By Brian Winter SAO PAULO | Tue May 15, 2012 9:55am EDT
(Reuters) – President Dilma Rousseff plans to cut and simplify taxes for electricity producers and distributors, two senior officials told Reuters, as part of a strategy to reduce Brazil‘s high business costs and stimulate its struggling economy.
Brazil has been on the brink of recession since mid-2011 as high taxes, an overvalued exchange rate and other structural problems squeeze what had previously been one of the world’s most dynamic emerging economies.
Rousseff has in recent months announced targeted tax cuts for stagnant sectors such as the automotive industry, embracing an incremental approach to reform that has drawn criticism from investors who say more drastic changes are needed.
But the officials, who spoke on condition of anonymity, said the tax reductions for electricity companies would likely be the most far-reaching to date.
They said Rousseff will announce the plans in coming weeks. Brazil has the world’s third-highest power costs so Rousseff is aiming to give relief to consumers as well as companies in energy-intensive areas such as steel and petrochemicals.
Internal government studies suggest that, depending on which taxes are cut, electricity costs could fall by between 3 and 10 percent starting as early as 2013, the officials said.
That would have a measurable impact on inflation, and thus aid Rousseff’s quest to push Brazilian interest rates lower.
“We know that taxes in Brazil are crazy, and we’re trying to do something about it,” one senior official said. “(Electricity) seems like a case where we can make a big difference quickly.”
Rousseff probably will not pass the tax cuts by decree, so she will have to negotiate them with Congress and other groups.
She plans to use her record-high popularity ratings to push through cuts to taxes at both the federal and state level, with a special focus on eliminating levies that overlap or are difficult to calculate, the officials said.
Brazil’s tax code is so complex that an average company spends 2,600 hours a year calculating what it owes, according to the World Bank‘s annual Doing Business study, which compares business practices around the world. That is almost 14 times the time needed to do taxes in the United States, and by far the highest among the 183 countries in the bank’s survey.
“The focus is as much on simplifying taxes as reducing them,” a second official said.
Brazil’s electricity industry includes state-run companies such as Eletrobras (LIPR3.SA) as well as multinationals like AES Corp. (AES.N) and GDF Suez (GSZ.PA). Hydroelectric power supplies about three-quarters of Brazil’s electricity needs, with nuclear, thermal and wind power accounting for the rest.
If the initiative is successful, Rousseff will use a similar blueprint to reduce taxes for other industries in coming months, possibly including telecoms, the officials said.
Specific details such as the size of the tax cuts, which taxes will be targeted, and the timing of the announcement are still being finalized by Rousseff’s team, the officials said. One said the plan would likely be unveiled in late June, before politicians nationwide turn their attention to municipal elections in October.
POWER COSTS A PROBLEM FOR INDUSTRIES
Electricity prices are a big component of the so-called “Brazil cost” – the mix of taxes, high interest rates, labor costs, infrastructure bottlenecks, and other issues that have caused the economy to become less competitive.
After a decade of strong performance, Brazil grew below the Latin American average in 2011 and so far this year.
Brazil’s average electricity cost of $180 per megawatt hour is exceeded only by Italy and Slovakia, the Getulio Vargas Foundation, a private think-tank, said in a 2011 study based on data from the International Energy Agency.
High electricity rates have contributed to stagnant investment and production in energy-intensive industries. Despite Brazil’s bauxite and alumina resources, no new aluminum factories have been built in Brazil since 1985 and two have closed, keeping production levels stagnant, the Getulio Vargas study said. It added that electricity accounts for 35 percent – “an insane proportion” – of the industry’s production costs.
Pittsburgh-based aluminum producer Alcoa (AA.N) said in April it was considering big production cuts at two of its Brazil factories in part because of high electricity costs.
One of the officials who spoke to Reuters said the situation at Alcoa had added urgency to Rousseff’s plan to cut taxes.
All told, taxes account for about half of the cost of electricity in Brazil, studies show. The taxes themselves are roughly evenly split between the federal and state level.
Cutting or simplifying taxes at the federal level will be relatively straightforward for Rousseff. However, she also believes she can push through tax cuts at the state level by using leverage from upcoming debt negotiations.
Several states are asking for lower interest rates on debt they owe the federal government. Rousseff will likely ask the states to simplify or cut their taxes on electricity in return, one of the sources said.
