Ladies and gentlemen,
I am honoured to stand before you here today and to carry on the great work that has been done at OPEC. The Organization has been instrumental in supporting a stable and sustainable supply of oil to the world for 62 years and I have no doubt it will continue to do so for many decades to come.
OPEC is a co-sponsor of this influential event, something of which we are very proud. We are grateful to be part of this congregation of great minds.
I want to thank Mr Nader Sultan, the Director of the Oxford Energy Seminar, for his generous invitation to speak today. Mr Sultan was one of my first bosses at the Kuwait Petroleum Company and a personal mentor. He is someone we still look up to in the Kuwaiti oil industry.
I also want to thank Dr Bassam Fattouh, the Director of the Oxford Institute for Energy Studies, who has a long history with OPEC and is often invited to give insightful presentations at OPEC events.
Among the many articles written by Dr Fattouh is a very astute paper and presentation he produced for OPEC’s 60th anniversary two years ago entitled, ‘OPEC at 60: the world with and without OPEC’.
It examines the Organization from an historical perspective over the period 1990 to 2018. His conclusion was that oil supply shocks would have been significantly larger and more persistent if OPEC had not existed.
Additionally, he found that shifts in OPEC oil output policy and the abandonment of its market balancing role would have had global welfare implications.
Ladies and gentlemen,
This seminar was given life by a huge supporter of OPEC, a distinguished academic and renowned energy expert for over four decades, the late Professor Robert Mabro. Professor Mabro was a learned founder of the Oxford Institute for Energy Studies, which he set up in 1982.
Prior to that, in 1978, he established the Oxford Energy Seminar. Today, it is an essential international energy forum that continues to attract high-calibre international energy experts, like yourselves, to discuss topical issues.
Both Professors have been beneficiaries of distinct OPEC awards: Professor Mabro was the first recipient of the OPEC Award in 2004, while Dr Fattouh received the OPEC Award for Research in 2018. The awards honour distinguished individuals who have made an outstanding contribution to knowledge of the petroleum industry and oil-related issues.
Both men also appear in articles in a 2006 OPEC-sponsored book entitled Oil in the 21st Century, edited by Professor Mabro. The book expounds at length on elements that are still critical today – dialogue, investment and sustainable development. Environment, climate change and renewable energy are also among the topics critically analyzed in the book.
Indeed, these topics have been on the agenda – and on OPEC’s radar – for a very long time. The book also sheds light on how things have progressed in 16 years. For example, it talks about the importance of the dialogues with the EU and China that were initiated at the time.
OPEC’s dialogues have intensified significantly since then and we have brought in many new dialogue partners. Besides the EU and China, regular talks now take place between various consumers and producers including Russia; India; Africa; and US independent producers.
In addition, there are regular meetings with other organizations such as the Gas Exporting Countries Forum; the International Energy Agency; the International Energy Forum; the African Energy Commission; African Petroleum Producers Organization; the International Monetary Fund/World Bank; the Vienna Energy Club; and the G20.
This does not include the extensive list of academics, researchers and analysts who are involved in OPEC dialogues. OPEC is also involved in the United Nations Framework Convention on Climate Change process and speaks at the annual Conference of the Parties (COP) sessions.
In this vein, since the adoption of OPEC’s first resolution at the inaugural Meeting of the OPEC Conference on September 14, 1960, dialogue has been front and centre.
It was this rich dialogue that helped OPEC through the Declaration of Cooperation and its non-OPEC partners rescue the oil industry from a severe downturn in 2014–2016, and once again, when the COVID-19 pandemic struck in 2020.
Ladies and gentlemen,
I have been asked to speak to you under the title: OPEC within the Global Energy Transition. This is a huge topic of the day, which I will do my best to address in the time that I have.
Humankind has seen several energy transitions over the past 200 years. Before 1800, prior to the Industrial Revolution, humans relied mainly on biomass for heat, along with muscle power for kinetic energy.
Next came the first commercial oil in 1859 in the US state of Pennsylvania. After that, in around 1930, coal usage increased, with the expansion of steam power and coal-fired plants.
Then oil demand surged around 1960 as the use of gasoline vehicles dramatically rose, and by 1970 it accounted for 40 % of global energy consumption. Finally, by 2020, fossil fuels alone accounted for nearly 80 % of the global energy mix. The increasing use of oil led to developmental leaps and bounds.
Each shift was driven by technological innovation – the steam engine, oil lamps, internal combustion engines and the wide-scale use of electricity are just a few examples.
Today’s energy transition has a different root, however. It stems from the realization that we must avoid the catastrophic effects of climate change, which requires a reduction in the release of greenhouse gases (GHG).
Ladies and gentlemen,
I think it important at this point to mention OPEC’s mission, which includes: “...to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”
Everything we do, every action we take, comes back to this one succinct statement. And, simply put, this will form the basis of how we tackle the energy transition. OPEC has proven itself over the past 62 years to be a rock solid, reliable, inclusive and active energy partner.
We will continue to maintain this focus on stability going forward.
I want to add that there is no set definition of the term ‘energy transition’. There will be many different viewpoints as to what it actually means: for developed and developing countries, for those who have access to energy, and those who currently do not.
