The report bases its predictions on a reference scenario which assumes that all decisions and plans relating to energy in place at the end of 2003 are implemented. Energy demand will increase at 1.7 per cent a year, slower than the 2 per cent average of the past few decades, and energy intensity – the amount of fuel required to produce a dollar of gross domestic product (GDP) – will decrease. Demand will grow to 121 million barrels a day (b/d) by 2030, and as non-OPEC supplies plateau and tail off OPEC’s share will rise from about 37 per cent today to 53 per cent – requiring capacity to almost double. Massive investment will also be needed in global oil infrastructure to enable crude production to reach the 121 million-b/d mark: the IEA suggests that about $3 million million must be pumped into oil fields, tankers, pipelines and refineries over the next two-and-a-half decades.
‘Oil is not going to run out,’ IEA executive director Claude Mandil said during the launch of the report at the annual Oil & Money conference in London on 26 October. ‘Proven reserves will cover all the supply needed until 2030. But we need to be discovering more and investing more in the right areas. Recent well counts show that the bulk are being drilled in North America, instead of in the Middle East and the former Soviet Union, where the prospects are far better.’
Mandil called on Middle East producers to open their industries to foreign investment to meet future supply needs. ‘The problem is that access to reserves is most difficult in the areas where they are most plentiful. Governments need to create a more level playing field between NOCs [national oil companies] and IOCs [international oil companies].’
While reassuring on supply levels over the next 25 years, the IEA warns that the increasing levels of oil traded from world trouble spots through busy corridors will enhance supply risks. ‘A central message of this outlook is that short-term risks to energy security will grow,’ says the study. ‘Major oil and gas importers – including most OECD countries, China and India – will become ever more dependent on imports from distant, often politically unstable, parts of the world.’ Net inter-regional trade will more than double to 65 million b/d, accounting for more than half of demand. ‘Booming trade will strengthen the mutual dependence among exporting and importing countries,’ the IEA says. ‘But it will also exacerbate the risks that wells or pipelines could be closed or tankers blocked by piracy, terrorist attacks or accidents. Rapid worldwide growth in natural gas consumption and trade will foster similar concerns.’
Increase in demand for natural gas will undergo the most spectacular growth, doubling by 2030, mainly on the back of the switch to gas for electricity generation. The bulk of the new supply is likely to come from shipments of liquefied natural gas (LNG), at just over half of inter-regional trade, up from about 30 per cent today. To meet the rise in demand, annual investment of $100,000 million will be needed in gas supply infrastructure.
On oil prices, the IEA predicts an increase of 0.7 per cent a year until 2030. However, unsurprisingly for an agency representing consumer countries, the report has a warning for OPEC on the dangers of high prices. Assuming an average of $35 a barrel, demand would be 15 per