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Energy ministers of the UAE and Saudi Arabia have called for increased investment in the industry and collective action as oil prices continued to trade higher amid supply concerns due to Russia’s invasion of Ukraine.
They issued a warning that a lack of timely investment could lead to supply being unable to meet energy demand.
“When demand recovers fully, we could see a potential shortage, if we don’t invest," Suhail Al Mazrouei, UAE Minister of Energy and Infrastructure, told the World Utilities Congress in Abu Dhabi on Tuesday.
"We are seeing some investments come back in US and others, these are good signs.”
He said the UAE was continuing to invest and there was no "huge shortage" in the market currently.
Spending in the oil and gas industry took a hit from the Covid-19 pandemic and due to governments' efforts to transition to cleaner forms of energy in a bid to cut harmful emissions.
Total investment in the upstream part of the oil and gas sector fell 23 per cent below pre-coronavirus levels to $341bn in 2021, according to the International Energy Forum and IHS Markit.
Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology, and managing director and group chief executive of Adnoc, has also highlighted the importance of increasing investment in oil and gas to overcome supply shortages.
The sector needs $600 billion of investment until 2030 to keep pace with rising demand, Dr Al Jaber said.
Oil and gas will account for more than 50 per cent of the global energy mix by 2045 and will continue to play an important role, even as the world pivots towards cleaner forms of energy, Opec's secretary general Mohammed Barkindo said in March. Opec countries produce about 40 per cent of the world's crude oil.
Mr Al Mazrouei said the Opec group, which includes the world’s top oil producers Saudi Arabia and Russia, among others, has been playing an important role in stabilising markets and boosting supply in line with demand.
He said: “We are the central bank of oil that’s why we didn’t see a 200 or 300 per cent increase and because we have that regulatory body that monitors and invests.”
“We meet [on a] monthly basis, we look at every aspect that affects demand … we are doing much more to cover our share in the area of supply. We are taking the burden … we’ve been transparent.”
Brent, the global benchmark for two thirds of the world's oil, is up more than 30 per cent since the start of this year after falling from a 14-year high, when it reached almost $140 per barrel in March on the back of Russia’s invasion of Ukraine.
Brent was down 1.84 per cent at $103.99 per barrel at 2.24pm UAE time on Tuesday. West Texas Intermediate, the gauge that tracks US crude, was trading 1.69 per cent lower at $101.35 a barrel.
Prince Abdulaziz bin Salman, Saudi Arabia’s Energy Minister, also said dwindling capacity in the energy sector was a concern.
“The world needs to wake up to an existing reality," he said. "The world is running out of energy capacity at all levels.”
The kingdom, Opec’s biggest producer, is boosting production capacity as well as refining to cater to global demand, he said.
Opec, which meets every month to assess the market, would not allow geopolitics to affect its decisions, the Saudi Arabian energy minister said.
“We keep out politics outside the building of Opec," he said. "We leave politics out of Opec+.”
The group of oil producers, which achieved a historic reduction of 9.7 million barrels per day between May 2020 and July last year, is unwinding cuts due to improving demand. It is adding 400,000bpd to the market every month, which will increase to 432,000bpd for May and June.