The world has ample energy reserves to meet its needs for the next 20 years and for decades beyond that.
But a complicated welter of economic, geopolitical, and environmental challenges must first be overcome to turn those reserves into available supplies. And even at that, massive investments will also be required to develop those energy reserves-as much as a cumulative $500-600 billion by 2010 for the needed oil production capacity alone.
Those are the primary findings of a major new study by the International Energy Agency, unveiled at an Oct. 23 press conference during the World Energy Congress in Buenos Aires.
In unveiling the study on global energy supply, IEA Executive Director Robert Priddle noted that it incorporates data from the Organization of Petroleum Exporting Countries-a first for an IEA report.
"This is a clear sign that the producer-consumer dialogue is moving along," he said.
However, at the press conference, Priddle also made a pointed reference to the part of the IEA study that concludes a moderate oil price strategy by OPEC would result in greater net annual revenues to the group by 2020 (see related story, p. 20).
Study findings
The IEA supply study focused on all forms of energy and various price and other scenarios in which the energy resources can be commercialized.
Priddle cited the latest US Geological Survey estimates that the world's proven oil reserves have risen steadily in the 1990s, to 1.196 trillion bbl in 2000 from 1.190 trillion bbl in 1991.
He noted that, while this growth is not significant in absolute volume terms, it is "remarkable that the rate of oil reserves growth [in the past year] has outpaced the rate of growth in the use of these reserves."
The study estimated that global oil consumption totaled 28 billion bbl in 2000, while most assessments of world oil reserves actually showed a net increase in total reserves last year. It also found that global oil demand will climb by a net 20 million b/d in the next 10 years.
With that increased demand in mind, Priddle also pointed to the effects of worldwide oil field decline rates on new production investment. Given a decline rate conservatively estimated at 5%/year and oil demand growth pegged at 2%/year, that calls for the equivalent of another 61 million b/d of oil production capacity that must be developed by 2010.
"If one takes the estimate of $5 billion to develop 1 million b/d of oil production capacity in the Middle East, and perhaps four to five times that much to develop the same volume of oil production capacity outside the Middle East, then the estimates of how much capital investment might be required to meet the world,s oil demand [by 2010] become staggering."
Priddle sees much of that massive investment directed toward the Middle East and former Soviet Union, with OPEC nations and unconventional oil such as extra-heavy crude and oil sands figuring heavily into the picture. That outlook suggests a greater need for a "congenial" business investment climate in those countries and oil prices that guarantee investors a fair return.
Whatever the ultimate level of those "fair-return" oil prices might be, Priddle emphasized the importance not only of stable but also moderate oil prices that would continue to encourage oil demand without spurring development of a great deal of new non-OPEC oil production capacity.
In the longer term, such a moderate oil price would actually deliver higher net annual oil revenues to OPEC than would either a low or high oil price scenario. The study found that OPEC,s oil revenues could handily top $600 billion in 2020, vs. a little over $500 billion under a high-price case and less than $400 billion under a low-price case.
Natural gas growth
Priddle also noted the explosive growth of the natural gas industry as it evolves into a true global market, citing it as further evidence that "the rate of growth in trade in energy is beginning to outpace the actual rate of growth in demand for that energy."
While that burgeoning energy trade spurs still more questions about energy security, coming as it will increasingly across geopolitically unstable areas, it nevertheless is evident that "95% of the increase in the world,s energy output by 2020 will come from outside" the Organization for Economic Cooperation and Development countries, Priddle said.
"Even as the OECD energy output itself increases," he added, "it's up to non-OECD to supply nearly all of the increase in world energy output that will be needed."
In particular, Priddle noted that OECD Europe will become 60% dependent on imports for its natural gas needs in the coming decade, and "gas prices may have to rise in order to meet this additional demand."
