Kate Mackenzie Supply crunch alarm – oh, no, wait…

The IEA writes that its monthly report “may provide food for thought in the optimists‐versus‐pessimists debate about supply prospects”.  They’re talking of course about the worries of a short- to medium-term supply crunch as investment falls due to the recession.

In a special feature, they point to data from IHS CERA and the US Department of Labor Statistics that show upstream costs falling:

Aggregate upstream capital costs, they say, fell 12 per cent year-on-year to November 2009. They point out that this is a positive figure against signs of upstream investment falling; a Barclays report published in December put the decline at 15 per cent. If companies are spending less, but costs are also falling at a not dissimilar rate, then perhaps supply crunch fears won’t be fully realised. Of the Barclays study, they add:

A key finding is that while National Oil Companies (NOCs) plan to hike their upstream investments by 15% in 2010, International Oil Companies (IOCs) will only spend 1% more – a
reflection in part of opportunity constraints borne of limited access to major new sources of reserves.

Whew. We haven’t seen that particular report, but that’s quite a striking difference. No wonder non-Opec supply is peaking.

Related links:

Finding new oil gets ever more expensive (FT Energy Source, 23/09/09)
Not your average peak oil theory, from Macquarie (FT Energy Source, 18/09/09)
IEA puts a number on supply crunch: Three years to go (FT Energy Source, (20/05/09)