Adipec 2016: Cut output or face the music, says Opec

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Adipec 2016: Cut output or face the music, says Opec
Jabar Ali Al Luaibi and Mohammad Barkindo launch the World Oil Outlook 2016 report at Adipec on Tuesday.

abu dhabi - Failure to implement Algiers accord will further prolong low growth and instability


Ashwani Kumar

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Published: Tue 8 Nov 2016, 8:09 PM

Last updated: Tue 8 Nov 2016, 10:11 PM

Opec Secretary-General Mohammad Barkindo said not implementing the Algiers accord to cut output would have negative consequences.

"I think a convergence of views is that failure to implement the Algiers accord in full and in a timely fashion will bring some consequences. negative consequences on the already fragile state of the industry," he said during the launch of the World Oil Outlook 2016 report at the Abu Dhabi International Petroleum Exhibition and Conference on Tuesday.

"The need to accelerate the drawdown of the stock overhang and bring the market rebalancing forward was at the heart of the Algiers accord. The rebalancing of the fundamentals of this market has taken longer than expected. Failure to jointly act with non-Opec colleagues in accordance with the Algiers accord will further prolong this period of low growth and instability in the market," he said.

The Opec secretary-general was confident that unity would be achieved soon. "Our consultations will continue in the coming weeks, and this includes with non-Opec nations. I remain confident that the message has sunk in and the consequences are clear. The global community, including markets, is awaiting both the Opec and non-Opec to jointly act on the framework reached in Algiers," he said.

The publication was unveiled for the first time outside the Opec secretariat in Vienna. The WOO report was launched by Iraqi Oil Minister Jabar Ali Al Luaibi.

Regarding the publication, Barkindo said: "It underlines the increasingly complex nature of the oil industry - in the upstream and downstream - the market adjustments taking place since the price drop in mid-2014, the interdependence of all nations, how security of supply and security of demand are interlinked and the need to better understand the market drivers, challenges, uncertainties as well as opportunities we face."

"The impact of the current industry cycle on investments has been unmistakable in both 2015 and 2016. While global spending on exploration and production by oil and gas producers is expected to fall slightly less this year, when compared to 2015, the combined amount over the two years equates to a loss of more than $300 billion. Looking ahead, this will likely impact not only new projects coming onstream, but new discoveries too."

He said renewables would continue to see the fastest growth. "Fossil fuels are expected to see their share in the energy mix fall from 81 per cent to 77 per cent by 2040. Oil and gas combined are still anticipated to account for 53 per cent of the energy needs in 2040, similar to current levels. It is clear that oil will continue to be a fuel of choice for many years to come."

He said oil demand is set to reach over 109 million barrels of oil a day by 2040 - an increase of over 16 million barrels a day. "The main driver of this growth is the road transportation sector in developing countries."

On the supply side, non-Opec sees a recovery in the medium term, but then plateaus, before declining post 2030.

"It means that in the long term, it is Opec that will be required to meet much of the expected additional demand. The estimated share of Opec crude in the total world liquids supply in 2040 is 37 per cent, which is three percentage points higher than the 2015 level."

"The WOO report should be viewed as a tool of reference to stimulate discussion," he added.


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