Convergence reshaping market, says Barkindo
Producer and consumer interests are unifying, which will be a welcome boost to global oil prices, according to Opec’s secretary-general
Opec secretary-general Mohammad Barkindo has been engaged in extensive bouts of shuttle diplomacy since he took over at the helm of the oil producers' organisation on 1 August-actions that may have played a role at the organisation's Algiers summit during which common ground was found between Middle Eastern rivals Saudi Arabia and Iran over the output freeze.
Speaking at the Reactions from Energy Leaders session to the presidential special addresses on 10 October, Barkindo told delegates that the "unique" market cycle has seen a convergence of views between producers and consuming countries.
"There's no longer a demarcation between consumers and producers any more-now it's net producers and net consumers, as we are all consumers and producers," said Barkindo.
This had led to a situation in which for the first time, consuming countries have been expressing genuine concern that the oil cycle had lasted longer than anticipated.
The 25 percent fall in oil sector investment seen in 2015 was an "unfortunate development that posed a threat to future supply-and to sustaining current supplies," said the Opec secretary-general.
"This industry is capital intensive and access to credit is a big challenge," he said.
"To have three consecutive years of contraction in investment is a threat to the security of supply as well as consumption."
Rovnag Abdullayev, President of Socar, Azerbaijan's state oil company, bore testimony to this.
"The biggest challenge is the low prices in oil and gas. Some companies prefer to stop investment.
"We on the other hand are implementing a different strategy despite the fact that prices were low when we undertook large projects."
Citing Shah Deniz Stage 2, a mega-project that will add a further 16 billion cubic metres per year (cm/y) of gas to the approximately 9bn cm/y produced by Shah Deniz Stage 1-for transport to the Georgia-Turkey border - Abdullayev said his company was proceeding with its project slate.
"The Tanap project is a huge investment but it's successful and we are cooperating with the Turkish government on this," he said.
"We are also working directly with the EU on $10bn worth of projects, carrying gas to Europe and Turkey."
Despite the tough market conditions, the Opec secretary-general challenged the more pessimistic WEC scenarios that by 2030 suggest demand could peak out for energy, and that by 2060 there could be stranded reserves.
"The basic fact is that if global population growth continues, demand for energy will continue to rise," said Barkindo.
"Our own estimates at Opec are projecting additional demand of 17m barrels, taking it to 120m barrels per day by 2030, [compared to WEC's 104 million]. We don't' see it plateauing-we see demand continuing to grow and see a continued underestimate of growth in the developing world."