Investments in oil and gas need to increase in coming years or markets will face continued shocks because of scarcity of supply and energy inequality, according to the secretary-general of Opec.
While Opec welcomes efforts to decarbonize energy sectors, a hasty shift away from fossil fuels is likely to have "unintended consequences" on global markets, secretary-general Mohammed Barkindo said today at the 23rd annual World Petroleum Congress in Houston, Texas.
"The challenges before us are enormous and we have seen recently that the strain and conflict related to energy affordability, energy security and the need to reduce emissions require a delicate balancing act," Barkindo said. "[We need] comprehensive and sustainable solutions, and with all voices heard and listened to."
"Focusing on only one of these issues while ignoring the others can lead unintended consequences, such as market distortions, item price volatility, and energy shortfalls."
Rising calls to cut investments in oil and gas are front of mind for many energy stakeholders in 2021, as environmental groups and national decarbonization plans increase pressure on producers, refiners and investment banks to shift expenditures into renewable business lines. In late October, more than 730 institutional investors around the world called on governments to mandate climate risk disclosure ahead of the COP26 climate summit in Glasgow in November, where parties ultimately made strides toward the phase-out of coal and fossil fuel subsidies.
But worldwide investments in oil and gas have been on the decline since hitting $700bn in 2014 and further declines could jeopardize international energy security as global populations, worldwide living standards and energy demand rise in coming decades, Barkindo said.
"If the necessary investments are not met, it could have knock-on implications and leave long-term scars — particularly for security of supply — affecting not only producers but consumers too," said Barkindo, who is scheduled to relinquish his position as secretary-general in the summer of next year after serving successive three-year terms.
Coalition kumbaya
While tension between the US and the Opec+ coalition was highlighted in recent months by repeated calls from President Joe Biden's administration for Opec+ to raise supply, the secretary-general struck a collaborative tone in his remarks today. The leadership of the US at the COP26 summit in Glasgow this November was a welcome sight, and further unity will be necessary to avoid the kind of discord roiling energy markets in recent months, Barkindo said.
"The current energy market turmoil seen across the world in recent months is perhaps an insight into some of the issues we are dealing with and what can occur if we do not see the bigger picture and the interwoven complexities," Barkindo said. "We need to asses all impacts of the energy security trilemma."
"Our energy future is not about 'them' or 'us,' it has to be about 'we.'"
The Opec+ group recently decided to press ahead with a planned 400,000 b/d production increase next month while leaving room for production adjustments ahead of its next meeting scheduled for 4 January.
Renewable reassessment
The secretary-general today echoed a speech delivered by Saudi Aramco chief executive Amin Nassir at the World Petroleum Congress on 6 December by sharing skepticism over the environmental friendliness and viability of current renewable technologies.
"For oil and gas, there are some who believe that these industries should not be part of the energy future, that they should be consigned to the dustbin of history, and that the future is one that can be dominated by renewables and electric vehicles (EVs) only," Barkindo said. "It is important to state clearly that the science does not tell us this."
While the Opec coalition forecasts that EVs will comprise around 20pc of the total world transport fleet by 2045, there are still issues with their practicability and decarbonization potential, Barkindo said.
Higher prices for EVs make them an unsuitable alternative to internal combustion engines for much of the world's population, while concerns over the environmental emissions stemming from metals mining and electricity sourcing also offset some green benefits arising from widespread adoption, he argued.
Nasser similarly said on 6 December that low-carbon technologies are "in no way near ready" to carry the load in coming years, arguing for wider support for the build-out of hydrogen and carbon capture infrastructure.
