Oil and gas tanks
OPEC+'s voice need to be louder to get the world listening to its concerns on energy investments. Image Credit: REUTERS

Dubai: Any disinvestment - or even under-investment - in the oil and gas sector, could cause market volatility in the long term and imperil global growth, according to a top OPEC official.

"OPEC has been very clear in highlighting the real and dangerous consequences of under-investment in the oil industry," said Haitham Al Ghais, Secretary-General of the Organisation of Petroleum Exporting Countries. "It endangers energy security and jeopardises sustainable development."

Al Ghais was speaking at 30th annual Middle East Petroleum and Gas Conference (MPGC) that opened in Dubai.

According to OPEC estimates, the world needs $12.1 trillion in investments to meet rising oil demand in the long run. "The reality is that oil and gas will continue to be an integral part of the energy mix for the foreseeable future,” the OPEC official added.

According to its global outlook, oil is expected to retain the largest share in the energy mix throughout the outlook period accounting for almost 30 per cent in 2045.

Haitham Al Ghais, Secretary-General of the OPEC added: "Given these high stakes, as an industry, we need to speak with one voice louder than ever before."

With global oil demand growth at around 8 million barrels per day (bpd), the world could face a supply problem as Western sanctions on Russian oil curtail production growth, Fereidun Fesharaki, Chairman of the FGE Consultancy.

"Russia can maintain production at around 10 million to 11 million bpd, but 2 million bpd of future growth are unlikely to go ahead with sanctions in place," said Fesharaki.

Indian Oil Corporation Chairman Shrikant Madhav Vaidya echoed similar concerns and said underinvestment in the exploration and production (EMP) sector is a cause for worry, especially for countries like India, which depend on imported oil.

He said: “It is estimated that about $640 million in investments is required year-on-year up to 2030 if we have to maintain the current supplies to meet the growing demand we have projected.”

Vaidya said India’s energy demand will increase to 9.6 million (bpd) daily by 2024. “We are going to see increased demand in oil and gas consumption in the country, which means the refining capacity has to go up,” he added. Indian Oil Corporation is the country’s top refiner by capacity.

The OPEC Secretary-General highlighted the importance of energy security and decarbonisation going hand in hand, requiring significant investments in all forms of energy. He acknowledged the challenges the oil and gas industry faced and asserted that the industry has been proactive in ensuring global security and reducing emissions.

The MPGC 2023 is hosted by Emirates National Oil Company (ENOC) and organised by S&P Global Commodity Insights under the theme ‘Re-think, Re-strategize and Re-boot: The Middle East Energy Markets in Transition’.

Sheikh Ahmed bin Saeed Al Maktoum, Chairman of the Dubai Supreme Council for Energy, President of the Dubai Civil Aviation Authority, and Chairman and Chief Executive, Emirates Group was present at the opening ceremony.

Saif Humaid Al Falasi, Group CEO of ENOC and Co-Chairman of MPGC 2023, said, ENOC is committed to drive the conversation around energy transition and sustainability as the future of the planet depends on it.

Indian Oil remains committed to Middle East term contracts

Indian Oil’s Vaidya said he remains committed to term contracts with the Middle East. However, spot purchases from the region have fallen due to increased Russian crude imports. He said: "The purchase for the Middle East continues to remain as it is as the term contracts, whatever we have lined up, are absolutely in place."

Vaidya said Russian cargoes fit the Indian refineries' specifications, and the country's growing consumption (reaching 5.6 million bpd in March) made room for increased imports. "Spot purchases have gone down because somewhere there has to be a dip to accommodate the Russian oil (purchases)," Vaidya said.

"So, we have already maintained whatever we have committed to the Middle East, and the total energy pie in the country is increasing. So, though I might have taken all from the other geographies, my continued relations with the Middle East, in terms of the oil supply, remain intact," said Vaidya.