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18 October 2011
Kwok W Wan, PARIS:
The world must invest $38 trillion in oil, gas and electricity
infrastructure over the next 25 years to stop prices from
soaring, the International Energy Agency (IEA) said today. And
about half of that will need to be spent in the power
Referring to data from the IEA's
upcoming World Energy Outlook 2011, to be
published in November, the agency said $16.9 trillion is needed
for electricity generation; $10 trillion in oil; $9.5 trillion
in natural gas; $1.1 trillion in coal; and $300 billion on
biofuels. "This means, more or less, that $1.5 trillion is
needed every year [over the next 25 years]," chief economist
Fatih Birol told reporters at the IEA ministerial meeting.
He highlighted that oil investment
was vital in Middle East and North African (Mena) countries,
because 90% of the required growth in crude production over the
next few years would come from that region. "If the investment
doesn't come through in those countries, it will have huge
implications for international oil markets and prices," Birol
"We will see a lot of oil coming from
Brazil and other regions, but in many producing countries,
output is declining … we must compensate for declines
[and increase production] to meet growth."
Earlier at the meeting, Jose Sergio Gabrielli, the chief executive of
Petrobras, said Brazil would be producing 5 million barrels
a day (b/d) by 2020.
The countries of the Mena region are
the world's largest oil and gas producers, but output could
fall as fields deplete. There has already been some curtailment
in new production investment, with Saudi Arabia recently
scrapping plans to lift output capacity to 15 million b/d;
while the Arab Spring and war in Libya have made investors wary
of some countries in the region.
"We see some signs of reluctance to
invest, which we think may end up with a much higher oil price
than we have now today. In some countries, because of the
unrest, the projects are not going forward as we would like to
see." he added.
Last week, Opec secretary general Abdalla El-Badri
claimed member countries will invest around $300 billion in 132
oil projects up to 2015, which would increase production
capacity by 21 million b/d.
However, the IEA was more pessimistic
than the new Libyan government about the swift resumption of
the country's production to its pre-war level of 1.6 million b/d. "We are
still looking at Libya, many projects and fields are not yet
appraised. We don't know how much damage there is. But I would
be positively surprised if we see pre-war levels reached before
2013," Birol said.
In terms of electricity, Birol said
the investment needed to connect the 1.3 billion people with no
access to power must jump fivefold - to $45 billion - over the
next five years, with the main focus required to alleviate energy poverty in Asia and
Africa. For the time being, he added, the investment outlook
appears to be adequate for the gas sector.
The IEA also claimed the world is
failing to rein in rising global temperatures resulting from
carbon emissions. "Our analysis of investments in clean energy
to limit temperature increase to 2°C is becoming much more
difficult. The door to reach 2°C may be closing unless we
act very boldly," Birol said. He could not comment on specific
numbers, but said an IEA report would be published on 9
If there are enough energetically and economically profitable hydrocarbon resources to matter. The underlying assumption of the article seems to be that a significant amount of the Earth's remaining subterranean hydrocarbons can be extracted with a high enough energy return and a low enough price to generate investment - an interesting assumption. I'd love to see the math behind that, with reference to real known quantities, of course.
Oct 20, 2011
Geopolitics has lost its impact on the market and the fundamentals are bearish