martes, 17 de noviembre de 2015

martes, noviembre 17, 2015

World energy watchdog fears 1970s oil crunch as Mid-East regains stranglehold

The Mid-East share of global oil exports will rise to 75pc if oil prices stay low and investment collapses, risking a strategic crisis in the future

By Ambrose Evans-Pritchard


Opec's strategy of flooding the market to knock out rivals has halved revenues from $1 trillion to $550bn a year and has set off a fiscal crisis, even for Saudi Arabia Photo: AP
 
 
The world risks a return to the strategic oil crises of the 1970s as Mid-East producers regain their stranglehold on global supply and drive non-Opec producers out of the market, the International Energy Agency has warned.

The Paris-based watchdog said upstream investment in crude oil ventures is collapsing. Low prices are forcing companies to abandon high-cost projects in the US, Canada, Russia, Brazil and parts of Africa, storing up a potential oil crunch in the future. It leaves the world economy dangerously reliant on Gulf supplies, unless counter-measures are taken in time.
 
Fatih Birol, the IEA’s director, said the oil industry needs $650bn a year of fresh investment just to keep output steady as old wells are depleted and the decline rate steepens, yet new outlays have fallen 20pc this year and are expected to drop by another 20pc next year.
 
“This is what I am worried about the most. It is the first time since the 1980s that investment will have declined for two consecutive years, and it will have serious consequences,” he said.
 

The IEA said in its World Energy Outlook that a protracted period of low oil prices near $50 a barrel would increase the Mid-East grip on oil exports from 50pc to 75pc, with very little spare capacity to cope with a crisis. Shale oil output in the US would drop by 2.5m barrels a day (b/d) by 2020 under this scenario, eliminating more than half the gains made during the shale revolution.

“Reliance on Middle East oil exports eventually escalates to a level last seen in the 1970s. Such a concentration of global supply would be accompanied by elevated concerns about energy security, with Asian consumers particularly vulnerable,” it said.



The concern is not so much that the Opec cartel would abuse its monopoly for political purposes – as occurred in the embargo of 1973 – but rather that the whole region is a maelstrom of sectarian conflict that could spin out of control at any time. The ISIS terrorist network is reaching ever wider.

Mr Birol said the consuming countries cannot afford to sit back, enjoy the windfall of cheap oil and ignore the security threat. They must tighten fuel efficiency rules for vehicles yet further and keep cutting the energy intensity of economic growth, even if the sense of urgency is fading.


US shale output collapses at $50 but holds up well at $70

Whether the rich Gulf states – let alone weaker Opec members such as Venezuela, Algeria, Nigeria or Libya – can themselves endure the pain of $50 oil for long is an open question.

Opec’s strategy of flooding the market to knock out rivals has halved revenues from $1 trillion to $550bn a year and has set off a fiscal crisis, even for Saudi Arabia. “They may have to take a second look at their policies,” he said.

The IEA said the more likely outcome is a recovery in crude prices to $80 by 2020. Fresh shale drilling in the US will pick up once prices reach $60 to $70, an estimate disputed by hydraulic frackers in Texas, who say leaps in technology are slashing costs so fast that the figure may be nearer $55 or even $50.




The bigger picture of global energy is that every assumption is being overturned with breathtaking speed. Renewables made up half of all new electricity generation worldwide last year – led by China - and will account for 60pc of all fresh investment in power over the next quarter century, a $7 trillion blitz of expansion.

Renewables will overtake coal to become by far the biggest source of electricity by 2040, with wind power surging by 300pc to 1,400 gigawatts (GW) and solar jumping 500pc to more than 1,000 GW as green energy competes increasingly on pure cost. Subsidies are falling fast and will be insignificant in developing economies by 2030.
The solar story is remarkable. It made up one gigawatt (GW) of power worldwide in 2000. This rose to 176GW last year. It is expected to reach 1,066GW by 2040, and potentially 2,232GW under a low-carbon scenario – more than 25 times the UK’s entire power capacity.

The IEA says the growth rate of global demand for energy will fall from 2.5pc a year a decade ago to just 1pc by the 2020s as consumption in the EU and the US falls in absolute terms, and the linkage between energy use and GDP breaks down.



America’s oil use will plummet by a quarter by 2040 due to fuel efficiency standards (CAFE) for cars and trucks. This alone will cut 4m barrels of oil per day of oil demand from world markets.
 
China’s energy demand boom – the biggest in history – is already almost over as the Communist Party weans the country off heavy industry and goes up the sophistication ladder, switching to a hi-tech service economy.

Its coal demand has plateaued and dirty coal plants are being shut down in the big cities. China’s overall energy use will start to flatten out from 2020 onwards, even though it will have 500m vehicles on the road within a generation. By 2040 its hydro-power, wind and solar power will match that of America and Europe combined, with India progressively shifting into the renewable camp in much the same way, though with a time lag.

Everything depends on the outcome of the COP21 climate summit in Paris this December - and on follow-up accords - to limit carbon emissions and cap the rise in global temperatures to two degrees above pre-industrial levels by the end of the century.




Mr Birol said there is “unprecedented momentum” for a far-reaching deal that changes the basic economics of energy. A third of all fossil fuels booked by resource companies cannot be burned under a "two degree" scenario and are likely to be “stranded assets” unless there is a massive adoption of carbon capture and storage. Coal will suffer the biggest hit.

The IEA’s base case is that annual CO2 emissions will rise by a further 16pc by 2040, but it would be a radically different picture if world leaders grasp the nettle and agree on measures to stop CO2 in the atmosphere rising above 450 parts per million by the 2100. That would imply a 50pc cut in emissions over the next 25 years, and a steeply-rising carbon price. This will not happen in Paris but United Nations officials say such an accord is within grasp over the next five to 10 years.

Mr Birol said that if there is any company in the energy industry that thinks it can safely ignore the fast-changing political landscape on climate change and dismiss the subject as the fringe obsession of green activists, they are making a “grave mistake”.

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