Barkindo: Stable oil market paramount for meeting growing demand
Oil is here to stay, and will hold one of the biggest roles in the energy mix at least until 2040, OPEC Secretary General Mohammad Barkindo said during an international symposium in The Netherlands on Tuesday.
Barkindo, heading the much talked about Organization of the Petroleum Exporting Countries, spoke at the 25th Lustrum of the Delft Mining Association MV (“Mijnbouwkundige Vereeniging”), where the main theme was Energy Transition, the world with a growing natural resource demand.
The OPEC Secretary General used the opportunity to reiterate some of the highlights of the OPEC’s recent World Oil Outlook. Peak oil demand will not happen anytime soon, at least not until 2040, the last year the OPEC document provides a forecast for.
“I couldn’t think of a more timely and relevant theme for our industry and indeed for OPEC, as we have just released out 2017 World Oil Outlook. The publication provides a comprehensive overview of medium to long-term forecast to 2040 oil and gas industry,” Barkindo said in his speech.
“It is important to understand that oil and gas will continue to play a major role in the world’s energy mix for the foreseeable future.”
“It is important to understand that oil and gas will continue to play a major role in the world’s energy mix for the foreseeable future, contributing 52 percent of the global energy mix by 2040.“
He said that energy demand would grow by 35 percent, with long-term oil demand surpassing for the first time in history one hundred million barrels a day just in 2020, to reach a level of more than 111 million barrels a day by 2040.
While the theme “Energy Transition” is generally perceived as the transition from fossil fuels to renewables, Barkindo said that this, for some, also means energy access.
Barkindo said that 1.2 billion people have no access “to what we take for granted in other parts of the world – electricity,” and that more than two billion people have no access to commercial energy, either for heating or cooking.”
It is this world, the developing world, that will drive the rising demand for oil, according to the OPEC Secretary General.
“The majority of this rising demand will come from developing countries, to reach 67 million barrels a day by 2040,” Barkindo said.
The OPEC Secretary General warned of the oil industry struggles in the past few years, when the oil price fell by 80 percent at one point, the worst downcycle of all the previous downcycles in the industry.
“It had a severe effect on the industry. Budgets were depleted, E&P spending was reduced by 27 percent in 2015 and 2016. Nearly one trillion in investments were frozen or discontinued,“ Barkindo said, highlighting the importance of the stability of oil prices for meeting the rapidly rising world oil demand.
On the point of oil prices, our reporter asked Barkindo about his expectations of OPEC’s upcoming meeting in Vienna, on November 30. The member countries will be discussing the possible extension to oil production cuts agreed upon in December last year with several non-OPEC nations.
“This anniversary will mark another milestone in our global efforts with our non-OPEC friends to restore stability for the global oil market,” Barkindo on OPEC’s next meeting
Barkindo said: “Next week will be the first anniversary of the historic declaration of cooperation that was entered into on the third of December 2016 in Vienna.”
“For the first time, the industry witnessed 24 producing countries both in OPEC and outside OPEC coming together voluntarily to jointly take action in order to restore stability to the global oil market, which had been lost since the summer of 2014.
“For the last 11 months we have been actively focused on the implementation of this historic declaration of cooperation with great success, I may say,” he said.
It has been widely reported and expected that OPEC will indeed extend the output cuts to further boost oil prices which have seen some gain in recent weeks, with Brent trading at more than $60 a barrel, up from the lowest of just over $28 a barrel in January 2016.
When asked whether he expected to see the agreement extended for another year, Barkindo responded diplomatically: “This anniversary will mark another milestone in our global efforts with our non-OPEC friends to restore stability for the global oil market.”
Vladimir Putin, President of Russia, the country leading the non-OPEC block, in his recent speech showed similar diplomacy. He didn’t confirm the deal would be extended, but neither did he rule it out.
He even went on to say that, should the cuts be extended, it would be at least until the end of 2018.
A recent statement by Saudi Arabia’s Crown Prince Mohammed bin Salman also gives reason to believe that the extension is almost certain.
He said: “The Kingdom affirms its readiness to extend the production cut agreement, which proved its feasibility by rebalancing supply and demand.”
Watch this space to learn whether we will indeed see another extension after the original agreement expires in March 2018.
25th Lustrum Delft Mining Association MV
Barkindo was the key note speaker at the Symposium “Energy transition, the world with a growing natural resource demand” organized by the Dutch Mining Association in celebration of its 125thanniversary in Delft on 21 November 2017. For Barkindo it was a special occasion, as he had participated as delegate in the same symposium thirty years ago, when the late Dr Lukman, then Minister of Petroleum Resources and later OPEC President and OPEC Secretary General, was the key note speaker.
The organization – a student association based in Delft, The Netherlands, for all BSc students Applied Earth Sciences and MSc and PhD students Resource Engineering, Geo-Engineering, Petroleum Engineering & Geosciences, Applied Geophysics and Geoscience & Remote Sensing – made a deliberate choice to ask Secretary General Barkindo as their key note speaker for a symposium on energy transition.
Wout Lohle, BSc-student Applied Earth Sciences, who is on the symposium committee: “The Applied Earth Sciences study program has a lot to do with the energy sector. With global population growth, comes growing energy demand. Today we want to discuss whether current sources including fossil fuels can satisfy this ever-growing demand and what room there is for innovation and alternative resources.”
“As part of the Applied Earth Sciences program, students are taught to find creative solutions to complex problems. We want to challenge students and alumni gathered here in Delft to think about the discussed challenges from a multidisciplinary perspective, looking also at geopolitical issues, demand for rare materials and sustainability,”said Lohle.