The economic crisis is jeopardising key energy industry investments that are needed to cope with future growth in demand and shifts to cleaner energy, executives and officials warned on Wednesday.
Executives from gas, oil and power generation firms said at a UN conference here that they were delaying and cutting back investments due to the credit crunch, the economic downturn and volatile oil and gas prices.
But, they added, fresh capital is needed to renew and expand infrastructure such as production capacity and gas pipelines, cut carbon emissions from traditional fuels or build up more costly alternative energy sources.
Global energy needs are expected to grow by more than 40 percent by 2030, according to an International Energy Agency report last week, despite a decline this year due to reduced economic activity with the recession.
"The danger is that under-investment in key energy producing countries could reduce availabilities leading to strong renewed price pressures," said Jan Kubica, Director General of the UN's Economic Commission for Europe.
"The financial crisis has made it all the more uncertain whether the full energy investment needed in the long term to meet growing energy needs can be mobilised," he added at the UNECE conference on energy security.
A World Energy Council survey of 60 executives presented at the conference showed that industry sentiment had declined sharply in 2009.
Half of the executives were ready to cut investments by more than 20 percent in some sectors or postpone them by more than two years, the survey showed.
Just 20 to 40 percent of executives said the financial crisis would have no influence on their investment levels, and only 10 percent were prepared to rule out postponements.
The cost of investing in new alternative energy sources was also about three times higher per kilowatt than current power technology, he cautioned.
But thoughts about investing in cheaper power plants with high carbon energy such as oil or coal might be misguided, as governments legislate to tackle climate change, he cautioned.
"It is a cheap solution now but perhaps an expensive solution in the future," Ulreich pointed out.
"Wrong investments are also a threat to energy security."
But he insisted that longer term investment was continuing and forecast that hydrocarbons would remain "more competitive" than renewables.
"We believe that the share of gas in the energy mix will be maintained or even increase," Pankratov said.
OPEC oil-producing nations had partly blamed the surge in crude oil prices to a record 147 dollars a barrel in July 2008 on the lack of refinery capacity, producing a bottleneck in the supply line.
Meanwhile, the industry has also repeatedly complained that volatile energy prices were undermining their long term planning.
On Wednesday, oil prices climbed towards 80 dollars, just months after they had slumped below 40 dollars a barrel.
Source: AFP Global Edition