By Festus Okoromadu
A report by the US-based International Energy Agency (IEA) has warned of potential upheavals in the global crude oil market between this year and 2020.
The report specifically hinted of a potential supply gap in the early 2020s.
In its flagship publication, World Energy Outlook (WEO) 2018, which was released yesterday, IEA alerted that the oil markets were entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s.
The report said that the global energy market will undergo major transformations ranging from growing electrification to the expansion of renewables, upheavals in oil production and globalisation of natural gas markets.
Appraising the role of governments, the report said that policy choices made by the authorities would determine the shape of the energy system of the future, adding that such decisions would have a critical influence in the direction of the world’s energy system.
The WEO analysis added that under current and planned policies, modelled in the New Policies Scenario, energy demand will grow by more than 25 per cent to 2040, thereby requiring more than $2 trillion a year of investment in new energy supply.
Commenting on the report, IEA’s executive director, Dr. Fatih Birol, said: “Our analysis shows that over 70 per cent of global energy investments will be government-driven and as such the message is clear – the world’s energy destiny lies with government decisions.
“Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centres, and expanding basic access to energy in Africa and elsewhere,” he said.
IEA said that its analysis showed oil consumption growing in coming decades, due to rising petrochemicals, trucking and aviation demand. It however remarked that meeting this growth in the near term means approvals of conventional oil projects need to double from their current low levels.
The agency warned that without such a pick-up in investment, US shale production, which has been expanding at record pace, would have to add more than 10 million barrels daily from today to 2025, the equivalent of adding Russia’s quota to global supply in seven years – which would be an unprecedented feat.
In the power markets, the report said that renewables have become the technology of choice, making up almost two-thirds of global capacity additions to 2040, thanks to falling costs and supportive government policies.
The report observed that the move was transforming the global power mix, with the share of renewables in generation rising to over 40 per cent by 2040, from 25 per cent now, even though coal remains the largest source and gas remains the second-largest.
With higher variability in supplies, power systems would need to make flexibility the cornerstone of future electricity markets in order to keep the lights on, the report emphasised.
The issue is of growing urgency as countries around the world are quickly ramping up their share of solar PV and wind, and would require market reforms, grid investments, as well as improving demand-response technologies, such as smart meters and battery storage technologies.
“Electricity markets are also undergoing a unique transformation with higher demand brought by the digital economy, electric vehicles and other technological change,” the report said.
… OPEC Assures Nigeria, Others Of Market Stability
Meanwhile, the secretary-general of the Organisation of the Petroleum Exporting Countries (OPEC), Dr. Mohammed Sanusi Barkindo, has assured Nigeria and the global oil community that OPEC would do all it takes to sustain the “relative stability” currently witnessed in the global energy market.
Barkindo gave the assurance at the opening ceremony of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) on Monday.
He said that the assurance on sustainable stability was necessary in the wake of emerging uncertainties in world energy demand, the resurgence of non-OPEC supplies as well as international geopolitics.
The Nigerian-born OPEC scribe said that the global energy market needs stability on sustainable basis. As we approach 2019, I am happy to assure the industry and the global community that the partnership between us and non-OPEC countries, now numbering an unprecedented 25 producing nations, has come to stay.
“What we are discussing now is the mechanics of the marriage. But all I can say now is that I am confident and hopeful that we will continue to jointly sustain this stability going forward,” the OPEC scribe added.
Meanwhile, the group managing director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, participated in a panel discussion yesterday.
A statement from the corporation said Dr. Baru joined other global CEOs to discuss “creating forward-thinking strategies, supporting upstream operations and market diversification,” where he will share NNPC’s drive to join the world in delivering future energy needs in line with anticipated global demand and population growth.
ADIPEC is an annual global oil and gas event attended by over 110,000 oil and gas professionals from across the world and where latest innovations and technologies in the global industry are showcased.
Now in its 21st edition, this year’s conference was opened by the United Arab Emirate (UAE) president, Sheikh Khalifa Bin Zayed Al Nahyan, with the theme: “Shaping the future of the world’s oil and gas industry.”