IEA chief: investments in upstream sector needed to meet oil demand beyond 2020

HOUSTON, March 5 (Xinhua) -- Unless investments are made in the upstream sector of the Oil & Gas Industry, oil production beyond 2020 will not be able to satisfy demand, chief of International Energy Agency (IEA) said Monday in Houston, Texas, the United States.

Fatih Birol, executive director of IEA, told a gathering of the media at CERAWeek by IHS Markit that declining production in existing fields amounts to about 3 million barrels a day, or "in other words, one North Sea (production) each year."

"IEA for six years has tried to highlight the decline in existing fields. This year we have looked at more than 10,000 fields, field by field, since the year 2000... to see what is the observed decline rate of production," said Birol, adding that "we lose 3 million barrels a day because of the decline of aging fields."

According to Birol, production growth is not only needed to meet the growth in oil demand, but at the same time to replace the decline in the aging fields.

Investment into the oil industry has yet to recover from an unprecedented two-year drop in capital expenditures (CAPEX) in 2015-2016, but the latest energy outlook by IEA sees little-to-no increase in upstream spending outside of the United States in 2017 and 2018.

Birol said the IEA energy outlook shows that CAPEX dropped 25 percent from 2014 to 2015 and then 26 percent from 2015 to 2016. The spending in 2016 to 2017 was flat after a 50 percent increase in spending on U.S. shale was largely offset by declines in investment elsewhere. Only a modest rise in CAPEX is expected this year as a shift towards short cycle projects, especially U.S. shale, accelerates.

That is not to say that companies are not spending more on new projects. An increase in spending is nevertheless expected for Exxon, which spent 23.1 billion U.S. dollars in 2017 compared with guidance of 24 billion dollars.

The same is the case for Statoil, who maintained CAPEX guidance at 11 billion U.S. dollars, while spending 9.4 billion dollars last year. ConocoPhillips and Eni raised spending plans, while BP and Chevron expect to spend less, the IEA energy outlook stated.

Because of long lead times and continued cost deflation, investment in conventional offshore developments looks set to decline again this year. However, there are signs of renewed optimism about spending for the longer term with several offshore projects sanctioned last year.

With conventional onshore investment remaining mostly flat, the only source of growth is from LTO where investment is expected to increase by roughly 20 percent, IEA stated.

In 1983, Cambridge Energy Research Associates (CERA) was founded in Cambridge, Massachusetts, the United States. Each year, CERA clients gathered for a few days in Houston, the energy capital of the nation, to attend the executive conference where they gained insight into the energy future while connecting with their peers. Over time, the program was expanded to five days of informative sessions and networking opportunities-and named CERAWeek.

This year's CERAWeek kicked off on Monday in Houston, Texas, the United States. The annual energy conference features presentations and discussions by energy industry and governmental leaders. The theme for this year's event is "Tipping Point: Strategies for a New Energy Future."

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