OPEC: Global Spending on Oil Production Fell by $300bn in Two Years

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Chineme Okafor in Abuja

The Organisation of Petroleum Exporting Countries has said that between 2015 and 2016, the global oil and gas industry witnessed a sharp contraction in its overall investment in exploration and production, mainly on account of the market imbalance witnessed within these periods.

OPEC’s Secretary General, Dr. Sanusi Barkindo stated recently at the 2017 International Petroleum Week in London that within these years, spending on oil and gas exploration and production fell by around 26 and 22 per cent, totaling about $300 billion.

Barkindo explained that the industry cannot afford to take in any more drop in investment for the third consecutive year, adding that it was necessary to stabilise the market going forward because oil would remain top on the world’s energy choice for a long time.

“The gravity of the sharp contraction in oil industry investment is underscored in the fact that in both 2015 and 2016 we witnessed a dramatic rationalisation of projects.

“Global oil and gas exploration and production spending fell by around 26 per cent in 2015 and a further 22 per cent drop in 2016. Combined, this equates to above $300 billion.

“This has impacted new projects coming on-stream and new discoveries too. To put it simply, the industry cannot afford to see investment levels fall for a third year in a row. Stability today is also vital for stability in the future, given that the oil industry is very much a medium-to-long-term business,” said Barkindo.

He stated that since the oil industry was a growth business, OPEC anticipates that the world would require more oil in the years ahead, and as such oil related investments worth $10 trillion would be required between now and 2040.
According to him, oil will remain a fuel of choice for the foreseeable future.

“We see the world requiring more oil in the years ahead. Oil will remain a fuel of choice for the foreseeable future. In OPEC’s latest World Oil Outlook, oil is still expected to supply over 26 per cent of the world’s energy demand by 2040. Oil demand increased by around 17mb/d between 2015 and 2040 to reach close to 110mb/d. This will require significant investments. And new barrels are needed to not only increase production, but also to accommodate for decline rates from existing fields. Overall, we see oil-related investment requirements of around $10 trillion over the period to 2040,” he explained.

He also said that the industry needed regular, timely and sustainable investment to guarantee security of supply to the world.

He noted that in the long-term, OPEC will be required to meet much of the expected additional demand for oil in the world, and that member countries were committed to making new investments despite the recent downturn in prices.

“In terms of crude, OPEC’s supply is estimated to increase to 41mb/d by 2040, an increase of around 9mb/d from 2016, while non-OPEC is anticipated to witness an overall decline of 2mb/d. In terms of all liquids, the increase for OPEC is close to 12mb/d from 2016, and for non-OPEC there is growth of about 3mb/d. It means that the estimated share of OPEC crude in the total world liquids supply in 2040 is 37 per cent, which is three percentage points higher than the 2015 level. To meet its obligations as a secure and reliable supplier of oil to world markets, OPEC member countries remain committed to investing in new capacity and necessary infrastructure, despite the downturn we have witnessed in the last couple of years,” Barkindo added.