sectoral economic costs and benefits of ghg mitigation - IPCC

Fossil Fuels
exporting countries, it would increase current oil revenues (based on 1998 average oil prices) by
53% in case of equal distribution and by 75 % if the added demand is split between the Top 10
producing countries. Of course, as noted above, this provides an extremely conservative scenario:
the increase in production is more likely to be divided as a function of the marginal cost of
production and transport of the marginal barrel of oil, disproportionately weighting the
production increases toward OPEC countries.
Table 4 Oil and Gas Reserve Production Ratios (1998)
Region
Oil
Reserves
(10 9 bbls)
Production
(million
tons)
Reserve/
Production
Ratio
Gas
Reserves
(10 12 cm)
Production
(10 9 cm)
Reserve/
Production
Ratio
North
America
85.1 667.0 17.2 8.35 739.0 11.3
S. & Cent.
America
89.5 343.3 37.9 6.21 86.7 71.6
Europe 20.7 325.1 8.3 5.21 274.3 19.0
FSU 65.4 361.3 25.2 56.70 643.9 88.1
Middle East 673.7 1096.8 83.2 49.53 181.0 >250
Africa 75.4 360.1 28.0 10.22 101.2 >100
Asia Pacific 43.1 365.4 15.9 10.17 245.8 41.4
World 1052.9 3519.0 40.8 146.39 2271.9 64.4
Source: BP–Amoco and IEA databases
If this demand was evenly distributed across the other regions (an unlikely scenario, as oil
production costs and shipping costs will affect the distribution within the global market), South
and Central America would see an increase of 170% in production, the Middle East an increase
of 55%, and the African region an increase of 155%.
A similar story may be told for natural gas. Here, production of nearly 45% of global natural gas
comes from reserves that are expected to be substantially depleted within 20 years. If that current
production is distributed among remaining producing regions, increases of nearly 200% would be
projected for South and Central America, 25% for the Former Soviet Union, more than 90% for
the Middle East, nearly 170% for Africa and nearly 70% for the Asia Pacific Region. Overall,
exporting countries which stand to lose from declining stocks of these fuels are largely in Annex
I, while the “winners” with additional production demand are developing countries.
As with oil, such figures do not take into account increasing demand for natural gas as a result of
economic growth – and perhaps more importantly, they do not take into account increasing
demand for natural gas a consequence of fuel switching. Such increases in demand, coupled with
a loss of a number of high volume current producers is also likely to drive the price of gas up.
Even without considering any regional depletion values, the IEA World Energy Outlook projects
an increase in gas spot market prices (a rise of 92% percent for North America, and between 12
and 14 % for the rest of the OECD) by 2010. The WEO also projects an increase of 50 % in
global gas demand. Based on these price and demand assumptions, for the regions that would
still be producing in 2010, this would imply revenue increases of 225%.
Questions of total reserves – and profitability of exports – are also tied to the costs of extraction.
While production costs are difficult to come by, some data is available. For example, information
in the financial reports of some of the oil majors as well as IEA data suggests production costs by
region as shown in Table 5.
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