London (Platts)--21May2009

Global oil investment this year is likely to be $100 billion lower than 2008
levels, the International Energy Agency's chief economist, Fatih Birol, said
May 20, warning that lower investment as a consequence of the global economic
crisis threatened future energy security as well as the effort to combat
climate change.

Birol, speaking to Platts by telephone from the IEA's Paris headquarters, said
the agency would present a paper, which he called "an X-ray of the energy
sector," on the impact of the recession on investment to a meeting of G8
energy ministers in Rome this weekend.

"What we have found is that the investment trends in the oil and gas industry
and the renewables industry are bad news for energy security and the fight
against climate change," he said.

"In terms of oil, what we have found is that oil investments in 2009 will be
at least 21% lower than what they were in 2008, which is more or less about
$100 billion less than what we had in 2008," he said, describing this as "a
huge drop."

Birol said as much as 6.2 million b/d of oil production capacity would be
adversely affected by the global economic crisis over the next several years.

Some 2 million b/d of capacity over the next two years already has been lost,
Birol said, adding that an additional volume of 4.2 million b/d of capacity
was being delayed for at least 18 months. "We are not sure how many of these
projects will see the light of day," he said.

Birol declined to forecast the path of oil prices over the next few years but
said if investments continued to fall and the world economy recovered over the
next few years, the result could be a gap in the balance between supply and
demand and "significantly higher" prices than those currently prevailing.

"If investments continue to fall and if the economy recovers strongly in the
next few years, especially from the emerging countries such as China,
India...the Middle East, and oil demand increases, there may well be a
difficulty in terms of the supply/demand balance in the next few years," he
said.

"I believe that when the economy recovers, when we come to normal market
conditions in terms of supply and demand and the economy, we may well see
higher prices than today, because many projects which need to be financed may
need higher price levels than we have seen in the past couple of months," he
said.

Earlier May 20, North Sea Brent crude futures climbed above $60/barrel for the
first time in six months. US light crude futures had already climbed above $60
on May 12 for the first time since November.

Birol also voiced particular concern about the renewable energy sector, where
investment had been expected to show a significant increase in 2009 but, due
to the recession, was now expected to plunge by 38%.

"In the past few years we have seen a tremendous increase in renewable energy
investment. However, due to the crisis?mainly as a result of lower energy
prices and the difficulties of many renewable energy companies [in obtaining]
access to credit?we expect that renewable investment in 2009 will be 38% lower
than in 2008," he said. "Which, of course, is bad news for climate change and,
at the same time, energy security."

Another concern, Birol said, was the longer-term impact of the recession on
the renewable energy sector, which he described as being in its infancy
compared with the "much more consolidated, much more experienced" oil
industry.

"If it is hit so badly by the financial crisis, it may be very difficult for
the renewable energy industry to get back on its feet in the future," he said.

"Therefore, we will make an appeal to the G8 leaders to look at their stimulus
packages a bit more carefully. We have looked at the green component of the
stimulus packages of all the G20 countries. They definitely have some
allocation for green energy in their stimulus packages, and this is a good
step, but it is far from being a satisfactory level of money," he said.

"If the governments would like to see a significant role for renewable energy,
for example in line with the sustainable energy scenario in the World Energy
Outlook of last year, the renewable energy investments in the stimulus
packages need to increase by a factor of six compared with what they have
today."
--Margaret McQuaile, margaret_mcquaile@platts.com