The Organisation of the Petroleum Exporting Countries, OPEC, has said only assurances on security of demand and security of investments can guarantee sustainable supply for growing global energy needs.
Speaking at a luncheon sponsored by Total E&P Limited last week in Abuja, the OPEC Secretary General, Abdullah el Badri, represented Ms mal Alawami, said, “Operators need to know there is a demand for their products. Demand and security is vital for investment planning especially in the oil industry in which investment projects are capital intensive and have long lease term
“Without enough security and without guarantee of future demand, investment in the industry will not grow. Similarly, how much operators are willing to invest will depend on this especially for the developing countries.”
In particularly, the OPEC scribe cautioned against extreme highs and extreme lows, in order to strike a balance between demand and supply, saying, “Of vital important in the search for investment is a stable and realistic oil price, one that is high enough for producers to continue to invest and low enough to support and sustain return to global economic growth.”
He argued that the recent volatility in global oil prices had affected both producers and consumers alike, adding that it has been acknowledged that factors other than fundamentals are driving prices.
Furthermore, he said that adding to the challenges in the complexity of oil demand forecast, is the fragility of the current global economic discovery. “OPEC is concerned about the consequences of the withdrawal of financial stimulus strategies around the world. Due to fall in oil prices and the global economic downturn, OPEC member countries had no choice but to suspend a number of their scheduled or planned projects.
“About 25 out of 150 projects have been stopped or delayed, however, s we observed changes in oil prices these projects were resumed. This stop gap situation was not experienced by OPEC members alone but by all other producer countries and oil companies faced similar challenges. The result has been felt throughout the industry, and we also experienced cuts in investment and budgetary plans,” he stated.
Against this backdrop, he said that OPEC is collaborating with some international organizations such as the International Energy Agency, IEA, and the International Energy Forum, IEF, “to better understand exactly how we can manage the physical market for crude oil and financial market interact as well as to examine the potential of improved regulations.”
Despite these uncertainties, which he said could jeopardise about $230billion investments, el Badri said OPEC member countries have forged ahead with new breakthroughs, such that combined capacity is now in excess of 6million bpd and expected to grow to 7million bpd by 2014.