World energy – a changing picture

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The world’s got 42 years of oil left, if production continues at 2008 levels. That is one of the scary statistics coming from the BP’s latest Statistical Review of World Energy, published last week. Forty two years sounds like quite a long time, but it’s not really. It’s less than two generations of supertankers which, by then, are likely to carry refined products, rather than crude oil anyway.
    BP’s boss, Tony Hayward, described 2008 as a year of “truly unprecedented developments”. For a start, oil demand fell 0.6%, not a huge dip in itself but a figure that disguises some pretty major changes to market fundamentals. The fall came despite rising demand and consumption in non-OECD nations, led by China which accounted for more than three quarters of those nations’ incremental consumption, and followed by India. For the first time ever, non-OECD demand exceeded that of OECD nations.
    In the US, the world’s largest energy guzzler by far, demand plummeted by 5.4% as industry braced itself going into the financial crisis and consumers bought less petrol which, after all, had shot up to record prices exceeding $2 a gallon. Energy analysts at BP, however, suspect that oil demand in the world’s largest economy may have peaked once and for all, partly because of the retreat of manufacturing and partly because parts of the American public is starting to think a soft hue of green.
    Of course, more oil is being found all the time and existing reserves that were not viable at $30 become quite interesting at $80. The 42-year figure, therefore, is one that will change significantly if energy prices continue their long-term upward trend, a pattern that is thought virtually inevitable by energy economists. However, just where and in what volumes new oil reserves will be found has significant implications for shipping: new oil deposits are likely to be found in much smaller volumes and in far less accessible locations.
    Having said that, the reserves-to-production ratio in the Middle East region as a whole is more than 78 years and altogether, countries there still hold almost 60% of proved world reserves. Saudi Arabia still has more than a fifth of the world’s oil, according to the BP statistics, sufficient to last more than 66 years at 2008 production rates. Iraq has a reserves-to-production ratio of more than 100 years; Iran almost 87 years; the UAE close to 90 years; and Kuwait just shy of 100 years.
    In stark contrast, the US, Canada and Mexico between them have less than 15 years of supplies at 2008 production levels. Europe and Eurasia have about 22 years, but Norway has just eight and the UK a measly six. Meanwhile Africa has just over 33 years and the Asia Pacific region 14.5 years.
    There’s a more positive story in natural gas – at last year’s production levels, the world has enough to last just over 60 years and total reserves continue to increase steadily. At the beginning of 1999, for example, the world had an estimated 148trn m3 of natural gas. By January 2008, this figure had increased to more than 177trn m3, a rise of close to 20%. The Russian Federation holds the lion’s share of reserves today, with Iran second and Qatar third. Other countries with notable gas reserves include Saudi Arabia, the UAE, Iraq, Turkmenistan, the US and Venezuela. Meanwhile recent gas finds off the coast of Brazil, in addition to vast oil finds on the country’s deepwater Tupi Field, for example, could transform Brazil’s energy fortunes.