There is no contradiction between the International Energy Agency’s forecast of long term oil supply growth to 2030 and a “supply crunch” by 2015, according to its chief economist Fatih Birol. Mr Birol insisted today that the short term crisis would not be caused by a fundamental shortage of oil but by entirely man-made factors.
Speaking at the launch of the IEA’s latest World Energy Outlook in London, Mr Birol reiterated both the Agency’s long term forecast that oil production will reach 116 million barrels per day in 2030 – up from around 86 mb/d today – and the evidence that supply will fail to to meet demand much sooner. The IEA’s reference case demand forecast requires an additional 37.5 mb/d in gross production capacity by the middle of the next decade, but new projects announced so far by oil companies will add only 25 mb/d, leaving a shortfall of 12.5 mb/d.
In answer to a question from lastoilshock.com, Mr Birol denied there was any contradiction between the two predictions, because any short-term crisis would be solely due to above-ground factors: “What we are saying is we could have a supply crunch to 2015 if we do not see enough investments coming to the markets, if we do not see production growing at a level to compensate the declines and meet the demand, and if the oil demand growth is not dampened in the OECD countries, China and India.”
IEA Deputy Executive Director William Ramsey added that major oil projects take about 5 years to complete, so the Agency could not yet know what additional capacity Saudi Arabia or Kuwait might bring on during 2012-2015. He also suggested that the rising oil price may trim demand growth and that this could also reduce the looming gap. “The supply crunch is not inevitable”, he said, “not by a long shot”.
However, Mr Birol also seemed to caution against too much reliance on the IEA’s long term forecast: “When we say in 2030 that the Saudi production will increase, Kuwait will increase, others will increase, this does not mean that we are saying in any case they will do it. We say they have the potential, when you look at their official reserves estimates, and if they put the money there, they have the potential to meet the gap between demand and non-OPEC production.” Previous IEA publications have queried official OPEC reserve numbers.
The IEA’s long term forecast is also undermined by its reliance on oil resource estimates from the United States Geological Survey that are widely regarded as wildly over-optimistic, and which the Agency will reappraise for its next WEO to be published this time next year.
Last week both Christophe de Margerie, CEO of Total, and Shokri Ghanem, head of Libya’s National Oil Company, said oil production would never top 100 mb/d, far below the IEA forecast, while Sadad al-Huseini, former head of E&P at Saudi Aramco, said oil production has already reached its ultimate plateau.