Speech by OPEC Secretary General to the 6th OPEC International Seminar

Delivered by HE Abdalla S. El-Badri, OPEC Secretary General, at the 6th OPEC International Seminar, Session I: Global Energy Outlooks, 3 June 2015, Hofburg Palace, Vienna, Austria

Excellencies, ladies and gentlemen,
Good morning.

I would like to begin by thanking everyone here today for being part of the 6th OPEC International Seminar.  As OPEC Secretary General, it is an honour to see so many international experts attending, and to see many distinguished and high-level speakers on the agenda.  I hope you all find the 6th OPEC International Seminar an enjoyable and rewarding experience.

For this session, I would also like to extend my thanks to our Chairman, His Excellency Ali I. Naimi, for agreeing to Chair the session and for his introductions, and to my fellow panelists for agreeing to participate.
In reviewing the outlook for the global energy scene – the focus of this session – I believe there is one point that we can all agree on.

The world will need more energy in the decades ahead, as the global population expands and economies grow, and as countries seek to provide the energy poor with access to modern energy services, the global need for energy will grow.  In OPEC’s most recent World Oil Outlook, energy demand is set to increase by around 50% between 2015 and 2040.

I think that most of us here today also understand that the world has enough energy resources to meet these expected future energy needs.  The key questions about our energy future relate to deliverability and sustainability.

In this regard, it is important to take on board all of the economic, social and environmental perspectives that feed into it.

The basic challenge is twofold:

Firstly, to supply enough energy to meet demand and help provide access to modern energy services for all.

And secondly, this needs to be done in a sustainable way, balancing the needs of people in relation to their social welfare, the economy and the environment.

It is clear that all forms of energy will be needed.  But it is crucial that we appreciate just what each energy source can provide in the future.

Renewables – from wind, solar, small hydro and geothermal – certainly hold promise, but globally their share of the energy mix will still be just 4 per cent by 2040, given their low initial base.

The share of biomass, nuclear and large hydro is expected to remain at steady levels throughout the period 2015-to-2040, at around 9 per cent, 6 per cent and 2.5 per cent, respectively.

This means that fossil fuels will continue to play a dominant role in meeting energy demand, although their overall share will fall from around 82 to 78 per cent during this period.  By the 2030s, the share of oil, coal and gas are anticipated to be at similar levels, at around 25 to 27 per cent.

Others will obviously have different views on how they see the future global energy mix.  This is natural.  But I think it is important to emphasize four key words: practical, realistic, logical and equitable.

Over the past two centuries or more, much of our economic growth has been fuelled by the exploitation of fossil fuels.  This has certainly brought real benefits.  It has helped improve living standards by providing such things as light, power and mobility.  It has enabled the development of industries and the creation of jobs.  And it has helped increase life expectancies.  In short, the industrialized world has been built with fossil fuels.

However, we should not forget that this has not been the story for everyone.  When we start up our cars, switch on a light, turn on our mobile phones, we need to recognize that these everyday things are still unknown to billions of people across the world who continue to suffer from energy poverty.

Today, around 2.7 billion people or more still rely on biomass for their basic needs, and 1.3 billion have no access to electricity.  These are people that need their voices heard.  They need access to reliable, safe and secure modern energy services to live and prosper.  We all want to improve our lives.

Of course, the economics of wanting more, coupled with growing populations and rising energy demand, has created challenges that were not foreseen at the time when Thomas Edison was developing the light bulb, or when Henry Ford was mass producing the car.

I am talking here about the environment and climate change.  This is a concern for us all.

Current climate change negotiations to develop an agreement in Paris at the end of the year and raise the level of ambitions for the pre-2020 period are extremely important.  But we need to make sure the interests and concerns of all of us are taken into account.

With this in mind, I will again repeat the four words: practical, realistic, logical and equitable.

Yes, we need to continue to develop renewables.  But they cannot be seen as a replacement for fossil fuels in the coming decades.

Yes, we need to continue to use energy more efficiently.  But we need to remember that some people still have no access to modern energy services.

Yes, there are environmental concerns regarding fossil fuels.  But there are ways that these can be met and overcome.

This includes pushing for the development and use of cleaner fossil fuel technologies, such as carbon capture and storage.  At OPEC, we recognize the importance of continually looking to advance the environmental credentials of oil, both in production and use.
Overall, we need to keep in mind that the three pillars of sustainable development – ‘economic, environmental and social’ – mean different things to different people. 

What I hope to have underscored is the importance of having a clear understanding of our energy future – whether this is 5, 10 or even 20 years ahead.  As you know, there is a fine balance between stability and instability in energy markets.

Looking ahead, from the perspective of oil we see demand growing to 111 million barrels a day by 2040, an increase of around 18 million barrels a day.  This expansion will require huge investments.

It means we need to have clarity in terms of demand and, in turn, supply.

This requires an understanding of the impact of the energy and environmental policies that are already in place, and those that are proposed.
Producers and investors will obviously want to see some signs of certainty; no-one wants to waste huge amounts of capital on unused plants and equipment.  But if these signs are not forthcoming, we could find that there is not enough new capacity and infrastructure in place to meet rising demand levels.

And for oil producers, it is important to recognize that they cannot standstill.  They need to think about an affordable, balanced and sustainable future.
Yes, oil is part of this future, but diversity is essential.   They need to look for alternative sources of income.  And they need to develop other sources of energy, particularly when many have distinct advantages in terms of solar and wind.

Clearly, there are also a number of other uncertainties and challenges facing the industry.  We are all obviously aware of the current market situation.  It is essential that stability returns to the market, to allow for the necessary investments to be made to meet future energy demand.  This is something OPEC always strives for, and it is in the interests of all parties.

In addition, there are other factors to consider: the uncertain prospects for the global economy; ongoing concerns about excessive speculation and the role of financial markets; the impact of geopolitics; potential manpower shortages in the years ahead; and advances in technology and their impacts on exploration and production.  And many new factors may be just around the corner.  There are always unknowns.

As an industry, there are many challenges and uncertainties we can face together.
We appreciate the continued dialogue we see between producers and consumers.  It is essential to have a producer-consumer environment that is conducive to reaching constructive end results.

We also welcome recent OPEC and non-OPEC discussions.  I have read many reports that suggest OPEC is targeting specific non-OPEC countries or producers with its decisions.  This is not true.  We welcome all energies.  We welcome all producers.

In the current market environment, I think we can all appreciate that the challenge of maintaining the supply-demand balance and reaching price stability requires the cooperation of major non-OPEC producers.  We should remember what cooperation between OPEC and non-OPEC producers achieved back in the 1998-1999 crisis.

Excellencies, ladies and gentlemen,

While none of us can plot the exact path of our energy future, I think we can all agree that our shared objective must be a stable and sustainable energy future for all.

Feeding into this are issues related to social welfare, economics and the environment; the views of developed and developing countries; those who have access to modern energy services and those who do not; and the need for all of us to be practical, realistic, logical and equitable when thinking and planning our global energy future.

Thank you for your attention.

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