Opening Remarks by OPEC Secretary General
Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General at the launch of OPEC's World Oil Outlook 2016, ADIPEC, Abu Dhabi, UAE, 8 November 2016.
Excellencies, ladies and gentlemen,
It gives OPEC great pleasure to launch this year’s World Oil Outlook at the Abu Dhabi International Petroleum Exhibition and Conference. This is the first time we have unveiled the publication outside of the OPEC Secretariat in Vienna, and we are extremely pleased to be here in an OPEC Member Country, the United Arab Emirates, for the 2016 launch.
This year’s World Oil Outlook is the tenth edition, a significant milestone for the publication. In the first edition back in 2007 it was emphasized that the Outlook was meant to contribute to the Organization’s commitment to support market stability and to provide a platform from which to review, analyze and evaluate various scenarios as to how the oil and energy scene may develop.
This guiding principle has remained central to the Outlook over the past decade, as the publication has evolved and expanded its research and analysis. Today, the Outlook also has an online interactive version, first launched in 2015, that enables users to download specific data and information that lies behind the analysis and commentary.
I should also like to highlight that yesterday we released the first-ever Annual Statistical Bulletin (ASB) Smart App, which is a joint development by IT experts from OPEC and the UAE Ministry of Energy. This app will make the ASB’s content of international oil and gas data available from any mobile device, at any time, on any day, from anywhere.
These recent developments are prime examples of OPEC’s support for data sharing and transparency.
Turning to the World Oil Outlook 2016, the publication underlines the increasingly complex nature of the oil industry, both in the upstream and downstream; the market adjustments that have been taking place since the price drop that began in mid-2014; the continued interdependence of all nations; how security of supply and security of demand are very much interlinked; and the need to better understand the market drivers, challenges, uncertainties, as well as opportunities, we face. These include such issues as policies, technology developments, the shifting energy mix, energy poverty and sustainable development concerns.
Allow me here to provide you with a number of key takeaways from this year’s publication, before our research team at the OPEC Secretariat present you with some more in-depth commentary.
Since the publication of the 2015 edition in December last year, the oil market has shown some signs that fundamentals are rebalancing. However, high inventory levels continue to be a major concern.
The need to accelerate the drawdown of the stock overhang and bring the market rebalancing forward were at the heart of the landmark 'Algiers Accord' taken by OPEC at the 170th (Extraordinary) Meeting of the OPEC Conference at the end of September.
Let me stress that OPEC Member Countries remain fully committed to implementing the 'Algiers Accord'. Our consultations will continue in the coming weeks, and this includes with non-OPEC nations. It is essential that all producers, both OPEC and non-OPEC, take coordinated action to help return sustainable stability to the market.
This is not only vital for the short-term, but the long-term too, as our industry looks to fund investment in new exploration and production, arrest decline rates in existing fields, expand midstream and downstream capacity, and hire, train and support the people that will continue to drive this industry forward in the years ahead.
The impact of the current industry cycle on investments has been unmistakeable in both 2015 and 2016. While global spending on exploration and production by oil and gas producers is expected to fall slightly less this year, when compared to 2015, the combined amount over the two years equates to a loss of more than $300 billion. Looking ahead, this will likely impact not only new projects coming onstream, but new discoveries too.
Here, I should like to stress the continued commitment of OPEC Member Countries to invest in existing and new production capacity so as to ensure they meet the future requirements of consumers in a timely and sustainable manner.
From the perspective of the future energy mix, renewables will continue to see the fastest growth, albeit from a low base. Fossil fuels are expected to see their share in the energy mix fall from 81 per cent to 77 per cent by 2040. Nonetheless, oil and gas combined are still anticipated to account for 53 per cent of the energy needs in 2040, similar to current levels. It is clear that oil will continue to be a fuel of choice for many years to come.
Oil demand is estimated to reach over 109 million barrels of oil a day by 2040, a healthy increase of over 16 million barrels a day. The main driver of this growth is the road transportation sector in developing countries.
On the supply side, non-OPEC sees a recovery in the medium-term, but then plateaus, before declining post-2030. It means that in the long-term it is OPEC that will be required to meet much of the expected additional demand. The estimated share of OPEC crude in the total world liquids supply in 2040 is 37 per cent, which is three percentage points higher than the 2015 level.
Turning briefly to the downstream, key points include the expectation for new refining capacity to follow future oil demand growth to developing regions. And for the crude trade flows between the Middle East and the Asia-Pacific to make up almost 50 per cent of global oil trade movements by 2040.
This year’s Outlook also devotes a specific chapter to the Paris Climate Agreement from last year’s COP 21 meeting, which entered into force on November the 4th. I should like to congratulate the UAE as one of the countries that has already ratified it.
From the perspective of OPEC, we welcome this agreement. Our Member Countries played a role in drafting the agreement, and they will also play a role in its implementation, based on the convention principle of ‘common but differentiated responsibilities’ and respective capabilities.
However, I should like to make reference to the fact that the Paris Agreement has reduced Annex 1 nations to voluntary contributions, and somewhat blurred the previous distinct classification between developed and developing countries.
In this regard, it is important to note that the Paris Agreement also calls for 'equity' for all Parties. Each country should be allowed to develop in a sustainable manner, with a focus on the principle of 'common but differentiated responsibilities'. It is critical to ensure that less-developed countries and future generations have equitable access to development opportunities.
The Outlook provides some analysis of the intended policy measures related to the Paris Agreement, underlines the uncertainties around its implementation and highlights its possible impact on the energy mix through a number of scenarios.
Excellencies, ladies and gentlemen,
The World Oil Outlook is not about making predictions. We believe that the Outlook should be viewed as a tool of reference to stimulate discussion and debate among industry stakeholders, which we hope will lead to a better understanding of the future of the industry. It is clear that the sharing of viewpoints is critical to our industry’s future, not only in the short-term, but in the medium- and long-term too.
We believe that this publication evidently demonstrates this – it is not only the result of close collaboration and coordination between the Secretariat and our Member Countries, but also a sign of OPEC’s ongoing commitment to dialogue as a means to help secure a sound and stable oil industry.
In closing, I would like to offer some thanks.
Thank you to the Government of the UAE, its Energy Ministry, as well as the organizers of ADIPEC, who have provided us with the platform to launch the World Oil Outlook 2016.
Thank you to the many dedicated and professional staff at the OPEC Secretariat that have worked on the Outlook. The fruits of their labour can undoubtedly be seen here in the publication we are launching today. And, of course, in the joint venture Annual Statistical Bulletin (ASB) Smart App, in conjunction with the UAE Ministry of Energy.
And a thank you to everyone here that is in attendance. We appreciate you listening, and we welcome the anticipated robust questions, as well as the expected constructive critique of the WOO that I am sure will stimulate our discussions.
Thank you for your attention.