IEA ups decline estimate to 9.1%
Don Tiberone
By Carola Hoyos and Javier Blas in London
Published: October 28 2008 23:32 | Last updated: October 28 2008 23:32
Output from the world’s oilfields is declining faster than previously
thought, the first authoritative public study of the biggest fields
shows.
Without extra investment to raise production, the natural annual rate
of output decline is 9.1 per cent, the International Energy Agency
says in its annual report, the World Energy Outlook, a draft of which
has been obtained by the Financial Times.
The findings suggest the world will 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 meet long-term demand. The effort
will become even more acute as prices fall and investment decisions
are delayed.
The IEA, the oil watchdog, forecasts that China, India and other
developing countries’ demand will require investments of $360bn each
year until 2030.
The agency says even with investment, the annual rate of output
decline is 6.4 per cent.
The decline will not necessarily be felt in the next few years because
demand is slowing down, but with the expected slowdown in investment
the eventual effect will be magnified, oil executives say.
“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
says.
The watchdog warned that 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 has given the industry – already
struggling to find enough supply to meet needs, especially from China
– a reprieve in the past few months.
The IEA predicted in its draft report, due to be published next month,
that demand would be damped, “reflecting the impact of much higher oil
prices and slightly slower economic growth”.
It expects oil consumption in 2030 to reach 106.4m barrels a day, down
from last year’s forecast of 116.3m b/d.
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.
All the increase in oil demand until 2030 comes from emerging
countries, while consumption in developed countries declines.
As a result, the share of rich countries in global demand will drop
from last year’s 59 per cent to less than half of the total in 2030.
This is the clearest indication yet that the focus of the industry on
the demand – not just the supply – side is moving away from the US,
Europe and Japan, towards emerging nations.