Paris (Platts)--18Oct2011/743 am EDT/1143 GMT

The world needs to invest a total of $10 trillion between now and 2035 to meet future demand, $2 trillion more than projected a year ago, the International Energy Agency's chief economist, Fatih Birol, said Tuesday.

Birol said this year's World Energy Outlook, which will be released in November, sees a need for total energy investment of $38 trillion over the period to 2035, around half of which is needed for oil and gas and half for electricity.

This means an annual investment requirement of around $1.5 trillion over the period, Birol told a news conference in Paris on the sidelines of the IEA's annual ministerial meeting.

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"Oil and gas are the key areas for investment," Birol said.

The agency is forecasting an investment requirement of $9.5 trillion for natural gas, $16.9 trillion for power, $1.1 trillion for coal and $0.3 trillion for biofuels.

Key to meeting future demand will be investment in the Middle East and North Africa, "because about 90% of [production] growth in the next 10 years needs to come from MENA," Birol said.

"And if it doesn't come through it will have major implications for oil prices," he said.

"We shouldn't forget that in many producing countries production is declining," Birol said, stressing the need to compensate for these declines.

But Birol also said there were "some signs of reluctance" to carry out the necessary investment, which could mean "much higher prices than we see today."

He declined, however, to say how high prices might rise if there was not enough investment to meet future needs.

Birol said he would be surprised if Libya managed to restore its oil production to levels seen before the uprising against Moammar Qadhafi before 2013.

"We are still looking at Libya," he said. But, he added, "I would be positively surprised if we see pre-war levels reached before 2013."

Top Libyan officials have said in recent weeks that they expected to restore crude production to pre-uprising levels of around 1.6 million b/d within 15 months.

The IEA said in its latest monthly oil market report on October 12 that it now expected Libyan production to recover to around 600,000 b/d by the end of this year, having upwardly revised its previous projection of between 350,000 b/d and 400,000 b/d by end-2011.

"So far, production is made up of relatively easy barrels from fields unaffected by the fighting but thereafter restoring production may be more difficult as companies implement repairs to war-damaged fields, terminals and other key infrastructure," the IEA said at the time.

--Margaret McQuaile, margaret_mcquaile@platts.com

--Kate Dourian, kate_Dourian@platts.com

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