The world needs the equivalent of four new Saudi Arabias if it is to fend off a looming supply crunch, a top International Energy Agency official said on Wednesday.
Fatih Birol, author of the IEA’s World Energy Outlook published on Wednesday, told Reuters investment in new output should be increased but warned the global financial crisis could delay crucial energy investment. “Even if growth in global demand was at zero for the next 22 years, in order to compensate the decline in the existing fields, we need to increase the production by around 45 million barrels per day (bpd), which is the equivalent to bringing four new Saudi Arabias to the markets,” he said.
Massive investment of $26 trillion will be needed by 2030 to offset the impact of falling supply, the IEA Outlook said. “The Outlook puts on the table the new energy realities and we highlight as the two eminent challenges oil supply and climate change,” Birol said. “But it also tells us that there are ways to fix the problems if we are not too late.”
He referred to the challenge of tackling ideology, economics and the changing structure of the industry as almost 80% of the growth in oil production is expected to come from state-owned oil companies by 2030. One of the hurdles was that oil would increasingly come from smaller fields, raising the extraction costs, Birol said.
The Paris-based IEA, which advises 28 nations on energy policy, said in its annual Outlook that if current trends persisted, energy-related emissions of carbon dioxide (CO2) would rise inexorably, pushing up global temperature by as much as six degrees Celsius in the long term.
“A six degree Celsius rise in the next few decades would have dramatic consequences for all of us,” Birol said. One of the first things needed was to target investment to ensure an increase of only about two degrees Celsius, the level agreed by major power G8 leaders and the United Nations, he said.
To achieve that temperature, costly investments in the nuclear field and energy efficiency for cars and light bulbs were needed, he added. “So each year in the next 25 years we have to spend on new energy investments money that equals 0.6% of the global gross domestic product (GDP),” he said. But Birol expressed concern the financial crisis could mean that the importance of the climate change issue was sliding down the international policy agenda.
The United Nations is due to host landmark climate change talks in Copenhagen in November 2009, which are due to decide new emissions targets when the Kyoto protocol ends in 2012. “I’m very scared the meeting will be a victim of the financial crisis we have now,” he said. So far cash-rich oil companies have managed to carry on investing, but Birol said the world financial crisis could eventually force them to spend less.
One positive note was the election last week of the new US president, Barack Obama, he said. “It is a relief to see the new US administration’s views on renewables, efficiency and climate change, which marry very well with our ... recommendations,” Birol added. (Reuters)