Financial Times leaks a big IEA report to show there will be a 9 percent annual decline in oil output

Thanks to Kevin Moore who has alerted the Living Economies google group to an article by Richard Heinberg commenting on the Financial Times report below. How sobering this is!

World will struggle to meet oil demand
By Carola Hoyos and Javier Blas
Published: October 29 2008 02:00 | Last updated: October 29 2008 02:00
Output from the world's oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de-mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries' demand will require investments of $360bn (£230bn) each year until 2030. The agency says even with investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.

"The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand," the IEA says.

The watchdog warned that the world needed to make a "significant increase in future investments just to maintain the current level of production".

The battle to replace mature oilfields' output could even offset the decline in demand growth, which has given the industry - already struggling to find enough supply to meet needs, especially from China - a reprieve in the past few months.

The IEA predicted in its draft report, due to be published next month, that demand would be damped, "reflecting the impact of much higher oil prices and slightly slower economic growth".

It expects oil consumption in 2030 to reach 106.4m barrels a day, down from last year's forecast of 116.3m b/d.

The projections could yet be revised lower because the draft report was written a month ago, before the global financial crisis deepened after the collapse of Lehman Brothers.

All the increase in oil demand until 2030 comes from emerging countries, while consumption in developed countries declines.

As a result, the share of rich countries in global demand will drop from last year's 59 per cent to less than half of the total in 2030.

This is the clearest indication yet that the focus of the industry on the demand - not just the supply - side is moving away from the US, Europe and Japan, towards emerging nations.

Investment is key, Page 8

Copyright The Financial Times Limited 2008

And here is Richard Heinberg's comment

Nine percent

by Richard Heinberg
The Financial Times has leaked the results of the International Energy Agency's long-awaited study of the depletion profiles of the world's 400 largest oilfields, indicating that, "Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent."

This is a stunning figure.
Considering regular crude oil only, this means that 6.825 million barrels a day of new production capacity must come on line each year just to keep up with the aggregate natural decline rate in existing oilfields. That's a new Saudi Arabia every 18 months.

The Financial Times story goes on:

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. The effort will become even more acute as [oil] prices fall and investment decisions are delayed.


This is putting it mildly. Investment capital is being vaporized almost daily in a global deflationary bonfire of unprecedented ferocity. Oil production projects are being mothballed left and right.
Inter alia, the IEA takes the requisite swat at "peak oil theorists," who, the agency somehow still believes, are saying that the world is "running out of oil." Of course that's NOT what peak oil theorists say, but a correct summation of their position would have to be followed with a statement to the effect that, "Our research supports their position," which would be just too embarrassing.

Sadly, the IEA feels it must pull its punch even further. With adequate investment in new small oilfields and unconventional sources like tarsands, it insists, the world can still achieve higher levels of production. In other words, if the $12 trillion that vanished from the world stock markets last week were invested in new tarsands projects, then theoretically a few more years of total oil production growth could be eked out (not growth in net energy production, mind you, but in the gross—and I do mean gross—production of exotic, very expensive stuff that it's physically possible to run your car on, assuming you could afford to do so).
Of course, any realistic assessment either of the likelihood of that level of investment appearing, or of the ability of new projects to really produce a sufficient rate of flow regardless of the size of the cash infusion, would end merely in a hearty belly-laugh.

Evidently peeved about being scooped on its planned November 12 press conference roll-out of the study, the IEA has disavowed the Financial Times story. But if nine percent is even close to being the final figure, then it's absolutely clear: July 2008 was the all-time peak in world oil production. Don't expect anyone at the IEA to officially admit that fact until 2025 or so. But among those who pay attention to the evidence and the terms of the debate, further ink need not be spilled in speculation.

Peak oil is history.