The linked story is in French and as such is less likely to hit the UK Media. However, in it FATIH BIROL, DIRECTEUR DES ÉTUDES ÉCONOMIQUES DE L'AGENCE INTERNATIONALE DE L'ÉNERGIE - the Director of Economic Studies at the Internatinoal Energy Agency basically says peak oil is closer than people think.
He says a substantial growth in Iraqi output will be needed to avoid a market "wall".
Automatic Translation
Without the Iraqi black gold, the oil market will face a "wall" from here at 2015
In September 2005, in the columns of the World, you launched this warning to the consumer
countries black gold: "Leave oil". Do you have the feeling to be heard?
Fatih Birol. Each day, the oil market becomes more difficult, because the speed of the growth of the request and the concentration of the production in a very small number of countries. Since 2005, the rise in the price of the barrel was confirmed: the current price, near to 70 dollars, is an important signal for the large consumer countries. The economy accepted almost without difficulty this raising of prices of the barrel.You are right, the rich economy accepted. But the world does not stop with the rich countries. Africa is in great difficulty. The debt grows hollow to buy oil. For the future generations, there is something of low register. But the energy invoice and the deficits also grow hollow in the United States, for example. The United States and the European Union try to use oil much more effectively, in order to reduce the growth of the demand for oil. Thus there was a reaction on behalf of the consumer countries well.
Is this reaction with the measurement of the dangers which you predict? The exit of oil goes up little by little in the diary of the OECD countries. But it should be stressed that a large share of the rise of the request comes from China and, to a lesser extent, of India. China counts for the moment 70 cars for thousand inhabitants, against 680 in Europe and 860 in the United States. If the Chinese want to catch up with the level of equipment of the Western nations, that will it occur?
Do the outputs exist to answer such an increase in demand?
From here at 2015, market and the oil industry severely will be put to the test. From here five to ten years, oil production out-OPEC will reach a maximum before starting to decline, for lack of sufficient reserves. Each day ago of new evidence of this fact. At the same time the peak of the economic phase of expansion of China will take place. The two events will coincide: the explosion of the growth of the Chinese request, and the fall of the production except country of OPEC. Our oil system will be it able to answer this challenge, it is the question.
Do the Chinese leaders have the will and the capacity to slow down their request for oil? This will exists. To set up a radical energy policy is easier in China than in a country having a political régime, say, different. On another side, the Chinese wish to benefit from the Western life style. An Chinese says himself: "if I have the money, why I would not buy a car?" I think that the Chinese government will not be able to do better than to slow down acceleration: there will be always a very strong growth of the demand for oil, no matter what it arrives. The oil industry must hold account of this fact and take measurements necessary.Can one envisage which will be the rate of this growth? It is a great unknown factor: which is the growth potential of the Chinese for the ten next years: 6 % per annum, 7 %, 10 %? This difference in some points will have very different implications in the world.
Biocarburants don't they constitute a response to this challenge?
Once again, the figures should be looked at, rather than to listen to rhetoric. Many governments encourage the agricultural fuel consumption, in particular in Europe, in Japan and the United States. Some of these policies are not founded on a solid economic rationality: the biocarburants will remain very expensive to produce. But even if these policies end, we think that the share of the biocarburants in 2030 will be only 7 % of the whole of the world production of fuels.To reach these 7 %, one will need an agricultural surface equivalent to the surface of Australia, plus those of Korea, Japan and New Zealand...
This competition with the surface devoted to traditional agriculture is likely to have consequences on the price of harvests.
Yes, it is already the case, and it is not good. And then there are also difficulties related to the environment: more and more of studies prove that the biocarburants automatically do not reduce the gas emissions for purpose of greenhouse, compared with oil. It is also a large concern. Thus for these at the same time economic and environmental reasons, 7 % of the total production of fuels are a figure very, very optimist. The agricultural fuels will never replace the oil of OPEC, as some hope for it. Their contribution will remain minor.
The which perhaps contribution of the new layers in Africa?Until one waits of Africa does not have anything revolutionist: a few hundreds of additional thousands of barrels per day here or there in West Africa. That will not change the things basically.
Then, from where the new outputs can come ?
The two only countries which can really change the course of the play are Saudi Arabia and Iraq. They can bring on the market a volume of significant additional crude, if they wish it. But in which conditions? There is there too an enormous question mark. Here the unknown factor, they are the figures on the reserves.
