Falling prices: OPEC prescribes $10tr investments for members
OPECMEMBERS of the Organisation of Petroleum Exporting Countries (OPEC) will require about $10 trillion oil related investment between now and 2040 to mitigate pangs of falling oil prices.
OPEC Secretary General, Abdalla S. El-Badri, who made this declaration on Tuesday at the sixth Asian Ministerial Energy Roundtable in Doha, Qatar, noted that from 2014 to 2015, the industry has seen a fall in exploration and production investment of around $130 billion.
This decline in investment is “a seed” for higher prices. We need a price where producers can invest and consumers have supply. We should really stabilize this market, ” El-Badri said.
According to El-Badri, the current cycle was triggered by oversupply. “But what is different on this occasion is that most of the supply increases in recent years have come from high-cost production. The market is now taking on board this new reality and gradually resetting itself, as we can see with falling non-OPEC supply growth and stronger demand. As with previous cycles, the industry will come through this one. In fact, cycles have helped make it increasingly resilient and more efficient. Our industry is built on strong foundations.”, he added.
El-Badri said: “the market is now taking on board this new reality and gradually resetting itself, as we can see with falling non-OPEC supply growth and stronger demand.”
“As with previous cycles, the industry will come through this one,” he said claiming that, “cycles have helped make it increasingly resilient and more efficient. Our industry is built on strong foundations. The industry has gone through many cycles. We have had periods when prices were low, and periods when prices were high. We have seen times when supply outstripped demand, and times when supply has struggled to keep up. There have been long periods of stability, as well as some periods of instability.”
He said that producers outside the group have rebuffed suggestions that they cooperate in reducing global supply to balance the market as OPEC wouldn’t act alone to subsidise higher-cost producers.
He said that non-OPEC producers must share the burden of any supply cuts as OPEC won’t accept less than 40 per cent of global output.
The OPEC chief hinted that even if the group’s members decided last November to reduce production by 1.5 million barrels a day, that wouldn’t have been enough to balance the market.
“If we cut we will keep cutting every time,” El Badri said. “As long as you keep the price above $80 a barrel to $100 a barrel this non-OPEC supply will stay until 2021 if we subsidise them every year. We have to share the burden. Everybody must contribute.”
He predicted that the market will return to a more balanced one in 2016. “We see global oil demand maintaining its recent healthy growth. We see less non-OPEC supply. And we see an increase in the demand for OPEC crude,” he added.