Arab Spring hits oil investment

The International Energy Agency is trying to find its feet after a failed crude stockpile release, its at times testy relationship with Opec and slowing economic growth in the OECD.

The price of oil climbed to $126 this year amid unrest in parts of the Middle East and the shutdown of supplies from Libya. Hussein Malla / AP Photo

PARIS // The world must invest US$38 trillion (Dh139.58tn) in energy over the next quarter century if it is to meet growing demand, says the International Energy Agency (IEA).

Some $10tn of that is required for oil alone, but the Arab Spring is threatening to derail important projects, said Fatih Birol, the chief economist of the IEA, which advises 28 industrialised nations on energy issues.

"Some countries seem to follow different oil policies not to raise production as much as the market would like to see," Dr Birol said yesterday on the sidelines of a meeting at IEA headquarters.

"In other countries they are not able to put money for projects on the table because they have other pressing issues in their countries to meet demands from the population.

"In some countries, because of the unrest, the projects are not going forward as much as we would like to see." Energy ministers from IEA member countries and the heads of major oil companies from Shell to Petrobras met yesterday as multibillion-dollar investments in new oilfields and gas terminals hang in the balance.

"Especially for a company like Petrobras, which is investing hugely in oil that will only come onstream in 2015, they're keen to find out that there will be a market for this oil," said Caroline Bain, the senior commodities specialist at the Economist Intelligence Unit in London.

Yesterday, Brent crude, the European benchmark, was trading slightly down at $110.77 a barrel, after China's statistics bureau reported its economy was growing at 9.1 per cent, or below expectations.

That followed last week's cut of 210,000 barrels per day (bpd) from the IEA's demand forecast for next year.

The energy watchdog is trying to find its footing amid volatile energy markets and a slowing global economy.

The IEA's rough year includes a failed release of crude stockpiles in July and projections that economic growth could dwindle to 1.7 per cent this year in the Organisation for Economic Co-operation and Development (OECD). OECD nations consume more than half of the world's energy, but in five years their share is expected to dip below half as growth in emerging markets picks up.

That calls for a new kind of IEA, analysts say.

"The IEA is evolving its role with greater coordination with new consumer states like India and China over stocks, which offer the opportunity to widen the relevance of its actions," said Catherine Hunter, an analyst at IHS Global Insight in London.

"It is also moving beyond oil alone - with greater focus on gas, clean energy and renewables."

Another question rests on the effectiveness of the IEA's main weapon, a 1.6 billion barrel emergency crude stockpile.

The price of oil climbed to $126 this year amid unrest in parts of the Middle East and the shutdown of supplies from Libya.

In June, after Opec ignored calls from the IEA to pump more oil to keep prices in check, the agency released 60 million barrels of oil

"Much ink has been spilt subsequently suggesting that the IEA action comes three months too late, depletes emergency stockpiles and has failed to reduce rampant crude and motor fuel prices," the IEA wrote in a report the following month. "However, we feel compelled to point out that critics cannot have their cake and eat it too."

The June release was only the third in the agency's history: the first two came during the 1991 Gulf War and after Hurricane Katrina in 2005.

"It wasn't clear that the situation was serious enough for them to use the ultimate tool, which is their reserves," Ms Bain said.

The stockpile release also angered some members of Opec, which had already been alienated by the IEA's public calls for them to up their quota.

Last month, Maria van der Hoeven, a former Dutch minister of economy, began her term as the IEA's executive director. One of her first stops was the Opec secretariat in Vienna.

* To follow the latest developments involving Opec visit www.thenational.ae/opec