Oil Report

IEA says oil capacity crunch looms at end of 2013

LISBON, Feb 27 (Reuters) - The International Energy Agency fears that an expected recovery in oil demand from 2010 and oil project cancellations due to low crude prices and the credit crisis will mean no spare oil capacity at the end of 2013.

“That is our concern. Investment, investment, investment, that is what we are asking,” IEA Executive Director Nabuo Tanaka said at a conference in Lisbon on Friday.

The Paris-based IEA, which advises 28 industrialised countries, earlier this month said global oil demand would drop by 980,000 barrels per day (bpd) this year but would rise again by about 1 million bpd in 2010 with an expected economic recovery.

Tanaka said that there was no room for complacency on spare oil capacity.

“We now see many cancellations or postponements of supply investment projects...and we learned the lesson last year when we didn’t invest, the market became volatile and oil prices reached $147 per barrel,” he said.

He added that supply from producing oil fields will decline dramatically, and that to offset the decline by 2030 “we need 45 million barrels per day of new capacity, or the equivalent of 4 Saudi Arabias”.

Regarding current oil prices, Tanaka urged the Organisation of Petroleum Exporting Countries (OPEC) not to seek rapid rises in oil prices by cutting supply.

“We hope OPEC will take a look at the market. Our concern is the global economic recovery and I believe OPEC’s concern is the same, so I think they will take a flexible decision. At least that is what we want to see happen,” he said.

Tanaka added that his main challenge was to persuade China and India to join his organisation, as “without engaging emerging countries like those we cannot maintain energy security”.

Reporting by Shrikesh Laxmidas; Editing by Keiron Henderson