In the midst of all the confusing and contradictory signals, from the pundits and not so pundits, it was indeed reassuring, refreshing, reinvigorating and professionally rewarding in many ways to hear, from non other than the International Energy Agency chief economist Dr. Fatih Birol, reiterating before a select audience that this hydrocarbon driven civilization is not approaching its ultimate end.
As the OECD energy watchdog, the IEA has a very important role to play and hence its assertion that this energy rich region will continue to play a vital role in quenching the global energy thirst in the years and decades to come, should also soothe some nerves at least.
Birol, is a well established and respected name in the global energy fraternity. Being the chief economist at the IEA, he is regarded as the principal author of the “World Energy Outlook - 22005” released by the IEA last month. Birol was in Riyadh, late November and during his visit he also presented the crucial chapter - “Middle East and North Africa Insights”- of the just published report before the select gathering of diplomats and energy professionals at the newly inaugurated headquarters of the International Energy Forum.
The presentation hovered around the IEA projection of state of industry in nine energy rich states of the Middle East & North Africa. And one major finding of the IEA reports was that despite what Mat Simmons & co, could continue to think, the region would continue to play a very critical role in meeting the global energy requirements in future too - which as per the IEA report could go up to 115 million bpd by 2030, if other constants remain same.
The Middle East & the North African region would still be the major energy provider to the world in 2030, argued Birol while presenting his energy insight of the region. From current approximately 29 million bpd, the supplies from the region would go up to 50.5 million bpd, as more than 60 percent of the proven oil reserves are in this region, he argued.
The MENA share in the global supplies would thus go up to 44 percent of the total global supplies by 2030. Currently the region accounts for only 35 percent share of the global markets, he projected.
However, in order to be able to meet the global needs, huge upstream and downstream investments are required in the energy sector, he argued. According to Birol, provided other constants remain same, an estimated $1.5 trillion - $56 billion per year - is required to be invested until 2030 in the sector in this region alone.
According to the IEA estimates, Saudi Arabia would also need to invest some $174 billion in the sector by 2030 and 80 percent of it would be have to be in the upstream sector, as the call on Saudi crude was projected to go up to 18 million barrels a day. Currently Saudi output is hovering around 9.5 million bpd. Birol however, was confident that Saudi Arabia has the potential, reserves, the technical capability and the will to invest so as to be able to meet this growing call on its crude.
Similarly in order to meet the requirements of lighter, preferred crude, an estimated $480 billion needed to go into the refining sector until then - both for new facilities and for revamping the existing ones, the IEA report projected.
In recent months, question marks have also been raised about the Saudi super giant field Ghawar with some arguing that it may not continue to produce at its current level as the field is already past its peak. Ghawar roughly produces five million barrels a day.
As far as the economics is concerned, as per the IEA projections, oil prices would stabilize and would be driven down over the next few years so that by 2010, the prices would be hovering around $46 a barrel, only going up to $74 per barrel by 2030 in nominal terms. Hence MENA revenues from its hydrocarbon resources would also go up from $313 billion in 2004 to $635 billion by 2030 - in 2004 terms.
