Some Thoughts from the International Energy Agency

Excerpted from a recently published report. This is our wake up call folks!

In 2008 the IEA for the first time projected a 50% drop in production from existing conventional oil fields by 2020.* This alarming figure was partly the result of the IEA’s first field-by-field analysis of a large number of oil fields. This fall in production coupled with projected increased demandfor oil is likely to result in a large gap between supply and
demand. Policy makers should note the underlying problem is that there will be a gap, the size of which will constantly vary depending on economic conditions. It is hard to overstate the significance of these warning signals, first raised in 2007, given the Agency’s previous misplaced confidence and assurances that oil supply could meet the world’s expanding demand.

Global Witness has focused its analysis on the work of the IEA, because, as it boasts, “Governments and industry from all across the globe have come to rely on… [its WEO
series and wider IEA commentary] to provide a consistent basis on which they can formulate policies and design business plans.” Established during the 1973-74 oil crisis to “co-ordinate measures in times of oil supply emergencies…,” it has become the leading global authority on energy issues, covering all major energy producing and consuming countries.

What is the scale of the problem? In November 2008, the IEA projected a 7m bpd gap by 2015, which equates to 7.7% of projected world demand by that year.‡ This gap
was estimated from the combined impacts of declining production from existing fields, long-term projections for increased global demand, and insufficient new production coming on stream to cope with this situation. The global recession has temporarily altered projections for global demand, but has not changed the underlying fundamental problems with increasing production. As the IEA put it, “… the gap now evident between what is currently being built and what will be needed to keep pace with demand is set to widen sharply after 2010. Around 7 mb/d [m bpd] of additional capacity (over and above that from all current projects) [Global Witness emphasis] needs to be brought on stream by 2015.” To appreciate the implication of a gap of this size from a national or regional perspective, see  A 50% projected drop in conventional oil production in just 11 years is truly astonishing. It represents a drop from
2008’s output of 74m bpd to just 37m bpd by 2020. The IEA project this steep rate of decline to begin almost immediately. To put this in context, the Agency also projects total world oil demand to reach 104m bpd by 2030.109 What is even more remarkable is that such a vast and imminent loss of conventional oil production has not caused wider comment. It should be making governments seriously question why the Agency, established in reaction to the 1973 oil crisis, appears until very recently to have missed the start of the next one.