Are there reasons to expect nasty surprises on this side?
I believe that the Saoudi government speaks about 230 billion barrels reserves. I do not have official reason not to believe in it. However Saudi Arabia just as the other producer countries and the international firms should be more transparent in the presentation of their figures. Because oil is a very crucial good for us all, and our right is to know, according to international standards', how much oil it remains us.
Is there a short-term risk?
One bases oneself on the assumption of an average rate of decline of the production of the existing oil fields of 8 % per annum. It is already much: for a dollar invested in order to increase the extractions, it is necessary to invest three dollars to compensate for this decline. But what would it occur if, any made accounts, the rate of decline were 9 %? The additional quantity of oil which would have to be found to compensate for the difference is equal to the rise of the oil consumption of the OECD countries envisaged from here at 2020.
Saudi Arabia recognizes a fast decline of several of its principal fields...
I can confirm that Saudi Arabia is able to reach an output of 15 million barrels per day (Mb/d) from here at 2015, against 12 Mb/d today, in accordance with the engagement of the Saoudi Minister for oil, Ali Al-Nouaïmi. However these 3 mbj additional, it is about all until one can wait to face the rise envisaged of the world demand for oil [ this request is 83 today Mb/d ].
And Iraq?
If the production does not increase in Iraq in an exponential way from here at 2015, we have a very big problem, even if Saudi Arabia respects its engagements. The figures are very simple, it does not need there to be an expert. It is enough to know to make a subtraction. China will grow very quickly, India also, and what Saudi Arabia projects, the 3 mbj moreover, will not even be enough to answer the rise of the Chinese request.
But, considering the current situation in Iraq, it is very improbable that this country arrives at its optimal capacity of production right like that!
If this situation improved radically, how long would it be necessary so that Iraqi oil industry reaches its optimal capacity? Official Iraqi speaks about 3 to 5 years. They know better than me. Even if what they say is exact, and that all occurs well to Iraq, it will be in any event a long process.Thus I repeat it, the oil industry will face a very serious test from here at 2015: with the decline of production out-OPEC and the peak of growth of China, the gap between supply and will widen to a significant degree.
What becomes the large private oil companies in this new play which, according to you, will be dominated more and more by the trust of the producer countries?
These "majors" [ Exxon, Rafter-Texaco, Shell, LP and Total ] will be in difficulty. They will not have any more access to the new outputs. They must redefine their strategies, if not if they remain concentrated on oil, they will have to be satisfied with markets of niches.
You say that they will not remain "majors" well a long time?It is what I say. In spite of the big rise in the price of the barrel, which enabled them to invest, the "majors" could not reconstitute their reserves!
Thus if the things do not improve in Iraq... ... there is a wall, a great test in front of us, if the Western powers and also China and India do not revise by their energy policy in a substantial
way, by taxing oil more, by seeking more energy effectiveness.
One does not take of it really the way. The world oil consumption grows more and more quickly.Unfortunately, there are many words, but few acts. I really hope that the consuming nations will include/understand the gravity of the situation, and will set up very strong and radical policies to slow down the rise of the demand for oil.
Such a step would play in favour of the fight against the climatic reheating, a fight with the exit still very dubious...
I believe that there is many ways of fighting the climatic reheating. But it is necessary to be very clear: if you want to solve the problem of the reheating, it is impossible to do it without India and especially without China, which has just become the first world gas transmitter for purpose of greenhouse. China is the key.
With them only, from here at 2030, the Chinese could emit more twice more carbon dioxide than the unit of the OECD countries [ See computer graphics: "Rise of the CO 2 emissions of 2004 to 2030 in China, India and in OECD" ]. That does not have any direction to take measures if China does not take part.
An example: Europe committed itself reducing its emissions of 20 % from here to 2020. Some say that it is realistic, others say that that is not it. But the question is not there. At the current rate/rhythm, China will need only one year and half to emit 20 % of emissions which Europe says lends to save!
You meet high Chinese persons in charge. Is the climate a major concern for them?
The first concern of the Chinese leaders, it is the growth and the economic effectiveness. Of course, they are concentrated on the problems of environment, but in fact the local problems worry them more. The air pollution of the east cities in their eyes more important than the climatic change.
