Barkindo: Oil demand outlook command $11.8 trn investment

Sopuruchi Onwuka

The need to bridge supply gaps emerging from medium to long term energy demand outlook requires significant $11.8 trillion petroleum industry investment in building capacity for production of additional 77 million barrels of oil equivalent (mboe) in the next 23 years.

Secretary General of the Organization of Petroleum Exporting Countries (OPEC), HE Dr Mohammed Barkindo, declared at the 2022 Nigerian International Energy Summit that bridging the projected oil and gas supply gaps requires operating models that must address the three key challenges of emission control, enhanced energy access to the underserved and supply sustainability.

Dr Barkindo explained that some 80 percent or $9.2 trillion of the total investments outlook would be required in the upstream petroleum industry while the midstream and downstream sectors would need $1.1 trillion and $1.5 trillion in related investments respectively.

He pointed out that the call for massive investments amplifies the growing role of the petroleum industry in meeting global energy demand in the medium to long term.

The Oracle Today reports that environmental concerns and associated climate action by governments, activists and lending agencies drained investments in the petroleum industry, leading to the prevailing supply concerns and consequent surge in oil and gas prices.

Dr Barkindo made it clear that oil and gas would continue to dominate global energy mix in the foreseeable future despite the prevailing hype about energy transition.

He made it clear that the investment requirements reassert the continuing relevance of petroleum in the emerging global energy order, adding that deliberate moves to halt new investments in oil and gas are misguided.

He warned that playing the ostrich about future petroleum demand would have severe consequences on the global economy.   

Dr Barkindo told ministerial delegates and industry captains at the conference that global energy demand would jump from 275 million barrels of oil equivalent a day (mboe/d) in 2020 to 352 mboe/d by 2045, pointing out that petroleum would take significant portion of the demand pie.

The volume of expected increase in global oil and gas demand, The Oracle Today reports, would translate to doubling the total output capacity of the Organization of Petroleum Exporting Countries (OPEC).

The expected energy demand surge, according to Dr Barkindo, would arise from rising global population, consequent urbanization and massive growth in the global economy within the outlook period.

He said the global economy would be more than double its size from $125 trillion 2020 to almost $270 trillion by 2045 based on 2017 purchasing power parity (2017 ppp). He added that global population would increase by 20 percent to hit 9.5 billion.

Dr Barkindo declared that all sources of energy would be required to service the demand surge that would arise from simultaneous growth in world population, urbanization and economic growth. And while acknowledging the rising supply from the renewable energy industry, he maintained that petroleum would still account for cumulative 78 percent of total energy demand in the period.

“Clearly, multiple sources of energy are required to meet this rise in demand. Oil (and gas) is forecast to remain the fuel with the largest share of the global energy mix until 2045,” he stated, adding that significant contribution expected from the renewable energy industry would be far insufficient to displace fossil fuels.

According to the OPEC scribe, the contribution of oil in the global energy mix is expected to fall from 30 percent in 2020 to 28 percent in 2045; and gas is expected to boost petroleum share of the energy mix to 50 percent in the period.

Renewable energy combining mainly solar, wind and geothermal energy, according to Dr Barkindo, is “fastest growing energy source with its share in the global primary energy mix. This means renewables’ share of the energy mix is projected to rise from 2.5 per cent in 2020 to 10 per cent in 2045.”

That growth in renewable translates to rising from 6.8 mboe/d in 2020 to close to 36.6 mboe/d in 2045.

“Any shortfall could have severe consequences, particularly if supply falls and demand does not. We could see crude oil and product shortages, all of which would have an impact on the global economy,” Dr Barkindo warned.

In swinging to energy advocacy, Dr Barkindo called for equitable energy demand distributions that would cater for the needs and peculiarities of different sections of the global community in a sustainable manner.

He argued that climate action should not be driven in a manner that would deny poor nations of the world their basic rights to energy, noting that Sub-Saharan Africa which contributes less that 3 percent of global emissions currently suffers access to energy.

He noted that staggering 759 million people worldwide did not have access to electricity in 2019, adding that 75 percent of the number is in sub-Saharan Africa. He also stated that about 2.6 billion people or 34 per cent of the global population do not have access to clean cooking fuels and technologies. The number, according to him, includes 70 per cent of Africans still exposed high levels of household air pollution.

“As an industry, we must approach these critical issues together through dialogue and cooperation, ensuring that all voices are heard and all viewpoints are considered. In this manner, we can reinvent the industry to allow it to fit with a just, equitable and fair energy transition, where no one is left behind.” Dr Barkindo stated.

“In order to not render countries already struggling even more besieged, it is necessary to carefully consider the adverse socio-economic impacts on these countries due to mitigation activities, in order to identify remediation measures and share best practices,” he said.

“We need to ensure energy is accessible and affordable for all; we need to transition to a more inclusive, fair and equitable world in which every person has access to energy as referenced in UN Sustainable Development Goal Seven (SDG7).

“The challenge of tackling emissions has many paths, as evidenced by the Intergovernmental Panel on Climate Change, the United Nations Framework Convention of Climate Change (UNFCCC) and the Paris Agreement. It is not just one path for all, whether that be a country or an industry,” he added.

“The capacities and national circumstances of developing countries must be taken into account in all actions.

He also emphasized the need for responsible operations and application of technology in growing oil production while suppressing emissions.

He said investing in technologies such as blue hydrogen could position Africa as net exporter of new energy. He pointed out that Carbon Capture Utilisation and Storage (CCUS), while harnessing the ‘reduce, reuse, recycle and remove’ carbon principles were all critical paths towards a sustainable society in Africa.

”These principles will not only minimize the environmental impacts of Green House Gas (GHG) emissions, but also contribute to achieving socioeconomic development and prosperity,” he said.