The left-leaning president will also ensure that any tax relief is fully passed along to consumers, the officials said.
Although the electricity sector is partly privately controlled, Rousseff believes she can use the pricing power of state-run companies to effectively push rates lower if needed, they said. An upcoming renegotiation of concessions in the industry could also be an opportunity to push for lower rates.
SHADOWS OF STRATEGY WITH BANKS
Rousseff’s tactics are similar to those she used to cut interest rates in recent months – another pillar of her strategy to reduce the “Brazil cost.”
Her government has frozen billions of dollars in spending, allowing the central bank to slash its benchmark interest rate by 3.5 percentage points since August. When some private-sector banks balked at lowering rates for consumers, Rousseff and senior officials publicly hectored them for having some of the world’s largest spreads.
State-run banks then announced lower interest rates for customers, and the private banks soon yielded and followed suit.
Such tactics have caused friction between Rousseff and some members of the business community, especially banking executives, who privately accuse her of trying to bully the private sector.
Yet the officials said Rousseff is using the best tools available to her to restore Brazil’s competitiveness. Congress blocked attempts at a comprehensive tax reform by her predecessor as president, and Rousseff, herself a former energy minister, believes the only politically viable alternative is to move one sector at a time, they said.
“I’m fully aware that Brazil needs to reduce its tax burden,” Rousseff told reporters while on a visit to India in March. “What I have done is take little measures that, in their totality, create greater tax breaks, which is fundamental for the country to grow.”
(Reporting by Brian Winter; Editing by Kieran Murray and Sofina Mirza-Reid)
- Brazil counts on ruthless tax ‘lion’ to keep it afloat (business.financialpost.com)
- Criminal charges and $22 Billion in Lawsuits Raise Questions About Brazil (mb50.wordpress.com)
- Brazil’s Rousseff to link returns on some savings accounts to central bank lending rate (theglobeandmail.com)
- Brazil expands welfare benefits (bbc.co.uk)
- Brazil president Dilma Rousseff blasts Western QE as ‘monetary tsunami’ (telegraph.co.uk)
PARIS/NEW YORK (Reuters)- Saudi Arabian Oil Minister Ali al-Naimi mounted his most direct rhetorical attack against high oil prices on Wednesday, but showed no sign of moving to increase supplies even as France joined the United States and Britain in talks for a release of strategic reserves.
Two weeks after Reuters initially reported that Britain and the United States were set to agree on tapping emergency stockpiles, French Energy Minister Eric Besson said the European nation was also in talks with Washington. Le Monde reported that the move could come in a matter of weeks.
At the same time, the Financial Times published a rare opinion piece by the head of the world’s largest crude oil exporter, who said a feared shortage of oil supplies was a “myth” but reiterated that Saudi Arabia was ready, able and willing to meet any gap in supplies.
The moves emphasized the growing concern from both sides of the market — producers and consumers — about the economic and political impact of the 15 percent jump in oil prices this year. But it also highlighted the different responses they are taking.
Any release of strategic reserves is expected to be based on the assumption that oil markets face a shortage of crude, putting Western economies directly in opposition to the opinions offered this month by top exporter Saudi Arabia.
Naimi’s comments were his bluntest yet on oil prices, which have been driven by the loss of supplies from several producers across the world and, more importantly, by the threat of a disruption from Iran.
“The bottom line is that Saudi Arabia would like to see a lower price,” he said.
“Supply is not the problem, and it has not been a problem in the recent past. There is no rational reason why oil prices are continuing to remain at these high levels.”
But in the editorial, Naimi fell short of saying that the kingdom planned to increase production. Oil markets, already trading lower on the day after news of the French talks with the United States, barely budged after his comments.
Oil markets have been gripped this year by expectations U.S. and EU sanctions against Tehran aimed at halting the OPEC nation’s nuclear ambitions will cause a shortage in global oil market.
Global supplies are already down by more than a million barrels per day, according to a Reuters survey, due to outages in Yemen, Syria, South Sudan and the North Sea.
Rising oil prices have become a major headache for politicians around the world, including U.S. President Barack Obama who is aiming for re-election in November and facing public anger over soaring U.S. gasoline prices.
Earlier in March, British sources said London was prepared to cooperate with Washington on a release of strategic oil stocks that was expected within months, in a bid to prevent fuel prices from choking economic growth.
