The US shale boom will make the country the biggest oil producer by 2016
Tim Webb
The world faces an oil supply crunch over the next decade because of Opec’s mistaken belief that burgeoning US shale oil production has made new projects redundant, the International Energy Agency has warned.
In an attempt to set the record straight, the Paris-based group said that “decision makers” in the cartel of oil producers had “misinterpreted” its dramatic pronouncements of the impact of the US shale boom.
As recently as May, the IEA described it as a “game changer”, which has “set off a supply shock that is sending ripples throughout the world”.
However, yesterday the group sought to downplay the phenomenon, which it described as a “surge rather than a revolution”, admitting that it had been sending the wrong signals to Gulf producers, which form the bedrock of the cartel.
Fatih Birol, chief economist at the IEA, said that Gulf producers had shown little appetite to invest in expanding production because of the glut of US shale oil. The IEA’s latest World Energy Outlook report forecasts that US shale oil production will start declining in the mid 2020s, leaving the world more dependent on Opec’s oil, he said.
“Our findings have been misinterpreted by some decision makers and analysts,” he said. “They were saying we do not need Middle East oil any more. This is wrong. Until 2020 the need will be less. But after 2020 the bulk of the growth in global oil production needs to come from the Middle East.”
Dr Birol said that it was essential that investments continue to be made in the plentiful, low-cost resources of the Middle East to meet growing demand from Asia.
“The Middle East is, and will remain, the heart of the global oil industry for many years to come,” he said. “Giving the wrong signal to Middle East producers may well delay investment. If we want Middle East oil in 2020, the investments need to be made by now.”
In the short term, the impact of US shale oil will be more dramatic than first thought. The IEA said that the US would overtake Russia as the world’s largest producer in 2015, two years earlier than its previous forecast. Combined with Brazil’s huge pre-salt offshore fields coming onstream this decade, this would depress demand for Opec’s crude during this decade.
The IEA forecast in May that North American output would rise by 3.9 million barrels a day between 2012 and 2018. Demand for Opec’s oil is expected to slip below 30 million barrels a day and remain there until 2018.
Dr Birol also waded into the furore over rocketing British energy bills, which companies have blamed on rising wholesale costs, a claim that some consumer groups have questioned. “The UK is an island not an energy island” he said. “Developments in global markets do affect the UK.”
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