Davos energy bosses divided on "peak oil" risks

Leading figures within the oil industry have clashed this week at the World Economic Forum in Davos over the risk to energy security posed by the "peak oil " phenomenon.

Thierry Desmarest, chief executive at French oil giant Total, yesterday told a meeting on energy supplies at the annual summit that the world's oil supplies were approaching their peak, the point at which many experts fear energy prices will begin to rise exponentially.

He said the industry would struggle to go beyond 95 million barrels per day, about 10 per cent above current levels of supply. "The problem of peak oil remains," he added.

His comments will be seized on by oil industry whistleblowers and environmental groups, who have been warning for years that the world is approaching an energy supply crunch that threatens to cripple the global economy. Experts have argued that the global recession has served to delay oil shortages for several years, noting that prior to the economic downturn, oil prices were running at record levels.

However, the chief executive of the Saudi state oil firm Saudi Aramco, Khalid al-Falih, told the same meeting in Davos that fears over "peak oil" had been hugely exaggerated.

"The concern about peak oil is behind us," he said, adding that "of the four trillion (barrels) of oil the planet is endowed with, only one has been produced ".

He did, however, admit that "most of what remains is more difficult and complex" to extract, but insisted there was "no doubt" the world can produce more than the 95 million to 100 million barrels a day that are projected to be required in the next few decades.

The spat came on the same day as the chief economist of the International Energy Agency, Dr Fatih Birol, cast fresh doubt on the wisdom of many oil firms' long-term investment plans, warning that demand for oil from industrialised nations has already peaked.

In an interview with Reuters on the sidelines of the Davos Summit, Birol predicted that the combination of improved fuel efficiency and the increased use of renewable energy meant demand for oil from developed countries would never return to the record levels seen in 2006 and 2007.

"When we look at the OECD countries – the US, Europe and Japan – I think the level of demand that we have seen in 2006 and 2007, we will never see again," he said. "There may be some zigzags up and down but as a trend I think it will be a downward trend in terms of oil consumption."

His comments were echoed by BP chief executive Tony Hayward, who also told an audience in Davos that the oil industry would never again sell as much in developed markets as it did in 2007.

The falling demand for oil in industrialised countries is likely to limit pressure on prices as demand from China, India and other large emerging markets continues to grow. However, it will also raise serious questions for the industry as to how long it will take before global demand peaks.

Countries such as China and Brazil have substantial programmes in place to accelerate the rollout of greener vehicle technologies such as electric cars and biofuels, while China famously has more stringent fuel efficiency standards than the US.

Some industry experts are confident that adoption of new technologies means oil demand could peak globally within the next 10 years, driving down prices and posing huge problems for those oil companies currently investing in increasingly costly extraction projects that will take decades to deliver a return.

"If there is a transformation in the transport sector, it may also slow down the growth substantially," Birol told Reuters. "Advanced-car technologies ... are very strongly pushed in many countries."