ABU DHABI // The world now faces an oversupply, not a shortage of energy, and a peak in oil production is out of sight, according to Nansen Saleri, an oil reserve expert who will bring the contentious peak oil debate to Abu Dhabi this week. "There's plenty of energy sources," he said. "We don't have an energy shortage problem, we have an energy allocation problem." When oil reached a record level above $147 on July 11, peak oil theorists around the world received much attention in the press.
The world's production of oil had reached a peak and was set to decline, some said, and record prices reflected the supply constraint. Dr Saleri, the former head of reservoir management for Saudi Aramco, will lead a discussion of peak oil at the four-day Abu Dhabi International Petroleum Exhibition & Conference (Adipec), which kicks off today. Organisers say the gathering of oil companies and service firms will be the first event ever to completely fill the National Exhibition Centre.
Conference participants are all wrestling with the same question: how to pursue expensive oil infrastructure projects in a time of increased anxiety about the falling crude price. Dr Saleri said crude's fall and an easing in the oil supply-demand balance had weakened pessimists' arguments that the world was nearing - or had reached - a peak in world oil production. "I think it exposed a lot of the poor assumptions on the part of the peak oil group regarding supply and demand," he said.
He added: "There's a prevailing school of thought that world economic growth will be choked by bottlenecks in the energy supply. I never prescribed to that school of thought, I thought prices were getting ahead of the situation." A new study of oil reservoirs by the International Energy Agency (IEA), an energy watchdog group, may lend support to pessimists' arguments. According to a draft of the report obtained by the Financial Times, output from the world's oil fields will decline by 9.1 per cent a year without extra investment, a faster rate than previously thought
But Dr Saleri was confident investment in new capacity would continue, in part because a number of projects in the Middle East involved a huge amound of sunk costs and have already "crossed a point of no return". Some projects may be slowed down, he said, because companies could no longer afford premium prices for equipment in short supply, like drilling rigs and specialised steel. "For the last few years people were actually paying premiums ... because every day delayed corresponded to huge losses in revenue," he said. "The need to justify these premiums may not be there."