'Unlikely' global fossil fuel figures come under fire

The International Energy Agency (IEA) has come under renewed fire for its 'reference scenario' figures, which it admits are not likely to become a reality even though they are widely used by oil and gas companies to help plan investments.

The scenario foresees a big rise in oil and gas production through to 2030, despite falling upstream investment, stagnant production and gathering momentum to cut carbon emissions.

Controversy around the publication of the 2009 World Energy Outlook — the organisation's flagship report — comes after allegations in the UK newspaper The Guardian that the IEA is overestimating the oil and gas sector's potential because of pressure from the US.

Renewable-energy advocates accuse the agency of using the reference-scenario figures to perpetuate the idea that fossil fuels can continue to meet the bulk of world energy demand and postpone discussion on a new energy matrix.

"I have seen top IEA figures present these data. In their body language, asides and one-to-one comments after the talks, they clearly believe there is not a snowball's chance in hell of getting anywhere close to 103 million barrels per day [bpd], any time," says Solarcentury chairman and former BP official Jeremy Leggett.

The reference scenario predicts that oil production will rise to meet demand of 103 million bpd by 2030, up from last year's average of 83 million bpd. Leggett accuses the oil industry and its "peripheral institutions" like the IEA of a "systematic cultural burial of risk".

"Investment bankers did it with complex derivatives. I very firmly believe that the oil and gas industry culturally does the same thing with the depletion of reserves. The bankers buried the risk until it exploded in their faces. It's going to be the same with the oil industry," he says.

Detailed forecasts in the IEA's reference scenario continue to play an important role within the oil and gas industry, despite a growing consensus that they are unrealistic and the agency's calculation that it will lead to an average global temperature rise of as much as 6 ¡ C.

Steve Sorrell, of the UK Energy Research Centre (UKERC), says the reference scenario is very influential. "It guides most governments' thinking. I do not think they have comparable modelling capacity in house, so they are not it in a position to analyse the figures."

IEA chief economist Fatih Birol tells Recharge that the agency maintains the reference scenario because: "First of all, this scenario is not likely; and secondly, it's not what we want to happen. It says: 'This is the way you are going, and if you go this way, you may have an accident'."

Birol says the IEA would like to see realisation of its so-called 450 parts per million (ppm) scenario, which would keep global temperature rises at 2C or below by maintaining carbon dioxide equivalent emissions in the atmosphere at 450ppm.

However, the IEA admits that many oil companies still use the agency's reference scenario.

IEA executive director Nobuo Tanako describes The Guardian 's allegations as "groundless". He adds: "We are very neutral, and we are proud of our analysis."

Birol says the IEA's data is reviewed by about 200 experts. He admits, though, that many of them work for international oil companies.

IEA figures contradict the growing evidence from its own research. The agency says demand in exploration and production in the global oil and gas sector is expected to fall by $90bn, or 19% compared with 2008. It has also published data showing that production from existing fields is declining at a faster rate than previously thought.

"We are worried by these trends," says Birol. "We need to bring on new production equivalent to four Saudi Arabias just to stand still."

To deal with depletion and provide the extra oil needed to meet the demand in the reference scenario, the Organization of the Petroleum Exporting Countries (Opec) will have to increase production from 36% to 54% of the world's total output to compensate for a steady decline in non-Opec output.

However, IEA officials admit there is little sign that Opec countries are willing or able to increase production to this level. Two thirds of fresh production would need to come from new oilfields, implying a phenomenal rate of oil discoveries.

"If we invest, we have enough resources below ground. The problems are above ground," says Tanaka, referring to investment. But that view goes against a growing number of organisations pointing to the constraints on increasing production.

These include the government-funded UKERC, which predicts that conventional oil production will peak before 2030, with a "significant risk" of a peak before 2020.

Sorrell says: "The IEA, the EIA [the US Energy Information Administration] and Opec all forecast rising production up to 2030. But all the others from independent modelling teams forecast a peak within that time. One of the reasons for the difference is that they all use more optimistic estimates of reserves."