Odac warns of global shortage of oil after 2007
THE world faces a global oil supply shortage after 2007, which would threaten economic growth, according to new research by the Oil Depletion Analysis Centre (Odac) which says that not enough major new fields will come on stream to offset declines .
â€śOur latest research confirms solidly our view that we cannot see any reasonable circumstances under which new supplies from expected mega oil projects could possibly meet world demand by 2008,â€ť said a spokesman for London-based Odac.
Chris Skrebowski, a board member of Odac, has analysed all planned oil field projects worldwide with reserves of more than 500 million barrels and concluded that, on current timetables, output from new fields will be insufficient to offset more major oil producers moving into net production decline.
Shell, which last year faced a corporate crisis after overstating its oil reserves, recently said its reserve replacement ratio had shrunk to 19%, the lowest of any oil major. This means Shell is finding less than one-fifth of what it produces.
â€śMore and more countries are tipping over into absolute decline. There are 18 major producers and 32 smaller ones in decline already â€“ that adds up to 29% of world production,â€ť said Skrebowski.
The Odac has calculated future scenarios based on a range of forecasts of annual world demand growth, ranging from modest expectations of 1% per annum up to 3%.
Last year, global oil demand grew by 3.3%, fuelled largely by China, and Odac argues that if demand continues to rise at this rate then, by 2008, the world will face a shortfall of one million barrels per day.
The Paris-based International Energy Agency (IEA) said last week it expects a moderation in Chinese demand and high oil prices to cool demand in 2005. But Skrebowksi said the IEA underestimated demand in 2004 and had to revise its estimates upwards every month.
He warned that if new field development timetables slip the world could face a supply shortage as early as 2007.
Fears of new developments falling behind schedule are growing as industry leaders warned that a shortage of skilled workers is causing increasing problems.
Sir Ian Wood, chairman and chief executive of Aberdeen-based energy services business Wood Group, said the people shortage has forced some contracting companies to stop bidding for work. â€śThereâ€™s a significant resource shortage right now. Itâ€™s a global workforce and a global issue,â€ť said Sir Ian.
Geoff Runcie, chief executive of Aberdeen & Grampian Chamber of Commerce, said: â€śIâ€™ve just spoken to two managing directors who say their work has been curtailed because they havenâ€™t got the people.â€ť
Skrebowski said if projects fall significantly behind schedule, he cannot guarantee that supply and demand will be in balance in 2007 and that, in any case, â€śby 2008 it all starts to go pear-shapedâ€ť. He will detail his findings at a conference in Edinburgh on April 25.
His warning coincides with a G7 summit in Washington this weekend at which the impact of high oil prices on economic growth is high on the agenda.
Recruitment specialists report increasingly fierce global competition among employers seeking to recruit engineers, geophysicists, divers and other specialists. High oil prices have triggered major new developments worldwide and exacerbated the people shortage.
Estimates of current vacancies in the North Sea vary, but recruiters believe there could be several thousand.
Anthony Rose, account manager at oilandgasjobsearch.com, said: â€śWe currently have 1377 active jobs available on our website, mainly engineers and geophysicists. But people are looking for staff from rig hands and roughnecks all the way up.
â€śWeâ€™re at an all-time high in terms of vacancies. This time last year we had 800 and new jobs are being posted at a rate of 50 a day,â€ť Rose added.
Andrew MacDonald, chairman of Aberdeen-based executive recruitment company Maxwell Drummond, said: â€śWeâ€™ve just signed a deal with a major company to find 40 people â€“ a year ago they would have been looking for just one or two. People are facing the same recruitment shortages right across the globe.â€ť