Highlights

• Strong growth in China, India & Middle East
• Flat demand in EU
• Oil supplies could tighten without improved efficiency and diversified transport fuels
• In natural gas, demand modelling for the OECD region indicates a return to 2008 demand levels by 2012
• China is seen as an area of strong growth for natural gas, with demand doubling to 140 bcm by 2015
• The rise of non-conventional gas and LNG bring a wave of new gas supplies
• Factors that could impact future supplies include the continuing depletion of existing oil and gas production, geopolitical risks in producing countries such as Nigeria, Russia and Iraq, and potential deepwater project delays after the recent Gulf of Mexico disaster

EB Bureau

“Oil and gas markets are starting to show signs of recovery, but the impact of the recession differs across regions, and the outlook remains very uncertain,” said Nobuo Tanaka, executive director of the International Energy Agency (IEA), while launching the Medium Term Oil and Gas Markets 2010. He said, “In both oil and gas, we see a notable dichotomy between non-OECD and OECD markets, with strong growth in China, India and the Middle East compared to weaker or flat demand elsewhere, especially in the fragile European economy. These contrasting trends cloud efforts to foresee how oil and gas markets will develop into the medium term. But what is clear is that both will need more investment, a greater focus on energy efficiency and improved data,” Tanaka said.

Taking into account this uncertainty, the IEA report presents two oil demand cases for the next five years: one based on relatively strong GDP growth of nearly 4.5 per cent per year from 2010 onwards (in line with the most recent IMF projections) and a reduction in oil use intensity of 3 per cent annually; the other one based on lower GDP growth at 3 per cent but with correspondingly slower reductions in oil intensity. Under higher growth, even with ongoing energy efficiency improvements, oil demand increases by an average of +1.2 million barrels per day (mb/d) annually (1.4 per cent), reaching close to 92 mb/d by 2015. Oil demand recovers to pre-crisis 2007 levels again by 2010. Effective OPEC spare capacity in this scenario begins to decline again as soon as next year, reaching 3.6 mb/d by 2015. While new OPEC capacity should come on stream in 2014, we anticipate a tightening global balance, with surplus capacity falling below 5per cent of global demand. This could lead to more jittery markets ahead, after what has been a prolonged period of relative price stability over the past year.

Also Read

• OPEC has surplus capacity to make up for shortfall: UAE
• BRIC key to growth, coal to rival oil by 2030: BP
• China overtakes US as the largest energy consumer
• High oil prices threaten to derail growth in India, China: IEA
• Opec cuts oil demand growth forecast on economy

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