Ever since soaring Chinese oil demand and the various peak-oil theories have gained world attention, not to mention rising CO2 emissions, it has become clear: hard truths face the global energy industry. These make for some dramatic headlines for consumers and feed the heightened rhetoric of politicians.

Simply put, it appears high commodity prices and rising oil and gas demand are here to stay, absent a major worldwide recession.

In July, reports from two significant agencies spotlighted these truths, the Paris-based International Energy Agency and the National Petroleum Council. Both warn frankly of a pending gap between traditional energy supplies available at reasonable cost, and ever-rising world demand.

BP's 56th annual "Statistical Review of World Energy" also shed light on these trends. Much has been made of China's oil thirst, but BP points out that last year, China's use of natural gas rose 21.6%. And coal led the list of the world's fastest-growing fuels consumed last year.

The IEA's annual medium-term forecast for world energy supply and demand, this time to 2012, concludes that oil supply will be tighter from OPEC and non-OPEC sources than previously believed, despite high prices that have induced more drilling activity worldwide.

Keep in mind that the IEA revises its projections frequently. What's more, its data are not comprehensive, and tend to be conservative. A recent report from energy banker Simmons & Co. International notes that the IEA only models on a field-level basis some 21% of non-OPEC oil supply. Simmons was quick to admit its own numbers were tough to come by as well. Not having accurate and complete data from any source is "a major glitch" when trying to forecast global oil supply, the firm reports.

At press time, the National Petroleum Council released its long-awaited study on world energy supply and demand to 2030, which was ordered by Energy Secretary Samuel Bodman two years ago.

The title says it all: Facing the hard truths about energy.

Like previous NPC studies, this one repeats the industry drumbeat for more oil and gas drilling offshore and in Rocky Mountain areas now off-limits. What's new is the tone-it bluntly says energy changes need to be made, CO2 emissions must be controlled, and the public needs to understand there will be higher costs involved.

The study reports on supply, demand, technology and geopolitical forces and policy. It draws on 350 experts from within and without the industry, as chaired by Lee Raymond, the immediate past chairman of ExxonMobil. Other committee chairs included the chief executives of Chevron, Schlumberger, Cambridge Energy Research Associates and the Center for Strategic & International Studies.

Additional input and peer reviews came from nearly 500 others. Altogether, the NPC assembled data, analysis and projections from the industry, governments and energy ministries, academics and consulting firms.

The NPC recommends energy conservation, stronger auto mileage standards, use of all alternative fuels and more nuclear energy.

Another hard truth? Operators have been announcing more delays and cost overruns that are hampering huge field developments around the world. Thunder Horse was discovered in the Gulf of Mexico in 1999, but the BP-operated field has suffered a number of mechanical delays. Latest word is that production may begin in 2008, about three years behind schedule.

One of the world's largest new oil fields, Kashagan, was announced by Italian company Eni and partners in 2000, in Kazakhstan. First commercial production was expected by now, but Eni says not until 2010 or 2011-more than a decade after the giant field was found.

We may be willing to spend enough to develop impressive new oil and gas finds, but it is taking longer to bring that incremental production to market. Can the world afford to wait?

The IEA says daily oil demand will rise by 10 million barrels by 2012, to reach 95.8 million barrels a day. That's a big leap from the 86 million the world consumes today. The forecast is based on world demand rising about 2.2 % annually.

The bottom line? Higher commodity prices are the new norm. For U.S. producers, that means many more plays, such as the gas-rich shales, the Deep Bossier, the Maverick Basin and the Bakken oil shale, make more sense to drill than ever before. The opportunities seem endless right now, especially when coupled with the vast amounts of available capital.



Don't forget to register to attend our sixth annual A&D Strategies and Opportunities Conference in Dallas on August 29, when Ray Hunt, Don Wolf and many other experts will speak on business-development trends. We're excited about a new half-day workshop preceding the conference, designed for fine-tuning the skills of A&D professionals and up-and-comers to the space. We look forward to meeting you there. Go to hartenergyconferences.com for the full agenda and other details.

See you there!

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