OPEC secretary general His Excellency Mohammad Sanusi Barkindo calls for renewed investment in the oil and gas industry, to meet the energy, transport, manufacturing and food requirements of tomorrow
Imagine that tomorrow there were no more oil in the world. Daily life would be disrupted in a multitude of ways. Essential services people depend on would vanish. Transportation would grind to a halt. Imperilled energy security has ramifications for political stability, the global economy and sustainable development.
Perhaps most ominously of all, the world’s food supply would be upended. The supply chain that delivers food to our tables relies heavily on hydrocarbons. Oil and gas are used in large quantities at all stages of food production, from the manufacture of fertilisers and pesticides to planting, irrigation and harvesting, as well as processing, packaging and distribution. Agricultural equipment depends on oil – not just tractors but also the machinery used for processing and shipping. The agricultural sector consumes around 2.5 million barrels per day of petroleum products. Food security and energy security are clearly interdependent. The same holds true for the pharmaceutical, electronics and plastics industries as well as many others.
This underscores the gravity of any future oil supply disruptions.
In this regard, it is important to keep in mind that the oil industry is both capital and investment intensive. It also continues to grow. According to our flagship publication World Oil Outlook 2018, oil demand is expected to reach almost 112 mb/d in 2040. Moreover, with natural decline rates averaging around 5% per year, the industry needs to add between four and five million barrels per day of new production each year just to maintain current levels. All told, an estimated $11 trillion in investment is needed in the oil industry to 2040.
Naturally, investors are adverse to volatility, as was made clear during the oil market downturn from 2014 to 2016. Investment waned, with spending in exploration and production falling by 27% in both 2015 and 2016. Nearly $1 trillion in investment was suspended or cancelled outright.
To attract the level of investment needed to meet the needs of tomorrow, markets need to be stable. This has been at the forefront of our thinking of the 24 OPEC and non-OPEC producing countries that have helped revive the fortunes of the oil industry through the Declaration of Cooperation. By working tirelessly towards sustainable oil market stability, the partners have also contributed to the global economic recovery seen over the past two years.
Oil market stability benefits both producers and consumers. It also has positive multiplier effects for global economic growth, job creation, food security and many other areas. Therefore, I hope the leaders gathering in Osaka for the G20 summit consider the importance of oil market stability in their discussions. Some policies, although well intentioned, can have unintended consequences by deterring essential investment into the oil industry.
OPEC is also acutely aware of the climate change challenge. We remain fully supportive of the Paris Agreement. Indeed, we firmly believe that a global consensus from the multilateral process remains the best and most inclusive way for all nations to collectively counter climate change in a fair and equitable manner.
No single energy source is a panacea for global warming. Reducing carbon emissions requires all-inclusive policies that do not discriminate in content or implementation. The oil industry plays a part in reducing emissions: working practices and fuel efficiency standards have improved exponentially over the decades and will continue to improve.
We must focus on technological innovation that allows us to reduce carbon emissions. I encourage all stakeholders to support advancement of carbon capture and storage, including direct air capture.
The private sector, civil society and governments must unite on the objectives of carbon removal, and utilise and advance such technologies. Working together, we can seek to address both the challenges of attracting sufficient levels of investment while reducing our environmental footprint. We can fulfil our responsibilities to future generations, ensuring both energy and food security.