A White House official reiterated that the United States was considering a reserve release but no decisions had been made.
“As we have said repeatedly, while this is an option that remains on the table, no decisions have been made and no specific actions have been proposed,” White House spokesman Josh Earnest told reporters.
“Anybody who tries to convince you — in this government or any other government, frankly — that specific decisions have been made or actions have been proposed is not speaking accurately.”
Fuel prices in France have hit record levels, prompting an intense debate between presidential candidates, also ahead of a national election. The French budget minister and government spokeswoman, Valerie Pecresse, told journalists France had joined the United States and the UK in IEA consultations to receive authorization to draw from strategic stocks.
Oil reserve releases are normally coordinated by the International Energy Agency that represents 28 industrialized countries on energy policy.
But the head of the IEA, Maria van der Hoeven, has said on several occasions that a coordinated IEA release is not warranted because there is no significant supply disruption on world oil markets. Germany and Italy say they are opposed.
Van der Hoeven said earlier this month that countries could choose unilaterally to release stocks in consultation with the agency. The IEA declined further comment on Wednesday.
The Paris-based IEA has authorized only three coordinated releases since it was founded in 1974, with the last one in June 2011 in response to lost Libyan production during its civil war.
The government in Berlin said it was unaware of any official request from the United States to release emergency oil stockpiles and did not believe the current situation justified such action under German law.
The German law on oil provisions says emergency reserves can only be released in the case of “physical disruption to supplies. In our view, there is no physical shortage at the moment,” a government spokeswoman told reporters.
Saudi Arabia is the only country in the world with significant spare capacity to compensate for a major supply shortfall.
Naimi last week insisted Saudi Arabia could immediately ramp up production up to its full strength — 12.5 million barrels per day (bpd) — from 9.9 million bpd now if buyers requested more oil.
In his piece on Wednesday, Naimi said that the OPEC kingpin did not want rising fuel costs to undermine the economy of consumer nations. Earlier this year he identified $100 a barrel as an ideal price for producers and consumers, about $25 below current world prices.
“I hope by speaking out on the issue that our intentions – and capabilities – are clear. We want to see stronger European growth and realize that reasonable crude oil prices are key to this,” he wrote, adding Saudi Arabia had a responsibility to “do what it can to mitigate prices.”
But, echoing his comments from last week, the oil minister said that it was not actual supply disruptions that were driving up prices, but political tensions and worries about potential shortages that were driving the market.
“It is the perceived potential shortage of oil keeping prices high – not the reality on the ground,” he said. “There is no lack of supply. There is no demand which cannot be met.”
- IEA sees no disruptions in oil markets (business.financialpost.com)
- Saudi Arabia sends tankers to US with pledge to bring down oil price (telegraph.co.uk)
- Murky data makes oil trading tricky (business.financialpost.com)
- Oil Prices: Saudi Pumping Surge & US-EU Iran Strategy (globalbarrel.com)
- Saudi Vela To Send 11 Supertankers To US In March/April (gcaptain.com)
With strong oil prices persisting, major energy companies are increasingly reinvesting their earnings in exploration and development of offshore oil and gas basins. Visiongain calculates capital expenditure in the MODU market will total $48.1bn in 2012.
According to the International Energy Agency, global oil demand will rise from 88 million barrels today to around 99 million barrels in 25 years time. Over this period the cost of extracting oil will be higher and production from offshore resources will not be as expensive as it was relative to development of onshore hydrocarbons.
Although new technological improvements mean fewer people will be needed on offshore oil and gas drilling rigs, the construction industry behind MODUs and assembly of related technologies is providing employment for thousands of people. For example, the Brazilian marine construction industry has emerged on a vast scale to enable its offshore industry to provide MODUs and technologies for Petrobras to meet its vast oil production targets from its offshore resources.
Most super-major oil and gas companies as well as independent oil and gas companies have each secured a share in the hydrocarbon-rich offshore regions across the globe and demand for MODUs is strong. Meanwhile, health and safety standards and technology have both improved across the industry, leading to a backlog of orders for new-build MODU.
The Mobile Offshore Drilling Units (MODU) Market 2012-2022 report includes 144 tables, charts and graphs that analyse quantify and forecast the MODU market in detail from 2012-2022 at the global level, four submarkets and for 7 regional markets. The analysis and forecasting ahs been reinforced by extensive consultation with industry experts. Two full transcripts of exclusive interviews are included from Friede & Goldman and Maxeler Technologies. The report also profiles 55 leading companies involved in the MODU market.
