Spare crude capacity to tighten from 2013

Stavanger, Norway: The world's spare oil output capacity will tighten from 2013 due to an expected growth in demand after expanding towards 2010, the head of the International Energy Agency (IEA) said yesterday.

"There will again be a less spare capacity from 2013, meaning oil prices are not likely to return to levels of a few years ago any time soon," said Nobuo Tanaka, the executive director of the IEA, the energy adviser for the world's most industrialised nations told an oil and gas conference.

On Tuesday, Tanaka said spare capacity would rise to four million barrels per day in 2010 from two million bpd now and new projects would come onstream.

With spare capacity thinning again, oil prices could then spike on potential supply disruptions caused by factors as diverse as hurricanes or geopolitical conflicts, he said.

Oil prices rose sharply in the first half of this year to touch a record $147 in July. They have since fallen to around $117 as demand in many developed countries weakened.

Tanaka said even at current levels prices were still high and harmful to the global economy, especially emerging markets.

He also said oil output from countries outside the Organisation of Petroleum Exporting Countries (Opec) was likely to peak in the next decade.

"Non-Opec output expected to peak by the middle of the next decade. Production will be increasingly dominated by a small number of major producers," Tanaka told conference delegates.

Although suppliers tend to be criticised for high prices, Tanaka reiterated his view that consumers should continue to conserve energy and fuel subsidies in such countries as China should be lifted.

The IEA says such subsidies create unnatural oil demand growth as they prevent the market mechanism of high global prices denting demand.

"Unless government policy changes, world energy demand will grow by 55 per cent by 2030. Despite all the attention given to wind, bio, solar, the reality is we are still heading for a fossil future - 84 per cent of the overall increase to come from oil, gas, and coal," Tanaka said.

The IEA estimates oil subsidies in China, India and the Middle East totalled $70 billion in 2006 and are even greater now, he said.

Tanaka also said an objective to cut emissions of carbon dioxide, a major greenhouse gas, by 50 per cent, a target pledged by the leaders of the G8 nations to fight with global worming, would achievable but extremely tough.

About $45 trillion of investment, or roughly 1 per cent of the world's GDP, would be necessary to achieve the target, he said.