Non-Opec oil production will peak next year, the International Energy Agency says in its World Energy Outlook.

The IEA also says that post-peak gas fields are declining at a rate of 7.5 per cent, but there appears to be enough recoverable gas reserves to satisfy world demand until at least 2030.

The IEA has been criticised for underplaying the risk of an imminent oil supply crunch. A story in The Guardian today quotes two whistleblowers who claim the agency privately believes oil production will never reach 100m barrels per day, despite its forecasts that world oil demand will reach 105m b/d by 2030.

The WEO repeats the 105m b/d forecast this year, but breaks its outlook into two scenarios: a ‘reference scenario’, in which energy use continues along its current path, and a ‘450 scenario’, in which governments make a concerted effort to limit atmospheric CO2 concentrations to 450ppm.

Under the no-change reference scenario, the IEA sees global oil rising 1 per cent per year, reaching 105m b/d in 2030. This is 1m b/d less than the agency’s forecast last year. OECD demand, in this scenario, will also fall.

Under the 450 scenario, non-hydro renewables rise from 2.5 per cent of the power mix in 2007 to 8.6 per cent in 2030.

Warnings of the no-change reference scenario

The WEO says that investment in upstream oil and gas production is 19 per cent lower this year than in 2008 - which it says could have “potentially serious consequences for energy security”, depending on how governments respond. It warns of price volatility and says:

These concerns are most acute for oil and electricity supplies. Any such shortfalls could, in turn, undermine the sustainability of the economic recovery.

Without any chance in government policy, the report warns, climate change and energy security pose big risks.

Average oil prices will be $100/barrel in 2020 (in 2008 dollars) compared to $60 this year.

OECD countries, although their oil imports will fall under both scenarios, will spend 2 per cent on average on importing oil and gas between now and 2030. Non-OECD countries will spend even more.

Natgas demand to grow

In both the ‘no change’ and the climate change aversion scenarios outlined by the International Energy Agency, natural gas plays an increasingly important role in future energy supply.

In the 450 scenario, world gas demand would grow by 17 per cent in 2030. But that would be 17 per cent lower than in the reference scenario, and demand would begin to fall in some areas after 2020 as low-carbon policies kick in.

In the shorter term, gas demand will grow by 2.5 per cent a year between 2010 and 2015, assuming an economic recovery begins next year. But in a bearish note for gas prices, the IEA says supply growth will outpace demand.

There is adequate natural gas resources to meet ‘any conceivable’ increase in demand, the agency says. There are 850tcm of commercially recoverable gas reserves and only 66tcm of that has been produced (or flared). But costs of production, in the long-term, will rise and half of the world’s existing capacity will need to be replaced by 2030.

The IEA is less confident than some that the shale gas boom in North America will be replicated in the rest of the world:

The extent to which the boom in unconventional gas production in North America can be replicated in other parts of the world endowed with such resources remains highly uncertain.

Related links:

Peak demand: Going big?

Energy companies idle 29.6% of oil output for storm
Tropical Storm Ida first to disrupt production this season (Bloomberg)

China-US deal on clean energy projects
CCS and electric cars, but no Copenhagen breakthrough (FT)

Ministers pick 10 nuclear sites
RWE Npower quits competition (FT)

Questions remains on viability and waste
UK nuclear issue swept under the carpet (FT)

Obama will go to Copenhagen to clinch deal
‘If it will make a difference’ (Reuters)

Sinopec, PetroChina gain on China fuel price increase
Government increases diesel and petrol prices for first time in two months (Bloomberg)

China seeks Africa joint ventures
Head of China’s Africa investment fund speaks (FT)

Reliance looks to buy LyondellBasell assets
Deal could be worth $6bn (FT)

Chemical reaction may help Mukesh Ambani focus
Comment: LyondellBasell would put distraction concerns to rest (FT)

Sites identified as suitable for nuclear power plants. Source: DECC

The UK government has published its long-awaited national policy statement drafts on electricity supply for the next two decades. The key point was the naming of 10 sites as suitable for nuclear power stations, most of them near existing or decommissioned plants. Industry seems keen on this (after all they suggested the sites) and even the opposition’s strongest criticism was that it was years too late.

