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20th WPC |
From OPEC's perspective, our thoughts on the
global oil scene are set out in the annual World Oil Outlook, with the
most recent version published last month.
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Speech by OPEC Secretary General, HE Abdalla S. El-Badri, to the 20th World
Petroleum Congress, Plenary 6: Producer-Consumer Dialogue: Expectations and
Deliverables, Doha, Qatar, 7 December 2011.
I would like to begin by thanking the organizers, the World Petroleum
Council, for the invitation to speak at this 20th World Petroleum Congress.
It gives me great pleasure to be part of such an important event; and one
taking place in Qatar, an OPEC Member Country.
I am also happy to share a platform for the first time with my fellow
speaker, the Executive Director of the IEA, (Her Excellency) Maria van der
Hoeven. We have already met and spoken on a number of occasions and I feel
our relationship is a very positive one.
Given today's topic - 'producer - consumer dialogue: expectations and
deliverables' - let me stress upfront that OPEC has long recognized the
value of adopting a cooperative approach to addressing major topical issues.
Today, it is clear the importance of dialogue between all stakeholders has
never been greater in our increasingly interdependent world. And the
heartbeat of this world is the global energy system.
It is a global, complex and ever expanding system; one that is finely
balanced and where stability must be the mantra.
With the global energy system expected to grow significantly in the coming
decades, the importance of advancing our understanding of each other has
never been so crucial.
It is essential we better appreciate each other's viewpoints; are realistic
in our targets and goals; and are more pragmatic in our discussions.
From OPEC's perspective, our thoughts on the global oil scene are set out in
the annual World Oil Outlook, with the most recent version published last
month.
In the Reference Case for this year's Outlook, energy demand increases by
more than 50% over the period 2010-to-2035.
Fossil fuels, currently accounting for 87% of the world's energy supply,
will still contribute 82% of the global total by 2035. For most of the
period to 2035, oil will remain the energy type with the largest share,
although its overall share will fall from 34% to 28%. It will remain key to
growth in the transportation sector. Coal's overall share remains similar to
today, at around 29%, whereas gas sees its share increase from 23% to 25%.
In terms of non-fossil fuels, renewable energy will grow fast, but since
this starts from a low base its share is still only 3% by 2035. Hydropower
increases a little, to 3% by 2035. Nuclear power also witnesses some
expansion, although prospects for nuclear have clearly been affected by
events in Fukushima. It is at 6% in 2035.
There are also plenty of resources to meet these growth patterns. For oil,
conventional and non-conventional resources are clearly plentiful for the
foreseeable future.
As in the past, technological advances will continue to extend the reach of
the industry, reduce costs and unlock additional resources. This can be
viewed in the recent developments for both shale gas and shale oil,
particularly in the US, although there is also potential for these resources
globally.
From the oil demand perspective, the central driver for medium-term
prospects is the global economy. Given the current economic landscape, there
are clearly many uncertainties as to how this might play out in the coming
years.
What will be the outcome of Europe's sovereign debt crisis?
How will the US tackle its slowing growth?
And what will be the impact of China's and India's moves to combat
overheating and inflation?
Looking to the long-term, other important drivers come in to play: policies,
technologies, demographics and consumer preferences. In our Reference Case,
demand increases by close to 23 mb/d over the period 2010-2035, reaching
almost 110 mb/d by 2035. Fully 80% of the increase in global demand is in
developing Asia.
However, oil use per capita in the OECD will remain much higher than in
developing countries. By 2035, oil use per head in developing countries will
average just three barrels, compared to close to 12 barrels for the OECD.
As with the medium-term, however, it is important to stress that there are a
number of uncertainties that could mean this demand figure is significantly
higher or lower.
Of particular concern to producing countries are the policies of a number of
consuming countries. Obviously, every country has the sovereign right to set
its own policies, but it is essential that these provide a clear picture as
to their impact on future oil consumption levels and overall energy supply
and demand patterns. They need to be feasible, predictable and sustainable.
And they should not discriminate against oil.
Turning to oil supply, over the long-term there will be increases in
conventional oil supply from the Caspian, Brazil, and of course OPEC, as
well as steady increases in non-conventional oil. Total non-OPEC supply in
the Reference Case increases around 8 mb/d over the period 2010-to-2035.
OPEC crude supply rises throughout this timeframe, increasing by 10 mb/d, to
reach just over 39 mb/d by 2035. And OPEC NGLs also rise strongly.
The World Oil Outlook also underlines the Organization's commitment to
sufficient and secure crude oil supplies. It shows that Member Countries
currently have around 132 upstream projects on the table for the five-year
period 2011-2015.
This could translate into an investment figure of close to $300 billion
should all projects be realized. Taking into account all OPEC liquids the
net increase is estimated to be close to 7 mb/d above 2011 levels.
As I have already alluded to, however, these investment decisions and
timings are influenced by many factors, such as the global economic
situation, policies and the price of oil. There are therefore genuine
concerns over security of demand.
I would also like to take the opportunity to briefly explore the current oil
market situation. This year has seen the oil market in a constant state of
flux: the ups and downs of the global economic recovery; Japan's multiple
disaster; unrest in parts of North Africa and the Middle East. What has been
apparent, however, is that there has been no shortage of oil anywhere in the
world.
Libya's shortfall earlier this year was met by other OPEC Member Countries.
And Libya is now quickly returning its production and export capacity to the
market.
Spare capacity has been, and remains at comfortable levels. And the
investments I have just outlined will see these comfortable levels increase
in the coming years.
In terms of prices, I think the average price level for this year is
satisfactory for both producers and consumers.
