In Oil & Companies News 18/10/2016
The global oil industry needs an astronomic investment injection over the next two decades or risk jeopardizing it’s ability to meet future oil demand, the Organization of the Petroleum Exporting Countries warned on Tuesday.
Speaking at the “Oil & Money” conference in London, the cartel’s Secretary-General Mohammed Barkindo said the recent oil crash has already taken a serious toll on investments, particularly the exploration-and-production sector, and poses a “serious threat” to both producers and consumers.
“It affects all of us,” he said. “Hence the need to restore balance in this market and to restore investments on a sustainable basis.”
“According to our world oil outlook report that will be officially released next month in Abu Dhabi, we estimate that by 2040 this industry will need in the region of $10 trillion dollars of investment in order to sustain production as well as supply,” he added.
The slump in oil prices since the summer of 2014 has dramatically hampered money flowing into the industry, both when it comes to current production and finding new fields for future supply. Barkindo said investments which dropped 26% in 2015, are projected to slide 22% this year and are forecast to continue to contract in 2017.
If the contraction continues, “then the global community—not only the industry—should really take this seriously and join hands in order to ensure the much needed security of supply going forward,” the OPEC chief said.
Fatih Birol, executive director at the International Energy Agency, agreed. He said supply each year drops by 2 million barrels a day, removing the equivalent of Iraq’s entire production from the global oil market every two years. That means the industry won’t be able to meet the expected rise in energy demand in the coming years, even if demand surprises to the downside, he explained.
Birol pointed out that both the number of oil discoveries and new oil projects are at historic lows. “And this will have implications in the next years to come and therefore it’s something we all need to bear in mind. It’s a major issue we all need to monitor very closely,” he said.
Last month, OPEC agreed on a preliminary deal to curb oil production in a bid to boost the flagging oil prices and spur future investments. Industry observers, however, have started to doubt the cartel’s ability to hammer out an effective agreement to create an oil output ceiling at its closely watched meeting on Nov. 30 in Vienna.
Barkindo ensured, however, that the 14 OPEC members as well as non-OPEC producer Russia will have worked out all the details in time to implement a freeze, and possibly a cut, to output at the coming meeting.
“This correction, this cycle, has really taking too long for most participants and most stakeholders. And therefore it’s time for us at OPEC together with our friends from non-OPEC in a coordinated fashion to take some action,” he said.
Source: MarketWatch
