At the risk of sounding like a broken record, here's another diary on the lack of investment by the oil industry, which follows
this one.
The reason for this is a new communication by the IEA (International Energy Agency), which comes two days about the speech by its director chronicled in my previous diary, and which puts numbers on their worrying declaration that the oil majors are not investing enough. In other words, they are getting seriously worried and are beginning to air their grievances publicly (instead of communicating to governments and companies like they do usually. To my knowledge, this is pretty much unprecedented.
Oil groups 'underinvest by up to 20%' (Financial Times, 6 May 2005)
Energy industry executives said the IEA was becoming more vocal about its concerns after companies had ignored earlier pleas by the watchdog for more investment.
Fatih Birol, IEA chief economist, told the Financial Times yesterday that investment in the oil sector was 15-20 per cent less last year than what was needed to meet IEA estimates for the next 25 years. This underinvestment resulted from two factors: listed companies returning cash to shareholders and international companies' lack of access to countries with vast reserves.
"This [lack of access] is the biggest issue the industry faces. We need to move on from asking whether we need to invest, to working out a new investment framework in oil-producing countries that is suitable for both sides," said Mr Birol.
(...)
He said companies' lack of access to Opec reserves had caused most exploration expenditure to flow to mature and therefore costly oil and gas fields in North America and Europe.
These two regions accounted for 71 per cent of the 25,000 new fields drilled over an eight-year period in the late 1990s and early 2000s, while the Middle East accounted for 2 per cent.
(...)
The International Monetary Fund says Opec countries are constrained by "competing demands for social and infrastructure expenditures and, in some cases, high public debt levels [that] have limited the funds available for investment in the oil sector".
With less than 10% of the reserves, Western countries accounted for 71% of new fields drilled
The bad news is:
- we're really running out of places where to drill, not because we're running out of oil, but because the oil that exists is not accessible to those that wnt to invest
- no one has a real incentive to change that: oil producing countries are happy to see higher prices, and so are the oil majors'shareholders, who see record amounts of cash returned to them (windfall profits not reinvested in the business)
- our dependency on OPEC (and other closed producers like Russia) is set to grow exponentially as every drop of oil is squeezed out of the non-OPEC countries
The good news is this is the best way to finally force us to do smart things on the
demand side, like conservation and the like - and to do it when there is still oil around to make the transition possible (all the OPEC oil still under the ground - which they will certainly be keen to sell us when the barrrel costs
several hundred dollars).
The EIA is in its role to warn us; it does not seem yet that many people are listening. Crunch time is approaching fast.