- Odfjell Offshore Raising up to $500M to Develop Fleet (mb50.wordpress.com)
- Offshore Drilling Industry to 2016 – Rapidly Rising Demand for Hydrocarbons Expected to Boost Offshore Drilling in Ultra-Deepwater and Harsh-weather Environments (prnewswire.com)
- UK: Ensco Ranks 1st Among Offshore Drillers by Costumer Satisfaction (mb50.wordpress.com)
- USA: Hercules Offshore Secures Contract for Newly Bought Rig (mb50.wordpress.com)
- Atwood Beacon to Drill Offshore Israel (mb50.wordpress.com)
- USA: Mr. Charlie Initiated the Modern Offshore Oil & Gas Industry, ASME Says (mb50.wordpress.com)
- ExxonMobil, OMV Petrom Strike Gas Offshore Romania (mb50.wordpress.com)
- Alaska champions $40bn pipeline plan (mb50.wordpress.com)
(Reuters) – Global oil supply outages are running at more than a million barrels a day, a Reuters survey has found, helping provide justification for the United States and Britain should they release strategic reserves in a bid to cut oil prices.
Civil unrest, adverse weather and technical glitches disrupted 1.2 million barrels per day (bpd) of global oil output in March on the 90 million bpd world market, according to a Reuters calculation from information provided by companies, government agencies and traders.
While disruptions of supply to the world oil market are commonplace, it is rare and perhaps unprecedented that such a large volume of oil is offline at any one time outside a single major disruption.
The aggregate reduction now is close to the volume of exports lost from Libya during civil war last year which at its worst knocked out 1.4 million barrels a day.
The International Energy Agency opened emergency reserves for only the third time last year to cover that loss but is resisting doing so again, arguing that it does not see a significant supply disruption.
The United States and Britain were reported by Reuters last week to be planning a bilateral release. South Korea would support a release, a government source said, but has not yet had an approach to do so. Others including Germany and France are opposed to an increase. “I think it’s pretty clear from the administration’s references to Sudan’s and other outages that if it decides to use the SPR (Strategic Petroleum Reserve) it will justify it partly on various recent disruptions,” said a former White House energy advisor, Bob McNally, who heads consultancy Rapidan Group.
Leading oil exporter Saudi Arabia has raised its own output to 9.85 million bpd in February, according to a Reuters survey, but is the only producer with significant spare output capacity to counter serious shortfalls.
Some of the current outages could ease in April, when output from Canadian and Australian oilfields is expected to resume after temporary shutdowns. In addition, Libyan output is fast rising toward pre-war levels.
Supplies from politically volatile producers Syria, Yemen and South Sudan may remain disrupted for a prolonged period. Sanctions against Iran could also offset any increase in output from other countries, tightening oil supply later this year.
“Australian productions are just about to come back after the cyclone,” said Seth Kleinman, analyst at Citigroup. “But you always want to bet on more supply outages than less. The situation in Sudan and South Sudan has shown no signs of improvement and the key to watch is oil loadings from Iran,” he said.
With Apache’s Stag likely to follow soon, about 65,700 bpd of Australian oil and about 320,000 bpd of Canadian oil, which has been unexpectedly closed off, are likely to come back to the market in April.
Still, a larger chunk of about 710,000 bpd in South Sudan, Yemen and Syria remains shut and shows no sign of an early return.
Disruptions may grow as a European Union ban on Iranian crude takes effect on July 1 and as pressure increases on Asian importers to reduce oil purchases from Iran. EU countries late last year were importing about 700,000 bpd of Iranian crude.
The IEA estimates Iran’s oil exports could be curtailed by between 800,000 and 1 million bpd from the middle of this year.
Citi’s Kleinman said Nigeria should be kept on the watch list. Although there have not been any significant outages in March, Africa’s largest producer suffers from sabotage attacks to oil production facilities, which have forced oil majors such as Royal Dutch Shell (RDSa.L) to suspend exports.
In the North Sea, the UK’s largest oilfield Buzzard has been experiencing sporadic technical glitches, which have reduced its output since last year.
