IEA chief says energy security favors unconventional resources

Jim Stott
Special Correspondent-Calgary

CALGARY, Nov. 26 -- Because of oil price fluctuations and terrorist threats, the issue of energy security is back on the public agenda with renewed focus on unconventional sources, said Robert Priddle, executive director of the International Energy Agency (IEA), Monday.

Priddle told a Calgary, Alta., conference on the outlook for nonconventional oil (NCO) that there is a need to evaluate the potential of that resource in the current situation. NCO includes heavy oil, extra heavy oil, bitumen, and oil shale. Large deposits of such resources are located in a number of areas, including the oil sands of northern Alberta, the Orinoco Belt in Venezuela and oil shales in Australia.

The IEA head said there is concern among consuming nations that they will grow more dependent on the Organization of Petroleum Exporting Countries for oil after 2020 as other sources such as the North Sea decline.

He said NCO has not been widely exploited, and the potential reserves are large and widely distributed outside of OPEC.

Priddle noted that there was good reason for consumer concern about oil supplies in the 1970s because some producing countries used oil then as a political weapon. He said governments were less interventionist in the 1990s and less concerned about security of energy supplies because it was taken for granted.

However, Priddle said, there is growing interest now in the availability of other energy sources, such as NCO and coal, at reasonable prices. Issues facing NCO development include environmental obstacles and the scale of capital investment required for large projects. In Alberta, for example, $24 billion already has been invested in development of unconventional energy resources, and an Alberta official said projects announced to date would require additional capital of $84 billion.

Priddle said it is important to evaluate whether NCO can meet the environmental and cost challenges of development. He suggested that NCO production could play a future role in placing a price cap on conventional oil.

Dr. Faith Birol, IEA's chief economist and head of its economic analysis division, said development of NCO reserves could be crucial to meeting supply needs over the longer term. IEA forecasts over the next 30 years are based on the assumption that countries would not radically change current energy policies. That means oil will remain the dominant energy source and meet about 40% of world energy needs, Birol said.

However, natural gas will take a larger share of the energy pie, he said, and there will be more coal development in nations such as China and India, which will account for about two-thirds of increased coal use. He said there will not be much change in the use of nuclear power; alternative sources, such as biomass and solar, will increase but not substantially.

Birol said two thirds of the growth in oil demand over the next 30 years will come from Asia, particularly China, with the transportation sector as the driving factor.
By 2030, the IEA economist said, OPEC's share of world oil production will increase to 55% from 38% currently, while production from the North Sea and the US will have declined.

NCO, which is concentrated outside the Middle East, could be making a significant contribution of 8 million b/d to world oil supplies by 2030, similar to the current production of Saudi Arabia, Birol said.

He said barriers to NCO development include social impact issues, technology, and market development. Therefore, governments may need to become more active in developing markets, he said.

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