PARIS, Nov. 15 -- If governments stick to current policies, world energy needs will be more than 50% higher in 2030 than they are today, warned Paris-based International Energy Agency in its recently released World Energy Outlook 2005 (WEO 2005).

But world energy resources are adequate to meet this sustained growth trend because global oil reserves today exceed the cumulative projected production to 2030, IEA said. This optimistic outlook, however, is based on a reference scenario that IEA describes as "unsustainable."

Under that reference scenario, primary world energy demand increases by an average rate of 1.6%/year, with fossil fuels accounting for 83% of the projected increase. By 2030, the world consumes 16.3 billion tonnes of oil equivalent (toe)/year-5.5 billion toe more than it does today-with more than two thirds of energy use coming from developing countries.

Also under the reference scenario, oil remains the single most important fuel, with transportation accounting for two thirds of the increase in oil use. Demand reaches 92 million b/d in 2010 and 115 million b/d in 2030.

Natural gas demand grows even faster, driven primarily by electric power generation, overtaking demand for coal by 2015. The share of nuclear power declines marginally, while hydropower remains broadly constant.

Under the reference scenario, the share of biomass declines slightly and is replaced by commercial fuels in developing countries. Other renewables, such as geothermal, solar, and wind energy, grow faster than any other energy source, but still account for only 2% of primary energy demand in 2030.

Reference scenario

Oil and gas resources from the Middle East and North Africa (MENA) will play a critical role in meeting the world's growing appetite for energy, IEA pointed out (OGJ Online, Nov. 7, 2005).

MENA's share of global oil and gas reserves is much higher than its share of current production, suggesting strong potential for growth. Under the reference scenario, MENA's share of world oil production is set to rise from 35% in 2004, or 29 million b/d, to 44% in 2030, or 50 million b/d. Saudi Arabia's production alone is expected to rise to more than 18 million b/d by 2030.

During 2004-30, in this view, net oil exports surge to 39 million b/d from 22 million b/d. The price of oil eases to about $35/bbl in 2010 as new production and refining capacities come on stream. It is then assumed to rise slowly to $37/bbl in 2020 and $39/bbl in 2030-$10/bbl higher than IEA's WEO 2004.

MENA also will become the world's leading gas exporter, with most of the rise in exports (largely LNG) reaching Europe and the US. Gas production will increase by an average of 4.3%/year as output rises from 385 billion cu m (bcm) in 2003 to some 600 bcm in 2010 and 1,210 bcm in 2030. More than two thirds of this gas will come from the Middle East. Net gas exports will soar to 444 bcm from 97 bcm in 2003.

Considering that domestic energy demand within MENA countries is bound to soar, driven by surging populations, economic growth, and heavy energy subsidies, IEA wonders how much oil and gas will be left for export. Alternatively, it also examines the case of consuming country governments switching to policies that would reduce their dependence on oil and gas and on supplies from MENA countries.

Other scenarios

IEA's WEO 2005 developed two other scenarios, each of them far more likely than the reference scenario. The first, a deferred investment scenario, assumes investment in the producing countries is delayed deliberately or inadvertently. The second, a world alternative policy scenario, assumes consumer countries cut demand and change their pattern of fuel use because of higher prices, environmental concerns, or security reasons, or all three.

Although the assumptions in both these scenarios are very different in nature and scope, global energy demand is significantly lower than in the reference scenario in both cases.

In the deferred investment scenario, more limited funds in MENA upstream projects push up crude prices more than $13/bbl by 2030 as well as drive up natural gas and coal prices. MENA's share of world oil production drops from 35% in 2004 to 33% in 2030 (vs. 44% in the reference scenario), as oil demand falls by 12 million b/d, or 9%.

In the alternative policy scenario, energy demand is deliberately curbed by 6%, which leads to lower energy prices as the share of oil and gas demand falls. In both scenarios, oil and gas demand falls significantly in importing regions, except in China where there is a switch from gas to coal.

Saudi Arabia's crude oil production in the deferred investment scenario would be 23% lower than in the reference scenario by 2030, at 14.1 million b/d; oil exports are reduced 27% to 10.5 million b/d.

Also under the deferred investment scenario, Iran's oil production is 27%, or 1.8 million b/d lower in 2030, with exports falling 40% to 2.7 million b/d. Iran's gas production falls 14% to 205 bcm/year. Exports decline to 30 bcm/year from 57 bcm/year in the reference scenario.

Algeria's oil production falls throughout 2004-30 to 1.3 million b/d, while total gas production would fall 21% to 42 bcm/year as investment in the gas sector drops around 25%. Net oil exports fall from 1.7 million b/d to 900,000 b/d in 2030, nearly 225,000 b/d less than in the reference scenario, while gas exports fall by 40 bcm/year to 104 bcm/year.

WEO 2005 indicates, however, that actual trends lie somewhere between all of its three scenarios. "In practice, policies of producing and consuming countries will change over time in response to each other, to market developments, and to shifts in market power."

The report added, "If MENA upstream investments fall short of what appears to be necessary to sustain the global economy, the more likely it is that consuming countries will adopt additional policies to curb demand growth and reliance on MENA." But even so, global energy use still increases, and MENA exports still grow significantly.