* $40 trln needs to be invested in energy supply by 2035
* $53 trln needed to prevent significant climate change
* Spending on oil output more than doubled in 2013 from 2000
* Upstream spending dominated by LNG
(Adds quotes, details)
By Simon Falush and Nina Chestney
LONDON, June 3 A potential shortfall in
investment in production in the Middle East could create a $15
increase in the oil price by 2025, the energy arm of the
Organisation for Economic Cooperation and Development (OECD)
The world will need to invest $40 trillion in energy supply
and $8 trillion on energy efficiency by 2035 to meet growing
demand and falling output from mature sources of energy, the
International Energy Agency (IEA) said in a report
A large proportion of the investment to increase output will
need to come from the Middle East as a rise in non-OPEC
production such as U.S. shale oil starts to lose steam in the
But the IEA was wary about the outlook for investment in the
region due to factors including security concerns and government
spending priorities outside the energy sector.
"If investment doesn't pick up as needed, we will have much
more volatile oil markets, and in the 2020s we will have higher
oil prices," Maria van der Hoeven, IEA executive director, told
reporters at the launch of the report.
Furthermore, the report said, if the world is to keep the
rise in the average global temperature below 2 degrees Celsius,
a total of $53 trillion will need to be spent, more of that
amount on energy efficiency and less on fossil fuels.
In 2013, investment in energy production was over $1.6
trillion, more than double the level in 2000 in real terms, and
spending on improvements in energy efficiency was $130 billion,
the IEA said.
Investment in renewable sources of energy rose to a peak of
$300 billion in 2011 from $60 billion in 2000 but has since
fallen to $250 billion for 2013.
More than four times this level, or $1.1 trillion per year,
was spent on the extraction and transport of fossil fuels, oil
refining and the construction of fossil fuel-fired power
stations, the report said.
Of the $40 trillion that will need to be spent by 2035, less
than half will be spent on meeting growth in demand.
"About 80 percent of all oil investments are made to
compensate for the decline in existing fields, so it means that
oil investments have little to do with oil demand growth and
much more to do with the decline of existing oil fields," Fatih
Birol, the IEA's chief economist, told reporters.
GAS SURGES, POWER STRUGGLES
Of the total investment in upstream oil and gas spending of
more than $850 billion per year by 2035, gas will account for
most of the increase. Over $700 billion is expected to be
invested in the liquefied natural gas (LNG) sector alone by
The IEA warned that more gas might not lead to much lower
"The expectation that a surge in new LNG supplies will
totally transform gas markets needs to be tempered by
recognition of the high capital cost of LNG infrastructure, with
transportation typically accounting for at least half of the
cost of gas delivered over long distances," the report said.
For Europe's power markets, the IEA warned that a shortfall
of investment could threaten reliability of electricity
"The investment required to maintain the reliability of
Europe's electricity system is unlikely to materialise with the
current design of power markets," the report said, adding that
wholesale prices were around 20 percent too low to make
"Europe requires more than $2 trillion in power sector
investment to 2035 ... If this situation persists, the
reliability of European electricity supply will be put at risk,"
the IEA said.
Van der Hoeven highlighted more fundamental problems in some
"Even if all the projected investment comes in on time,
almost 1 billion people will be left without access to energy in
2035," she told Reuters.
(Editing by William Hardy and Jane Baird)