The world needs to find a new Saudi Arabia every two years to meet oil demand
Dana Gas boss says we need to find an extra 80m barrels of oil each year to meet demand, and, despite dazzling new technology, this won't be easy.
July 1, 2008 8:42 by kippreport
The world oil consumption is increasing by one to two million barrels a day, per year, against a natural decline in the oil wells and reservoir of around eight per cent a year, warns Hamid Jafar, executive chairman of Dana Gas.
Jafar made this observation while addressing the senior bankers at the ‘Bankers Lunch’ at Dubai International Financial Centre (DIFC) recently. He stressed the fact that given the fall in oil reserves to the extent of 67 million barrels each year, and one to two per cent increase in consumption every year, 80 million barrels of ‘new oil’ needs to be found every year to keep up with the demand.
“This means the world needs to find one Saudi Arabia every one or two years,” he adds. “The problem lies in the reality that more oil is being produced than found despite the dazzling technology.”
World oil production currently is 85 million barrel a day. Some think this may increase to 100m bpd, others say it is already at its peak.
At best, the International Energy Agency (IEA) says the peak could be 116 million bpd which seems to be realistic, and this we could reach by 2015. Outside the Organisation of Petroleum Exporting Countries (OPEC) area, other prolific areas in oil are North Sea and Alaska.
Jafar points out the IEA prediction says by 2030, most of the world oil needs to come from wells and fields that are not tapped or not been discovered as of today.
Predicting future oil prices has been proved meaningless, he says, but oil has proved time and again to be inelastic – meaning that the price doesn’t have anything to do with demand and supply.
“In 1969, the oil price was $1and this continued for a couple of years. But by the end of the decade, the price reached $40 per barrel. The oil price hovered around $15 a barrel for two decades from the mid-eighties. So if you multiply that by 40 as what happened in the 70s, you get a price of $600 a barrel,” he explains.
Five years ago many columnists wrote that a global recession could bring down the oil price to $30 a barrel. The International Energy Agency last year presented three oil price scenarios, when the oil price was $64 a barrel.
“The high price scenario was that the oil price would reach $100 a barrel by 2030,” he says, “but to the surprise of IEA itself it crossed $130 the following year.
“A few days ago the oil price jumped by $9 a barrel in a single day. This has to be viewed against fact that oil was $9 a barrel ten years back.”
First seen in The Business Weekly