But such demand growth is not inevitable. “The projected growth in demand is not set in stone,” Tanaka said. “Greater attention to improved oil use efficiency and diversification of transport fuel supplies could maintain spare capacity at closer to the current 5-6 million barrels per day, while generating a slow but steady increase in demand for OPEC crude.” In the lower GDP growth scenario, oil demand growth averages around 1 per cent (840 kb/d), taking global demand to 90 mb/d by 2015 and also effectively prolonging the period of more comfortable markets. Particularly noteworthy is the role of non-OECD countries, where almost all growth in oil demand is to be found in either scenarios and the pivotal importance of the transport sector in driving demand.

In the natural gas area, IEA demand modelling for the OECD region indicates a return to 2008 demand levels by 2012, but with significant variation between regions, with European demand recovery slower than elsewhere. China is seen as an area of strong growth, with demand doubling to 140 bcm by 2015 compared to 2007 now seen as a conservative forecast. This would make China a bigger gas user than any OECD country bar the United States, with suppliers including Turkmenistan, Qatar, Australia, and soon Myanmar, supplementing local output. “The oil supply outlook shows a marked improvement from a year ago,” Tanaka observed. “While non-OPEC supply continues to grow slowly, OPEC crude and natural gas liquids account for the bulk of the 5.4 mb/d of production growth to 2015.” For gas, two major supply trends dominate. The rise of non-conventional gas, first described in our 2008 review, has continued apace, making the United States the world’s biggest gas producer in 2009. The increase in liquefied natural gas (LNG) capacity means that a wave of new gas supplies will hit the markets over the next few years totalling in excess of 120 bcm per annum, a 50 per cent increase over 2008, and bringing important linkages between regions. “This oversupply of gas put strong downward pressure on prices,” Tanaka said, noting that spot prices for gas were well below half of oil prices for most of 2009.

“While the outlook for gas supplies may thus appear relatively comfortable, we cannot afford complacency – we must push forward now with new investment,” Tanaka warned. Long lead times for oil and gas projects require commitment years in advance to new supply projects. And there are other factors that could impact future supplies, such as the continuing depletion of existing oil and gas production, geopolitical risks in producing countries as diverse as Nigeria, Russia and Iraq, and potential deepwater project delays after the recent Gulf of Mexico disaster. For both energy sources, investment is needed through the value chain — in the upstream and in new hydro cracking capacity in the refining sector for oil, and in pipelines and other infrastructure for gas.

Also Read

• OPEC has surplus capacity to make up for shortfall: UAE
• BRIC key to growth, coal to rival oil by 2030: BP
• China overtakes US as the largest energy consumer
• High oil prices threaten to derail growth in India, China: IEA
• Opec cuts oil demand growth forecast on economy

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