Dubai (Platts)--18Sep2012/819 am EDT/1219 GMT

The world faces a potential supply challenge for both oil and gas in the coming two decades and will need to put an additional 40 million b/d of new oil on markets by 2020, a senior Total executive said Tuesday.

Jean-Luc Guiziou, president of Total in the UAE, told CWC's NOC & Governments Summit in Dubai, that while a relatively stable oil price environment was good for investors, sustained "firm oil prices" had pushed markets into backwardation and, combined with a weaker euro, had led to the highest ever gasoline price in countries like France while placing an economic burden on other countries in Europe, already suffering from debt issues.

"This situation creates tensions in regions like Europe, where the economies are struggling," Guiziou said.

"Currently, the cost of energy is becoming a burden on the economic development of the countries of the region," he said.

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At the same time, markets faced conflicting issues of rising supply from some areas but geopolitical tensions on the other, which he said was causing uncertainty and affecting the price structure.

"On the one hand, we have good news on the supply side. We are seeing the booming development of oil and gas in North America and good news of discoveries in frontier exploration provinces," Guiziou said, referring to areas such as East Africa and offshore Brazil.

"At the same time, we see geopolitical issues and events which provide a constant threat to the ability of our industry to supply the markets in a smooth way," Guiziou said, adding that this was evident in the backwardation that has been a feature of the oil market for some time.

"Total's view is that of a world which will remain facing undersupply challenges in the mid- and long-terms," Guiziou said.

"Despite the good news on the supply side, we need to remember that we have as an industry to put on the market by 2020 about 40 million b/d of new oil, which is a huge number, and obviously those 40 million b/d will replace oil from mature fields. It's within a short time frame so a lot of challenges will be faced by our industry."

He said that the same applied to the gas market.

"We see before the end of the decade a shortage of supply on the European and Asian markets," he said.

This will require the industry to proceed with "very intensive capital allocations and expenses to develop new facilities and put that new oil and gas on the market," which Guiziou said was a joint responsibility of both the international oil companies and the state-owned resource holders.

--Kate Dourian, kate_dourian@platts.com
--Edited by Maurice Geller, maurice_geller@platts.com

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