Oil and gas will continue to play a major role in the world’s energy mix for the foreseeable future, contributing an estimated 52 percent to the global energy mix by 2040, the Organization of the Petroleum Exporting Countries (OPEC) president said in a statement Wednesday.
Mohammad Sanusi Barkindo, OPEC secretary general in a statement after his speech at the 25th Lustrum Symposium on Nov. 21 in Delft, located in the Netherlands said total primary energy demand is increasing by 35 percent in the period to 2040.
'Long-term oil demand is projected to surpass 100 million barrels per day (mb/d) in 2020 to reach a level of more than 111 mb/d by 2040,' he said, adding that the majority of this rising demand will come from developing countries, increasing by almost 24 mb/d, to reach 67 mb/d by 2040.
He explained that there is no expectation for peak oil demand over the forecasted period, but that oil would continue to be relied upon over the long term to help meet the world’s rapidly rising energy requirements.
He warned though that this is no small challenge considering that an estimated 1.1 billion people around the world still have no access to electricity.
- Growth forecast in industry sectors
Industry will drive this growth in demand, he maintained, detailing that the three main sectors will be road transportation with 5.4 mb/d, petrochemicals with 3.9 mb/d and aviation with 2.9 mb/d.
'Now, turning to the supply picture, non-OPEC liquids supply is forecast to increase from 57 mb/d in 2016 to 62 mb/d in 2022,' mainly as a result of the recovery and improved outlook for U.S. tight oil production, he said, but added that for the forecast further ahead up to 2040, supplies will drop to 60.4 mb/d.
'This dynamic bodes well for OPEC crude, which will benefit from rising demand, reaching an estimated 41.4 mb/d by 2040. The share of OPEC liquids in the total global liquids supply is forecast to rise to 46 percent by 2040, up from 40 percent in 2016,' he explained.
Barkindo, however, warned that a revival in investments is required to cover this increasing demand given that nearly one trillion dollars in investments were frozen or discontinued, and many thousands of industry jobs were cut.
'Considering the fallout from this crisis I have just described regarding the need to meet rapidly rising world oil demand in the coming decades, it is clearly imperative that industry investment is urgently restored to levels that will secure the energy requirements of future generations. To achieve this, an estimated $10.5 trillion in industry investment is expected to be required from now until 2040,' he said.
- Investments in oil and gas to rise
On a positive note, he said that investment is picking up slightly this year and in 2018, but added that, 'this is far from the levels we have witnessed in the past.'
He advised it is not only a question of increasing new production, but that producers would also need to compensate for natural decline rates, which can be 5 percent per year.
Therefore, to maintain current production levels, industry might need to add upwards of 4 mb/d each year, he said.
'OPEC member countries have continued to invest in their industries throughout this volatile down-cycle.'
He said that progress is being made as global stocks are coming down, while the world economic outlook is positive with robust demand ahead.
'We are on the path to stability,' he underlined.
- World requires variety of energy sources
To ensure adequate energy supply levels, Barkindo said that all energy sources would be needed including fossil fuels, which are still plentiful.
At present, the world’s proven crude oil reserves alone stand above 1.2 trillion barrels.
'It is also important to recognize the positive aspects of these resources and how they have impacted the lives of billions around the world for hundreds of years,' he said, adding 'these natural resources are fundamental to our daily lives, and will continue to be well into the future.'
Notwithstanding, he acknowledged the environmental issues with emissions that emanate from fossil fuels.
'OPEC will continue to prioritize the advancement of the environmental credentials of oil, both in production and usage,' he said.
Energy transition does not necessarily mean moving from one energy source to another, he affirmed.
'All energy sources will be needed in the years ahead to meet rising demand, and each source has an important role to play in the overall energy mix,' he concluded.
By Gulsen Cagatay