HOUSTON — Only several months into the agreement between OPEC and 11 non-OPEC countries to cut production by 1.8 MMbopd, OPEC Secretary General Mohammad Sanusi Barkindo has urged other producers to join in the effort.
“We should not close this broad platform,” said Barkindo during remarks at the 2017 CERAWeek conference on Tuesday, in Houston. “Others are welcome to join, because in our view, for the first time, we are turning a historic page in oil, that if solidified, has a potential to maintain stability, not only for the short term, but the medium-to-long term.”
Barkindo did not exclude U.S. shale producers. He said the shale revolution was welcome initially, because the world had lost production, caused by instability in Libya and Nigeria, as well as sanctions on Iran. “Without the shale revolution, probably the global economy would have been in deep crisis,” he said. “We only wish that it was done in an orderly fashion, without triggering this severe cycle that we are still battling to come out of.”
Short-term production cuts are needed to stimulate lower oil prices, and to encourage increased E&P spending, to meet long-term energy demand, he said. OPEC estimates rising demand of about 17 MMbopd from now until 2040, and it will take about $10 trillion in E&P investments to meet such demand growth, said Barkindo. “We have just lost about three years of required investments, and therefore, it is incumbent on industry, including the financial industry that funds our activities, to gear up to maintain a sustainable level of investment going forward.” He noted that OPEC will be meeting on March 26 in Kuwait, to review the agreed-upon production cuts.
IEA Executive Director Fatih Birol echoed Barkindo’s sentiments on the need for increased investment. “Investments need to be made and must not be delayed,” Birol said. “We don’t see a peak in oil demand. Maybe growth is slowing down, but we don’t see a peak.”
While the IEA predicts a second wave of shale oil growth over the next five years, he said this will not be enough to satisfy a possible “strong supply gap” in the future, due to projected long-term energy demand growth. “Even that is not enough to make the IEA feel that we should be relaxed in the next two to three years,” Birol remarked. “We may well face serious challenges in 2019, 2020 and beyond.”