It is a privilege for me to have been invited to address the 1997 World Petroleum Conference. In my brief talk this morning, I will share with you the IEA's perspective on the state and direction of world energy markets with special emphasis on oil.

  1. Major changes in oil markets over last twenty

  2. Recent energy market developments and the

  3. Long-term outlook of world energy demand and

  4. The key issues that affect the long-term trends.

I will focus on four major themes: years; outlook over medium-term; energy resources; and 1. CHANGES IN THE LAST TWENTY YEARS Geopolitics of energy One of the most important developments for the world economy over the last 20 years is the process of globalisation. And energy, especially oil, has taken an important part in the globalisation process. There is indeed a ‘new geopolitics of energy’ that consists with the energy world of the 1970s.

Some key aspects of the ‘new geopolitics’ of energy are:

  • OPEC is no longer the prime mover of the world oil market; its position has changed from dominant supplier to swing producer, where demand not satisfied by other sources is met by OPEC production.

  • The producer-consumer confrontation of the 1970s has been replaced by dialogue and a strong common interest in transparent, efficient energy markets.

  • New producing areas, such as the North Sea and the Gulf of Mexico, have emerged.

Central Asia, because of its potential for oil and gas supply, is also becoming increasingly relevant. Deep water areas around the world show bright prospects for new oil and gas supply. Technological breakthroughs are making exploration and production from these areas cost competitive. - Non-OECD countries have become increasingly important in the world oil balance. In 1973, they accounted for only 30% of world oil demand.

Twenty years later, this share has increased to 43%. According to the IEA's 1996 World Energy Outlook, the Non-OECD share of total oil demand will be above 50% by 2010. Within the Non-OECD group, the Asia-Pacific region has emerged to be a main demand centre, accounting for more than 40% of the total incremental demand for oil between now and the year 2010. It is clear that Asia is becoming the centre of gravity of the world energy system.

Geopolitics, in the traditional sense, have also changed:

  • The political background has shifted from one of super power confrontation to a focus on intraregional conflicts and tensions, such as the Iran-Iraq War, the Gulf War, the continuing Arab-Israeli dispute, etc.

  • The collapse of the former Soviet Union opened up the vast area of Central Asia to foreign partnerships, releasing important potential for development of hydrocarbon resources.

However, political instability in Central A

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