Oil is not in a hurry to bury – Newspaper Kommersant No. 203 (7404) dated 11/01/2022

Global energy demand will continue to grow at a strong pace, with the oil industry facing risks of underinvestment, according to OPEC’s annual review of the oil market until 2045, released on Monday. The authors of the report expect that China, India and other developing countries will fuel demand until 2035, after which energy consumption will reach a “plateau”. Russian production is expected to decline by 3.8% over this period.

Global energy supply must increase by 2.7 million barrels per day (b/d) of oil equivalent through 2045 to meet rising energy demand, says annual long-term OPEC forecast. At the same time, oil production capacity must increase by 5 million b/d per year just to keep the supply at the level of 100 million b/d. Such growth, however, requires a “massive investment,” the organization notes, estimating a total investment of $12.1 trillion through 2045.

The authors of the report emphasize that “the ongoing underinvestment of the industry, including against the backdrop of falling prices, a pandemic and a policy of abandoning fossil fuels, is of significant concern.”

OPEC also notes that in the face of uncertainty, in addition to reducing emissions, the importance of security and availability of supplies is again growing.

The forecast provides for an increase in the world’s population to 9.5 billion people by 2045 (from the current 7.9 billion) and an increase in global GDP by 3% per year, which will lead to a doubling of the size of the global economy to $ 270 trillion (calculated at purchasing power parity for 2017 year). By this time, China and India will account for 37% of global GDP, the share of developed countries will be 34%. The forecast, however, is quite conservative in assessing the prospects for the introduction of electric cars (their share by 2045 should be 22%) – OPEC expects that internal combustion engines will remain the “dominant technology” in the forecast horizon for both personal and commercial vehicles, and in aviation. In maritime transport and power generation, the share of gas as an energy source will increase, and renewable energy sources will primarily contribute to the replacement of coal, the report says.

Total energy demand is expected to rise from 286 million b/d of oil equivalent to 351 million b/d (by 23%), exclusively from developing countries, with India alone accounting for 28% of new consumption.

Of the 69 million b/d of the expected increase in demand, 31 million b/d will be met by wind and solar generation (the share of renewable sources will increase from 2.6% to 10.9%), 19 million b/d by natural gas ( the share will grow from 23.2% to 24.2%), while demand for oil will increase by 12 million barrels per day (its share in the energy balance will decrease from 30.9% to 28.7%), and for coal it will decrease by 16 .5 million b/d (its share will fall from 26.1% to 16.6%). The total share of oil and gas, as expected by OPEC, will still exceed 50% of world generation by 2045.

Describing the trajectory of demand, OPEC assumes its growth to 107 million b/d by 2027, which is 10 million b/d more than in 2021. After 2024, energy consumption in the OECD countries will decrease, after 2035, growth from developing countries will also be exhausted, as a result, oil demand will reach a plateau at 109.8 million b/d. By industry, the largest increase in demand is expected in aviation – plus 4.1 million b/d, petrochemicals will add another 3.7 million b/d to the total.

Oil supply outside OPEC will increase to 71.4 million b/d by 2027 (from the current 63.6 million b/d), while the US will account for 3.9 million b/d of this increase, an increase in production is also expected in Brazil, Guyana, Canada and Norway, and in Russia, due to the conflict in Ukraine, production will decrease by 0.7 million bpd. In the early 2030s, US production, on the contrary, will begin to decline, the total supply of non-OPEC countries will drop to 67.5 million bpd. According to the organization’s forecast, Russian production will decrease to 10.4 million b/d by this moment (minus 0.4 million b/d compared to the level of 2021). The share of OPEC during this period may grow from 33% to 39%.

Tatyana Edovina