Buzzard’s output fell to about 153,000 bpd earlier in March but recovered to a normal 200,000 bpd late last week.
Following is the breakdown of global oil production outages by region and country as of mid-March.
MIDDLE EAST AND NORTH AFRICA – 490,000 bpd
Syria – Export outage totals about 150,000 bpd. Syrian oil output has been severely reduced since last year and its exports suspended since September due to international sanctions.
Before the conflict, Syria exported about 150,000 bpd of mostly heavy Souedie crude.
Yemen – About 140,000 bpd of Yemen’s oil output has been reduced by months of political unrest over the last year. Output came to a near standstill in mid-February during a week-long worker strike at its largest oilfield.
Libya – Libya’s crude output as of late March was about 1.4 million bpd, or 200,000 bpd below the full production level of 1.6 million bpd before the 2011 civil war. An official with Libya’s National Oil Corporation said its exports are likely to increase to 1.4 million bpd in April, including some deliveries from tanks following some loading delays from March due to bad weather.
AFRICA – 350,000 bpd
South Sudan – South Sudan shut its crude oil output of roughly 350,000 bpd – about three quarters of the combined total from Sudan and South Sudan – in January after Sudan took some of the crude to make up for what Khartoum said were unpaid transit fees.
AMERICAS – 320,000 bpd
Canada – Oil output has been cut by about 320,000 bpd as production of Suncor Energy Inc’s (SU.TO) and Syncrude Canada has been cut by 220,000 bpd and 100,000 bpd, respectively, for unplanned outages. Both will be back online in April.
ASIA PACIFIC – 65,700 bpd
Australia – Cyclone Luna forced Apache (APA.N) and Woodside Petroleum (WPL.AX) to shut Stag, Enfield and North West Shelf oilfields last week. Woodside said on Monday it had restarted production at Enfield. After the restart, the production shut-ins total about 65,700 bpd. The figure includes the 8,800 bpd Stag field, which Apache said is expected to restart soon.
- Oil shut-ins, slow supply growth support price: IEA (business.financialpost.com)
- Murky data makes oil trading tricky (business.financialpost.com)
- Tapping oil from the SPR may be trickier than ever (business.financialpost.com)
- OPEC oil output rises to more than three-year high (business.financialpost.com)
- China urges restraint in Sudan dispute (mb50.wordpress.com)
- Analysis: More, not less, oil this year despite Iran ban (reuters.com)
Peak oil theories over the last few years are now not in the spotlight that rules over oil prices this year as the new king of market movers, the “global economic uncertainty” looks set to be a game changer in the coming months ahead.
IEA Oil Report 2012
The latest Monthly Oil Market Report from the US IEA (International Energy Agency) forecasts the call on OPEC crude in 2012 at 30.2 million barrels per day. It also forecasts global oil demand will average 90.3 million barrels per day in 2012, an increase of 1.3 million over 2011.
However, the crude oil markets are expected to remain volatile throughout 2012, with the fundamentals of oil supply and demand continuing to take a back seat to the debt situation in Europe and tensions in the Middle East, with Iran in the driving seat.
“Given already very low European crude inventories, a spate of precautionary buying and escalating tensions surrounding the Iranian issue could sustain prompt prices at levels higher than otherwise, amid the growing concerns about the euro zone and weaker global economic activity for 2012.” the IEA said on 12th December.
Iran and Oil Supplies
Turning to oil supplies, the Iranian oil issue remains unclear, as the USA and its allies along with the EU are considering new sanctions on the Iranian oil as we know which increase fears that it will curb the oil supply, which will push oil prices to the upside strongly, and from the Iranian side, it said that if any sanctions happened, it will stop oil passing from the Strait of Hormuz.
Back to Europe which remained for the past year the main factor that drive global markets, as the crisis is deepening and contagion risks are appearing, where many negative consequences can be noticed, however, hopes increased at the beginning of the year that serious measures would be implemented to halt the crisis’ train.
US Dollar and Oil Prices
On the other hand, the US dollar is encouraging crude oil to continue this upside journey, as it declined at the beginning of the year due to different factors. The ICE US Dollar Index opened the session at 80.27 and recorded a high of 80.29 then it declined to reach so far a low of 79.88, and is currently trading around 79.95.
