IEA warns of oil supply limit, cites field analysis

By Alex Lawler

LONDON (Reuters) - Constraints and risks, both above and below ground, may leave consumers short of oil over the coming years, the International Energy Agency said on Wednesday.

The 2008 edition of the annual World Energy Outlook for the first time based its assessments on a detailed field-by-field analysis of production trends, investment and costs.

This year's record rally to a peak of $147.27 a barrel for U.S. crude in July had already reflected market expectation supplies would be inadequate.

World supply would rise to 106 million barrels per day (bpd) in 2030 from 84 million bpd in 2007, if enough investment were made, the IEA, which advises most of the world's big economies on energy policy, said.

The 2030 estimate is about 10 million bpd lower than last year's forecast.

It lowered the 2030 supply projection -- and its estimate of demand -- because this year's report expects oil prices to be higher and economic growth to be slower over the next two decades.

While warning of risks to supply, the IEA stopped short of endorsing peak oil -- the controversial view that production has reached, or will soon reach, a high point and then fall.

"Global oil production in total is not expected to peak before 2030," it said.

DECLINE RATES

Even so, the IEA said the more easily accessible sources of crude, or conventional oil, were expected to reach a plateau toward the end of the projection period.

That will make the world more reliant on non-conventional and more costly sources, such as oil sands, as well as on Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries.

Massive investment was needed to bring on new supply to meet demand and compensate for declining output at aging fields to avert another surge in prices.

The report looked at 800 of the world's oilfields and found the average rate of decline is currently 6.7 percent for those that have passed their production peak. It expects that rate to increase to 8.6 percent in 2030.

(Editing by Peg Mackey and Barbara Lewis)