Opening speech by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the Launch of the 2019 OPEC World Oil Outlook (WOO 2019), 5 November 2019, Wiener Börsensäle, Vienna, Austria.

[SLIDE 1]

Distinguished guests, ladies and gentlemen,

Good morning.

It gives OPEC great pleasure to launch this year’s World Oil Outlook at the Börsensäle – the old Vienna Stock Exchange – here in the Secretariat’s home city of Vienna.

This beautiful Neo-Renaissance masterpiece, which was completed in 1877, has oceans of marble, acres of stucco, forests of columns and no end of space.  It is a truly stunning piece of architecture, and just a short stroll across the road for us at the OPEC Secretariat!

We are extremely lucky to call Vienna our home; a city full of music, literature, arts and culture.

[SLIDE 2]

I would also like to welcome such a distinguished gathering here for this event, and to particularly thank my good friend, Rainer Seele, CEO of Austrian oil and gas company OMV, who just delivered some thoughtful and motivating remarks, and his excellent team for being part of our launch today.  

We greatly value your support of this launch.  OPEC’s relationship with OMV, not only here in Vienna, but in many of our Member Countries is a significant one.  We hope it continues to blossom in the years and decades to come.

It is also a great pleasure to welcome HE Yury Sentyurin, Secretary General of the Gas Exporting Countries Forum (GECF), who has been central to helping evolve the productive relationship between OPEC and the GECF over the past few years.  This was evident most recently in October 2019, when our two organizations signed a Memorandum of Understanding (MoU) to strengthen cooperation in research and the sharing of best practices.

I would also like to thank our moderator for today’s launch, the genial John Defterios from CNN.  We always appreciate John’s views and insights, and we look forward to him guiding us through this morning’s programme.

[SLIDE 3]

Distinguished guests, ladies and gentlemen,

This year’s World Oil Outlook is the 13^th edition; it has come a long way since it was first launched back in 2007.  

It has more than doubled in size adding both depth and breadth; it has greatly expanded its data sharing and analysis; and it now has an online interactive version, first launched in 2015, as well as a smart app that gives increased access to the publication's vital analysis and energy data.  To put it simply, it has enabled the Organization to become more open and transparent. 

Its evolution is testament to the tremendous work undertaken by the research, editorial and design teams at the OPEC Secretariat.  Without them, we would not have the high-class publication that we present to you today.  The Organization is enormously proud of their efforts.

What I should stress, however, is that one thing has not changed.  In the first edition back in 2007, it was emphasized that the Outlook was meant to contribute to the Organization’s commitment to support sustainable market stability and to provide a platform from which to review, analyze and evaluate how the oil and energy scene may develop.

This key guiding principle remains central to the Outlook.

The issue of sustainable market stability, as well as helping return balance to the market, can also be seen clearly in the success of the ‘Declaration of Cooperation’ between 24 OPEC and non-OPEC producers, as well as in the July 2019 endorsement of the ‘Charter of Cooperation’, which provides a longer-term institutional framework for this landmark cooperation.

Turning to the World Oil Outlook 2019, the publication underlines the increasingly complex nature of the oil industry, both in the upstream and downstream; the continued energy 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 all face.  These include such issues as policies, technology developments, energy poverty, climate change and sustainable development.

Allow me now to provide you with a number of key takeaways from this year’s publication, before we have a panel discussion and a Q&A with management and analysts from OPEC’s Research Division.

[SLIDE 4]

Total primary energy demand is set to expand by a robust 25% between 2018 and 2040.  This will be driven by expansion in the global economy, which in 2040 is expected to be double the size it was in 2018, and population growth, which is projected to reach around 9.2 billion in 2040, an increase of around 1.5 billion from today’s level.

Moreover, we also need to remember that close to one billion people still have no access to electricity and almost three billion people still lack access to clean energy fuels.  It is a universal obligation to address the major challenge of energy poverty. 

Energy is a central facet that links our daily lives; it is not on call, it cannot take a holiday, it cannot call in sick. Energy is a 24-hour service. 

[SLIDE 5]

It is also clear that all forms of energy will be required to help meeting this expanding demand in a sustainable way, balancing the needs of people in relation to their social well-being, the economy and the environment.

Renewables are coming of age, and are forecast to witness the largest growth in percentage terms, but even by 2040 all renewables combined are only estimated to make up around 19% of the global energy mix.

Natural gas experiences the largest demand growth, the share of coal drops the most, and oil is expected to remain the fuel with the largest share in the energy mix throughout the forecast period to 2040.

We appreciate that some will view this as an OPEC forecast, and dispute the numbers.

Firstly, let me say that many OPEC Member Countries have great sources of solar and wind, and we are seeing huge investments being made in this field.  We fully support the development of renewables.  

And secondly, we do not see any reputable publication projecting, in their reference outlooks, that renewables will come anywhere close to overtaking oil and gas in the decades ahead.

[SLIDE 6]

Oil demand is forecast to reach 110.6 million barrels a day (mb/d) by 2040.  The non-OECD drives oil demand with expected growth of 21.4 mb/d by 2040, compared to 2018, whereas the OECD region is estimated to contract by 9.6 mb/d.