In general, trading volumes remain mightily low, which give space for any minor factor to affect crude heavily and give it momentum, where fluctuations may be evident ahead of the American data which may add positive signs for the world’s largest economy.
- Where is Oil Price Heading in 2012? (ibtimes.com)
- Peak oil review – Jan 2 (energybulletin.net)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
- Peak Oil is a Myth (socyberty.com)
- IEA warns high oil prices threaten global economy (thehindu.com)
- Too many wild cards cloud 2012 oil price outlook (business.financialpost.com)
- Case for a sustained $100 oil price (investmentpostcards.com)
LONDON (Dow Jones Newswires), Dec. 2, 2011
Shell said Friday it will pull out of Syria amid a wave of tighter sanctions against President Bashar al-Assad‘s regime following his violent crackdown on protesters.
A spokesman for the Anglo-Dutch energy giant said: “Shell will cease its activities in Syria in compliance with sanctions. Our main priority is the safety of our employees of whom we are very proud. We hope the situation improves quickly for all Syrians.”
Shell has interests in three production licenses in Syria covering some 40 oil fields, with its share of production in 2010 approximately 20,000 barrels of oil equivalent a day. It also has exploration interests in the south of the country.
Payments from the government for oil produced in the country, to Shell and other companies, have been interrupted as Syria’s cash reserves continue to dwindle. According to Egbert Wesselink of Dutch charity IKV Pax Christi, Shell hasn’t been paid for the last week at least.
He said Shell’s decision to leave Syria was likely due to a combination of sanctions and reduced payments from Syria’s national oil company.
“Shell isn’t really operational there right now anyway. The effect of this will mean oil production will go right down,” said Wesselink, adding that storage facilities at the country’s export terminals are almost overflowing with crude as Syria runs out of markets to sell to.
Syria pumps about 370,000 barrels of oil a day, about 150,000 of it exported, according to the International Energy Agency. Those exports make up about one-third of Syria’s export income–and nearly all of it is sold to Europe.
“Now sanctions are working, the European boycott is effective,” he said. The country had even tried to switch to selling to Asian buyers instead, Wesselink said, but none of them were prepared to take it.
Shipbrokers who track the passage of oil globally said that exports from Syria have been virtually non-existent in the last two months, while Asian buyers spoken to by Dow Jones Newswires this week said they had no interest in lifting the country’s oil.
Copyright (c) 2011 Dow Jones & Company, Inc.
by Alexis Flynn
Dow Jones Newswires
- EU imposes sanctions on Syrian oil companies – Reuters (reuters.com)
- EU names new sanctioned Syrian officials (seattletimes.nwsource.com)
- EU imposes new Syria sanctions (nation.com.pk)
- EU tightens sanctions on Syria, Iran (News) (euractiv.com)
- Russia to continue arms exports to Syria: deputy PM (news.xinhuanet.com)
- Syria: Assad Regime Embroiled In Civil War As Deaths Said By UN To Be ‘Much … – Sky News (news.sky.com)
- Turkey loses patience with Syria (smh.com.au)
- Syrian oil, VIPs targeted in new sanctions (Reuters) (old.news.yahoo.com)
The warning lays bare the world’s heightened vulnerability to any hitch in what is still the world’s largest oil patch. The continued reliance on this region comes despite a push for increased independence from oil imports in North America with the extraction of domestic, more expensive hydrocarbons.
In its annual energy outlook, the IEA warns that “if between 2011 and 2015, investment in the MENA region runs one-third lower than the $100 billion a year required, consumers could face a near-term rise in the oil price to $150″ a barrel.
That’s because increased production in the Middle East and North Africa will cover more than 90% of the extra barrels needed worldwide through 2035.
Back in 2008, a spike to an all-time high of $147 a barrel blamed by some economists for exacerbating the global financial crisis.
Yet “it is far from certain that all of this investment [needed from the MENA region] will be forthcoming” to keep oil below that level, said the agency, which represents the world’s largest consumers. It cited increased political instability, conflicts damaging oil infrastructure, international sanctions and resource nationalism as key risks to spending.
This year, the overthrow of three Arab regimes and turmoil elsewhere in the region showed such risks are far from being academic.
In Libya, a civil war interrupted most production and investments for eight months and damaged key oil terminals. The increased emphasis on risk in the region underscores the lasting impact of the Arab uprisings on the oil-rich area.
