Simmons tells OTC world needs $5 trillion in energy investments

April 30, 2001
The world's energy capacity must be boosted by 30% to provide a comfortable cushion of excess energy cushion, but that task will take decades and an estimated investment of $5 trillion, Matthew Simmons, president of Simmons & Co. International, told an Offshore Technology Conference luncheon Monday.


Paula Dittrick
OGJ Online

HOUSTON, Apr. 30 -- The world's energy capacity needs to be boosted by 30% to provide a comfortable cushion of excess energy cushion, but that task will take decades and an estimated investment of $5 trillion, Matthew Simmons, president of Simmons & Co. International, told an Offshore Technology Conference luncheon Monday.

Simmons & Co. is a Houston-based investment banking firm.

Simmons said he foresees a potential world energy crisis that will be worse than the energy crisis of 1973 or 1979. "We have used up our spare capacity," Simmons said. "For years, the Organization of Petroleum Exporting Countries maintained massive excess capacity. It served as a giant insurance plan," Simmons said.

"Saudi Arabia is the only OPEC country saying it has excess capacity," Simmons said, adding Saudi Arabia claims to have 1.8 million b/d spare capacity but Saudi officials also say it would take 90 days to produce that oil.

Also, he said, "The world is out of spare tanker capacity, spare refinery capacity, and spare pipeline capacity."

Simmons estimated it would take a decade to add a cushion of 10% excess capacity, adding he would recommend a cushion of 30% excess capacity.

"We also need to return to more nuclear energy and coal" for electricity generation, Simmons said.

Simmons said the world faces a crunch in energy supplies because "30 years of energy mistakes" contributed to the energy industry downsizing for 20 years to cope with prices "that were simply too low."

The energy supply crunch puts a burden on the offshore oil and gas industry, Simmons said, adding the problem is that the offshore drilling fleet is an average 20-25 years old.

"Half of all people now working in the offshore industry will retire in the next decade," Simmons added.

Simmons is an advisor to US Vice-President Richard Cheney's task force that is considering energy policy recommendations for the Bush administration.

Contact Paula Dittrick at [email protected]