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Time Will Run Out For Oil Exporters Sooner Than Many Expect

21 July 2008

Petroleum-fuelled prosperity is masking the challenge of oil depletion and removing the sense of urgency that is desperately needed to promote diversification in oil-exporting states. All eyes are on supply-demand dynamics instead of how these countries' economies - so linked to our own - can be sustained as oil and gas resources deplete.

A new report by Chatham House says today's oil-price boom may be raising the global profile and financial clout of oil-exporting countries but their dependence on oil, (and gas) revenues has increased. This cannot continue: production will level off and eventually fall; rising energy consumption at home will reduce the amount available for export. For these countries to continue to grow, dependence on oil revenues must be reduced.

The report discusses, with some pessimism, the capacity of most of these countries to reduce their dependence by developing new sources of government revenue and export earnings from the non-hydrocarbon sectors of their economies.

The study estimates, under simple assumptions and various scenarios, how long each of the twelve exporting countries looked at here, would have until it must begin reducing dependence, how big the reduction should be by 2025, and when exports are likely to tail off.

Strikingly, it shows that even Saudi Arabia must plan for export decline, and explains why some countries might rationally choose to keep oil in the ground, even at over $100 a barrel.

The prospects for many are not that good. Only three of the twelve countries are clearly on a path of ending their dependence on oil: for most of the others, time is running out for finding sufficient alternatives to sustain current or even moderate rates of growth in the long term.

Notes to Editors:

'Ending Dependence: Hard Choices for Oil-Exporting States' is written by John V Mitchell and Professor Paul Stevens from the Energy, Environment and Development Programme, Chatham House.

The report looks at Algeria, Angola, Azerbaijan, Indonesia, Iran, Kazakhstan, Kuwait, Malaysia, Nigeria, Norway, Saudi Arabia and Timor Leste.

More information on the Resource Depletion, Dependence and Development project can be found here.

For further information please contact:

Nicola Norton, Media Relations Manager
+44 (0) 20 7957 5739