Natural Gas Supplies Extremely Tight in 5 years

Says the International Energy Agency (energy tabulator for the “rich” OECD countries).

Not only does oil look extremely tight in five years time, but this coincides with the prospect of even tighter natural gas markets at the turn of the decade.

The above quote is from an article on the CBC.

But the full report has so much more.

Download it here.

You could read the entire thing and while you might come away a bit more knowledgeable of energy markets, you’d likely be bored to death with numbers.

Lucky for us, or perhaps not, the very first paragraph has plenty of food for thought… so here it is (emphasis added):

Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012. A stronger demand outlook, together with project slippage and geopolitical problems has led to downward revisions of OPEC spare capacity by 2 mb/d in 2009. Despite an increase in biofuels production and a bunching of supply projects over the next few years, OPEC spare capacity is expected to remain relatively constrained before 2009 when slowing upstream capacity growth and accelerating non-OECD demand once more pull it down to uncomfortably low levels.

If you are familiar at all with my blog, then you would have read this sort of thing here before.

What makes this difference is the source. This is, truly, a ground breaking prediction for the OECD. With oil prices currently near their all-time highs, the general consensus from most governmental sources has been that either demand will subside with increased cost, and/or supply will eventually catch up.

Apparently now, the IEA, which remember advises the worlds richest countries on these issues, believes that

  1. World Demand will continue to rise steadily for the forseeable future
  2. Supply, especially in Non-OPEC countries, simply won’t keep up

Why the supply problems?

Well… production from the North Sea has peaked… soon, the UK will be an importer, not exporter of NG and crude oil. So to has Mexico, their largest field had declined substantially (over 5%) in the past 2 years. Russia is currently the largest exporter, and it is currently raising production, it is doing so very slowly, and many question how much longer it will be before that rise is reversed.

And that is “non-OPEC”… OPEC has it’s own problems…Iraq is a terrible problem… as long as things continue there, it, and the world’s 3rd largest reserves, are basically a non-issue… and the longer they’re offline, the less difference it would make. And then, of course, there is Saudi Arabia. No one knows their reserves exactly… but, they have no ceded their largest world exporter label to Russia, and questions abound on how far they can push their reserves. Their largest field is one of the oldest in the world, and many expect it to start to decline within the next 1-5 years.

So what about the Oil Sands? And Biofuels? And Offshore Drilling? and ANWAR? and all those other “it’s OK, we have XXXX”…

well, the problem is, they are a drop in the bucket (or the barrel?) compared to these massive, historic oil fields. Where Ghawar in Saudi Arabia or Cantarell in Mexico can produce much more than 1 million barrels a day of oil… These other sources truly struggle to realise that target.

So you see, it’s not about the oil in the ground… it’s more about how fast it shoots out of the ground. The IEA is starting to tell us that soon, we may not be able to pump the oil fast enough to drive our cars as freely as we do today.

(oh ya, and then there is that first quote at the top… about Natural Gas… did you know currently only 5% of Natural Gas supplies worldwide crosses overseas? Think about that for a second…. how do *you* heat your house, or cook your food, or dry your clothes?)