The Organization of Petroleum Exporting Countries (OPEC) stressed that there are eight major challenges coming in the oil industry in addition to many other complex factors affecting the market, most notably: climate change, energy poverty, trade disputes, geopolitical factors, lower economic growth, policies change, escalating population growth, and economic sanctions, considering that these and other factors will continue to strongly influence over the coming period.
A recent report, prepared by OPEC, on the outcome of the dialogue with China in Vienna at its third session shows that producers need to early prepare for all challenges and be prepared for all eventualities, noting that they can only do this together as partners who can communicate quickly and frankly when difficult situations arise.
Maintaining communication channels at all times and sharing facts and data regularly reduces the impact of any eventuality, noting that this is the only way forward in an industry that has become increasingly interconnected over time, and no one can bear the difficulties alone, according to the report.
OPEC & China Partnership
The report explains that OPEC’s growing partnership with China represents a win-win situation not only for both sides but for the oil market and the entire world economy, referring to OPEC Secretary-General Mohammad Barkindo’s saying: “I cannot stress enough the importance of our dialogue in shaping future decisions on production as well as investment”.
“The rapid development of China, over the past few decades, is remarkable, a testament to China’s creativity, hard work, and determination for development,” the report adds.
In order to continue to do well in OPEC, which is to balance the oil market for the benefit of producers, consumers, the global economy, and the future development of mankind, the industry needs reliable and timely data and statistics, the report says, stressing the importance of China’s role and its tremendous impact on global energy developments.
Expectations about Increase Demand
Energy demand is expected to increase 33% from 2015 to 2040, with about 95% of this demand coming from Asian countries led by India and China, the report says.
The report stresses that oil will remain the largest share of the energy mix by 2040, by about 28%, and together, oil and gas are expected to account for more than 50% of global energy needs.
Global demand is expected to grow by 14.5 million bpd to reach 112 million bpd by 2040. Land transport will continue to be one of the main drivers of oil demand, even taking into account efficiency advances, tighter emission policies, and the growth of electric vehicles.
The report gives a greater weight to the total stockpiles of cars growth by 1.1 billion between 2017 and 2040 to reach 2.4 billion, explaining that electric cars will account for only 13% of the total fleet by 2040, predicting the largest growth in oil demand will come from the petrochemical sector.
The report notes that the outlook for the petroleum sector is very bright, and that the oil industry also has a responsibility to be part of the solution to the climate change challenge and that they must be more than just a stable energy supplier.
Need to invest $11tn
The report notes that OPEC estimates that investments of $11tn are needed in the industry to address disparities in demand and supply expectations, referring that market fluctuations, geopolitical interventions and, more recently, the discriminatory nature of policies against oil and gas are the most detrimental factors that discourage investment in the sector.
The report quotes Bill Gates, founder of Microsoft as saying that the fossil fuel filter has zero climate impact, and advises investors to support technology that helps reduce emissions, pointing out that those who want to change the world is better to put their money and energy behind the technologies that slow down carbon emissions.
The market is awaiting the release of OPEC’s annual report next month, which is expected to include positive data on supply, demand and inventories, and the commitment of producers to match the high plan to reduce oil supply next year.