IEA calls for Middle East investment

THE WORLD could slump into a massive energy crisis if the oil-rich Middle Eastern countries do not invest enough in energy production over the next two decades, according to the International Energy Agency (IEA).

  • E-Mail
By  Rhys Jones Published  November 13, 2005

THE WORLD could slump into a massive energy crisis if the oil-rich Middle Eastern countries do not invest enough in energy production over the next two decades, according to the International Energy Agency (IEA). The IEA, in its World Energy Outlook report for 2005, predicted that under its ‘reference scenario’, gas production in the region would triple by 2030 while that of oil would grow by 75%. The report focused on six of the largest-energy producing states in the Middle East — Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates — as well as North African producers Algeria, Egypt and Libya. By 2030, according to the IEA, these countries will be responsible for 44% of world oil production against 35% at present. However, experts at the IEA, which seeks to coordinate and monitor energy policies in its 26 member states, foresee two other scenarios that could also unfold over the next quarter century. Under the first projection the target countries — instead of boosting investment — could in fact decide to defer such spending. The IEA said that a doubling in annual upstream investment would be needed by 2030, but cautioned: “It is far from certain that all that investment will be forthcoming.” It suggested that some Middle East and North African (MENA) producers “could choose deliberately to develop production capacity more slowly” than the IEA foresees or could be hamstrung by external factors such as a shortage of capital. Under such circumstances, it said, the global energy balance would be “radically altered”. The report calculated that if upstream investment in oil-producing facilities were to remain constant in the target countries, at an average share of gross domestic product over the past decade, the resulting decline in investment would come to US$110 billion between now and 2030. That would act as a drag on world economic growth, lowering global energy demand by 6% in 2030 compared with the reference scenario. The IEA added that the producers themselves would suffer in the absence of robust investment, since many of them are heavily dependent on revenues from crude oil sales. Under a third, “alternative” course of events, according to the IEA, consuming countries would press ahead with “vigorous new policy measures” aimed at rationalising energy use and switching from fossil fuels. Such policies “could and no doubt will steer the world onto a different energy path”, the IEA said, citing a call by Group of Eight (G8) at a July summit for measures to combat consumption of fossil fuels and greenhouse-gas emissions. Stronger action on conservation would mean a fall in oil and gas demand in the main consuming regions, leading to reduced MENA exports and lower prices, according to the IEA.

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code