Despite transition, oil will remain largest source of energy by 2045, says OPEC

…’Halting $11.8tr oil-related investments will hurt everyone’

Hinging its argument on a world population that is set to expand to 9.5 billion by 2045 and huge potential for socio-economic development in terms of expanding access to modern energy services for the under-served, the Organization of the Petroleum Exporting Countries (OPEC) has said oil will retain its number one position in the energy mix, providing 28 per cent of global energy needs.

With the exception of coal which will remain stunted, the cartel stated that renewables’ global fuel share will rise over 10% by 2045, followed by gas, driven in part by higher urbanization rates, industrial demand and its competitiveness over coal in power generation.

OPEC in its latest World Oil Outlook, predicted that global oil demand will rise from a pandemic stricken 90.6 million b/d in 2020 to 108.2 million b/d in 2045, from which it will remain largely flat.

The cartel’s Secretary-General, Mohammad Sanusi Barkindo, stated that the growth in demand will be frontloaded in the first five years, when oil demand will rise 2.6 million b/d yearly, before slowing to 600,000 b/d from 2025-2030 and then 300,000 b/d from 2030-2035.

Hitherto, the Department of Petroleum Resources (DPR), had stated that irrespective of seeming opposition against its continued use, crude oil and gas would continue to remain relevant well into the future.

DPR Director, Sarki Auwalu, who allayed concerns over the future of crude oil globally, stated that the continued relevance of the resource would be due to a number of factors.

He described these factors as availability, accessibility, affordability, reliability, and efficiency, adding that this character of petroleum gives it a degree of comparative advantage over emerging energy alternatives for secured and stable energy supply.

He argued that the current apathy towards crude oil is not driven by technical and economic considerations alone. According to him, the ongoing narratives of the relative significance of each energy type and the clamour of ‘end of oil era’ is not informed by technical and economic considerations alone but by global geopolitics and the vagaries of neo-colonialism as well.

To meet market needs, Barkindo says $11.8 trillion in oil-related investments will be required through 2045, mostly in the US upstream.

If the necessary investments are not made, OPEC argued that it could have knock-on implications, as viewed in current gas developments in Europe and elsewhere around the world, leaving long-term scars, not only for producers, but consumers too.

“To place this in some further context, upstream capital expenditure fell by around 30 per cent in 2020 as a result of the impact of the pandemic, and this follows drops of 27 per cent in both 2015 and 2016.

“Let me stress that the return of investments is a core objective of the Declaration of Cooperation. The investment requirements clearly underline that any talk of the oil and gas industries being consigned to the past and of the need to halt new investments in oil and gas is wrong-headed”, Barkindo warned.

Despite an anticipated rise in the number of electric vehicles to about 500 million by 2045, representing almost 20 per cent of the global fleet by then, OPEC noted that internal combustion engine vehicles are set to retain the largest market share at over 76 per cent by 2045, with oil demand in the road transportation sector expected to stay at around a level of 46mb/d after 2025.