Like a hamster trapped on a wheel, the International Energy Agency’s 2008 World Energy Outlook paints a depressing picture of an oil industry having to run faster and faster just to keep pace with burgeoning oil demand over the next 20 years.
WEO2008 estimates the industry will need to find 64 million barrels per day (bpd) of new oil production capacity to meet the expected growth in demand by 21 million bpd by 2030 and offset 43 million bpd of expected declines from existing fields. The total cost is put at around $5 trillion at today’s prices.
The gross capacity required is equivalent to more than three quarters of the world’s current oil production (82 million bpd) and the capital expenditure exceeds the total annual output of Japan, Germany or China.
WEO2008 strongly implies herculean efforts will be required to bring all this new oil onstream, and the industry has no more than a moderate prospect of succeeding. Only a structural upward shift in prices can generate the incentives and resources to make this investment programme possible. Oil consumers should accustom themselves to much more expensive oil throughout the forecasting horizon.
Based on an expected average decline of 6.7-8.6 percent per year, WEO2008 concludes output from existing fields will decline from 70 million bpd at present (plus 12 million bpd of natural gas liquids, unconventional oils and oil sands) to 51 million bpd in 2015 and 27 million bpd in 2030.
By 2030, the world will need 104 million bpd of production, according to the IEA. WEO2008 assumes the gap will be filled by 23 million bpd of new conventional oil production from known but not yet producing fields; 19 million bpd from fields that have yet to be found…. Continue reading at Reuters..