Demand for both oil and natural gas should increase steadily over the medium term, but will be stronger in China, India and the Middle East than in the industrial countries, the International Energy Agency said in a new forecast.
“These contrasting trends cloud efforts to foresee how oil and gas markets will develop into the medium term,” said Nobuo Tanaka, executive director of the IEA. “But what is clear is that both will need more investment, a greater focus on energy efficiency and improved data.”
For oil, IEA used two scenarios in its forecast. One, based on GDP growth of 4.5% a year from 2010 on as forecast by the International Monetary Fund, sees oil demand increasing an average 1.4% a year to reach nearly 92 million barrels a day by 2015. That scenario also predicates a reduction in oil use intensity of 3% annually.
The second scenario presumes 3% annual GDP growth – and slower reduction in oil use intensity – and forecasts 1% annual growth in oil demand to 90 mb/d by 2015.
Under the fast growth scenario, spare capacity, including added capacity in OPEC countries, could fall below 5% of global demand, which would lead to “more jittery markets,” the IEA said. Under the slower growth scenario, supplies would be more comfortable.
In either scenario, the agency noted, almost all growth in oil demand is to be found in countries that don’t belong to the Organisation for Economic Co-operation and Development. The IEA also notes the “pivotal importance” of the transport sector in driving demand.
Natural gas shows the same dichotomy of faster growth in demand in places like China, where demand is expected to double by 2015, if not sooner, and Europe, where recovery in demand remains fragile.
Natural gas markets are characterized by the growth in unconventional production, which made the U.S. the largest natural gas producer in 2009, and the growth in liquefied natural gas, which will see supplies rise by 50% over the next few years from 2008 levels.
The agency cautioned, however, that there is no room for complacency regarding supply, given the long lead time for oil and gas projects.
Both energy sources require investment through the entire value chain, the IEA said, in the upstream and in new hydro-cracking capacity for oil, and in pipelines and other infrastructure for gas.
By. Darrell Delamaide