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Page added on April 27, 2017

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Aramco, IEA warn of future supply crunch

Consumption

Two of the most influential voices in the oil market today separately set out a stark picture of a coming crude supply shortfall.

The IEA and state-owned Saudi Aramco both pointed to the sharp reduction in investment levels since the oil price began to fall in 2014, and warned of trouble ahead.

The IEA said crude discoveries and project approvals both fell to multi-year lows in 2016, as low prices squeezed investment spending. Discoveries of 2.4bn bl in 2016 fell way below the 9bn bl annual average for the previous 15 years, and the number of projects receiving a final investment decision (FID) last year was at the lowest since the 1940s, it said.

“The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the world”, said IEA executive director Fatih Birol.

Speaking in Paris, Aramco chief executive Amin Nasser said: “The supplies required for the years ahead are falling behind substantially because the vast, long-term investments in proven and reliable energy sources are not being made. This presents a grave and growing threat to world energy security”, Nasser said, adding that 30mn b/d of oil production capacity needs to be developed over the next five years. The IEA last month warned that crude output growth “all but stalls” after 2020, and today said exploration spend and project approval are likely to be low again this year.

“When we talk about normal decline today… [it is] a decline of 5pc/yr,” Nasser said. A significant proportion of work happening now is infill drilling, which he said will actually increase rates of decline.

“What we need in the industry is… megaprojects that would mitigate the decline over the long-term. Otherwise the decline will accelerate… closer to 10pc, which would be difficult to compensate for over the long term.”

Nasser said in the immediate term the market is moving toward balance, and given predictions of global economic growth he decried the idea of ‘peak demand’. Oil demand “will continue to grow, in absolute terms, at fairly healthy levels, for the foreseeable future,” he said. The IEA pegs global demand growth at 1.2mn b/d a year in the next five years.

“I believe ‘peak oil demand’ is not in sight for at least the next few decades, and… the notion of ‘stranded resources’ is not one I recognise,” he said. Later, Nasser declined to comment on preparations to list 5pc of Aramco, but reiterated that the plan remains on track for next year.

ARGUS



16 Comments on "Aramco, IEA warn of future supply crunch"

  1. Cloggie on Thu, 27th Apr 2017 11:17 am 

    54 GW new wind capacity in 2016.

    Offshore about to take off, giving wind another boost:

    https://cleantechnica.com/2017/04/26/54-gw-new-wind-power-installed-2016-competing-subsidised-incumbents-gwec/

    Who needs Aramco.

  2. bobinget on Thu, 27th Apr 2017 12:04 pm 

    Who needs electricity?
    Wind and solar on good day’s provide electric power.
    Some decade, battery storage, will power
    ships and aircraft just like electric power works on land based rail, trucking and automobiles.

    Try to understand, energy is not a single source.
    Up till now every energy resource, not unlike medicines, have serious side effects. Currently, coal
    is way ahead, killing air breathers, rich and poor.

    We are converting solar, wind, geothermal, hydro,
    into clean, drinkable water from oceans and sewage.

    Someday we will come up with a liquid fuel from hydrogen or CO/2 and Cloggie can fly around the world..

  3. Bob on Thu, 27th Apr 2017 2:39 pm 

    A 5% yearly decline rate tells you everything you need to know. Project forward 20 years and there won’t be much left to talk about. Soon wind/solar/conservation will be all we will have. Adjust now, avoid the rush.

  4. Plantagenet on Thu, 27th Apr 2017 2:57 pm 

    Its obviously in Aramco’s self interest to predict future oil shortages, because Aramco is doing a stock offering right now when the the world is in an oil glut.

    Caveat Emptor

    Cheers!

  5. energy investor on Thu, 27th Apr 2017 5:54 pm 

    If the money in E&D is not spent in increasing amounts (viz the Red Queen) we won’t find much oil.

    If finds don’t replace depletion then output will ultimately fall.

    Just logic…well, isn’t it?

    Not sure why the comments above don’t include the words, “of course the IEA and Aramco are correct.”

  6. rockman on Thu, 27th Apr 2017 8:39 pm 

    All a matter of your perspective. For the many tens of millions who cannot afford the current price of oil there is TODAY a supply crunch. IOW a severe shortage of oil supplies selling for $25/bbl. Just as when oil was selling for $90/bbl and hundreds of millions of US citizens had all the oil available to them that they wanted to buy. IOW there was no supply crunch…for them.

    So, what’s your personal stupid perspective? LOL

  7. Cloggie on Fri, 28th Apr 2017 2:18 am 

    Not sure why the comments above don’t include the words, “of course the IEA and Aramco are correct.”

    Because it is possible to be correct and irrelevant at the same time.

    There is enough fossil for the coming 3-4 decades to accomplish the energy transition that is now in full swing, future crunch or no crunch. Renewable is the largest share of new installed capacity. This is unlikely going to be reversed.

    Just add up 1 and 1 and arrive at 2.

    Hope this helps.

