The Sleipner A project injects carbon dioxide into saltwater aquifers deep beneath the sea floor off the Norwegian coast. The project turns a profit due to the presence of Norway’s high carbon taxes, scientists say. Carbon capture and storage, also called carbon sequestration, traps carbon dioxide after it is produced and injects it underground. The gas never enters the atmosphere. The practice could transform heavy carbon spewers, such as coal power plants, into relatively clean machines with regard to global warming. Photo: Statoil

The International Energy Agency (IEA), the Paris-based energy adviser to industrialised countries including Ireland, said today that during the past five years, spare oil producing capacity has fallen below the 3-4 mb/d (million barrels per day)typical of the past decade. The IEA also said that without policy change, world energy demand will more than double by 2030; Meeting IPCC emissions cut of 50% by 2050 would require huge amount of investment and unprecedented technological breakthroughs.

The Financial Times reports today that Saudi Arabia, the world’s biggest oil producer, has put on hold any plans to further increase long-term production capacity from its vast oil fields, its most powerful policymakers have said.

In a series of statements, including one by the king himself, the kingdom has warned consumers it does not reckon there is a need for further expansion, an assumption disputed by the world’s biggest developed countries.

The FT says that the realisation Saudi Arabia will not increase production to 15m barrels a day as quickly as important consumers and the markets had assumed could put further pressure on oil prices, which touched fresh records last week.

There is some speculation that production in some of the older Saudi fields, is reaching a peak.

Last week, it was reported that Russia, the second-biggest oil producer, hit a peak in production in 2007.

“With oil prices surging over $110 a barrel and growing concerns over the environmental repercussions of the world‟s spiraling energy demand, the dialogue between energy producing and consuming countries is more meaningful than ever”, said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA), in his key note address to the 11th International Energy Forum (IEF) today in Rome.

Stressing the value of this unique forum for policy dialogue to which Ministerial delegations and senior policy makers from over 90 countries have been invited this year, he detailed IEA analysis of the key global energy challenges the world needs to address in the coming years.

High Oil Prices

“Current oil prices are too high, especially for developing countries which face other significant cost increases, and considering the threats to global economic growth at the moment”, Tanaka said. Amid various views about the reasons behind the price rally – some blame market fundamentals, others speculation and financial flows - the IEA sees a combination of different factors driving this phenomenon: primarily, strong demand growth in the developing world coupled with constraints in bringing new oil to the market.

During the past five years, spare capacity has fallen below the 3-4 mb/d typical of the past decade. IEA analysis shows that there is no quick fix on the supply side and spare capacity is likely to remain tight. This underscores the need for more investment. Investment “Investment is one of the main challenges we are facing in the global energy sector”, Tanaka said: “$22 trillion in investment will be needed in energy-supply infrastructure by 2030. The oil sector alone needs $ 5.4 trillion. Although spending has recently increased, supply growth could remain sluggish, because of increasing costs and a proliferation of above-ground risks, such as more frequent access limitations and tighter fiscal and regulatory regimes.”

The IEA calls for investment now to ensure adequate supplies of all forms of energy. Unless current policies change, world energy demand will more than double by 2030. There is a clear need for governments and industry to do all they can to increase the output response of new investment and for national and international oil companies to enhance cooperation. In the short to medium term, increased energy efficiency can yield substantial savings in energy consumption and can help improve the country‟s energy security while at the same time reducing CO₂ emissions.

Climate Change

Climate change is another key challenge, against the background that fossil fuels will still continue to dominate the global energy mix in the foreseeable future. Without new policies, CO2 emissions could jump 56% by 2030, leading to an eventual increase in average global temperature of up to 6^oC. With this in mind, the IEA is currently analysing what would be needed to meet the most ambitious Intergovernmental Panel on Climate Change(IPCC) scenario of cutting emissions by 50% by 2050.

A report to be presented at the G8 Summit in Hokkaido will show that meeting such a target would entail a huge amount of investment and unprecedented technological breakthroughs such as in carbon capture and storage (CCS). Tanaka urged Ministers gathered in Rome to support making CCS eligible to receive revenues generated by the Clean Development Mechanism (CDM) as it could accelerate deployment of this crucial new technology. “The deployment of CCS should be a litmus test for the seriousness of environmental negotiators dealing with climate challenge.” “In short”, Tanaka said, “the world´s energy economy is on a pathway that is not sustainable”. This is valid for the oil market, where there is an urgent need for investment, to ensure an adequate cushion between supply and demand returns to the market. This is also true from an environmental perspective.

“In the long term, to meet environmental concerns, we will require a veritable energy revolution that completely transforms the way we produce and use energy. However, the energy sector should not be viewed only as the cause of the climate problem but also as part of the solution”,Tanaka said. After all, it readily lends itself to provide the type of transferable skills required to prosper in a low carbon economy. An essential step in this process would be to continue the dialogue between producers and consumers, Mr. Tanaka said and stressed that the dialogue had already resulted in concrete achievements such as the Joint Oil Data Initiative (JODI). “It must now focus on areas where progress is needed and where mutually beneficial outcomes are possible”, he said, citing as an example cooperation between the IEA and oil cartel OPEC on carbon capture and storage -- a technology which would be doubly beneficial as it would lead to lower CO₂ emissions while enhancing oil recovery.