LEADING energy companies have put future supplies of oil at risk by reducing their investment in research and technology.

Evidence of cuts in R&D spending by the oil majors emerged yesterday in a report from the International Energy Agency (IEA). The agency said technology needed to produce oil in difficult areas, such as deep sea, could be delayed because of budget cuts, layoffs and outsourcing after the 1998 price collapse.

The agency called for major investment into oil and gas recovery. It reckons that the world must spend $5 trillion (£2.8 trillion) over the next 25 years to meet an expected 50 per cent increase in global demand.

Claude Mandil, IEA’s executive director, said: “There is no shortage of oil and gas in the ground but quenching the world’s thirst for them will call for major investment in modern technologies.”

The report reveals that the top five oil multinationals, including ExxonMobil, BP and Shell, reduced their annual investment in R&D by almost $2 billion from 1998 to 2000. “The decline in R&D investment . . . could be a worrying sign that technological progress might be slower over coming years than in the past,” the IEA says.

Technological advance must speed up if oil production was to meet demand, the body said. Total spending on research is currently a trifling 1 per cent of the industry’s turnover.

Known oilfields were declining, the IEA says, and the industry was turning to unconventional sources, such as tar sands, but the cost of recovery was big, which required higher oil prices.

More research is also needed to enhance oil recovery. Typically, only 35 per cent of the oil in a reservoir is recovered and a 5 per cent boost to recovery rates would generate more oil than Saudi Arabia’s total reserves.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts