IEA Report Leaked
Update: IEA Dismayed Over Leaked Report (says final version to be released on November 12th).
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.
And while they have slashed their consumption forecasts for 2030, they still look incredibly optimistic to me:
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.
It’s not just me who thinks that consumption number looks far too high. A year ago Total CEO Christophe de Margerie and ConocoPhillips CEO Jim Mulva were both quoted as saying those numbers didn’t look achievable (as reported on here). Here’s Mulva:
ConocoPhillips (COP) Chief Executive James Mulva had earlier told a New York financial conference that he doubted that world oil producers would be able to meet forecast long-term energy demand growth. The International Energy Agency, the energy watchdog for western economies, has projected 2030 world oil demand of 116 million barrels a day. But Mulva said he doesn’t believe oil supply will ever exceed 100 million barrels a day. He didn’t offer a price forecast.
“Demand will be going up, but it will be constrained by supply,” Mulva said. “I don’t think we are going to see the supply going over 100 million barrels a day and the reason is: Where is all that going to come from?”
The increased consumption, the IEA predicts, will come from emerging countries. Demand in developed countries is expected to fall.
A related article in FT has more:
“Saudi Arabia remains the world’s largest oil producer throughout the projection period, its production climbing from 10.2m b/d in 2007 to 15.7m b/d in 2030,” the report says. “Its willingness and ability to make timely investments in oil production capacity will be a key determinant of future oil price trends.”
While I have stated many times that I don’t think Saudi has peaked – and I think they have a lot of oil left to produce – I have read comments from the Saudis themselves that say these projections of 15 million bpd are sheer fantasy.
Finally, there’s this nugget:
The draft report has found that the planet is far from running out of oil, as some so-called “peak oil” theorists argued. But it also finds that output from the world’s oil fields, some of them discovered more than 30 years ago, is declining much faster than previously thought. That means the oil industry will need to invest more than expected.
This business about “running out of oil” is a gross mischaracterization. The fact is we could peak and not run out of oil for a hundred years. Peak oil does not mean “running out of oil”, and it is this misunderstanding that has helped prevent the public from absorbing the potential implications of peak oil. “Peak oil? Nah, we have plenty of oil.” Of course we do have plenty of oil. The question is whether supply can continue to grow. And I think we are nearing the end of supply growth. How that plays out is one of the things we spend a lot of time debating here.
As soon as I get a chance I want to write up something on OPEC mismanagement, and the problems that poses for the world economy. They have announced deep cuts, and are contemplating deeper cuts. These are the sorts of cuts that helped the big price run-up, so if OPEC maintains discipline we may be headed back up the roller coaster by next summer.