Big oil exporters must diversify economies: IEA

▶ Crude-producing nations urged to rely less on energy revenues

The world’s biggest oil and gas producers are under unprecedented pressure to cut their reliance on energy revenues, as advances in fuel efficiencies and electric vehicles threaten to undercut demand and erode their finances, the International Energy Agency (IEA) said on Thursday.

It warned that inaction or unsuccessful efforts to diversify sources of income would compound the risks facing both producer economies and global markets.

“More than at any other point in recent history, I believe there needs to be fundamental change in the development models of those countries,” IEA director Fatih Birol said.

Structural factors such as the boom in US shale oil production, which is taking market share from rivals such as Saudi Arabia and Nigeria on the supply side, and efforts to reduce fossil fuel use to slow climate change on the demand side, are already putting oil producers’ budgets under pressure.

Birol said that at an oil price of $80 a barrel, oil and gas revenues for these countries were on average around $1,800 per capita per year. But with shale coming into the picture and demand developments such as new technology and efficiencies, that could fall to $1,250 by 2030, a 30 percent drop.

“When we look at these countries, on average they get more than 70 percent of their government revenues from oil and gas,” he said. “Those are under pressure from prices, they are under pressure from the amount of oil they export and under pressure from population growth... We think it is very different from the past.”

The IEA’s special report focuses on producing countries where oil and natural gas make up at least one third of all exports and revenues contribute at least one third of total fiscal revenue.

The IEA said it looked in particular at Iraq, Nigeria, Russia, Saudi Arabia, the United Arab Emirates and Venezuela.

The agency, which advises western governments on energy policy, sees oil demand growing by 10 percent to more than 106 million barrels per day by 2040 under its “New Policies Scenario”, and natural gas demand increasing by over 40 percent to 5,400 billion cubic meters in the same period.

Birol said Middle East exporters in particular could work toward cutting their domestic consumption of crude oil.