Oil producers outside Opec will need large investments just to maintain output, the head of the International Energy Agency said on Tuesday. Nobuo Tanaka, head of the IEA, which advises 28 industrialised nations on energy, also said demand from China and India remain strong despite the global economic slowdown.
Oil producers that are not members of the Organisation of Petroleum Exporting Countries (Opec) such as the UK, Mexico and Russia, is the key issue the IEA will address in a mid and long-term energy outlook to be published in November, he said.
"Supplies from Opec will decline. But supplies from non-Opec producers will decline even more sharply," Tanaka told Reuters. "Without significant investment, even maintaining the current production volume will be a difficult task. Providing evidence for that argument is the key message this time." IEA would also provide outlooks for non-Opec production capacity, Tanaka said. He did not provide further details.
Tanaka, who visited Russia last week, said the world's top non-Opec oil producer, would need to review its heavy taxation on oil producers to attract foreign investments. "The biggest message to Russia from us is we want Russia to create an environment to prompt investments and in order to do that tax reform may be necessary."
The IEA would like to maintain dialogue with Russia even if the country did not join the agency, he said. Tanaka and several oil industry officials have voiced concern that plummeting oil prices might clog investments and cause delays to some energy projects. Oil prices have slumped to around $63 a barrel from record highs above $147 hit in July, mainly driven by robust demand from emerging markets such as China and India.
Tanaka said Chinese and Indian demand still appeared to be relatively strong despite a fall in demand in many developed countries, most notably the world's top consumer United States.
"There are a lot of anecdotal evidence that Chinese and Indian demand is falling. But statistics coming to us still seem strong. We cannot say demand from China and India is down with much confidence," he said. "However, growth from these countries will be good for global economy." Tanaka also said oil stocks in the developed countries were still low and needed to rise to provide supply cushions in case of any supply disruptions. His view contrasts with that of Opec oil ministers, who say that oil stocks are relatively high now.
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