Long-term oil demand growth comes mainly from petrochemicals at 4.1 mb/d, road transportation at 2.9 mb/d and aviation at 2.4 mb/d.

[SLIDE 7]

In the road transportation sector, which will remain by far the largest sector for oil demand, the total vehicle fleet – including passenger and commercial vehicles – is estimated to grow by more than 1 billion to around 2.4 billion vehicles on the road by 2040.

It is also noticeable that the long-term share of electric vehicles in the total fleet is projected to reach a level of around 13% in 2040, supported by falling battery costs and incentivizing policies, but the majority of the growth continues to be for conventional vehicles.

One key point to underline from the Outlook is that in the period to 2040, fuel efficiency improvements are expected to result in a greater reduction in oil demand, than the increasing penetration of alternative fuel vehicles.

[SLIDE 8]

On the supply side, non-OPEC liquids supply is projected to grow by 9.9 mb/d between 2018 and 2024.  The majority is forecast to come from US tight oil, but Brazil, Norway, Canada, Guyana and Kazakhstan are also expected to contribute to this increase.

From the mid-2020s, however, non-OPEC sees a steady decline, with US total liquids supply set to peak around this time.  It underscores that it is OPEC Member Countries that will be required to meet the majority of the longer-term demand requirements.

Demand for OPEC liquids is projected to increase to around 44.4 mb/d in 2040, up from 36.6 mb/d in 2018.

[SLIDE 9]

From the perspective of the downstream, crude distillation capacity additions of around 8 mb/d are expected between 2019 and 2024, with over 70% in the Asia-Pacific and the Middle East. 

It should be noted that this is close to 50% of the expected total capacity additions of 16.5 mb/d required in the long-term to 2040.  This points to the potential for significant excess refining capacity in the medium-term period.

In terms of trade, global crude oil and condensate trade is estimated to remain relatively static at around 38 mb/d between 2018 and 2025, before increasing to around 42 mb/d by 2040.

Two trends are worth highlighting in this regard.  The first is that in the medium-term the US & Canada, as one region, is expected to increase crude and condensate exports, on the back of growth in tight oil production.

The second is that over the entire forecast period, the major oil trade route remains the Middle East to the Asia-Pacific. Total Middle East exports are set to increase by around 7 mb/d between 2025 and 2040 to reach around 23 mb/d.

[SLIDE 10]

The scale of what lies ahead is brought home by the investment requirements.  Oil-related investments across the upstream, midstream and downstream are estimated at around $10.6 trillion in the period to 2040.

From OPEC’s perspective, we fully identify with the fact that the foundation for investment, growth and economic diversification can only come through balance and stability in the market.

In this regard, OPEC Member Countries remain fully committed to investments across the whole industry value chain, and the issue of returning global investments is a core focus of the ‘Declaration of Cooperation’.

[SLIDE 11]

This year’s Outlook also reviews a plethora of technology innovations, policy issues and energy matters related to sustainable development.

A key focus is on the Paris Agreement, which OPEC is fully engaged with and supportive of.  All 14 OPEC Member Countries have signed the Paris Agreement and ten have ratified it.

The Outlook highlights that energy-exporting developing countries are likely to be disproportionately affected by the impacts of climate response measures related to possible economic diversification options.  It is vital that there is an enhancement of the understanding of the measures’ impacts and a proper treatment of their implications.

It also emphasizes the importance of economic diversification efforts as an approach to mitigate risk arising from the implementation of climate response measures, although there is no one-size-fits-all prescription for these efforts.

What is also evident is the importance of technologies in reducing emissions.  We need to look for more efficient technological solutions everywhere, across all available energies, and utilize all available and innovative options to reduce emissions from the energy sector.  We should not limit ourselves by putting all our eggs in one basket.

As Bob Dudley, CEO of BP, said at the Oil & Money conference in London recently; when tackling emissions there needs “to be recognition that … there are many paths and we need to pursue them all.”

At OPEC, we recognize the complexity of the challenge.  Complex problems require comprehensive solutions. The oil industry has to be part of the solution; it possesses critical resources and expertise that can help unlock our emissions-free future and ensure there is enough supply to meet expected future demand growth.

[SLIDE 12]

It is also important to stress that the World Oil Outlook is not about making predictions.  We believe that the Outlook should be viewed as a tool of reference to stimulate informed discussion and debate among industry stakeholders, which we hope will lead to a better understanding of the future of the industry, and, hence, allow us to develop optimal strategies.  

It is vital that we all continue to listen and learn.  It was the legendary Henry Ford who once said:

“Anyone who stops learning is old, whether at twenty or eighty.  Anyone who keeps learning stays young.  The greatest thing in life is to keep your mind young.”

We hope this publication not only proves insightful, but also keeps you young too!

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.

[SLIDE 13]

What I can say is that OPEC, and I am sure the entire oil and gas industry, welcomes dialogue with all stakeholders; and welcomes action too.

It is therefore my distinct honour and privilege to launch the OPEC WOO 2019.

Thank you for your attention.