It is at a level that allows producers to invest to meet future demand, and
at the same time, it does not impede the global economic recovery.
For prices, however, speculative activities remain an issue in the current
market.
This can be viewed in the respective sizes of the paper and physical
markets. Since 2005, there has been a sharp increase in the number of open
interest futures and options contracts. At times it has surpassed three
million contracts per day, equivalent to 3 bln b/d. This is 35 times the
size of actual world oil demand.
It should also be noted that between 2009 and 2011, data shows an almost
one-to-one correlation between WTI prices and the speculative activity of
the net long positions of money managers. This is in terms of both volume
and value.
Let me stress, excessive speculation is detrimental to both producers and
consumers and can cause prices to detach from fundamentals. It is essential
to avoid distorting the essential price discovery function of the market.
From this brief review of the energy scene, as well as the oil market, I
think we can all appreciate the benefits of dialogue and cooperation. We
need to continually evolve our understanding of each other.
In addition, we also need to recognize that there are other specific
challenges for the industry's stakeholders, as well as for world leaders, in
the years ahead.
I am sure many of us here are keeping a close eye on the current
negotiations at the UN Climate Conference in Durban. OPEC recognizes the
importance of being part of these negotiations to develop solutions that
safeguard the legitimate interests of all Parties.
It is essential that these multilateral negotiations reach an agreement that
is comprehensive, balanced, fair and equitable; one that respects all the
principles and provisions of the United Nations Framework Climate Change
Convention and its Kyoto Protocol.
I welcome this year's World Petroleum Congress theme: 'Energy Solutions for
All: Promoting Cooperation, Innovation and Investment'. It is essential
everyone has access to reliable and sustainable modern energy services.
We need to remember that 1.4 billion people have no access to electricity
and some 2.7 billion rely on biomass for their basic needs.
Sustainable development is a high priority agenda for OPEC Member Countries,
all developing nations. It is also the main objective of the assistance they
provide to other developing countries, directly through their own aid
institutions, as well as through the OPEC Fund for International
Development, which is an active participant in the UN Initiative of
'Sustainable Energy for All'.
Energy poverty needs the urgent and critical attention of world leaders.
Rio+20 next year is a great opportunity in this regard.
Another ongoing challenge relates to excessive market volatility and the
continuing trend towards oil acting as a heavily traded financial asset, an
issue I touched upon earlier.
There is a need for a better understanding of the effects of excessive
market volatility and the role of speculation. In fact, only last week,
OPEC, along with the IEA and the International Energy Forum (IEF), organized
a workshop in Vienna that examined the issues surrounding the interactions
between physical and financial energy markets.
We should also not forget the human resource. With strong competition from
other sectors for skilled staff and many in our industry approaching
retirement, there is a need to address the difficulties in finding and
hiring labour at the global level. This means concerted efforts to restore
this essential capacity, by facilitating education and training in energy
disciplines, and making the industry an attractive career choice.
What I hope I have underlined here are some of the key issues we need to
talk about and cooperate on; both as part of the industry's
producer-consumer dialogue, and at the broader global and multilateral
level.
Cooperation between OPEC and the IEA goes back many years and has advanced
considerably in recent times. OPEC sees the dialogue between the two as an
important element in improving the understanding of the concerns of all
parties for oil market stability and predictability. I am sure my fellow
panelist will agree when I say: long may this positive cooperation continue.
Over the last year or so, and as part of the Cancun Ministerial Declaration
from the IEF Meeting in April 2010, the two organizations, along with the
IEF, have held a number of workshops on financial markets, energy regulation
and in January this year, the three organizations held the first annual
Symposium on Energy Outlooks in Riyadh. The latter event provided a platform
for sharing insights and exchanging views about energy trends and
uncertainties, as well as short-, medium- and long-term energy outlooks.
In February next year, OPEC and the IEA will also hold a joint workshop on
the use of CO2 for enhanced oil recovery in Kuwait. I think both of our
organizations view this as a potential 'win-win' approach. OPEC also
participates in the IEA Greenhouse Gas Emissions Reduction Programme.
Elsewhere, OPEC actively participates in the IEF's Joint Oil Data Initiative
set up to enhance the transparency, quality, timeliness and flows of oil
market data.
We continue to maintain a strong and positive relationship with the European
Union, with our 8th Ministerial-level meeting taking place in June this
year. Workshops and roundtables with the EU have covered such topics as
carbon capture and storage; the impact of the economic crisis on oil
investment; and, technological advances in the road transportation sector.
OPEC, alongside the World Bank, the OECD and the IEA, has also been heavily
involved in collaborative work related to the G-20 Energy Agenda. Ongoing
work streams include energy subsidies, a study on price reporting agencies
and the Global Marine Environment Protection Initiative.
And we have also furthered dialogue with other non-OPEC producers and
various UN bodies.
So what of the future of the producer-consumer dialogue? Obviously, I do not
have a crystal ball, but I do feel I can leave you with a few thoughts.
I cannot stand here and say that we will find agreement on everything. We
don't live in a perfect world. It is important, however, for producers and
consumers to find common ground. And with this in mind:
We need to look for shared solutions, where and when appropriate.
We need to have a producer-consumer environment that is conducive to
reaching constructive end results.
And we need input from each and every stakeholder.
At OPEC, we believe in continuing to develop existing and new avenues of
cooperation with innovative thinking, collaboration and swift action on key
issues, many of which are complex, broad and inter-related.
Our shared objective must be a stable and sustainable energy future in an
increasingly interdependent world. |