  8. dave thompson on Fri, 28th Apr 2017 4:55 am 

    There is nothing now available that will replace what we expect Fossil Fuels to do to power industrial civilization. Nothing.

  9. Jan on Fri, 28th Apr 2017 5:41 am 

    The Arabs did their best to destroy other sources of oil production, driving prices down to 15 year lows. Then they tell us there has not been enough investment.
    Politicians who thinks these people are our friends should be sacked

  10. Davy on Fri, 28th Apr 2017 6:00 am 

    Let’s pick apart the above comment.

    “There is enough fossil fuel for the coming 3-4 decades”. This statement is an opinion not science.
    Is that a fact? Are those fossil fuels economic? Is the economy capable of delivering them? Together that could be a double negative. A declining economy struggling to produce declining economically valued fossil fuels to produce lower energy density alternatives.

    “the energy transition is no in full swing” This statement is emotions not real analysis.
    I admit there is early momentum but look at the current penetration. I would hardly call that “full swing”. We have a long way to go with the hardest part ahead. Going across a transition threshold at some point is going to be a monumental task. This process could be a curve meeting a curve. The economy deteriorating curve and the difficult part of renewable transition curve meeting in impossibility. We are just now doing the easy part with a still functioning economy. The hard part is ahead.

    “Future crunch or no crunch”. This statement is one of emotional diminishment.
    The economic situation is potentially dire and the one thing that is hard for you to argue away. You can project techno optimism easier than argue away the fact that that your techno optimism needs huge amount of capital, resources, and a global economy to combine capital and resources in productive investments. This should be your biggest worry. We may have the technology but we may not have the wherewithal to realize it. Dismissing this issue shows your biggest delusions.

    “Renewable is the largest share of new installed capacity. This is unlikely going to be reversed.” This statement is part fuzzy facts and ends with a pure unsupported opinion. New capacity installed is high but considering how low the current base is this is still not worthy of too much cheering. Saying this is unlikely to be reversed has no leg to stand on.

    I want your world to be realized but I am not going to listen to another happy ending story without questions. These happy ending stories have been fed to us for years now by the status quo. Maybe we should reflect on where we are at and how we got here. Reflecting on that points to the above comment being some more of the same. We should practice a wisdom of caution with techno optimism because it is modernism that has brought us to this point. Doubling down on modernism may be making it worse. A trap is a trap. If you are caught sometimes it is best to acknowledge you are caught and make other arrangements.

  11. AFDF on Fri, 28th Apr 2017 6:20 am 

    We’re heading off the cliff just about now. Whipp out your kerosene lamps and candles folks. It will be dark and stormy sailing ahead.

    The globalists and new world order folks had all planned our future for us in the scenario of oil depletion. They’re eugenicists. That’s why Alex Jones planned his life early.

    By the age of 5, he already had 21000 women.

    We’re doomed folks.

  12. deadlykillerbeaz on Fri, 28th Apr 2017 6:21 am 

    How will I be able to fly to Munich for Oktoberfest and drink beer with the Japanese if there is a supply crunch?

    I demand an increase in oil production for at least another 500 years.

    No debating, no negotiating, no compromising.

    Don’t laugh, it’s not funny!

    If oil isn’t there, I’m taking hostages.

    Now get out there and get some more!

  13. Davy on Fri, 28th Apr 2017 6:27 am 

    “With Mass Vehicle Electrification on the Horizon, New Oil Development hits a 70 Year Low”
    https://robertscribbler.com/

    This climate guy is losing it! Check out this article and the assumptions. I love the graph on “Rise of the Electric car. Check out where we are at and where we are supposed to be going…wow, grab the popcorn and hold on…or just another popcorn fart from delusional increasingly desperate fake greens.
    https://robertscribbler.com/#jp-carousel-15363

    This guy is a great climate scientist. I read him routinely. He is a complete failure on the understanding of our global system and economics. He is a flaming techno optimist who fails to understand just how dirty tech is in any shape. He fails to understand predicaments from problems. He is part of the problem with the world today.

  14. onlooker on Fri, 28th Apr 2017 7:16 am 

    There is enough fossil for the coming 3-4 decades to accomplish the energy transition that is now in full swing, — Echoing what other posters said, what remains of the fossil fuel bonanza are the more energy/economically intensive to access resources. Even if civilization could for access them, it would be at a high energetic/economic cost, leaving not much net energy for the entire Economy. I don’t see how then a full scale transition to Renewable that will require much energy can be effected

  15. Cloggie on Fri, 28th Apr 2017 7:25 am 

    “There is enough fossil fuel for the coming 3-4 decades”. This statement is an opinion not science.

    http://www.dailymail.co.uk/news/article-2593032/Coal-fuel-UK-centuries-Vast-deposits-totalling-23trillion-tonnes-North-Sea.html

    Q.E.D.

  16. bobinget on Fri, 28th Apr 2017 10:45 am 

    Javier’s tweet.

    Shale can easily outlast OPEC countries while destroying public wealth.

    Another month, another drop: #SaudiArabia FX reserves down $5.4 billion in March to $508.6 billion (lowest since mid-2011)

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