TOKYO Feb 17 The rise of the Islamic State (IS)
in Iraq and Syria presents a major challenge for the investment
necessary to prevent an oil shortage in the next decade, the
International Energy Agency's (IEA's) top economist said on
While the IEA has sounded warnings that Middle East crude
production will need to rise in the 2020s to meet predicted
demand, Chief Economist Fatih Birol said there remain "myopic"
views about the need for investment at a time when the fall in
oil prices means energy companies are slashing new drilling.
U.S. oil output from shale formations, while expected to
rise in the short term even with the cutbacks in drilling and
investment, will not be enough to meet demand. The traditional
Middle East producers will need to meet the expected rise in
consumption, Birol said, with Iraq expected to contribute about
50 percent of the additional oil needed.
That means "we now have a problem," Birol said, speaking to
Japan's gas industry association four days after the IEA
confirmed his appointment to replace Maria van der Hoeven as
executive director when her term expires at the end of August.
"The security problems caused by Daesh (IS) and others are
creating a major challenge for the new investments in the Middle
East and if those investments are not made today we will not see
that badly needed production growth around the 2020s," Birol
"The appetite for investments in the Middle East is close to
zero, mainly as a result of the unpredictability of the region,"
IS extremists have disrupted oil production in northern
Iraq, although output in the south - where most of the country's
crude comes from - has so far been largely unaffected.
Still, attacks by Islamist groups with suspected ties to IS
are spreading, including to an oilfield in Libya in which
France's Total has a stake.
Oil prices have rallied to around $62 a barrel from a
six-year trough below $46 in mid-January, mostly on worries
about falling rig counts in the United States and the outlook
for future shale oil production.
Still, U.S. crude inventories have continued to swell
because of production already in place, with the stocks rising
to a record high of nearly 418 million barrels in the week to
Feb. 6, government data showed last week.
(Reporting by Aaron Sheldrick; Editing by Tom Hogue)