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Lack of oil investment ‘threatens energy security’

Opec's Haitham Al Ghais told Adipec that the oil industry needs $600bn of investment a year Reuters
Opec's Haitham Al Ghais told Adipec that the oil industry needs $600bn of investment a year
  • $14trn needed up to 2045, says Opec
  • Demand set to rise by 2.3m bpd
  • Adipec runs until October 5

The lack of investment in oil and gas is a threat to global energy security, ministers and industry leaders have told the Adipec conference in Abu Dhabi. 

“At Opec, we see investments required from now to 2045 for the oil industry alone of around $14 trillion. That’s around $600 billion per year,” Opec secretary general Haitham Al Ghais said at the energy industry meeting in the UAE capital on Monday.

“This is what we need to assure energy security for Europe and the rest of the world.”

Al Ghais added that calls to stop investing in oil were counterproductive and energy security was “the cornerstone” of global economic prosperity, as crude prices head towards $100 a barrel.

Also speaking at Adipec, which runs until October 5, the UAE energy and infrastructure minister Suhail Al Mazrouei said: “We need oil for the energy transition, otherwise the consumers are going to be the losers in this game.”

While fossil fuel producers recognise the need for energy transition and decarbonising, this change cannot happen without hydrocarbons, as demand for oil is still strong, the pair said. 

Opec expects demand to rise by 2.3 million barrels per day to roughly 103 million bpd this year. This will be mainly driven by countries in Asia and the Middle East.

“We still see oil demand [being] quite resilient this year as it was last year. That’s why the investment in our industry is key while we try to decarbonise faster,” said Al Ghais. 

Investments in the oil and gas industry play a crucial role in the energy transition, Ellis Renforth, president of operations for Europe, the Middle East and Africa at engineering consultancy Wood, told AGBI.

He added that while the world is moving towards cleaner alternatives, consumers and policymakers must recognise that the industry still provides a significant portion of global energy needs.

“This ensures a reliable energy supply during the transition period and enables a more equitable shift,” Renforth said.

Opec has been warning about the risks of underinvesting in oil and gas for many years.

Climate concerns and rising interest rates – as well as pressure from governments, activists, investors and banks – have driven down investment, leading to a lack of spare capacity.

“We try to maintain spare capacity and this requires a concerted effort by all the stakeholders to see the importance of investing in this industry,” said Al Ghais.

Al Mazrouei pointed out that Opec+ had lost 4 million barrels of capacity in just three years. “Those are not going to come back because of a lack of investment,” he said.

State oil companies in the Gulf have begun to increase their investments. The UAE is ramping up its output capacity to 5 million bpd by 2027, ahead of the previous target of 2030, said Al Mazrouei. Saudi Arabia is also increasing output capacity.

The UAE, which will host the Cop28 climate summit this year, is ramping up renewables targets too

Oil giant Adnoc is doubling its carbon-capture target. It plans to capture 10 million tons of carbon dioxide emissions annually by 2030, up from a previous target of 5 million tons.

The UAE is also seeking to triple its renewables capacity by 2030. ”We wanted to give an example before Cop28. We will be even more aggressive after 2030,” said Al Mazrouei.

“We have also laid down our strategy in hydrogen. We believe in hydrogen and we believe UAE will be an exporter of hydrogen and we will be producing 1.4 million tons of hydrogen by the year 2030.”