Published: Thu, November 15, 2018
Research | By Raquel Erickson

Oil Market Reliance on US Shale Potential Is Risky, IEA Says

Oil Market Reliance on US Shale Potential Is Risky, IEA Says

The United States will be the biggest contributor to global oil production growth in the period to 2040, accounting for 75 percent of the total, the International Energy Agency said in its latest World Energy Outlook, adding, however, that this would require a lot more investments than what is now being made in production expansion.

The IEA's Tim Gould says that, although oil use for cars peaks in the mid-2020s, this will be more than offset by rising demand for oil in road freight, aviation, shipping and, increasingly, for petrochemicals. It's great that the IEA now see wind being the no. 1 source of electricity in Europe in less than 10 years.

"The electricity sector is experiencing its most dramatic transformation since its creation more than a century ago", said the International Energy Agency in an annual energy outlook that focused on electricity.

"Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centers, and expanding basic access to energy in Africa and elsewhere".

IOGP executive director Gordon Ballard said: "The case for investments in exploration and production is clear: all IEA scenarios show strong future demand for oil and gas". However, even with that growth, renewables will still account for only 12.4% of the energy pie. That's less than 160 gigawatts of new wind production and 230 gigawatts of solar.

Global gas demand would increase by 1.6% a year to 2040 and would be 45% higher by then than today, The IEA said.

This means fears of a glut in gas supplies are unfounded, the agency said in a note.

The World Bank Group said at the One Planet Summit in Paris in December that it would cease to finance upstream oil and gas projects after 2019 "to align its support to countries to meet their Paris goals".

Growth is expected to be driven primarily by shale fracking, which should lead USA shale oil supply to more than double, reaching 9.2 million barrels a day by the mid-2020s, the agency said.

According to Reuters, these estimates are based on the agency's "New Policies Scenario".

Oil demand is expected to increase to 106 million barrels per day (mbd) by 2040, 11 mbd more than today, according to the IEA's flagship publication World Energy Outlook 2018.

That's because of the campaign to replace coal as the primary winter heating (and cooking) fuel in homes across northern China, especially in the winter heating season that starts on Thursday. China will remain the biggest emitter.

In charting projections for electricity generation capacities and demand, the IEA has suggested there remains a significant gap between its forecasts and staying within those climate targets, requiring what the IEA has termed as a "systematic preference" for investments in sustainable energy technologies.

The United States, already the world's top oil producer due to its shale revolution, is projected to lead new oil production up to 2025, accounting for 75 percent of increases. In particular, coal-fired power plants, which account for one-third of energy-related Carbon dioxide emissions today, represent more than a third of cumulative locked-in emissions to 2040.

The agency said this growth trajectory was "far out of step" with what scientific knowledge says would be required to tackle climate change.

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