The U.S. shale boom masks threats to global oil supply including Middle East turmoil, conflict in Ukraine and the difficulty of unconventional oil production beyond North America, the International Energy Agency (IEA) said.

“The global energy system is in danger of falling short of the hopes and expectations placed upon it,” the IEA said Nov. 12 in its annual World Energy Outlook. “The short-term picture of a well-supplied oil market should not disguise the challenges that lie ahead as reliance grows on a relatively small number of producers.”

Global oil consumption will rise to 104 MMbbl/d in 2040 from 90 MMbbl/d in 2013, driven by demand for transport fuel and petrochemicals in developing countries, the report said. To meet that growth and replace exhausted fields will require about $900 billion a year in investment by the 2030s as oil companies develop fields from Canada’s oil sands to the deep waters off Brazil, the IEA said.

Brent crude has slumped from a June high of about $115 a barrel to about $81 on Nov. 11 as crude production in the U.S. reached the highest in 40 years, driven by shale fields in North Dakota and Texas. That’s threatening investment in the global industry as companies try to insulate profits from the price fall. While the near-term picture is secure, the development of capital-intensive areas outside North America is at risk, the IEA said.

Oil sands

In the Canadian oil sands, among the most expensive oil deposits in the world to exploit, a slowdown is already evident and the IEA estimates about a quarter of projects are at risk as prices fall. Norway’s Statoil ASA and France’s Total SA have both delayed projects in the region this year.

Likewise, the complexity and capital intensity of developing Brazil’s deepwater fields could also contribute to a shortfall in investment.

Replicating the U.S. shale oil boom outside of North America will also be a challenge, the report said. A lack of existing oil and gas infrastructure, environmental opposition to fracking and uncertain geology are among the reasons unconventional drilling hasn’t spread.

Oil companies from Shell to ConocoPhillips said last month that they would cut capital spending to maintain profitability in the face of lower oil prices.

Political risks

Threats to new investment stand alongside political risks to oil and gas production. Sanctions that restrict Russia’s access to technologies and capital markets have raised concerns about security of supply from the world’s largest energy exporter, the IEA said.

Iraq is the biggest risk to the security of oil supply, the report said, contributing to the most turbulent time in the Middle East since the 1970s. The region is heavily depended upon as the only large source of low-cost oil. With Asian countries set to import two out of every three barrels of crude traded internationally by 2040, over-reliance on the region for production growth is a concern, the IEA said.

The Paris-based IEA advises industrialized nations on energy policy and produces the World Energy Outlook each year, making long-term forecasts on global oil and gas supply.