LONDON (Reuters) - Falling oil prices may cut investment in U.S. shale oil by 10 percent next year, the International Energy Agency (IEA) said, slowing growth in a sector that has turned the United States into a major global producer.
The recent drop in oil prices “should not blind us to the problems that may be around the corner,” Fatih Birol, the IEA’s chief economist, told Reuters ahead of the launch of the agency’s 2014 World Energy Outlook.
Benchmark oil prices have dropped by about 30 percent over the past four months to around $82 a barrel due mostly to increased supplies from the Middle East and North America, squeezing budgets of oil-producing nations and oil companies.
“If prices remain at these lows, this may result in a decline in U.S. upstream capital expenditures by 10 percent in 2015, which will have (an) implication for future production growth,” Birol said.
The lower oil prices are also increasing debt levels for Brazil’s state-owned Petrobras, which could lead to delays in projects there, too, Birol said at the launch of the report.
U.S. shale oil output rose by 1 million barrels per day (bpd) per year over the past four years as strong oil prices led to a boom in fracking, a technique that uses materials under high pressure to release gas and oil trapped in deep rock.
U.S. shale production is set to peak at around 4.5 million bpd in the 2020s before gradually declining, according to the IEA.
Oil prices could, however, rise as weak prices perk demand.
The IEA forecast global oil demand to rise from 90 million bpd in 2013 to 104 million bpd in 2040, when the energy supply mix divides into four almost-equal parts between oil, gas, coal and low-carbon sources.
On the demand side, while China has supported most of the global demand growth over the past decade, India and east Asian countries are set to become the main drivers, Birol said in a news conference.
“China energy demand growth is slowing down and in the 2020s it (the slowdown) will be much more pronounced,” he said, as the world’s top energy consumer becomes more energy efficient and its economic and population growth ease.
Strife in the Middle East, mostly in Iraq, poses a threat to future supplies - hampering investments necessary to sustain production growth there, Birol said.
Demand for gas is set to grow by more than half by 2040, the fastest rate among the fossil fuels, and increasingly flexible global trade in liquefied natural gas (LNG) will decrease risks of supply disruptions, the IEA said.
Editing by Keiron Henderson