“The global energy outlook, given ongoing geopolitical events, and the role for Middle East and North African suppliers in helping secure future global energy demand”

Speech delivered by HE Abdalla S. El-Badri, OPEC Secretary General, at the Gala Dinner for the 2014 Abdullah Bin Hamad Al-Attiyah International Energy Awards, Doha, Qatar, 8 April 2014

Your Excellencies, distinguished guests, ladies and gentlemen,
Good evening.

It is an honour to be here with you this evening to speak about the global energy outlook, the role for Middle East and North African suppliers in helping secure future global energy demand, as well as some of the challenges the industry faces, including recent geopolitical events.

Before I begin, however, allow me to say a few words about His Excellency, Abdullah Bin Hamad Al-Attiyah, and the awards that carry his name.

As many of you will know, my own personal acquaintance with His Excellency goes back many decades. His achievements over the years are ones to be extremely proud of.

In Qatar, he has been a driving force behind the country’s transformation into one of the world’s major energy hubs.

At OPEC too, he has played a prominent role in helping the Organization through some difficult times. He has been able to use his charm and humour to bring people together. And he has been able to broker solutions, when there has been discord.

It is appropriate then, that the Awards given tonight recognize the hard work of other people associated with the industry.

I will now turn to the first theme of my speech – our global energy future. How we view this has of course shifted over the years, but allow me to give you a brief insight into OPEC’s current views.

It is clear that world energy demand is set to grow. In OPEC’s 2013 World Oil Outlook, world energy demand rises by 52 per cent over the period between 2010 and 2035.

Renewables, from wind, solar, small hydro and geothermal, are expected to grow at over seven per cent per year, often as a result of government support and incentives. They certainly hold promise; but globally their share of the energy mix will still be less than 3 per cent by 2035, given their low initial base.

Both the share of biomass and nuclear remain at steady levels throughout the period 2010-to-2035, at around 9 per cent and 6 per cent respectively.

So it is fossil fuels that will continue to play the dominant role in meeting demand, although their overall share will fall from 82 to 80 per cent. Throughout most of this period, oil will remain the energy source with the largest share, although its overall share declines from 33 to 27 per cent. Coal’s share remains relatively stable at around 27 per cent. The share of natural gas, however, is expected to rise from 22 to 26 per cent.

Focusing specifically on oil, our projections see demand increasing by around 20 million barrels a day during the period to 2035. And there will be a big shift in the balance between the OECD area and elsewhere, leading to a steady decline in demand in all OECD regions. It will be developing countries that drive demand, with developing Asia accounting for most of the global increase.

Here, I should like to highlight an issue that many in the industry and media are talking about: the role of US tight oil in the industry’s future.

There is no doubt that this is a welcome addition. It adds depth and diversity to the market. But questions remain as how sustainable this will be in the long-term. In OPEC’s World Oil Outlook 2013, we see US tight oil, including NGLs, reaching 4.9 million barrels a day by 2018, before declining thereafter.

All this leads me into the second theme of my speech – the continuing importance of the Middle East and North Africa in helping meet future global oil and energy demand.

Over the years, the MENA region’s geographic position – and its abundant natural resources – has given it immense strategic importance. The region has been, and remains, central in keeping energy supplies moving to all corners of the world.

Clearly, the region is now perfectly-positioned for supplying this ever-expanding Asian oil and gas demand centre. And there is no doubt that the region has the resources to continue to play a major role in providing energy supplies, ensuring energy security and contributing to market stability for the foreseeable future.

The region holds around 865 billion barrels of proven crude oil reserves and 86 trillion cubic metres of proven gas reserves. This represents about 58 per cent and 43 per cent of the global totals, respectively. The majority of this is also to be found in OPEC Member Countries.

In 2012, the region produced over 31 million barrels a day of liquids and over 750 billion cubic metres of natural gas, with a significant part of this provided as export to the world.

Looking ahead, OPEC’s World Oil Outlook expects that crude and product exports from the MENA region will increase from just over 22 million barrels a day to close to 28 million barrels a day between 2012 and 2035. And, of course, as everyone here this evening knows, gas exports are expected to expand significantly too.

Taking all this into account, it is clear that the energy market outlook is a favourable one. Demand is set to increase, resources are available, and the MENA region is strategically well-placed to supply the world with energy.

However, as we all know, no-one can make precise predictions about the future. History tells us that things rarely stay the same, and the market and its stakeholders will have to evolve to ever-changing circumstances in the years ahead.

There is no doubt that the future path for the industry will be marked with many challenges and uncertainties – the third theme of this evening.

One specific challenge – and one that I have been asked to talk about– is geopolitics.

We all know geopolitical events can have an impact on the oil market and raise questions about energy security. Some people might like to try to keep geopolitical issues out of the energy business. But they are often inseparable.

Over the past few years we have seen many geopolitical events impact the oil market. These include the instability in Iraq, international sanctions on Iran, uprisings in Libya, Egypt and Tunisia, instability in parts of Nigeria, conflict in Syria, and unrest in other countries such as Yemen and Somalia.

Many of these are still with us in 2014. Of course, in the past month we witnessed unexpected developments between Russia and Ukraine.

There have been concerns that this crisis could lead to interruptions of Russian oil and gas supplies to Europe. It has also raised some questions as to whether additional supplies could be sourced from the MENA region.

However, supplies from Russia have kept flowing. And Ukraine remains a key transit country. I hope this continues. It is essential to keep energy flowing – even if political tensions exist. Energy is a global commodity. It drives our industries and businesses; it transports our people and commercial goods; and it is essential to everything we do.

I should also add that it is important that wise people in these countries work towards resolutions that are satisfactory to all parties. We need to keep the channels of communication open.

The oil market also needs to be able to have a degree of flexibility – for example, through spare capacity and stocks – to help manage the impact of such challenges. We need to work together and provide the market with some direction – and, hopefully, a certain degree of stability. And in this, OPEC continues to play a vital role.

Obviously, there are also many other uncertainties for the market to factor in and accommodate.

For example, the global economy – its health is vital to our energy future. And vice versa.

The global economic situation currently offers up a mixed picture. We continue to see an ongoing recovery in the OECD. But recent events in Ukraine, as well as a slight slowdown in a number of emerging economies, present challenges.

Other uncertainties are broad and varied. They include the potential impact of UN climate change negotiations; the role of financial markets and oil market speculation; some consuming country energy policies; a shortage of human capital; advances in technology; rising costs; and severe weather.

At present, we see the oil market as well-balanced. Yes, there are challenges. But we feel these are currently being absorbed by the market. Supply is meeting demand, and prices have been stable.

Nonetheless, we need to remain vigilant. In an industry where upstream projects are capital-intensive and long-term in nature, we need to recognize that any uncertainties can put investments in oil exploration and production projects at risk – which, in turn, can threaten future supply.

Your Excellencies, ladies and gentlemen,

This all brings me to the one word that I have uttered on many occasions since I became Secretary General. And that word is ‘stability’.

Stability is central to everything we do. It is the overarching concern that links us all.

We need stability – for investments and capacity expansion, to guarantee supply levels are adequate and sufficient, and to enable producers to respond quickly and appropriately in times of unexpected supply constraints.

We need stability – for investors and producers to realize a fair return from the exploitation of their non-renewable resource.

We need stability – for consumers to receive reliable and secure supplies.

We need stability – for the market to react and respond to future unforeseen events.

We need stability in all its forms. It helps ensure a more balanced market today, which will help provide a balanced market in the future.

This is something I am sure we can all appreciate.

Thank you for your attention.