whoa!!
On May 22, 2008, at 10:16 AM, Jon Bosak wrote: > The IEA joins an increasing number of oil companies predicting a > crisis starting around 2015. > > Jon > > ================================================================== > > The Wall Street Journal > May 22, 2008 > > Energy Watchdog Warns Of Oil-Production Crunch > IEA Official Says Supplies May Plateau Below Expected Demand > By NEIL KING JR. and PETER FRITSCH > May 22, 2008; Page A1 > > 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. > > The Paris-based International Energy Agency is in the middle of > its first attempt to comprehensively assess the condition of the > world's top 400 oil fields. Its findings won't be released until > November, but the bottom line is already clear: Future crude > supplies could be far tighter than previously thought. > > A pessimistic supply outlook from the IEA could further rattle an > oil market that already has seen crude prices rocket over $130 a > barrel, double what they were a year ago. U.S. benchmark crude > broke a record for the fourth day in a row, rising 3.3% Wednesday > to close at $133.17 a barrel on the New York Mercantile Exchange. > > 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 decision to rigorously survey supply -- instead of just > demand, as in the past -- reflects an increasing fear within the > agency and elsewhere that oil-producing regions aren't on track to > meet future needs. > > "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, in an interview with The Wall Street > Journal. "This is a dangerous situation." > > The agency's forecasts are widely followed by the industry, Wall > Street and the big oil-consuming countries that fund its work. > > The IEA monitors energy markets for the world's 26 most-advanced > economies, including the U.S., Japan and all of Europe. It acts as > a counterweight in the market to the views of the Organization of > Petroleum Exporting Countries. The IEA's endorsement of a crimped > supply scenario likely will be interpreted by the cartel as yet > another call to pump more oil -- a call it will have a difficult > time answering. Last week, the Saudis gave President Bush a > lukewarm response to his plea for more oil, saying they were > already adding 300,000 barrels a day to the market, an > announcement that did nothing to cool prices. > > At the same time, the IEA's conclusions likely will be seized on > by advocates of expanded drilling in prohibited areas like the > U.S. outer continental shelf or the Alaska National Wildlife > Refuge. > > 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. The fields supply over two-thirds > of daily world production. > > The findings won't be definitive. Big producers including > Venezuela, Iran and China aren't cooperating, and others like > Saudi Arabia typically treat the detailed production data of > individual fields as closely guarded state secrets, so it's not > clear how specific their contributions will be. To try to > compensate, the IEA will use computer modeling to make > estimates. It will also collect information gathered by IHS Inc., > a major data and analysis provider based in Colorado, as well as > the U.S. Geologic Survey, a smattering of oil and oil-service > companies, and national petroleum councils. > > Supply-Side Gloom > > But the direction of the IEA's work echoes the gathering > supply-side gloom articulated by some Big Oil executives in recent > months. A growing number of people in the industry are endorsing a > version of the "peak-oil" theory: that oil production will plateau > in coming years, as suppliers fail to replace depleted fields with > enough fresh ones to boost overall output. All of that has > prompted numerous upward revisions to long-term oil-price > forecasts on Wall Street. > > 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. Prices that high would add to the > inflationary pressures weighing on the world economy and to the > woes of fuel-sensitive industries such as airlines and autos. > > The IEA's study marks a big change in the agency's efforts to peer > into the future. In the past, the IEA focused mainly on assessing > future demand, and then looked at how much non-OPEC countries were > likely to produce to meet that demand. Any gap, it was assumed, > would then be met by big OPEC producers such as Saudi Arabia, Iran > or Kuwait. > > But the IEA's pessimism over future supplies has been building for > some time. 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. The current IEA work aims to tally the range of > investments and projects under way to boost production from the > fields in question to get a clearer sense of what to expect in > production flows. > > "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. Examining the state of the world's big oil fields could > prod their owners into unaccustomed transparency, he says. > > Some critics of the IEA, while praising its new study, say a > revision in the agency's long-term forecasting is long > overdue. The agency has failed to anticipate many of the big > energy developments in recent years, such as the surge in Chinese > demand in 2004 and this year's skyrocketing prices. "The IEA is > always conflicted by political pressures," says Chris Skrebowski, > a London-based oil analyst who keeps his own database on big > petroleum projects and is pessimistic about supply. "In this case > I think they want to make as incontrovertible as possible the fact > that we are facing a real crunch." > > U.S. Forecasts > > The U.S. Energy Department's own forecasting shop, the Energy > Information Administration, has long stuck to the same > demand-driven methodology as the IEA, assuming that supply will > keep up with the world's growing hunger for oil. But the > U.S. agency 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, and that it will take a significant > uptick in production of nonconventional fuels such as ethanol to > push global fuel supplies over 100 million barrels a day by 2030. > > "We are optimistic in terms of resource availability, but wary > about whether the investments get made in the right places and at > a pace that will bring on supply to meet demand," says Guy Caruso, > the U.S. agency's administrator. > > In Paris, analysts at IEA also fret that a lack of investment in > many OPEC countries, combined with a diminished incentive to ramp > up output, casts serious doubt over how much the cartel will > expand its production in the future. The big OPEC producers have > been raking in record profits, creating a disincentive in many > countries to sink more billions into increased oil production. > > Meanwhile, politics and other forces are delaying projects that > could bring more oil on-stream. Continued fighting in Iraq has > stymied efforts to revive aging fields, while international > sanctions on Iran have kept investments there from moving > forward. Rebel attacks in Nigeria and political turmoil in > Venezuela have cut into both countries' output. Big non-OPEC > producers such as Mexico and Russia, which have either barred or > sidelined international operators, are seeing production > slump. The U.S., with a legal moratorium barring exploration in > 85% of its offshore waters, is struggling to keep its output > steady. > > The IEA study will try to answer one question that bedevils those > trying to forecast future prices and the supply-demand balance: > How rapidly are the world's top fields declining? The rates at > which their production dwindles over time are a much-debated > barometer of the health of the world's oil patch. > > Depletion Rate > > 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. > > "We are of the opinion that the public isn't aware of the role of > the decline rate of existing fields in the energy supply balance, > and that this rate will accelerate in the future," says the IEA's > Mr. Birol. > > Some analysts, however, contend that scarcity isn't the issue -- > only access to reserves and investment in tapping them. "We know > there is plenty of oil and gas resource in the world," says Pete > Stark, vice president for industry relations at IHS. He says the > difficulties of supply aren't buried in oil fields, but are "above > ground." > > Mr. Morse at Lehman Brothers notes that there are plenty of > questions about supply yet to be answered. "However confident the > IEA may be about the data it has, they know nothing about the > resources we've yet to discover in the deep waters or in the > arctic," he says. > > URL for this article: > http://online.wsj.com/article/SB121139527250011387.html > > _______________________________________________ > For more information about sustainability in the Tompkins County > area, please visit: http://www.sustainabletompkins.org/ > > RSS, archives, subscription & listserv information for: > [email protected] > http://lists.mutualaid.org/mailman/listinfo/sustainabletompkins > free hosting by http://www.mutualaid.org Marlo Capoccia Garden Gate www.gardengatedelivery.com _______________________________________________ For more information about sustainability in the Tompkins County area, please visit: http://www.sustainabletompkins.org/ RSS, archives, subscription & listserv information for: [email protected] http://lists.mutualaid.org/mailman/listinfo/sustainabletompkins free hosting by http://www.mutualaid.org
