IEA director Nobua Tanaka. (image: iea.org)

International Energy Agency executive director Nobuo Tanaka has a lot on his mind, as detailed in a Reuters article published on Tuesday.

At the top of his agenda is the state of the world’s economy. Though expectations of economic recovery and revived oil demand are high, Tanaka said that stocks of distillate fuel—which includes diesel and heating oil—remain high throughout the member countries of the Organization for Economic Cooperation and Development, which is comprised of the globe’s 30 biggest economies. A lack of demand for diesel fuel, Tanaka said, serves as an indicator for industrial production.

Ship brokers ICAP estimate that over 90 million barrels of oil products are currently stored at sea. Another 6.5 million barrels could be added to this total by the end of the year. This, more than anything else, indicates the huge amount of supply currently backlogged.

The large stockpiles of fuel could also make it difficult for OPEC to determine whether to raise or lower oil production at its next meeting scheduled for December. Tanaka said:

“OECD inventories are very high, and OPEC’s concern is the global economic recovery, so if the economies recover in a robust manner, they will have to produce more. If not, just simply adding to the stock levels does not make any sense.”

However, despite weak demand and large supply, the price of crude oil has hovered around the $80 per barrel mark, significantly higher than prices were this time last year. One reason for this, he said, was the weakening of the dollar, the currency used to price oil.

The loss of value in the dollar has become so pronounced that some have called for it to be replaced with a basket of currencies when pricing oil, as discussed in October here on HeatingOil.com. However, Tanaka maintained that “the most reliable and liquid currency is still the greenback. Moving away from the dollar may not necessarily be the final solution.”

Tanaka also said that existing oil fields could soon reach their peak. However, offshore and underground oil reservoirs remain largely untapped (a point seconded by oil analyst Stephen Schork); they could play a more prominent role in supplying the world’s with oil if investors felt they could make a profit by exploring these opportunities.

Tanaka’s remarks come on the heel of the IEA’s latest World Energy Outlook, which was released last week. In this report, the IEA predicted that oil consumption would rise to 105 million barrels per day in 2030, up from 85 million today. Along with this would come a gigantic increase in demand for electricity. Combined, this could add to climate change while disrupting the world’s security.

Tanaka also refuted accusations published last week in the Guardian from a whistleblower who says that the IEA is underplaying the potential of an oil shortage: “That article says we are too complacent. That’s not true. In fact, we have been quite alarmist about the necessity of putting huge investments into potential, new fields.”

Oil rigs dominate the view from Angola's beaches. (image: eiuenergy.wordpress.com)

by Nick Malinowski
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Large Potential, Large Problems

A potential economic powerhouse in Africa, Angola has surpassed Nigeria and become the continent’s biggest oil producer. The country benefits from billions of dollars in foreign development investments and relative political stability as the country emerges from the brutal chaos of its 27-year civil war, which ended nearly eight years ago, but corruption and inequality restrict these benefits to the privileged few. The Sub-Saharan African nation shipped out nearly 2 million barrels of crude a day in October 2009, and that capacity is continuing to expand as more and more international oil firms vie for offshore production blocks, turning their attention from Nigeria, whose oil industry faces attacks from militant groups, to the highly speculative deepwater wells off the Angolan coast.

Some analysts have suggested that by 2011 Angola’s petroleum exports will rival Kuwait’s at about 2.6 million barrels a day; production has nearly tripled since 1997. The United States and China, among other foreign powers, have pumped resources into the former Portuguese colony to promote the efforts of their respective energy companies, yet most of the Angolan population still lives on less than two US dollars a day and the country remains near the bottom of nearly all development indicators. However, oil companies and governments worldwide have been buying in to the promise that Angola could be one of the last great untapped petroleum resource regions of the world.

Angola boasts rich deepwater petroleum and natural gas reserves, although onshore resources remain largely unexplored due to the political instability in the wake of the civil war. Oil production has increased ten-fold since the 1970s, propelled by discoveries that reach as far as 100 miles from the coast. Roughly three times the size of California, Angola boasts 9.5 billion barrels of proven petroleum reserves along with 272 billion cubic meters of natural gas reserves. It has the fourth most oil reserves of any country in Africa behind Libya (43.6 billion barrels), Nigeria (36.2 billion barrels), and Algeria (12.2 billion barrels). Though Angola’s reserves pale in comparison to these nations, it has bloomed into a key player in Africa’s oil industry and its top producer primarily by leaning heavily on its top two customers: the United States and China, which consume more than 90 percent of its output.

Brazilian President Luiz Inacio Lula da Silva (in white hardhat) posing with oil workers. (image: allianz.com)

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The largest and most populous country in South America, Brazil boasts more than just beautiful beaches and beautiful people, though it does have its fair share of both. Notwithstanding large disparities in income levels and high crime rates, Brazil stands as South America’s leading economic power, supported by its new and challenging role as a major player in the world of oil.

Oil Production in Brazil

According to the US Energy Information Administration (EIA), Brazil held 12.6 billion barrels of proven oil reserves as of 2009. In 2008 the country produced 2.4 million barrels per day (bpd), 76 percent of which was crude oil. Based on the EIA’s 2009 Short Term Energy Outlook, the agency predicts that Brazil’s output will reach 2.61 million bpd in 2009 and 2.81 million bpd in 2010. Mostly energy self-sufficient, the country’s oil consumption totaled 2.52 million bpd in 2008.

In comparison with other oil-producing nations, Brazil’s output is still on the low side. Venezuela, Brazil’s OPEC counterpart in South America, currently has proven crude reserves of 172 billion barrels and produces 3.12 million barrels per day. Meanwhile, Saudi Arabia, the world’s biggest producer of oil, boasts reserves of 264 billion barrels and churns out 9.1 million barrels per day. Overall, Brazil is the world’s fifteenth largest oil producer, and the second largest in South America, after Venezuela.