The world faces a potential oil supply crunch and higher prices, according to the latest analysis by the International Energy Agency.
The IEA said increasing shale oil output by the United States means middle east producers are delaying investing believing there will be an “abundance of oil” from shale, when in fact there will be a surge, but in the longer term current producers will still be crucial providers.
IEA Chief Economist Fatih Birol said it was essential that investments continue to be made in the plentiful, low-cost resources of the Middle East in order to meet growing demand from Asia.
“The Middle East is and will remain the heart of the global oil industry for many years to come,” he said.
“Giving the wrong signal to Middle East producers may well delay investment. If we want Middle East oil in 2020, the investments need to be made by now.”
Meanwhile demand will continue to rise, driven increasingly by China and even more so by India, from last year’s 87.4 million barrels per day to 101 million barrels a day by 2035.
By then the Middle East will have regained its dominance – especially as a supplier to Asia.
The IEA said that by the mid-2020s the region – home to core members of the Organization of the Petroleum Exporting Countries – will provide most of the increase in global supply as non-OPEC production slows.
Fatih Birol said: “Due to the limited resource base (of US shale oil), it is going to plateau and decline. After 2020 there will be a major dominance of Middle East oil.”
The United States will overtake Saudi Arabia and Russia to become the world’s top oil producer by 2016, or perhaps even earlier but the IEA said the world is not “on the cusp of a new era of oil abundance”.
The agency, which advises large industrialised nations on energy policy, is of the opinion that other countries are unlikely to match the success of the US in tapping shale.