OPEC Seeks $12.6tn Investments to Revamp Global Oil Industry

By Emmanuel Addeh

The Organisation of Petroleum Exporting Countries (OPEC) has disclosed that the global oil industry will require about $12.6 trillion investments in the downstream, midstream as well as upstream to sustain its innovative and production efficiency in the next 25 years.

Secretary General of the organisation, Dr Sanusi Barkindo, who spoke at the Crescent Ideas Forum on ‘‘The Outlook on Energy’’ videoconference, also predicted a rash of closure of refineries globally in the next few years as regions develop new capacities.

He stated that OPEC’s World Oil Outlook showed that upstream capital expenditure could fall by more than 30 per cent in 2020 alone, but maintained that crude oil will continue to be relevant in the next two decades and a half.
Barkindo argued that the oil industry cannot move forward without adequate capital to sustain its historic leadership, stating that it would need financial firepower to grow out of the coronavirus-induced crisis, to sustain technological development and human resources, and to help provide a stable, economic and secure energy supply.

“For OPEC and its member countries, stable and timely investment is essential if we are to successfully achieve our cherished goals of economic diversification and development, and importantly, to help diverse our own energy mix.

“In fact, OPEC’s World Oil Outlook shows that upstream capital expenditure could fall by more than 30 per cent in 2020, exceeding the annual dramatic declines seen in the industry downturn of 2015 and 2016.

“Looking ahead, our projections for the oil industry show that investment of around $12.6 trillion will be needed in the upstream, midstream and downstream between now and 2045.

“To get there, it is very important that the policy discussions on energy and investment remain inclusive and supportive of a diverse portfolio of energy options,” he said.

According to him: “Turning to the downstream, we anticipate a wave of refinery closures as new capacity comes online in the Middle East and Africa, as well as the Asia-Pacific, with crude distillation capacity expected to increase by 15.6 million b/d until 2045”.

The OPEC boss stated that despite the challenges that exist today, OPEC was committed to investments that strengthen the oil industry’s resilience and capacity to meet the world’s demand needs over the long term.

“Only yesterday, the UAE announced visionary plans to invest around $122 billion in its oil industry over the next five years. This is a powerful example of how a leading oil-producing nation is looking at the road ahead,” he said.

Barkindo explained that OPEC was heartened by the promising vaccine developments, and the hope that they can quickly be brought to market to save lives, first and foremost, but also to help reboot the global economy.

“In this respect, our OPEC outlook for 2020 oil demand is now slightly above 90 million b/d. This represents a sharp decline of nearly 10 million b/d from where we started the year, and almost an 11 million b/d contraction compared to what we forecast for the year back in January.

“In 2021, we expect growth to bounce back to 6.2 million b/d, to just over 96 million b/d, compared to our pre-coronavirus expectations for demand reaching almost 102 million b/d next year.

“The recent revisions are due to the easing pace of the economic recovery and recent Covid-19 containment measures, which are assumed to impact transportation and industrial fuel demand well into next year,” he said.

He noted that the crucial market rebalancing efforts are now further complicated by high stock levels, stressing that preliminary data for October shows that total OECD commercial oil stocks were 208 million barrels above the latest five-year average, compared to 13 million barrels below the five-year average in January of this year.

“Total global inventories have surged by more than 1 billion barrels since the beginning of this year. These figures would have been dramatically higher – and clearly unsustainable – had it not been for the unprecedented cooperative efforts taken to address the imbalance in fundamentals and stabilize the market.

“In April, we delivered an unprecedented response to an unparalleled market shock, by adjusting output down by 9.7 million b/d, or roughly 10 per cent global demand at the time.

“ These efforts were spearheaded by leaders of major world oil producers and further supported by the G20, in the spirit of solidarity, at the group’s Extraordinary Energy Ministerial Meeting on April 10th,” he recalled.

Barkindo announced that Since May, the production adjustments undertaken by the participating countries had helped reduce the global supply by around 1.6 billion barrels.

“The outlook for crude oil may look anaemic now, but we anticipate a gradual normalisation of demand growth as the world recovers from the Covid-19 shock. Our analysts foresee global oil demand returning to relatively robust annual growth and reaching nearly 104 million b/d by 2025.

“In the longer term, there are a number of factors that will drive consumption, such as population and economic growth, especially in developing and emerging economies. We expect the global economy to more than double from 2019 to 2045, to $258 trillion, and the population to grow by at least 20, to 9.5 billion.