Energy Watchdog Warns Of Oil-Production Crunch

Wall Street Journal today reported that IEA, the Paris based International Energy Watchdog is taking up study to reassess the global oil supply and reserves.

http://online.wsj.com/article/SB121139527250011387.html

Highlights

• The world's premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.
• For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.
• "The oil investments required may be much, much higher than what people assume," said Fatih Birol, the IEA's chief economist and the leader of the study.
• The IEA, employing a team of 25 analysts, is trying to shed light on some of the industry's best-kept secrets by assessing the health of major fields scattered from Venezuela and Mexico to Saudi Arabia, Kuwait and Iraq.
• Goldman Sachs grabbed headlines recently with a forecast saying that oil could top $140 a barrel this summer and could average $200 a barrel next year.
• Last summer, the agency warned that OPEC's spare capacity could shrink "to minimal levels by 2012." In November, it said its analysis of projects known to be in the works suggested that the world could face a shortfall by 2015 of as much as 12.5 million barrels a day, unless there was a sharp drop in expected demand.
• "This is very important, because the IEA is treated as the world's only serious independent guardian of energy data and forecasts," says Edward Morse, chief energy economist at Lehman Brothers.
• U.S. Energy Department also has embarked on its own supply study, which it hopes to complete this summer. Like the IEA, its preliminary findings are somewhat gloomy: They suggest daily output of conventional crude oil alone, now about 73 million barrels, will plateau at 84 million barrels.
• A study released earlier this year by the Cambridge Energy Research Associates, a consulting firm and unit of IHS, concluded that the depletion rate of the world's 811 biggest fields is around 4.5% a year. At that rate, oil companies have to make huge investments just to keep overall production steady. Others say the depletion rate could be higher.