A steady flow of industry investment into the oil and gas sector is crucial to meet rising energy requirements, says Opec secretary general Mohammad Barkindo.
“Oil and gas will continue to play an important role in world energy supply in the medium to long term and meeting these rising energy requirements will be dependent on a steady flow of industry investment,” Mr Barkindo said at a workshop organised by the International Energy Agency, the International Energy Forum and the Organisation of Petroleum Exporting Countries on Thursday.
Investment is also “essential to advancing innovation and technology that will be instrumental in further improving the environmental footprint and reducing emissions”, he said.
The virtual workshop was co-chaired by Mr Barkindo, along with Joseph McMonigle, IEF secretary general, and Keisuke Sadamori, director of the office for energy markets and security at the IEA.
Energy prices are surging due to limited investments in the hydrocarbons and infrastructure sector, as well as low inventories amid a rise in demand globally, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told the CeraWeek India Energy Forum on Wednesday.
Analysts including top US economist Nouriel Roubini expect oil prices to touch $100 per barrel by the end of this year due to a lack of investments in the energy sector as the world focuses on transitioning to clean energy in a bid to cut emissions.
“It is exactly these types of close collaboration that we will need to see more of in the weeks and months ahead as this industry continues to rise to the challenge of adapting to the paradigm shifts that are currently taking place,” Mr Barkindo added.
There is little over a week until the highly-anticipated United Nations Climate Change Conference (COP26) in Glasgow and investment would be one of the deciding issues for the industry in the years ahead, the Opec secretary general said.
Global demand is rebounding after the Covid-19 pandemic but private sector investment is yet to respond adequately, Mr McMonigle said. This could lead to price fluctuations that will impact market stability and derail a sustainable and inclusive recovery from the pandemic, he added.
The world is not investing enough to meet its future energy needs, Mr Sadamori said. Transition-related spending has gradually picked up, but remains far short of what is required to meet rising demand for energy services in a sustainable way, he added.
The amount currently spent on oil appears to be geared towards a world of stagnant or falling demand. A surge in spending on clean energy transitions provides the way forward, but this needs to happen quickly or global energy markets are likely to be volatile for years to come, according to Mr Sadamori.
“An effective and orderly transition will be critical – not only to reach international climate targets but also to prevent serious supply disruptions and destabilising price volatility along the way,” Mr Sadamori added.
The joint workshop is one part of the trilateral work programme established by the three agencies and endorsed by energy ministers at the 12th International Energy Forum in Mexico in March 2010.
The three organisers will convene for the next joint workshop next year.