However, they very take the reheating with the serious one, but I think that the first step must be taken by the Western countries, which will have to offer their assistance and to give good reasons to China so that it joins the combat.
Remarks collected by Matthieu Auzanneau
He says a substantial growth in Iraqi output will be needed to avoid a market "wall".
Automatic Translation
Without the Iraqi black gold, the oil market will face a "wall" from here at 2015
In September 2005, in the columns of the World, you launched this warning to the consumer
countries black gold: "Leave oil". Do you have the feeling to be heard?
Fatih Birol. Each day, the oil market becomes more difficult, because the speed of the growth of the request and the concentration of the production in a very small number of countries. Since 2005, the rise in the price of the barrel was confirmed: the current price, near to 70 dollars, is an important signal for the large consumer countries. The economy accepted almost without difficulty this raising of prices of the barrel.You are right, the rich economy accepted. But the world does not stop with the rich countries. Africa is in great difficulty. The debt grows hollow to buy oil. For the future generations, there is something of low register. But the energy invoice and the deficits also grow hollow in the United States, for example. The United States and the European Union try to use oil much more effectively, in order to reduce the growth of the demand for oil. Thus there was a reaction on behalf of the consumer countries well.
Is this reaction with the measurement of the dangers which you predict? The exit of oil goes up little by little in the diary of the OECD countries. But it should be stressed that a large share of the rise of the request comes from China and, to a lesser extent, of India. China counts for the moment 70 cars for thousand inhabitants, against 680 in Europe and 860 in the United States. If the Chinese want to catch up with the level of equipment of the Western nations, that will it occur?
Do the outputs exist to answer such an increase in demand?
From here at 2015, market and the oil industry severely will be put to the test. From here five to ten years, oil production out-OPEC will reach a maximum before starting to decline, for lack of sufficient reserves. Each day ago of new evidence of this fact. At the same time the peak of the economic phase of expansion of China will take place. The two events will coincide: the explosion of the growth of the Chinese request, and the fall of the production except country of OPEC. Our oil system will be it able to answer this challenge, it is the question.
Do the Chinese leaders have the will and the capacity to slow down their request for oil? This will exists. To set up a radical energy policy is easier in China than in a country having a political régime, say, different. On another side, the Chinese wish to benefit from the Western life style. An Chinese says himself: "if I have the money, why I would not buy a car?" I think that the Chinese government will not be able to do better than to slow down acceleration: there will be always a very strong growth of the demand for oil, no matter what it arrives. The oil industry must hold account of this fact and take measurements necessary.Can one envisage which will be the rate of this growth? It is a great unknown factor: which is the growth potential of the Chinese for the ten next years: 6 % per annum, 7 %, 10 %? This difference in some points will have very different implications in the world.
Biocarburants don't they constitute a response to this challenge?
Once again, the figures should be looked at, rather than to listen to rhetoric. Many governments encourage the agricultural fuel consumption, in particular in Europe, in Japan and the United States. Some of these policies are not founded on a solid economic rationality: the biocarburants will remain very expensive to produce. But even if these policies end, we think that the share of the biocarburants in 2030 will be only 7 % of the whole of the world production of fuels.To reach these 7 %, one will need an agricultural surface equivalent to the surface of Australia, plus those of Korea, Japan and New Zealand...
This competition with the surface devoted to traditional agriculture is likely to have consequences on the price of harvests.
Yes, it is already the case, and it is not good. And then there are also difficulties related to the environment: more and more of studies prove that the biocarburants automatically do not reduce the gas emissions for purpose of greenhouse, compared with oil. It is also a large concern. Thus for these at the same time economic and environmental reasons, 7 % of the total production of fuels are a figure very, very optimist. The agricultural fuels will never replace the oil of OPEC, as some hope for it. Their contribution will remain minor.
The which perhaps contribution of the new layers in Africa?Until one waits of Africa does not have anything revolutionist: a few hundreds of additional thousands of barrels per day here or there in West Africa. That will not change the things basically.
Then, from where the new outputs can come ?
The two only countries which can really change the course of the play are Saudi Arabia and Iraq. They can bring on the market a volume of significant additional crude, if they wish it. But in which conditions? There is there too an enormous question mark. Here the unknown factor, they are the figures on the reserves.
Are there reasons to expect nasty surprises on this side?
