After the credit crunch, the oil crunch: watchdog warns over falling supplies
• World needs to find 64m extra barrels a day by 2030
• Green revolution required to replace fuel sources
David Gow, guardian.co.uk 12 Nov 08;
The International Energy Agency is to call today for an energy revolution and a "major de-carbonisation" of global fuel sources as the world confronts tighter oil supplies caused by shrinking investment.
The energy watchdog is warning for the first time that oil output could pass its peak as power shifts from "super-majors" to national companies controlled by producer states. It highlights a potential oil-supply crunch.
The unprecedented wake-up call comes as the European commission says in a report due out tomorrow that while oilfields decline, the balance of supply and demand will become "increasingly tight, possibly critically so".
It adds: "The need to address climate change will require a massive switch to high-efficiency, low-carbon energy technologies."
The commission report warns that oil supplies are limited, with reserves and spare output capacity concentrated in a few hands. "Recent severe price rises and volatility on oil and gas markets reflect these changing trends", it says.
Both bodies express heightened anxieties that the west's energy requirements could be squeezed as emerging economies such as China consume more oil and conclude long-term deals with oil-rich states. This could be exacerbated by a restriction on investment by the Organisation of Petroleum Exporting Countries (Opec) - possibly joined by Russia - to boost revenues. Opec will control 51% of output by 2030 compared with 44% in 2007.
Rising demand
The IEA's latest World Energy Outlook predicts that global energy demand will increase 45% between now and 2030 and oil prices will rise to $200 a barrel by then - or $120 at 2007 prices.
It says the recent surge in prices to just shy of $150 this summer has highlighted the "ultimately finite" nature of oil and gas reserves.
"The immediate risk to supply is not one of a lack of global resources, but rather a lack of investment," the report says. "Upstream investment has been rising rapidly in nominal terms but much of the increase is due to surging costs and the need to combat rising decline rates - especially in higher-cost provinces."
"Expanding production in the lowest-cost countries will be central to meeting the world's needs at reasonable cost."
The IEA was founded during the oil crisis of 1973-74 and acts as energy policy adviser to 28 countries including Britain.
Global oil demand and supply is projected to rise from 84m barrels a day to 106m in 2030, with all of this increase driven by emerging economies, but the IEA sees conventional oil output peaking before then. Most of the increased production will come from natural gas liquids and non-conventional technologies such as Canadian oil sands.
Adequate investment
The agency says there is enough oil to support rising demand and output, with proven reserves of up to 1.3tn barrels - or enough for 40 years - and potential reserves of as much as 3.5tn barrels. But it says the increased output "hinges on adequate and timely investment".
Up to 64m barrels a day of extra gross capacity - the equivalent to almost six times that of Saudi Arabia today - needs to come on stream between 2007 and 2030. Almost half of that is required by 2015, with an extra 7m barrels a day over current plans approved within the next two years "to avoid a fall in spare capacity towards the middle of the next decade".
The IEA warns bluntly: "There remains a real risk that under-investment will cause an oil-supply crunch in that timeframe."
It says a detailed analysis of 800 fields owned by 54 "super-giants" shows that the decline in production is likely to accelerate as oilfields become depleted. This means that the global decline rate of 6.7% for fields past their peak will increase to 8.6% in 2030 and may fall even faster, at 10.5%, without adequate investment.
The 50 largest oil companies, the IEA says, plan to invest $600bn (£380bn) in upstream oil and gas by 2012. But such companies often do not have access to the regions with the largest reserves. The national companies in countries such as Saudi Arabia and Venezuela will account for 80% of increased output by 2030.
"The dominance of national companies may make it less certain that the investment projected in this outlook will actually be made," it says, pointing to the lack of financial firepower and technical expertise of such firms.
Claude Turmes, a Green MEP and rapporteur on renewables for the European parliament, said: "IEA is talking about a huge disruption to the market between now and 2015 and in the long-run - without a huge investment in Saudi, Iraq and Iran which may not be in their interest."
Like the commission, the IEA calls for a dramatic shift towards "greener" energy to prevent global warming, saying that, on unchanged policies, the average temperature will rise 6°C by the end of the century. That is triple the maximum increase sought by the EU in its climate change policies.
It says that, on current trends, greenhouse gas emissions will rise by 45% to 41 gigatonnes (Gt) in 2030, with three-quarters of the increase coming from China, India and the Middle East as urbanisation there grows exponentially.
In its most ambitious scenario for cutting emissions and limiting the global temperature rise to 2°C, it says hundreds of millions of homes and businesses will have to change the way they use energy.
OECD countries will have to cut emissions by 40% from 2006 levels by 2030 while emerging economies will have to limit emissions growth to 20%.
