industry a reprieve in the past few months, it said.
The Financial Times said the IEA predicted in its report, due to be published next month, that demand would be dampened, 'reflecting the impact of much higher oil prices and slightly slower economic growth.'
The IEA expected oil consumption in 2030 to reach 106.4 million barrels a day, down from last year's forecast of 116.3 million, said the newspaper.
It said the projections could yet be revised lower because the draft report was written a month ago, before the global financial crisis deepened after the collapse of Lehman Brothers.
Oil prices had rallied soon after the head of the Opec oil producers cartel warned on Tuesday that it could cut output again if prices keep falling despite an emergency reduction last week.
Opec, which produces 40 per cent of the world's crude, could hold a new emergency meeting before its next scheduled session in December, the Organisation of Petroleum Exporting Countries (Opec) secretary general Abdalla Salem El-Badri said.
'We will have to wait and see how the market will react ... (but) if this problem continues then we will have another cut,' he told reporters on the sidelines of an oil conference in London.
'If the situation deteriorated to the point where we had to have another meeting before Algeria we will do that,' he said, referring to the next scheduled Opec meeting in Oran, Algeria, on Dec 17.
'If the market reacted badly (to the cut in oil production) we will meet before that.' - Reuters