Iraq will be the largest source of new production additions. Providing investments aren’t delayed, the IEA expects its output to reach 5.4 million barrels a day in 2020 and 7.7 million barrels a day in 2035, compared with about 2.7 million barrels a day today. The numbers are lower, however, than Iraq’s own plans to reach a capacity of 6 million-8 million barrels a day before 2020.
Production from the second contributor, Saudi Arabia, is expected to grow by almost 40% to nearly 14 million barrels a day by 2035, it said.
By contrast, the agency takes a bearish view on Libya’s output. It says could take two years to recover from war damage and won’t grow at all until 2030–in contrast with the view in Tripoli that no more than 15 months are needed to return to normal.
The IEA also predicts production in Iran will be hindered by sanctions and tough investment terms with the Islamic Republic only adding 600,000 barrels a day in production by 2035.
Western consumers are paying more for oil out of fear for their future supply. But at the same time, the Organization of Petroleum Exporting Countries acknowledged Tuesday that its members–the majority in MENA–needed higher oil prices to cover their social spending.
The agency’s main scenario sees oil-import prices still rising to $118 a barrel in real terms in 2020 and $140 a barrel in 2035.
Overall, the IEA, which represents the view of oil consumers, normally has higher oil-demand expectations than producers group OPEC. But under its main scenario, which takes into account new measures to cut energy consumption, the IEA sees global demand for oil at 92.4 million barrels a day in 2020 and 99.4 million barrels a day in 2035.
That’s less than OPEC’s working assumptions released Tuesday, with respectively 97.8 million barrels a day and 109.7 million barrels a day for these dates.
Copyright (c) 2011 Dow Jones & Company, Inc.
Source – RIGZONE
- IEA: Oil price in ‘danger zone’ (bbc.co.uk)
- Commodity review: Annie get your gun (tradingfloor.com)
- IEA Follows OPEC Downward on Oil Demand (CVX, VLO) (247wallst.com)
- Oil demand growth could stall in 2012: IEA (business.financialpost.com)
Natural gas, once seen as a useful bridge between the eras of coal and renewables, poses one of the biggest threats to the wind-energy business, if not the whole future clean-tech revolution, according to experts.
“We’ve talked over the last decade of gas as a bridging technology, but we’re now seeing what I would call the threat of gas,” James Leape, director-general of WWF International, told the European Future Energy Forum in Geneva, Switzerland.
“Frankly, if we build the future economy on shale gas, we will have lost the fight to control climate change.”
The US energy sector has been transformed by the ability to tap huge reserves of shale gas economically, employing a controversial technique known as hydraulic fracturing — or fracking — in which subterranean layers of impermeable rock are cracked open using pressurised fluids.
Shale-gas fever has spread to Europe, with drilling companies claiming that Poland, Romania, the UK and other countries have large, accessible deposits.
While many observers — including the Obama administration and the International Energy Agency (IEA) — believe the shale-gas boom will have useful medium-term environmental consequences compared to the high carbon emissions of coal, others believe it is more harmful once its extraction methods are taken into account.
Fracking has been banned in France, Switzerland and several US states. The intense water demands imposed by the technique are also a concern.
Markus Wråke, head of the IEA’s Energy Technologies Perspective group, says the shale-gas boom — rather than the explosion of renewables — has proved the most disruptive change to the energy industry in recent years.
“In some settings, gas is an enormous improvement over coal,” he says. “The question is: when does gas go from being part of the solution to part of the problem?
“We could see significant synergies with other fuels we believe are important over the longer term, like biogas and hydrogen. But the fact remains that if we have really low gas prices, it could threaten the development of some of the clean technologies that we need.”
But far from being an enemy of renewables, natural gas is “not only a companion, but a very necessary one”, he tells Recharge.
“The beauty of gas as a complement to fluctuating renewables is it’s so fast: you press a button and the gas-fired power station starts up. It’s much more flexible in that respect than coal, and it’s not as polluting,” Eldrup adds.
“From our perspective, wind, biomass and gas form the basis of our future energy mix — you can’t do without any of them.”
- Industry aims to win support for Quebec shale gas (theglobeandmail.com)
- China Has More Shale Gas Than We Do. Will They Embrace Environmental Safeguards on Fracking? Will We? (3eintelligence.wordpress.com)
- Natural gas shale play development now going global (mb50.wordpress.com)