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As the global demand for oil grows, so does the demand for substantial investment upstream, according to leaders of the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
Responding to an inquiry from CERAWeek by IHS Markit Chairman Dr. Daniel Yergin about how quickly oil markets are rebalancing following a recent dip in pricing, Fatih Birol, executive director of International Energy Agency (IEA), referred to reports released in early March that said the IEA sees no peak in oil demand.
"Oil demand is growing," Birol said, addressing delegates to CERAWeek by IHS Markit. "We are witnessing the second wave of shale oil growth, but even that is not enough to make the IEA feel that we should be relaxing in the next two or three years despite the strong supply, because investment is still lacking.
"If I can underline one keyword here, it is investment for the upstream. Lack of investments, I think, is the nerve center of the debates we have in the oil markets. We may well see the impact of lack of investments in terms of the tightening of markets around 2030 and beyond."
While OPEC battles short-term possibilities "for obvious reasons because of the disadvantage this cycle," His Excellency Mohammad Sanusi Barkindo, secretary general of OPEC, said OPEC continues to focus on investments in the long term.
"We postulate that the industry would need an estimated whopping amount of about $10 trillion in U.S. dollars in order to meet this rise in demand of about 17 million barrels a day of oil through 2040," Barkindo said. "We already have two to three years of required investments. Therefore, it is incumbent on the industry -- and when I say the industry, included is the financial industry that funds our activities -- to catch up in order to maintain a sustainable level of the required investment going forward."
Birol said the IEA is advocating for investments in the upstream to be made without delay.
"This is the main message: Invest, invest and invest," he stressed.
Birol noted Asian trucks alone are responsible for one-third of the global demand growth.
"We barely have any substitutes for oil products there," he continued. "That is why we believe that even though the automotive sector may go through a transformation -- and the pace of transformation is a very big discussion there -- we will still see global oil demand growth."
Renewables, emissions and shale gas
Birol believes one of the most important discussions relating to climate change is the desire of many countries to reduce their emissions, citing numerous renewables and energy efficiency programs.
"Renewables are growing very strongly across the world, mainly focusing on electricity generation," he said, adding that in 2016, the renewable capacity increase in power generation was higher than coal, oil, gas and nuclear put together, accounting for more than 50 percent of the capacity growth.
"It is not anymore a rich man's fuel," Birol said.
Regarding emissions, Birol said the single largest drop in carbon dioxide emissions in the world occurred in the United States (according to a special report released in 2011 by the IEA titled, "Are We Entering a Golden Age of Gas?"), with shale gas replacing coal in electricity generation.
"I believe after this growth of shale gas in the United States -- with the new administration addressing pipelines and debottlenecking, and putting the Iraq policies for industry, making life easier for the industry -- we may well see the growth of shale gas in the United States -- maybe much bigger than we all thought," Birol said.
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