OPEC document warns of investment uncertainty

Conferences

There will be a slight drop in demand for OPEC oil by 2012 followed by considerable uncertainty over demand growth to 2020 or how much to invest in meeting it, a document tabled at EU-OPEC talks on Tuesday showed.

Oil exporting group OPEC currently pumps about 32 million barrels per day (bpd), but changes in climate policy, increases in car ownership in developing countries and moves by non-OPEC oil producers could drastically alter consumption patterns. OPEC supplies could dip to around 31 million bpd in 2012, before climbing again, but with a wide range of scenarios, said the document, seen by Reuters and due for formal release next month.

Non-OPEC supplies could climb by around 10% to 55 million bpd by 2012 as alternatives such as biofuels play a bigger part in the energy mix, it added.

OPEC had been meeting with EU ministers in Brussels to look for ways of soothing sky high oil prices after protests about fuel prices from Brussels to Barcelona and fears energy costs are slowing growth in the eurozone and fuelling inflation. After the meeting, OPEC President Chakib Khelil reiterated there was no shortage of oil available on markets. “Our view from a producers' point of view ... is that as far as fundamentals are concerned I think we have equilibrium between supply and demand,” Khelil told reporters. “In fact right now we have more supply than demand.” The European Commission last week said the most effective response would be pushing ahead with climate and energy reforms to reduce the EU's dependence on imported oil.

 
INVESTMENT UNCERTAINTY

But while welcoming a broader energy mix, OPEC said policy changes made investment decisions more difficult. “The recent policy proposals to address climate change and renewables targets could have substantial impacts upon the amount of oil that would need to be supplied by OPEC,” said the report. As a result, OPEC faces considerable uncertainty over how much to invest in supplying oil, with crude demand seen in the range of 29 million to 38 million bpd by 2020. “Scenarios for the call on OPEC crude oil suggest that the range of uncertainty for OPEC oil is considerable,” it added. “This translates into an uncertainty gap for upstream investment needs in OPEC member countries of over $300 billion.”

Developments in the transport sector hold the key to future demand growth, the report said. “The potential for increases in vehicle ownership is greatest in developing countries: four billion people currently live in countries with an average of less than one car per 20 people, while this ratio is well over one for every two in many developed countries,” it added.

The document warned the gap between supply and demand for middle distillates would grow, unless there was more investment in diesel-oriented projects. “This evolving gap will likely drive price differentials towards a premium for diesel and could also have an impact on the absolute level of product and crude prices,” it said. (Reuters)

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