China’s thirst to keep oil prices booming: IEA (G&M)
ERIC REGULY
ROME— Globe and Mail Update
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China’s voracious appetite for fuel will push up oil prices substantially over the next two decades and will ensure that unconventional oil, notably Canada’s oil sands, will play an increasingly important role in the global energy mix, the International Energy Agency said its flagship World Energy Outlook report.
The report, published Tuesday, said crude oil prices will reach $113 (U.S.) a barrel (in 2009 dollars) in 2035, up from an average of $60 last year. Fatih Britol, the IEA's chief economist, predicted that the price will rise to about $110 in 2015 from the current price of about $87.
Chinese growth is the energy price drive. “It is hard to overestimate the growing importance of China in global energy,” said Nobuo Tanaka, executive director of the IEA, said in a statement. “How the country responds to the threats to global energy security and climate posed by rising fossil-fuel use will have far-reaching consequences for the rest of the world.”
China overtook the United States in 2009 to become the world’s largest energy user, in spite of its relatively low per-capital energy consumption. In the IEA’s outlook, China alone will contribute 36 per cent of the projected growth in energy use between 2008 and 2035.
The IEC expects oil demand to grow steadily, in spite of the considerable investments being made in non-fossil-fuel technology and carbon reduction efforts under last year’s Copenhagen climate-change accord. By 2035, oil demand will reach 99-million barrels a day, about 15-million barrels higher than 2009’s level. All of that growth will come from developing countries -- almost half from China alone. Demand in the developed world will actually fall by six-million barrels a day.
Canada’s role as an energy powerhouse seems secure under the IEA forecasts as so-called unconventional oil -- oil that cannot be easily pumped out of reservoirs -- takes a bigger proportion of the total oil mix. Unconventional oil is dominated by the oil sands in Northern Alberta and the heavy oil reserves in Venezuela. The IEA expects oil sands production to climb from 1.3-million barrels a day last year to 4.2-million in 2035, “making an important contribution to the world’s energy security.”
In conventional oil, the globe hotspot is the Caspian Sea region, the IEA said, which contains “substantial resources of both oil and natural gas.” The agency said that Caspian oil production should peak at 5.4-million barrels a day between 2025 and 2030, up from 2009’s 2.9-milllion barrels, with all of the increase coming from Kazakhstan.
Kazakhstan’s oil-production growth will be the world’s fourth highest, after Saudi Arabia, Iraq and Brazil, making the former Soviet republic an energy superstar. The IEA said the financing and building pipelines for the export market loom as the country’s greatest challenge.
Caspian gas production is also set to soar. The IEA expects the region to pump out 310-billion cubic metres in 2035, almost double the current figure. Turkmenistan is driving this expansion.
Gas will become the fuel with the brightest future. Demand for the fuel fell in 2009, because of the global economic downturn, but has sinceresumed its upward trajectory. The IEA expects demand to rise by 44 per cent by 2035 -- an average rate increase 1.4 per cent a year. China’s gas-demand growth will be 6 per cent a year. “China could lead us into a golden age for gas,” the IEA said. “Demand in the Middle East increases almost as much.”
In spite of the rising demand for gas, the IEA expects the “gas glut,” which has depressed prices, will expand to to 200-billion cubic metres next year, up from 130-billion this year, followed by “a hesitant decline.”
Given the leap in fossil fuel demand, the IEA held out virtually no hope that the national commitments made to reduce greenhouse gas emissions will be met. “Rising demand for fossil fuels will continue to drive up energy-related carbon dioxide emissions through 2035, making it all but impossible to achieve the 2-degree C [temperature rise limit] goal, as the required reductions in emissions after 2020 would be too steep,” the IEA said.
The IEA blamed “lack of ambition in the Copenhagen Accord” even though the agency believes the technology exists to reduce the planet’s carbon footprint. It noted that even though the use of renewable energy (hydro, wind, solar, geothermal, among others) will triple by 2035, its share of total energy demand will rise to only about 14 per cent.
The slow progress so far in reducing carbon output means the estimated cost of reaching the 2-degree goals has increased by $1-trillion “and undoubtedly made it less likely that the goal will actually be achieved,” the IEA said.
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