HOUSTON-- The International Energy Agency (IEA) on Monday called for more investments to meet future oil supply in the world.
"Global oil supply could struggle to keep pace with demand after 2020, risking a sharp increase in prices, unless new projects are approved soon," the IEA warned in a report issued here at the CERAWeek, an annual international gathering of energy industry leaders, experts, government officials and policy makers.
Echoing the the agency's latest five-year oil market analysis and forecast report, IEA's Executive Director Fatih Birol said at a press conference here on Monday that "We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go, but this is no time for complacency. We don't see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon."
According to the report, the global picture appears comfortable for the next three years but supply growth slows considerably after that. The demand and supply trends point to a tight global oil market, with spare production capacity in 2022 falling to a 14-year low.
In the next few years, oil supply is growing in the countries like the United States, Canada, Brazil and elsewhere but this growth could stall by 2020 if the record two-year investment slump of 2015 and 2016 is not reversed. While investments in the U.S. shale play are picking up strongly, early indications of global spending for 2017 are not encouraging.
In the next five years, oil demand will rise, passing the symbolic 100 mb/d threshold in 2019 and reaching about 104 mb/d by 2022.Developing countries account for all of the growth and Asia dominates, with about seven out of every 10 extra barrels consumed globally. India' s oil demand growth will outpace China by then.
While electric vehicles are an important factor for oil demand, the IEA estimates they will displace only limited amounts of transportation fuel by 2022.
The IEA believes that the largest contribution to new supplies will come from the United States. The agency expects the U.S. light tight oil (LTO) production to make a strong comeback and grow by 1.4 mb/d by 2022 if prices remain around 60 dollars/bbl.
The United States responds more rapidly to price signals than other producers. the report said that if prices climb to 80 dollars/bbl, U.S. LTO production could grow by 3 mb/d in five years. Alternatively, if prices are at 50 dollars/bbl, it could decline from the early 2020s.
Within OPEC, the bulk of new supplies will come from major low-cost Middle Eastern producers, namely Iraq, Iran, and the United Arab Emirates. Others like Nigeria, Algeria and Venezuela will decline. For its part, production from Russia is forecast to remain stable over the next five years.
As for the changes in international oil-trade flows and investments in storage infrastructure, the IEA said that Asia will need to look beyond the Middle East to meet its growing import requirements.
With OPEC countries focused on boosting domestic refining capacity to meet local demand and ramp-up exports of refined products, additional crude oil exports from Brazil and Canada will be higher than those from the Middle East.
The five-day CERAWeek by IHS Markit opened here on Monday with a theme of "pace of change: building a new energy future".
Source: Philippines News Agency