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Oil price
Oil companies have grappled with the downturn and a “lower for longer” price outlook by slashing spending, cutting thousands of jobs and delaying around $200 billion in mega-projects around the world.
The IEA estimates investment has already fallen by 20 percent this year.
“In the next 10 years, even if oil demand growth were zero ... just to increase production to compensate for the decline of existing fields, we need investment at the level of $650 billion,” Birol told a news conference.
Higher-cost producers in Canada and Brazil, as well as the United States are likely to fall victim to low oil prices faster than most exporters, but these declines could be offset by supply growth in Iraq and Iran.
Birol said the Middle East, which already provides about a third of the world’s oil, could see exports equate to more than two thirds of total supply, particularly in a sustained environment of $50 oil prices.
“We have to think carefully about the oil security implications of a very few number of countries exporting a big chunk to the global markets alone,” he said.
Yet unrest in Iraq, now OPEC’s second-largest producer, and ageing infrastructure could hamper raising output there. Iran, expected to be free of Western sanctions this year, needs major investment to return to the 2.5 million bpd in production seen prior to 2012.
On the demand side, the IEA expects total energy consumption in China, the world’s largest commodity consumer, to
be double that of the United States by 2040.
But greater efficiency and a shift away from heavy industry for economic growth will mean China will need 85 percent less energy to generate each unit of future economic growth than it did in the past 25 years.
India will be the chief driver of rising demand, where the IEA expects consumption to increase more than anywhere else, hitting 10 million bpd by 2040.
Birol said that while the agency’s basecase scenario was not one in which the oil price languished around $50 for the next decade, it could not rule out a sustained period of low oil prices.
Low global economic growth in the near term and a lasting switch by OPEC to a policy of pumping oil at record rates to increase its market share and more resilient non-OPEC supply could conspire to keep the oil price lower for longer.
“The oil price in this scenario remains close to $50 a barrel until the end of this decade, before rising gradually back to $85 a barrel in 2040,” the IEA said in its report.
“In the low-oil-price scenario, the Middle East’s share in the oil market ends up higher than at any time in the last 40 years,” the report said.
Continued from Page 32 Kuwaiti production continued to edge slowly upwards in September, to an average of 2.7 mb/d during the month. The country is aiming to recover from the loss of at least 250,000 b/d in crude output from the partitioned Neutral Zone by
Continued from Page 32 But the domestic bond issues have started pushing up Saudi money market rates by draining liquidity from banks. International bonds, which foreign banks have been pitching since early 2015 to manage, could relieve some of this pressure.
An international debt programme would be a major policy shift by Riyadh, which has been very conservative towards bonds in recent years. Public debt dropped to a miniscule 1.6 percent of gross domestic product at the end of last year.
The IMF estimates this figure will rise to 44 percent by 2020. The Saudi government has been discussing creating a debt management office to handle issues, the sources said.
The Gulf banker said Saudi Arabia’s first international issue would be a test case so would probably have a maturity of around 10 years. After that, it might consider longer maturities such as 30 years.
The initial issue would likely be in the region of $1 billion to $2 billion, he added. “There’s not a number we have discussed but they would be looking at a substantial benchmark size.
“The most they would be able to tap the international market would be two or four times a year,” he added.