The Secretary General of the Gas Exporting Countries’ Forum (GECF) Dr Seyed Mohammad Hossein Adeli, now has eighteen country members covering 67% of world proven reserves responsible for around 50% of traded gas. It represents a gathering of the world’s leading gas producers and was set up as an international governmental organization with the objective to increase the level of coordination and strengthen the collaboration among member countries. I wonder if we shall ever see an OPEC type cartel grow from this? He confirmed that as global economic growth increases and demand for energy rises, the proportion for gas will be even greater. Furthermore, this will need to take climate change legislation into account if one accepts that gas is a relatively clean fuel for generation and compared to coal. It certainly is, and as with the NOCs earlier, he too will favour a carbon tax, which has twice the impact on coal than gas.
The financial view given by Dr Thomas Helbling of the IMF and Dr Paulo de Sa Practice of the World Bank looked at growth figures which Dr Helbling estimated at 4% overall by 2020 with the US achieving over 2%, Europe under 2%, and Japan at 1%. These figures will be supported by lower oil prices. However, Dr Paulo de Sa Practice discussed the consequence of lower oil prices and how new technologies will enable producers to cope. We already know that industry supply companies have been engaging in costcutting and streamlining exercises. The World Bank is currently advising consuming countries to plan for oil at $75 and producing countries to plan for $60. Meanwhile, OPEC has lost or is losing the role as the market swing producer, and this is now the place for the US.
I was able to ask the panel if there was now a realisation that a price of $100 was no longer sustainable to consumers. After a brief silence, Thomas Helbing of the IMF picked it up, probably embarrassed at the silence, declared that “it wouldn’t be helpful!”
The 6th OPEC International Seminar gave us a varied selection of speakers from different parts of the energy arena and from those that I was able to listen to, the message was clear. Lower oil prices will give support to those countries still struggling to get out of the global recession of 2008 and encourage them to invest in energy efficiency for the future. Conversely, for producers there is the realisation that the higher prices that they have enjoyed in recent years have been detrimental to the global economy. They will have to cut their costs, increase efficiency, and make use of new technology to extract energy resources both conventional and non-conventional while acknowledging the impact of climate change and the subsequent legislation and taxation that will come with it.
Governments will need to agree on global climate change legislation and adjust and redefine policies to ensure that whatever is taken is fed back into their respective energy infrastructures. In so far as the price of oil is concerned, it would seem that the consensus view is that it will range between $60-80 between now and 2020. With this in mind, we can now look to the OPEC meeting that followed. With the seminar just behind us, the transition to the 167th Conference was seamless with many of the issues already covered. The big issue for OPEC is still production levels and with the collective output over 30mbpd, each member is striving for a bigger share.
Iran is hoping to return fully to the market by the end of the year, and in the short term will probably in the short only be able to increase by around 300,000 bpd. Iraq and Libya would produce more if it wasn’t for the ongoing conflicts in their respective countries and without a resolution in sight for either, it is unlikely that we can expect more from either.
Nigeria usually talks about producing more but in recent years hasn’t been able to and the concern that one may have about Nigeria is that demand for its product is falling. With refiners now geared up to working with the heavy grades, they have no reason to pay a premium for high-quality grades such as that from Nigeria. Nigeria is currently producing around 2mbpd with “aspirations” to double that by 2020, which is not likely to happen. It is one member of OPEC that will have to work hard to maintain its market share. Venezuela is a lost cause, and one has to consider how the administration will cope with the lower oil price and loss of revenue.
