Syed Rashid Husain REVIEWING the old files of the IEA's World Energy Outlook (WEO) makes a very interesting reading. After all WEO has been documenting history, year after year, for decades. In its own stride, “it is now the world's most authoritative source of energy market analysis and projections, providing critical analytical insights into trends in energy demand and supply and what they mean for energy security, environmental protection and economic development.” A cursory look, through the pages of the annual compilation, takes one through the astronomical changes the energy world has undergone over these last two decades or so. Describing its key assumptions, the WEO - 1994 noted, the reference case projections are based upon an assumed average IEA import price of oil of $17 per barrel in 1994 and 1995 (in constant $ 1993), rising to $28 per barrel by 2005, after which it remains flat. This was definitely the talk of a different planet. And then WEO - 1995 while stressing growing consumption, said: On assumptions made, oil demand could be between 85 and 105 million bpd (it stood at around 85 million bpd then) by 2010. Later on it also warned that while the abundance of potential energy resources was not in dispute, yet the combination of energy demand growth may not be sustainable And the story continues to go through ups and downs. Jumping to recent editions, WEO 2007 while underlining that China was the major growth driver, it also admitted that the world's remaining oil resources were sufficient to meet rising demand over the next two and a half decades. Yet, with geopolitics in background, it also lamented that output was to be more concentrated in OPEC, with its share in global supplies increasing from 42 percent to 52 percent by 2030. The global oil demand was also projected to reach 116 million bpd in 2030 in the reference scenario – 32 mbpd up on 2006. And then suspecting a lack of investment in the sector, the WEO 2007 warned of “a (possible) supply side crunch in the period to 2015, involving an abrupt escalation in oil prices.” To maintain growth in production capacity, the oil industry needed to invest a total of $5.4 trillion over the period 2006 – 2030, it said. The WEO in 2007 also projected that the IEA crude oil import price – a proxy for international oil prices – was to be around $60 (in 2006 dollar terms) in 2015 and to rise slightly to $62 by 2030 (or $108 in nominal terms). The next WEO edition came out in 2008, painting a potentially scary scenario: “The world's energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially.” Emphasis was on climate change. “On current trends, energy-related emissions of carbon-dioxide (CO2) and other greenhouse gases will rise inexorably, pushing up average global temperature by as much as 6°C in the long term.” Energy subsidy too emerged on the horizon; “Removing subsidies on energy consumption, which amounted to a staggering $310 billion in the 20 largest non-OECD countries in 2007, could make a major contribution to curbing demand and emissions growth.” Oil demand in 2030 was however, revised downwards in the document by 10 million bpd over the last WEO. Investment in the sector was again underlined to be critical: The Reference Scenario projections call for cumulative investment of over $26 trillion (in year-2007 dollars) in 2007-2030, over $4 trillion more than projected in 2007. The projections were based on the assumption that the IEA crude oil import price averages $100 per barrel (in real year-2007 dollars) over the period 2008-2015, rising to over $120 in 2030. In nominal terms, prices double to just over $200 per barrel in 2030, the document underlined. World oil supply was projected to rise from 84 mbpd in 2007 to 106 mbpd in 2030 in the Reference Scenario, with Saudi Arabia remaining the world's largest producer throughout the period, producing 15.6 mbpd in 2030. Global dependence on OPEC was rising. However, this projected increase in global oil output was hinged on adequate and timely investment. Some 64 mbpd of additional gross capacity — the equivalent of almost six Saudi Arabia — needed to be brought on stream between 2007 and 2030 and 30 mbpd of new capacity was needed by 2015. WEO-2008 also carried out an analysis of production at 800 fields of the world, including the 54 super-giants (holding more than 5 billion barrels) in production. With Ghawar very much under spotlight, courtesy Matthew Simmon, this was a very timely effort. And interestingly, decline rates were found to be lowest for the biggest fields, averaging 3.4 percent for super giant fields, 6.5 percent for giant fields and 10.4 percent for large fields. Observed decline rates also varied markedly by region; lowest in the Middle East and highest in the North Sea. The WEO-2009 was delivered in the aftermath of the global recession and its impact on the compilation was evident. Despite the repeated claims of peak oil by pundits all around, the document concluded that as a consequence of the financial crisis, the global energy usage was to fall. In the Reference Scenario of the report, global consumption was to begin recovering in 2010, reaching 88 million bpd in 2015 and touching 105 million bpd in 2030. However, with the limitations envisaged by the IEA, the global energy demand to 2030 could also remain parked at just above the current levels — to only 89 million barrels a day, the report pointed out. In another sign of a changing world, the WEO ‘09 also projected that China would overtake the US - somewhere around 2025 - as far as consumption was concerned. However, on the eve of the report's publication, Britain's Guardian claimed that under pressure from the US, the IEA deliberately exaggerated — read fudged — the level of accessible new supplies of oil, so as to prevent panic on global stock markets, initiating an interesting debate then. The focus of next edition, WEO 2010 was clearly on two issues: the emerging, dominant role of China in the global energy equation and the faltering climate battle. China's daily demand for oil was projected to touch 13 million bpd by 2035. Price was also projected to rise from just over $60 in 2009 to $113 per barrel (in year-2009 dollars) in 2035. Demand was to touch 99 million bpd by 2035 — 15 mbpd higher than in 2009. Focus then shifted to climate change issues. WEO 2011 emitted a stark warning to the energy hungry world — change your habits or be doomed. If fossil fuel infrastructure was not changed, the world will “lose forever” the chance to avoid dangerous climate change, it emphasized. And there was reason for this despondency! Despite all the talk of low carbon economy, CO2 emissions in 2010 jumped by 5.3 percent to a record 30.4 gigatons, an increase of 1.4 gt on the previous year” another IEA report then said. And when the WEO 2012 came out last week, it changed the picture altogether: “US is set to surpass Saudi Arabia as the world's top producer by 2017.” This is the world of energy. What a turnaround!
