Opec calls for more investments in oil industry to meet demand

Haitham Al Ghais, Secretary General of the Organisation of the Petroleum Exporting Countries (Opec), emphasised the need for increased investments in the oil industry to meet global energy demands and sustain economic growth.

He stressed that these investments are crucial for ensuring reliable energy supplies for current and future generations.

In statements to Emirates News Agency (WAM), Al Ghais said, “Allocating more investments in the oil industry will contribute to promoting the sustainability of the global energy sector, securing sufficient and reliable supplies for the world as a whole, and ensuring secure supplies for future generations.”

The Opec Secretary General pointed out that the increase in investments in the oil industry comes in light of the increase in global demand for energy, as the exploration and production sector needs investments estimated at $11.1 trillion, the refining and manufacturing sector about $1.7 trillion, while the transportation and marketing sector requires investments of $1.2 trillion by 2045.

The Opec Secretary General highlighted the importance of investments in the energy sector for global energy security and emission reduction. He emphasised the role of member states in addressing critical global issues like climate change and energy transition.

He highlighted the organisation’s active involvement in climate change negotiations, emphasising member states’ belief in its global significance. Opec facilitates information exchange and supports members in implementing strategies to reduce emissions, fostering environmentally friendly practices in the oil and energy industry.

He noted that Opec members consistently announce and implement initiatives to meet ambitious climate goals, aligning with national commitments under the Paris Agreement. These efforts include innovative projects leveraging diverse natural resources and sector-specific expertise to develop technologies such as carbon capture, utilisation, and storage, enhancing sustainability across all facets of the oil industry.

Oil benchmark Brent hovered close to $86 a barrel on Monday as hostilities intensified between Russia and Ukraine and in the Middle East.

Brent crude futures climbed 40 cents to $85.83 a barrel by 1124 GMT while US crude futures also gained 40 cents to $81.03.

Both benchmarks have risen steadily this year, with Brent up nearly 11% and WTI about 12.5% by Friday’s close.

The upward trajectory is linked to belief that a sticky recession is being fought off, with interest rates in major economies expected to fall by the summer, while the Opec+ group of oil producers has extended supply curbs into the second quarter.

Concerns over global oil supply are being heightened, meanwhile, by attacks on Russian energy facilities and Ukrainian energy infrastructure as well as fading hopes of a ceasefire in the Israel-Hamas conflict, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

Another Russian oil refinery had half of its capacity knocked out in a drone attack over the weekend, sources told Reuters. It is the latest casualty from a string of attacks by Ukraine this month.

Oil demand forecasts for 2024 have received modest upgrades as post-pandemic economic recovery continues after its inflation-induced dip, but Opec has retained its supply curbs, said Tamas Varga of oil broker PVM.

This has created a significant buffer that can be used in case of a genuine supply shortage, a key element when arguing against a sustained Brent rally above $90 a barrel, he said.

Meanwhile, foreign oil firms operating in Iraq’s Kurdistan region are partly to blame for the delay in resuming crude exports after failing to submit contracts for revision, Iraq’s oil ministry said.

The Iraq-Turkey oil pipeline (ITP) which once handled about 0.5% of global oil supply has been halted, stuck in legal and financial limbo, since March 2023.

The flows were halted after the Paris-based International Chamber of Commerce in a longstanding arbitration case ruled Ankara had violated provisions of a 1973 treaty by facilitating such exports without the consent of the Iraqi federal government.

Iraq’s oil ministry in a statement published late on Sunday noted that foreign companies, alongside the Iraqi Kurdish authorities, have still not submitted contracts for revision to the ministry.

The government is seeking to revise such deals after a court ruled ones signed with the Kurdistan Regional Government (KRG) were invalid, it said in response to a statement on Saturday by the Association of the Petroleum Industry of Kurdistan (APIKUR).

Iraq’s federal court in 2022 deemed an oil and gas law regulating the Kurdistan region’s oil and gas industry as unconstitutional.

Iraq owes Turkey minimum payments as long as the pipeline is technically operational - estimated by consultancy Wood Mackenzie at around $25 million per month. APIKUR has cited a similar figure saying it understands Iraq owes $800,000 in daily penalties.

APIKUR said the government of Iraq had not “taken the required actions” to reopen ITP, adding that “there has been no real progress” to reopen ITP despite meetings in Baghdad in January between representatives of the Iraqi government, the KRG and international oil companies.

WAM/ Agencies