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The world’s oil and gasfields are declining at a faster rate than previously thought, leaving the energy sector facing a costly battle to maintain output, the International Energy Agency said on Tuesday.
The IEA, an intergovernmental body dedicated to energy research and security, said it had analysed data from 15,000 oil and gasfields and concluded that production is growing more precarious because of an increasing reliance on shale oil and gas, where fields need continuous new drilling to maintain their output.
Fatih Birol, head of the IEA, said that since 2019 the oil industry has spent “nearly 90 per cent of annual investment” on oil and gas production, or around $500bn a year, simply to arrest the decline in existing fields.
“The situation means that the industry has to run much faster just to stand still,” he added.
The IEA’s findings are likely to be greeted enthusiastically by the oil industry, which has consistently maintained that it needs to spend heavily to maintain its current production levels.
The report also represents a shift in position from the organisation, which warned last year that the industry faced a “staggering glut” of oil, and that many producers should “look at their business plans”.
The IEA has been under significant pressure from the Trump administration, which has accused it of discouraging oil industry investment by forecasting that the world would reach peak oil consumption towards the end of this decade.
In Tuesday’s report, the IEA suggested that if oil companies stop spending altogether, the world’s annual oil production will contract by 5.5mn barrels a day, roughly the combined production of Brazil and Norway. US shale oil and gas would collapse by 35 per cent in the first year after drilling stopped, it added.
The IEA also said that as oil and gasfields decline, the world’s fuel supplies will gradually become concentrated in the Middle East and Russia, whose giant fields decline more slowly.
The market share of Opec and Russia may rise from around 43 per cent today to more than 65 per cent by 2050, it said.