Despite bonanza year, oil industry refuses to invest
Doha forum calls for more investment, more energy efficiency and more transparency in the industry
Delayed investment, bureaucracy and a lack of transparency between consumers and producers are to be blamed for the current price of crude, said Paris-based energy watch dog, international energy agency (IEA), last month. IEA’s executive director, Claude Mandil, inaugurated the 10th International Energy Forum in Doha, Qatar, where ministerial delegations from more than 60 key producing and consuming countries meet informally every two years.
A one-day meeting of leading energy executives preceded this year’s event. “Major investment, together with energy efficiency improvements, is needed along the entire energy chain to overcome the challenges we are confronting in today’s energy markets. Only through timely investment, can we build the energy bridges needed for a sustainable future,” Madil said. The executive director said that a prolonged pattern of under-investment in the oil sector has created constraints in the system that will take several years to resolve. Current oil price levels reflect not only geopolitics, but also bottlenecks in both upstream and downstream capacities, and are a risk to sustained global economic growth.
Because the investment cycle takes time to bring new supplies on line, uncertainty will continue to characterise the market, he said. Mandil called for more investment now to ensure adequate supplies of all forms of energy. He told producers that if current policies remain in place, global energy demand will grow by 25% by 2015, and by that time oil demand will reach 99.5 million barrels per day.
This rapid growth will be driven by demand in developing countries. Recent reports have criticised the GCC nations for not learning from the 1970s oil shock, where they were accused of squandering funds. Though GCC states have posted record oil revenues of about US $300 billion last year, investment in the oil sector is not in proportion to it, analysts said. “I believe Gulf states have so far failed to learn the lesson of squandering huge revenues from the first oil shock in 1973, Kuwaiti economist Hajjaj Bukhdur said.
“Yes, they have increased public spending but at a rate greatly lower than the increase in revenues. They have only done less than 30% of what they can do,” Bukhdur told AFP. Last year’s oil income of the GCC, which holds at least 45% of proven global crude reserves, is double 2003 earnings, and more than three times the level of revenues in 2001.
The GCC, which groups organisation of producing and exporting countries (Opec) members Saudi Arabia, Kuwait, the UAE and Qatar, and non-Opec Oman and Bahrain, have earned more than $800 billion from oil in the past five years. This income is set to grow, as experts agreed that oil will remain dominant as the single largest fuel in the global primary energy mix. The forum concluded that continued strong demand for all fossil fuels seems a certainty at this time, even taking into account stronger policies to mitigate global warming risks, though sustained high prices may slow growth slightly.
On a broader level, Mandil has urged both producers and consumers to work together to confront the challenges posed by energy poverty and climate change.
No energy system will be sustainable without global access to modern energy services, reliable and affordable supplies, and reduction of environmental impact, he said.