Warning as world faces $17,000bn energy bill

Natural resources, oil news, mining news, Times Online: "OIL producers in the Gulf and North Africa must double investment in new rigs and refineries to $56 billion (£32 billion) a year over the coming quarter of a century to meet soaring global demand for fuel, a leading energy watchdog said yesterday.

In a report that intensified Western pressure on oil states to boost crude output, the International Energy Agency (IEA) said that $17,000 billion needed to be invested by governments and companies globally by 2030 if world energy needs are to be met — $1,000 billion more than estimated a year ago.

The IEA’s projections showed that world energy demand is set to soar by more than 50 per cent over 25 years, raising the threat of a further surge in prices for oil and other fuels unless enough investment is made.

The report also highlighted anxieties over environmental damage from a leap in greenhouse gas emissions.

Claude Mandil, the agency’s executive director, said: “These projected trends have important implications and lead to a future that is not sustainable. We must change these outcomes and get the planet on to a sustainable energy path.”

The analysis emphasised risks posed by growing Western dependency upon oil from the Middle East and North Africa, with their share of global oil production set to rise to 44 per cent by 2030, from 35 per cent today. Although the Middle East has the greatest proven oil reserves, the IEA expressed concern about whether obstacles to investment, including barriers to access by foreign oil groups, would be removed.

“A critical uncertainty is whether the substantial investments needed in the upstream hydrocarbons sector in Middle East . . . countries will, in fact, be forthcoming,” the agency concluded.

Saudi Arabia alone is estimated to need to invest $174 billion up to 2030 in oil and gas projects to achieve the production envisaged by the IEA. The Saudi Government has opened up its gasfields and downstream (processing and distribution) sector to foreign companies, but its prized oilfields remain in state hands.

The agency’s forecasts show that there are sufficient oil and gas reserves to meet the world’s needs over the next 25 years. However, the IEA sounded a warning that prices will rise without investment to boost production.

With sufficient investment, it sees the costs of crude easing from an average of $36.33 a barrel last year to $35 at present prices by 2010, and then rising to $39 by 2030 — an upward revision of $10 a barrel from last year’s report.

However, if investment lags, the agency forecasts that crude prices could reach $52 in real terms by 2030, or $86 in cash terms. The impact would knock a quarter-point a year off world growth, the agency said."