Oil demand will continue to rise even as the world moves to clean energy and the industry requires “huge investments” of $12.1 trillion in the period to 2045 to increase production and meet demand, according to the Organisation of the Petroleum Exporting Countries (Opec).
Demand for oil as a primary fuel is expected to increase to 101 million barrels of oil equivalent a day in 2045 from 88 million barrels of oil equivalent a day in 2021, with its share in the energy mix dropping to 29 per cent from 31 per cent during the period, the 13-member organisation said in its World Oil Outlook on Monday.
Even as the pace of oil demand growth slows “oil is set to retain the highest share in the global energy mix during the entire forecast period,” Vienna-based Opec said.
“The combined market share of oil and gas in the global primary energy mix is expected to remain above 50 per cent to 2045.”
Oil demand in China, the world’s second-largest economy and biggest importer of crude, is set to rise to 16.5 million barrels of oil equivalent a day by 2045 from 14.2 million barrels of oil equivalent a day last year led by the road transport sector and petrochemical industry, according to Opec data.
Oil demand in India, the world's third-largest crude importer, will increase to 11 million barrels of oil equivalent a day from 4.8 million barrels of oil equivalent a day last year.
The report highlights the need to increase investment in the oil and gas sector amid an anticipated increase in demand due to growing populations in a number of countries.
“Chronic underinvestment into the global oil industry in recent years, due to industry downturns, the Covid-19 pandemic, as well as policies centred on ending financing in fossil fuel projects, is a major cause of concern,” Opec secretary general Haitham Al Ghais said in the report.
The oil producers group remains “committed to investments to ensure oil supply meets demand and to further decarbonise the industry”, he said.
Member states are “making significant investments in other energies, such as renewables, nuclear, gas and hydrogen. We believe that an all-options, all-solutions and all-technologies must be utilised”, Mr Al Ghais said.
Other senior executives have also recently highlighted underinvestment in the oil and gas sector.
The energy crisis existed before “black swan events that impacted every country”, however, among the root causes of the crisis was the inability of financiers, investment institutions and many of the energy companies to invest, Khaldoon Al Mubarak, managing director and chief executive of Mubadala Investment Company, told the Future Investment Initiative in Riyadh last week.
Maintaining investment in oil and gas is critical for energy security and economic progress as current market dynamics do not reflect underlying fundamentals and long-term demand growth, Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, said at the Energy Intelligence Forum in London this month.
The global oil and gas industry requires more than $600 billion of investment annually to keep up with the growing demand for energy, even as the world transitions to cleaner forms of energy, Dr Al Jaber, who is also group chief executive of Abu Dhabi National Oil Company, said last year.
Total investment in the upstream sector of the oil and gas sector fell 23 per cent below pre-coronavirus levels to $341bn in 2021, while oil demand continued to rise globally, according to a report by the International Energy Forum (IEF) and IHS Markit last year.
“The investment challenge requires all industry stakeholders to work together to ensure a long-term investment-friendly climate, with sufficient finance available. One that is sustainable and works for both producers and consumers, and developed and developing countries,” Mr Al Ghais said.
The global population is set to rise by 1.6 billion between 2021 and 2045 to 9.5 billion led by non-OECD (Organisation for Economic Co-operation and Development) countries boosting demand for oil, according to the Opec report.
Population growth in the non-OECD region will account for more than 96 per cent of the expected total increase, with the OECD's share expected at less than 4 per cent.
The global working-age population (aged between 15 and 64) is anticipated to expand by 870 million throughout the projection period and urbanisation is forecast to expand further in the coming decades, with 66 per cent of the world’s population projected to live in cities by 2045.
Meanwhile, global gross domestic product is set to increase by 3 per cent on average annually over the period 2021—2045, largely driven by non-OECD countries, according to Opec's report.
“The medium-term economic growth dynamic will be influenced by the outcome of the Covid-19 pandemic, the inflationary trend in connection with financial tightening, and the consequences of the Russia-Ukraine conflict,” the report said. “Towards the end of the medium-term period, GDP growth will settle at 3.1 per cent.”
Within the OECD, economic growth is forecast to average 1.7 per annum while non-OECD countries are expected to expand by 3.8 per annum during the period led by China and India, the world’s top two populous countries.