Oil market stability will be vital to the energy transition, Opec secretary general Mohammed Barkindo said 27 January, adding that stability provides needed funding.
“Stability begets stability, and this will be essential to helping bring on board the huge investments required in the years ahead,” Barkindo said in his remarks to the S&P Global Platts Americas Petroleum and Energy Virtual Conference.
“Without the necessary investments, there is the potential for further volatility and a future energy shortfall, which is not in the interest of either producers or consumers.”
Ensuring an ample energy supply to meet the expected future energy growth is the basic challenge of the energy transition, he noted, adding that achieving the growth in a sustainable way—using carbon capture and fuel efficiency technologies, for example—that balance the needs of the people in relation to their social welfare, economy and the environment is key.
“It is vital that the required investments are made in all energies to ensure stable and continuous supplies and to help reduce and ultimately eliminate emissions.”
The return of investment is a core objective of Opec+, Barkindo said.
“Huge investments will be required across all energies. The multilateral approach of the declaration of cooperation has shown just what can be achieved by working together,” he said.
He cited Opec’s 2020 World Oil Outlook, which estimated that $12.6 trillion in spending would be required through 2045 and noted that upstream capex fell by more than 30% in 2020.
“If this is not rectified, it could leave long term scars, not only for us producers, but for consumers as well,” he said.
‘Electric vehicles do not offer a viable alternative to the internal combustion engine’
Barkindo reiterated Opec’s support of the science behind climate change and the need for renewables, while also putting forward the cartel’s view that oil and gas will continue to play primary roles in meeting future energy demands.
“There are some who believe the oil and gas industries should not be a part of the energy future, that it is one that can be dominated by renewables and electric vehicles,” he said. “It is important to state clearly that the science does not tell us this. And the statistics related to the plight of energy poverty, do not tell us this either.”
Citing the outlook, he noted that wind and solar, while expanding quickly, will make up a little more than 20% of the global energy mix by 2045. In contrast, oil and gas will supply more than 50% of the world’s energy needs. The share of electric vehicles in the total road transportation fleet is projected to expand to around 16% in 2045.
“Opec supports their development in a sustainable manner. However, for many of the world's population, electric vehicles do not offer a viable alternative to the internal combustion engine, primarily due to cost,” he said.
These numbers stand in stark contrast to the International Energy Agency's projections in its 2020 World Energy Outlook.
Oil demand in advanced economies such as the European Union will fall by nearly five million barrels per day by 2030 due to a stong policy push for electrification and efficiency improvements.
It is a reduction that is more than offset by a rise of nine million barrels per day in emerging market and developing economies. India, for example, remains the largest source of growth in oil in this coming decade, according to the IEA.
Under a more optimistic scenario for clean energy, the IEA estimates that oil demand could peak by the early 2020s and fall by a third to 66 million b/d in 2040, with road transport responsible for over 60% of the reduction.
The agency forecasts sales in electric passenger cars to rise from 2% of the market in 2019 to more than 50% in 2030, and close to 100% by 2050. The shift also is seen in trucking, with around 40% of medium- and heavy-duty trucks are forecasted to be electric by 2050.
Phasing out fossil fuels too quickly could make energy too expensive for the global poor.
"If billions of people in the developing world suffering from a lack of energy access feel they are excluded from access to energies that have helped fuel the developed world, then this could sow further divisions and expand the divide between the haves and have nots, the global North and the South," he said.
"Let me be clear: nobody should be left behind in the energy transition."