The Organisation of Petroleum Exporting Countries (OPEC) has projected that despite the growing need for renewables as a source of energy, crude oil and its associated products will remain the largest contributor to the energy mix in the next 25 years.
In its annual World Oil Outlook (WOO) 2020, released by the cartel’s Secretary General, Nigeria’s Sanusi Barkindo, the international group of oil producers, said it believed oil would remain the largest contributor to the energy mix through to 2045, accounting for more than 27 per cent, followed by gas (roughly 25 per cent), and coal (nearly 20 per cent).
The organisation stated that a major economic constraint for oil-producing countries in Africa remains their high sovereign debt obligations and cost of debt servicing coupled with geo-political issues, which it said would have serious negative impact if allowed to worsen in the continent.
The report agreed with the authorities in the Nigerian oil and gas industry that natural gas will be the fastest growing fossil fuel, stressing that there will be a huge leap due to growth in urbanisation, industrial demand and the phasing out of coal in the power generation mix.
OPEC described the impact of the covid-19 pandemic faced by the industry, especially earlier in the year as “an existential threat”, saying that climate policies will continue to shape the future of energy.
It projected that worldwide oil demand was expected to increase by about 10 million barrels per day (b/d) over the long term, rising to 109 million b/d in 2040, and peaking at 109.1 million b/d around 2045.
The latest figures indicated a downward revision of over 1 million b/d when compared to the 2040 levels projected in the group’s 2019 outlook, which stood at 99.7 million b/d in 2019 published last November.
“From an energy point of view, the lockdown-induced economic recession has resulted in the sharpest downturn in energy and oil demand in living memory,” OPEC said in the report yesterday.
According to the organisation, the contribution from solar, wind and geothermal energy was expected to grow by 6.6 per cent per year on average through to 2045, faster than any other energy source.
The report further indicated that world crude demand will make a strong post-Covid-19 recovery in 2021-2023 but will peak somewhere around 2040 and 2045.
OPEC added that it expects global oil demand to rise to 103.7million b/d by 2025, up by 4 million b/d from 2019, with “relatively high” annual increments of 2.1million b/d and 1.5mn b/d in 2022 and 2023, respectively.
The cartel said its position was based on the restored economic growth, especially in the major developing countries, as well as demand catching up in the sectors hit most by the pandemic, including aviation, road transport and industry.
The forecast would suit OPEC members, including Nigeria, which will be required to fill the gap and increase their oil market share as non-OPEC supply declines in the long term. Non-Opec crude supply growth in 2019-25 will still slightly exceed global demand growth over the period, although by much less than anticipated last year.
According to OPEC, future spending in upstream oil will need to average $380 billion/yr in 2020-2045 in order to meet demand, with spending dropping by 32 per cent this year from 2019, to around $225 billion.