However, what is clear is that this energy transition is unprecedented in both its speed and scale. We do not know how it will play out, but we must avoid a ‘disorderly transition’. Current volatility on the oil market is an indication that more needs to be done.
Movements by financial institutions to limit and stringently control how money is invested into fossil fuels under environmental, social and governance (ESG) constraints will exacerbate this situation. The solution we see is investment not only into renewables, but also into making fossil fuels more ‘green’.
Because one thing is clear to OPEC – all forms of energy will be needed to meet growing demand. According to our preliminary numbers for the upcoming World Oil Outlook, total primary energy demand is set to rise by a strong 23% in the period from 2021 to
2045, or 28%, if we consider 2020 as a baseline.
Although ‘other renewables’, including mainly solar, wind and geothermal energy, see the largest growth leading to a share of over 11% by this time, oil is expected to retain the largest share of the energy mix, accounting for around 29% by 2045.
Ladies and gentlemen,
Let me add here that there are no climate deniers at OPEC. We do not view renewable energies as an opponent or a threat. We embrace them. Many of our Member Countries are international leaders in renewables.
For example, new and announced hydrogen projects are taking place in five OPEC Member Countries, including in Africa with the establishment of the African Hydrogen Partnership to expand the use of hydrogen as an energy carrier. OPEC Member Countries Angola and Nigeria are partnering with the German government to develop their hydrogen potential.
OPEC Members currently have four carbon capture and storage facilities with a combined capacity of 3.3 million tonnes per annum, with more under development and announced. Nigeria will work with the World Bank to develop a domestic market for carbon capture utilization and storage.
Saudi Arabia has been directing the Saudi Green Initiative, which saw 60 initiatives announced in 2021, representing investment of 158 billion British pounds [SAR 700 billion] towards the growth of the green economy. Their vision includes development of a circular carbon economy, which has been endorsed by the G20.
The UAE is a pioneer in energy diversification, launching some of the world’s most innovative solar, wind and waste-to-energy projects. Record-breaking bids in renewable energy auctions in the UAE and Saudi Arabia have made solar power cost-competitive with conventional energy technologies.
Kuwait has massive solar and wind energy potential and the Kuwait Petroleum Corporation (KPC) recently launched solar energy initiatives to generate 1,500 MW of energy. It envisages securing 23% of oil sector energy needs from solar power in the first year of operation. Algeria is also expecting to have 1 GW of solar power available in the next year or two.
Not only do these initiatives combat climate change, they allow us to free up oil molecules that can be used for the international market.
Ladies and gentlemen,
No one is better placed to help find solutions to climate change than the oil industry. We have the know-how, the manpower and decades of experience. When we all work together, we can create a smooth energy transition and support leading innovation in eliminating greenhouse gases from all energy sources.
Finally, the energy transition is about more than decarbonization. Energy poverty is a leading tragedy in the world today. It hinders development, increases the need to burn undesirable biomass as a fuel and can increase the risk of geopolitical tension.
The eradication of energy poverty would enable the achievement of many other UN Sustainable Development Goals, including those related to climate action. About 734 million of our brothers and sisters on this planet are without access to electricity – around 77% of whom are in sub-Saharan Africa – an issue that was exacerbated by the pandemic.
Further, about 2.4 billion people lack access to clean cooking fuels and technologies. Decision-making must be done in an inclusive and fair manner. It should take into account the principles of the Paris Agreement and the United Nations Framework Convention on Climate Change, in particular those of historical responsibility and common-but-differentiated responsibilities.
Ladies and gentlemen,
My final word will be on investment. Our upcoming World Oil Outlook shows cumulative oil-related investment requirements amount to almost $12.1 trillion in the 2021–2045 period. Of this, nearly 80%, or $9.5 trillion is needed in the upstream. We are falling far, far short of this.
In recent years, we have been disheartened to hear calls from some to limit or stop funding for new oil and gas projects. However, over the past year we have been encouraged by the change in tone of many energy stakeholders and institutions that are now recognizing the critical importance of a stable and sustainable supply of oil to the world’s future energy security.
Related to this, I would point out that a recent survey by the World Energy Council shows world leaders are increasingly sceptical about a rapid transition in light of today’s global energy challenges. Such viewpoints reinforce the urgent need for enhanced global cooperation to achieve an orderly transition based on energy security, affordability and sustainability. We hope these changing attitudes will lead to more desperately needed investment in the oil industry around the world, in order to sustain energy security down the road. For how are we to meet the energy needs of tomorrow if we do not invest today? A lack of investment today in our industry could lead to catastrophic energy shortages in the future.
I want to point out here that we are already reaching critically low spare capacity, due to chronic underinvestment. This plays a huge role in the market volatility we are currently witnessing – exacerbated by geopolitical developments. We live in a world that has become increasingly energy interdependent and this will no doubt be a colossal feature of the global energy transition. It is a world that requires a balanced focus on energy affordability, energy security and reducing emissions.
Yes, there are challenges in the future. And yes, we only have one planet. We all have to do our part to conserve energy and combat climate change for the sake of future generations. The best way to do this is to support an energy transition that utilizes all energies, keeps energy affordable and abundant, and which considers the equality of all people at its core.
Thank you.