45mbpd extra oil capacity required in 20 years to meet rising global demand

Oil producers need to generate an extra crude output capacity of about 45 million barrels per day in the next 20 years to meet rising demand and offset a steady decline in major fields, the International Energy Agency (IEA) has said.

The bulk of the increase is expected to come from Saudi Arabia and other members of the 12-nation Organisation of Petroleum Exporting Countries (Opec) as other supply sources have nearly reached their peak, Fatih Birol, IEA’s Chief Economist, told the Paris-based Arab Oil and Gas magazine.

Birol said Opec, which controls nearly 70 per cent of the world’s oil but pumps just under 40 per cent of the supplies, would have the financial resources to add that capacity given the expected sharp rise in its earnings.

Citing forecasts by the IEA, he said Opec’s cumulative crude export income could reach a staggering $23 trillion (Dh84.48trn) during 2008-2030, nearly four fold the group’s revenues in the previous 22 years. “In the World Energy Outlook 2008, we carried out a very detailed analysis of the rate of decline of output at 800 oil fields that accounted for two-thirds of world oil production and contained three-quarters of global reserves,” he said.

“That study found there was an average rate of decline of 6.7 per cent a year at most mature fields. We then explained that, even if world oil demand remained flat between now and 2030, one would need to add 45 million bpd to existing production capacity to replace the decline at existing fields, which is equivalent to around four times the production capacity of Saudi Arabia. The outlook for world oil supply thus represents a major challenge at the geological, technological, economic and financial levels,” he told the magazine.

He estimated that about half the 45 million bpd will have to come from oil fields that have not yet been developed and the other half from fields that have not yet been discovered. “On the basis of this analysis, we estimate that conventional oil supply could reach a peak around 2020 if we do not discover new oil basins between now and then. But when discussing the peak oil issue, it is not at all enough to study only the prospects for supply.”

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