Photo Courtesy of GE Oil and Gas

Florence, Italy — As the price of oil begins to make a steady climb back toward the $US80-per-barrel mark seen a few weeks ago, rig counts rise in the United States to more than 37% since the middle of last year, exploration and production spending is on the rise roughly 10% and hydrocarbon demand is projected to increase to levels seen in 2007, more countries are expected to step up recovery efforts.

“This economy has accelerated to what we call inside the company ‘multi-polar,’” said GE Oil & Gas President and Chief Executive Officer Claudi Santiago during the company’s annual oil and gas show here Feb. 1 and 2. The theme of this year’s event is Innovation Now.

“In fact, if you look at 2009, 92% of the increment of GDP [gross domestic product] around the world came from two countries: China and India. And when you look at the next five years, including 2010, about two-thirds of the growth of the economies around the world; only one-third will come from developing countries: this is the United States and the rest of the developing countries.”

According to the International Monetary Fund’s World Energy Outlook from October 2009, China contributed 72% to the global GDP and India 20%. The rest of the world, without any country being named specifically, contributed the remaining 8%.

The GDP global contributions by region are slightly more defined in the outlook’s predictions of 2010 through 2014 with China contributing 27%; India: 8%; the United States: 13%, developed economies 22%; and the rest of the world making up the remaining 30%.

The International Energy Agency in its World Energy Outlook 2009 predicted between 2010 and 2020 the main oil and gas demand recovery will come from non Organization for Economic Cooperation and Development (OECD) countries India, China and the Middle East.

“We are accelerating the entering of this multi-polar world where economies that used to dominate the landscape, in particular the United States, will be challenged by new upcomers like China, India and the Middle East where GDP is going to accelerate much faster than the most mature undeveloped economies,” Santiago said.

“Collectively, non-OECD countries account for over 90% of the increase, their share of global primary energy demand rising from 52% to 63%. China and India represent over 53% of incremental demand to 2030. Coupled with strong growth from ASEAN [Association of Southeast Asian Nations], this is contributing to a refocusing of the global energy landscape toward Asia. Outside of Asia, the Middle East sees the fastest rate of increase, contributing 10% to incremental demand,” according to the outlook.

“Mature economies like the United States and Europe probably will not need much energy to sustain the current level of economic activity, and the focus will evolve from more mature and developed economies to this emerging market …,” Santiago said.

With increased transportation needs in China and India, where projections in 2020 report passenger cars could consume the equivalent of nearly 10 million barrels per day (b/d), the challenge will be meeting future oil demand, he noted, saying that with the projected oil depletion of 5% per year, 44 million b/d will most likely be needed, which amounts to five times Saudi Arabia’s production.

“With this kind of transportation needs, China plus India could consume, 10 years from now, 100% of the oil production of Saudi Arabia, and we still need to provide energy to the rest of the world.

“So clearly the world is moving toward this multi-polar context where emerging economies are going to play a key role. As an industry, we have to think about this extra demand and 10 years from now, we will need five times the production of Saudi Arabia to satisfy the request for oil around the world. We have 10 years to create five times the same production that exists today in Saudi Arabia,” Santiago said.

With the search for clean energy and alternatives to conventional fuel, “gas will continue to be a key source of energy,” he said, noting that by 2020, 38% of fuel will most likely come from natural gas; coal: 23%; renewables: 30%; nuclear: 5%; and oil contributing 4%.

Ten years from now, Santiago said, “electricity will be very important to sustain these emerging economies.” Collectively, we need to think as an industry about how we are going to move this gas from where it is to countries where it will be needed. Again, another challenge when you think about the amount of gas that we will need to move around the world to sustain the demand for electricity of all these emerging economies.”

With the projected depletion of gas estimated at 8% annually, 2,300 billion cubic meters of gas will be needed in the next 10 years, which Santiago said represents four times Russia’s production today.

“Collectively I think we have a challenge in the industry that we cannot escape, and we have to address.

“Innovation brings risk; innovation brings surprises; innovation brings unpredictable things … but we really need to push the technology boundaries of the industry,” Santiago said. – Monique A. Hitchings