* Oil investment to continue decline in 2016
* Middle East share of supply to rise with $50 oil
(Updates with comment on investment, releads)
By Amanda Cooper
LONDON, Nov 10 (Reuters) - Oil is unlikely to return to $80
a barrel before the end of 2020 despite unprecedented declines
in investment, as yearly demand growth struggles to top 1
million barrels per day (bpd), the International Energy Agency
said on Tuesday.
In its World Energy Outlook, the IEA said it anticipates
demand growth under its central scenario will rise annually by
some 900,000 bpd to 2020, gradually reaching demand of 103.5
million bpd by 2040.
The drop in crude to around $50 a barrel this year LCOc1
has triggered steep cutbacks in production of U.S. shale oil,
one of the major contributors to the oversupply that has
stripped 50 percent off the price in the last 12 months.
"Our expectation is to see prices gradually rising to $80
around 2020," Fatih Birol, executive director of the IEA, told
Reuters ahead of the release of the report.
"We estimate this year investments in oil will decline more
than 20 percent. But, perhaps even more importantly, this
decline will continue next year as well."
"In the last 25 years, we have never seen two consecutive
years where the investments are declining and this may well have
implications for the oil market in the years to come."
Oil companies have grappled with the downturn and a "lower
for longer" price outlook by slashing spending, cutting
thousands of jobs and delaying around $200 billion in
mega-projects around the world.
The IEA estimates investment has already fallen by 20
percent this year.
"In the next 10 years, even if oil demand growth were zero
... just to increase production to compensate for the decline of
existing fields, we need investment at the level of $650
billion," Birol told a news conference.
Higher-cost producers in Canada and Brazil, as well as the
United States are likely to fall victim to low oil prices faster
than most exporters, but these declines could be offset by
supply growth in Iraq and Iran.
OIL SECURITY
Birol said the Middle East, which already provides about a
third of the world's oil, could see exports equate to more than
two thirds of total supply, particularly in a sustained
environment of $50 oil prices.
"We have to think carefully about the oil security
implications of a very few number of countries exporting a big
chunk to the global markets alone," he said.
Yet unrest in Iraq, now OPEC's second-largest producer, and
ageing infrastructure could hamper raising output there. Iran,
expected to be free of Western sanctions this year, needs major
investment to return to the 2.5 million bpd in production seen
prior to 2012.
On the demand side, the IEA expects total energy consumption
in China, the world's largest commodity consumer, to be double
that of the United States by 2040.
But greater efficiency and a shift away from heavy industry
for economic growth will mean China will need 85 percent less
energy to generate each unit of future economic growth than it
did in the past 25 years.
India will be the chief driver of rising demand, where the
IEA expects consumption to increase more than anywhere else,
hitting 10 million bpd by 2040.
Birol said that while the agency's base-case scenario was
not one in which the oil price languished around $50 for the
next decade, it could not rule out a sustained period of low oil
prices.
Low global economic growth in the near term and a lasting
switch by OPEC to a policy of pumping oil at record rates to
increase its market share and more resilient non-OPEC supply
could conspire to keep the oil price lower for longer.
"The oil price in this scenario remains close to $50 a
barrel until the end of this decade, before rising gradually
back to $85 a barrel in 2040," the IEA said in its report.
"In the low-oil-price scenario, the Middle East's share in
the oil market ends up higher than at any time in the last 40
years," the report said.