Greenhouse gases could rise 45 per cent, IEA say
The world is on course for a 45 per cent increase in greenhouse gas emissions by 2030, the International Energy Agency (IEA) has warned.
By Paul Eccleston, The Telegraph 12 Nov 08;
This would lead to a temperature rise of 6ºC when scientists have warned that this must be kept below 2ºC to avoid catastrophic climate change.
The IEA's World Energy Outlook report says increasing demand and use of energy is unsustainable and has to be curbed.
It says use of low-carbon energy through hydropower, nuclear, biomass, and other renewables needs to expand from 19 per cent in 2006 to 26 per cent by 2030.
Coal and gas fired power plants will also have to be equipped with carbon capture and storage technology (CCS) to limit the average temperature rise to even 3ºC.
The switch to more low carbon energy will require extra investment of £2.7 trillion – equivalent to 0.2 per cent of GDP, – the IEA report said, with an average £11 spent per head worldwide on more efficient cars, appliances and buildings. The improved energy efficiency would deliver fuel-cost savings of almost £4.5 trillion.
Three-quarters of the projected rises in energy-related CO2 emissions will be accounted for by China, India and the Middle East.
IEA executive director Nobuo Tanaka said: "Current trends in energy supply and consumption are patently unsustainable – environmentally, economically and socially – they can and must be altered.
"Rising imports of oil and gas into Organisation for Economic Co-operation and Development (OECD) regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes.
"At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6°C."
The report says that, assuming no new government policies, world energy demand will grow by 1.6 per cent per year on average between 2006 and 2030 – an increase of 45 per cent. This figure is lower than projected last year because the economic slowdown has reduced demand.
Demand for oil will rise from the current 85m barrels per day to 106m barrels by 2030. Demand for coal will rise more than any other fuel – despite the environmental damage it causes – accounting for more than a third of the increase in energy use.
The renewable energy industry will grow rapidly and will become the second-largest source of electricity soon after 2010.
The report claims oil will remain the world's main source of energy for many years to come even with the rapid development of alternative renewable energy technology but the amount of oil remaining, production costs and consumer price will remain unpredictable.
"One thing is certain", said Mr Tanaka, "while market imbalances will feed volatility, the era of cheap oil is over".
He said big international oil and gas companies would in the future have limited scope to increase reserves and production while in contrast national companies are projected to account for about 80 per cent of the increase of both oil and gas production to 2030.
But it was uncertain whether the companies will be willing to find the investment needed and increasing production in the lowest-cost countries – most of them in OPEC – will be central to meeting the world's oil needs at reasonable cost.
The report says measures to curb CO2 emissions will improve energy security by reducing global fossil-fuel energy use but this should not alarm the world's major oil producers.
"OPEC production will need to be 12m barrels per day higher in 2030 than today. It is clear that the energy sector will have to play the central role in tackling climate change," said Mr Tanaka.
Dr Keith Allott, head of climate change at WWF-UK agreed with the IEA than an energy revolution was needed but added:
"What concerns us is that, despite acknowledging the damaging effect of high carbon energy sources, the IEA fails to call for an end to 'business-as-usual' coal.
"Currently, even countries such as the UK, which has positioned itself as a leader on climate change, are considering plans to develop new unabated coal-fired power stations.
"This would lock us into a high carbon future, when globally, our focus should be placed on developing clean and renewable energy sources."
Energy body warns on oil prices
Sarah Mukherjee, BBC News 12 Nov 08;
One of the world's leading authorities on energy supply says the era of cheap oil is over and prices could soon be back up to $100 a barrel.
The International Energy Agency (IEA), in its World Energy Outlook for 2008, says prices could soar as high as $200 a barrel by 2030.
The immediate risk to supply, it says, is not one of a lack of global resources.
Instead, it points to a lack of investment where it is needed.
Rising costs
The world, the report's authors conclude, is not running out of oil just yet - indeed, there is enough of it to supply the world for more than 40 years at current rates of consumption.
But, they point out, field by field, declines in oil production are accelerating and more money will be needed in research and development to extract the oil there is.
While world oil supply will rise, the report's authors predict that massive investments in energy infrastructure will be needed - an eye-watering $26 trillion dollars up to 2030.
A significant amount of this money - $8.4 trillion - will need to be spent on oil and gas exploration and development.
In one scenario considered by the IEA, China and India will account for just over half of the increase in world primary energy demand between 2006 and 2030, and much of the increase in world oil demand.
But despite the agency's assessment of oil and gas reserves, the report contains a stark warning of the consequences of continuing to rely on fossil fuels.
The consequences for the global climate of policy inaction when it comes to decarbonising the world economy are "shocking", according to the report.
"Strong, co-ordinated action is needed urgently to curb the growth in greenhouse gas emissions and the resulting rise in global temperatures," it said.