This is not something to be taken lightly, however. Many of the UK’s existing nuclear, and some coal plants, will become too old to keep working, while cumbersome and slow planning approval has held up development of both renewables and fossil fuelled plants (nuclear has, in addition, its own specific political and financial problems). This has been a pressing concern for years now. The government’s goal to increase the supply of energy from renewables and address energy security concerns (namely, importing gas from Russia) makes it even more challenging. Continue reading "How soon will the UK get its new energy policies?"

One of the difficult issues facing countries negotiating at Copenhagen is ‘carbon leakage’. Developed countries agree — in principle — that they should sign up for more stringent emissions reduction targets, allowing developing countries to continue increasing their emissions for a while in order for their populations’ living standards to improve.

But big developed countries, particularly the US, face massive political backlash against the idea of signing up to commitments that would increase costs to their own carbon-intensive industries. Even worse is the prospect of ‘carbon leakage’ - or, work going offshore to developing countries who were allowed more generous limits. The US has floated the idea of a border tax to offset this, which is only inflaming developing countries ahead of Copenhagen. Continue reading "Chichilnisky on how to solve ‘carbon leakage’ with carbon trading"

On FT Energy Source:

Did oil cause the latest recession? The IEA weighs in

A potentially bullish nat gas data mystery

Shell falls short on the forecourt

Oil, US gas prices rise on Hurricane Ida concerns

Further reading:

India’s Reliance set to spend $6bn on LyondellBasell assets, say sources (Economic Times)

The new Iraqi deals don’t mean cheap oil (Energy Outlook)

Shale gas skeptic plot thickens (Houston Chronicle)

Is socialism a prerequisite for a national nuclear industry? (Matthew Yglesias)

Gas players are hedging their bets with liquids ‘topnots’ (The Barrel/Platts)

Technical guide to shale gas (The Oil Drum)

Angola to stash more cash into fund (UpstreamOnline)

EPA demands attorneys remove video critical of cap and trade (Grist)

An old Shell gas station in Winston-Salem, North Carolina. Source: Flickr

Shell is usually pretty pro-active in its approach to shaping its public image. It is eager to host and participate public discussions on climate change and CCS, and the company’s climate change scientist David Hone writes what is, for a corporate-sponsored effort, not a bad blog.

But those efforts tend to be focused on oil and gas production, or big-picture stuff such as the future of fossil fuels. They seem to be falling down a little, at least by comparison, when it comes to the somewhat more mundane downstream efforts.

First, the poppy scandal. In the UK, Shell retailers are not allowing charities, including the Royal British Legion’s ubiquitous poppy appeal, to put their fundraising boxes on its service station counters. It’s easy to guess how that turned out: threats of boycotts from ex-servicemen and general accusations of heartlessness.

And in the US, Shell on Friday agreed to pay $19.5m for “numerous violations” discovered in an investigation into 1,000 gasoline stations around California. “Many dealt with failure to properly monitor underground storage tanks and spill alarm systems,” the AP reported.

(Incidentally, the rather eye-catching gas station pictured above is in neither California nor the UK.)

Update: Shell has changed its mind about the poppies and published a rather abject apology about the whole affair. Royaldutchshellplc.com - probably company’s most eagle-eyed watchers - have published the whole thing and even gave them a pat on the back for it.

It’s a basic economic tenet that supply must always equal demand. So when the Energy Information Administration finds in its monthly natural gas report that the volumes of gas produced are not equivalent to the amount of gas that is bought, it publishes a number known as the ‘balancing item’. This represents the different between the two amounts, and it is added to the supply number to correct whatever error led to the imbalance between reported supply and demand.

If there is more supply than demand recorded, the balancing item is negative. If supply is lower than demand, the balancing item is positive to make up the difference. Continue reading "A potentially bullish natural gas data mystery"