I believe that the Saoudi government speaks about 230 billion barrels reserves. I do not have official reason not to believe in it. However Saudi Arabia just as the other producer countries and the international firms should be more transparent in the presentation of their figures. Because oil is a very crucial good for us all, and our right is to know, according to international standards', how much oil it remains us.
Is there a short-term risk?
One bases oneself on the assumption of an average rate of decline of the production of the existing oil fields of 8 % per annum. It is already much: for a dollar invested in order to increase the extractions, it is necessary to invest three dollars to compensate for this decline. But what would it occur if, any made accounts, the rate of decline were 9 %? The additional quantity of oil which would have to be found to compensate for the difference is equal to the rise of the oil consumption of the OECD countries envisaged from here at 2020.
Saudi Arabia recognizes a fast decline of several of its principal fields...
I can confirm that Saudi Arabia is able to reach an output of 15 million barrels per day (Mb/d) from here at 2015, against 12 Mb/d today, in accordance with the engagement of the Saoudi Minister for oil, Ali Al-Nouaïmi. However these 3 mbj additional, it is about all until one can wait to face the rise envisaged of the world demand for oil [ this request is 83 today Mb/d ].
And Iraq?
If the production does not increase in Iraq in an exponential way from here at 2015, we have a very big problem, even if Saudi Arabia respects its engagements. The figures are very simple, it does not need there to be an expert. It is enough to know to make a subtraction. China will grow very quickly, India also, and what Saudi Arabia projects, the 3 mbj moreover, will not even be enough to answer the rise of the Chinese request.
But, considering the current situation in Iraq, it is very improbable that this country arrives at its optimal capacity of production right like that!
If this situation improved radically, how long would it be necessary so that Iraqi oil industry reaches its optimal capacity? Official Iraqi speaks about 3 to 5 years. They know better than me. Even if what they say is exact, and that all occurs well to Iraq, it will be in any event a long process.Thus I repeat it, the oil industry will face a very serious test from here at 2015: with the decline of production out-OPEC and the peak of growth of China, the gap between supply and will widen to a significant degree.
What becomes the large private oil companies in this new play which, according to you, will be dominated more and more by the trust of the producer countries?
These "majors" [ Exxon, Rafter-Texaco, Shell, LP and Total ] will be in difficulty. They will not have any more access to the new outputs. They must redefine their strategies, if not if they remain concentrated on oil, they will have to be satisfied with markets of niches.
You say that they will not remain "majors" well a long time?It is what I say. In spite of the big rise in the price of the barrel, which enabled them to invest, the "majors" could not reconstitute their reserves!
Thus if the things do not improve in Iraq... ... there is a wall, a great test in front of us, if the Western powers and also China and India do not revise by their energy policy in a substantial
way, by taxing oil more, by seeking more energy effectiveness.
One does not take of it really the way. The world oil consumption grows more and more quickly.Unfortunately, there are many words, but few acts. I really hope that the consuming nations will include/understand the gravity of the situation, and will set up very strong and radical policies to slow down the rise of the demand for oil.
Such a step would play in favour of the fight against the climatic reheating, a fight with the exit still very dubious...
I believe that there is many ways of fighting the climatic reheating. But it is necessary to be very clear: if you want to solve the problem of the reheating, it is impossible to do it without India and especially without China, which has just become the first world gas transmitter for purpose of greenhouse. China is the key.
With them only, from here at 2030, the Chinese could emit more twice more carbon dioxide than the unit of the OECD countries [ See computer graphics: "Rise of the CO 2 emissions of 2004 to 2030 in China, India and in OECD" ]. That does not have any direction to take measures if China does not take part.
An example: Europe committed itself reducing its emissions of 20 % from here to 2020. Some say that it is realistic, others say that that is not it. But the question is not there. At the current rate/rhythm, China will need only one year and half to emit 20 % of emissions which Europe says lends to save!
You meet high Chinese persons in charge. Is the climate a major concern for them?
The first concern of the Chinese leaders, it is the growth and the economic effectiveness. Of course, they are concentrated on the problems of environment, but in fact the local problems worry them more. The air pollution of the east cities in their eyes more important than the climatic change.
However, they very take the reheating with the serious one, but I think that the first step must be taken by the Western countries, which will have to offer their assistance and to give good reasons to China so that it joins the combat.
Remarks collected by Matthieu Auzanneau
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