Energy spending cuts under fire | IEA cites threat to economic recovery, but need for conservation and new climate treaty

Energy spending cuts under fire

IEA cites threat to economic recovery, but need for conservation and new climate treaty

SHAWN MCCARTHY

OTTAWA — From Wednesday’s Globe and Mail Published on Wednesday, Nov. 11, 2009 12:00AM EST Last updated on Saturday, Nov. 14, 2009 3:15AM EST

GLOBAL ENERGY REPORTER

Global energy companies have responded to the economic crisis by slashing much-needed investment, and the resulting loss of future production could undermine an economic recovery, the International Energy Agency warns.

In its annual outlook released yesterday, the Paris-based agency said the investment shortfall will make it more difficult – and eventually more costly – for the world to meet growing energy demand, and at the same time address the serious threat posed by climate change.

Faced with weakened demand and lower prices, energy companies are drilling fewer oil and gas wells, postponing or cancelling new production projects and cutting back spending on refineries, pipelines and power stations.

"Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious effects on energy security, climate change and energy poverty," said the IEA, which advises rich nations on energy policy.

"Sustained lower investment could lead to a shortage of capacity and another spike in energy prices in several years’ time."

Global oil and gas companies slashed investment in 2009 by 19 per cent, or $90-billion (U.S.), compared with 2008 levels.

Among the hardest-hit sector was Canada’s oil sands industry, the IEA said, noting that since mid-2008 projects involving a total of 1.7 million barrels per day of new production and $150-billion (U.S.) of total investment have been suspended or cancelled.

Still, the agency’s forecasters expect production in the oil sands to grow from the current 1.4 million barrels a day to 2.1 million barrels in 2015, and 3.9 million barrels in 2030.

But that production could be much lower if countries urgently adopt the measures needed to prevent catastrophic effects from global warming. The IEA is, in fact, urging countries to finalize a new climate treaty when they meet in Copenhagen in December.

Without new climate change policies, the IEA says global oil demand will grow to 105 million barrels daily by 2030, from 85 million barrels a day in 2007: growth averaging out to about 1 per cent a year, virtually all of which would occur outside North America, Europe and Japan.

With policies aimed at keeping temperatures from ever rising more than 2 degrees C, oil demand would remain essentially flat at 88 million barrels a day.

In the business-as-usual scenario, other fossil fuel demand would grow even faster than oil, with natural gas consumption climbing by 1.5 per cent per year globally and coal demand up by 1.9 per cent annually.

Despite the vast costs involved in global emissions reduction, the IEA comes down clearly on the side of those who say the price of failing to control climate change would be far greater.

Energy conservation in transportation, buildings and industrial processes remains the most practical and cost-effective means of reducing emissions, the agency said.

"Current policies put us on an alarming fossil-energy path," the agency warned. Without a dramatic shift – a "low-carbon energy revolution" – the Earth’s average temperature would warm by 6 degrees by the end of the century.

"This would lead almost certainly to massive climactic change and irreparable damage to the planet," it said.

*******

Ups and downs

Percentage change in planned 2009 investment for the world’s major oil companies (ranked by 2008 spending). Of the 17 listed, only four aimed to hike spending.

PetroChina: up 0.4%

Shell: down 3%

Petrobras: down 4%

Gazprom: down 43%

Exxon Mobil: up 4%

Chevron: down 14%

BP: down 14%

Eni SpA: down 18%

Total SA: down 12%

ConocoPhillips: down 37%

Pemex: up 13%

StatoilHydro: down 20%

Sinopec: up 4%

Lukoil: down 42%

Devon Energy: down 52%

Repsol YPF: down 10%

Rosneft: down 20%

Source: Int’l Energy Agenc

http://www.theglobeandmail.com/report-on-business/energy-spending-cuts-under-fire/article1358868/

~ by Cory Morningstar on November 16, 2009.

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