Business Journal


‘Stability is Key to Sustainable Global Energy Future’

When looking at the global energy scene, it is important to consider where we are today, where we might be going, and how we might get there. For OPEC, this is laid out every year in its World Oil Outlook.
The most recent version of this was published at the end of 2011. In its Reference Case, energy demand increases by more than 50% between 2010 and 2035. And over the same timeframe, world population is expected to expand from 6.9 billion to almost 8.6 billion.

Growth Impetus
All energies witness growth, although overall shares shift over time.
Fossil fuels – which currently account for 87% of the world’s energy supply – will still contribute 82 per cent by 2035. Oil will retain the largest share for most of the period to 2035, although its overall share falls from 34 per cent to 28 per cent. It will remain central to growth in many areas of the global economy, especially the transportation sector. Coal’s share remains similar to today, at around 29 per cent, whereas gas increases from 23 per cent to 25 per cent.
In terms of non-fossil fuels, renewable energy grows fast. But as it starts from a low base, its share will still be only three per cent by 2035. Hydropower will increase only a little – to three per cent by 2035. Nuclear power will also witness some expansion, although prospects have been affected by events in Fukushima. It is seen as having only a six per cent share in 2035.
To meet this growth, there are plenty of available resources. For oil, conventional, as well as non-conventional resources are sufficient for the foreseeable future.
We expect to see significant increases in conventional oil supply from Brazil, the Caspian region, and of course OPEC, as well as steady increases in non-conventional oil and natural gas liquids.
Nevertheless, some continue to question whether this projected oil demand increase can be met. Let me firmly state: yes it can.
It is true the world will need significant additional production capacity to 2035, including to compensate for natural decline in oil fields. But this is nothing new for the industry. This has always been the case. Today’s challenges are no different from those faced in the past. Our industry has always been able to deliver.

Strategic Investments
And let me stress– significant investments are being made today. For the five-year period 2012-2016, OPEC’s Member Countries currently have 116 upstream projects in their portfolio. Should all projects be realised, this could translate into an investment figure of close to $280 billion.
Taking into account all OPEC liquids, the net increase is estimated to be close to 7 mb/d above 2012 levels, although investment decisions and plans will obviously be influenced by various factors, such as the global economic situation, policies and the price of oil.
Moreover, technological advances will continue to extend the reach of the industry – helping to reduce costs, unlock additional resources and increase supplies.
It is clear that future oil demand can be met. From the demand-side, there are also the environmental and energy policies of a number of consuming countries. Obviously, every country has the sovereign right to set its own policies. But it is essential that they provide a clear idea as to the potential impact of policies on future oil consumption levels, as well as overall energy supply and demand patterns.
It is easy to understand why – given the many uncertainties associated with oil demand projections that are highlighted in scenarios in our World Oil Outlook.

Market Uncertainties
And there are scenarios that examine the possibilities for higher and lower economic growth.
What these scenarios underscore are genuine concerns over security of demand. There are major demand uncertainties.
I am sure we can also appreciate that this leads to investment uncertainty. And if investments are not made in a timely and adequate manner, then future consumer needs might not be met.
The industry as a whole also faces other challenges.
This includes the ongoing need to reduce excessive market volatility. We cannot avoid speculation and volatility altogether. However, it is essential we look to mitigate extreme volatility and excessive speculation. These are detrimental.
And here, I should like to underscore one further challenge; that of energy poverty. We need to remember that 1.4 billion people have no access to electricity and some 2.7 billion rely on traditional biomass for their basic needs. Alleviating energy poverty is a priority for sustainable development. It needs the urgent attention of world leaders. The Rio+20 meeting later this month is a great opportunity in this regard.
When looking at the challenges before us, however, we should also think about the often related opportunities. For example: Advancing collaboration between producers and consumers, as well as between National Oil Companies and International Oil Companies on various issues. It is important to have input, as appropriate, from each and every stakeholder.
Sharing experiences with new technology: We have seen this, for example, in efforts to reduce the industry’s environmental impact – through such technologies as Carbon Capture and Storage, which has been discussed and shared by many in the industry, and, of course, alleviating energy poverty for billions around the world.
I would like to touch on one other theme that is highlighted in the programme: ‘potential game-changers’.
The first is shale oil and shale gas. It is clear they are already changing the energy landscape in the US, and there are evidently possibilities elsewhere. However, challenges associated with the environmental impact of hydraulic fracturing remain, especially on groundwater supplies. And while technology and scientific innovation will help eventually solve these problems, it will take time.

Future Outlook
Energy use will continue to grow. It will remain central to our everyday lives; the heartbeat of our increasingly interdependent and complex world. In terms of resources, there are more than enough to meet expected demand growth.
And overall, fossil fuels will continue to supply over 80% of our energy needs by 2035, with oil the energy type with the largest share for most of this period.
Finally, given the long-term nature of our industry and the need for clarity and predictability – not only for oil, but energy in general – I would like to leave you with three appropriate words: ‘stability, stability, stability’.
Stability for investments and expansion to flourish;
Stability for economies around the world to grow;
And stability for producers that allows them a fair return from the exploitation of their exhaustible natural resources.
Stability is the key to a sustainable global energy future for us all

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