IEA WEO talks up US shale role

US shale production is likely to stay "higher for longer", reducing the share of Opec members and Russia in the global oil supply, the IEA said in this year's World Energy Outlook (WEO).

"Efforts to manage conditions in the oil market could face strong headwinds," it said.

In the WEO's Stated Policies scenario, which incorporates existing measures and announced policy intentions and targets, but "does not speculate on how these might evolve", annual US production growth "slows from the breakneck pace seen in recent years". But, the US still accounts for 85pc of the increase in global oil production to 2030, and for 30pc of the increase in gas. The US will produce more oil and gas than Russia by 2025 under this scenario, the IEA said.

In this scenario, US tight crude production grows from 6mn b/d in 2018 to just under 11mn b/d in 2030. The majority of this growth comes from the Permian basin in Texas, "which by itself produces more crude than the continent of Africa soon after 2030."

The resilient US output reduces the share of Opec nations and Russia in global oil production to 47pc in 2030, a steady decline from 55pc in the middle of the 2000s and around 51pc in 2018. The world will still rely heavily on oil supply from the Middle East for years to come, the IEA said.

In the IEA's Stated Policies scenario, global oil demand grows by about 1mn b/d every year to 2025 from 96.9mn b/d in 2018.

"There is a material slowdown after 2025, but this does not lead to a definitive peak in oil use," the WEO said. Demand increases to 105.4mn b/d in 2030, then by 100,000 b/d each year on average during that decade to 106.4mn b/d in 2040.

Opec said in its World Oil Outlook earlier this month that non-Opec crude supply will grow in excess of global oil demand in the next five years, driven by higher US output.

The IEA's Stated Policies scenario is "still well off track from the aim of a secure and sustainable energy future", it said. In its Sustainable Development scenario — "fully aligned with the Paris Agreement" — oil demand "peaks very soon" and falls to 67mn b/d by 2040, a level last seen in 1990.

The IEA warned last year of a possible shortfall in supply" in the middle of next decade if US tight oil production does not grow fast enough or if "there was not a pickup in conventional crude oil approvals". But "tight oil production has been revised upwards in this Outlook and there are some signs of an increase in project approvals in 2019," the IEA said.

In the Stated Policies scenario, total energy demand rises by 1pc/yr to 2040, with electricity use growing at more than double the pace. Lower-carbon sources of energy, led by solar PV, supply more than a half of this growth, with gas accounting for another third, the IEA said.

"There is no single or simple solution to transforming global energy systems. Many technologies and fuels have a part to play across all sectors of the economy," IEA executive director Fatih Birol said. "For this to happen, we need strong leadership from policy makers, as governments hold the clearest responsibility to act and have the greatest scope to shape the future."

"A sharp pick-up in energy efficiency improvements is the element that does the most to bring the world towards the Sustainable Development scenario," the report said. "Right now, efficiency improvements are slowing: the 1.2pc rate in 2018 is around half the average seen since 2010 and remains far below the 3pc rate that would be needed."

The Stated Policies scenario states that "more than 30mn electric cars are sold each year by 2040, and the 330mn electric cars on the road in 2040 avoid 4mn b/d of oil demand".

By Konstantin Rozhnov