Middle East key for global oil market

Oil consumption in the Middle East rises to 11.3 million barrels a day in 2040.

Abu Dhabi — The Middle East remains in the centre of the global oil market, being one of the key players in driving global demand for energy growth.

“While there is a view that current developments in our markets particularly in North America have to a degree sidelined the Middle East or moved the Middle East away from the centre of the global oil market discussion, the IEA does not subscribe to that view. We still see that the Middle East is very much in the centre of the debate,” said Timothy Gould, senior energy analyst at the International Energy Agency (IEA) in France.

Speaking on Wednesday at the second day of the 20^th Annual Energy Conference in the Capital, Gould presented some data from the newly-published World Energy Outlook 2014, which looks at key regional and global energy market developments up to 2040.

“Over the last decade, since 2000 we’ve seen a substantial increase in global energy demand,” he said noting that almost half (45 per cent) has been due to the rise of energy consumption in China.

But this is now changing. China is no longer the main driver of developments in energy market owing to its policies and the lower rate of population and economic growth that was seen in the past 10-15 years.

“Other parts of the world will be drivers of energy demand growth, particularly India, part of this region, part of Sub-Saharan Africa, part of South East Asia and Latin America. Those will be the key areas which will decide how fast the global demand for energy growth,” Gould pointed out.

According to him, global energy demand will be up to around 104 million barrels a day by 2040. And demand is concentrated increasingly in two sectors of the economy – transport and petrochemicals.

Oil consumption in the Middle East rises to 11.3 million barrels a day in 2040.

“So we need to find 40 million barrels a day to 2040, where is this likely to come from? What we see is that the growth in oil production is only likely to come in a relatively small number of sources, those sources for us are the US, Canada, Brazil and the Middle East.”

He noted, however, that US oil production will reach a plateau in the 2020’s and will fall back in 2040 at the same level today, while unresolved and ongoing issues in Canada and Brazil could hold back supply into the market.

“The remainder of this large and growing width of incremental oil supply in our view needs to come from the Middle East, and we see some encouraging signs here and I would include in the most encouraging signs also the developments that we see in Abu Dhabi with the focus that you have on enhanced oil recovery.”

“But we also see some warning signs both in terms of fiscal demographic pressures that we see that could, in our view, strain the amount of investment that is made in the upstream oil sector. But also naturally because of the security situation in some key countries,” Gould pointed out.

He noted that increments from the Middle East are only required by 2020, however, with the lead times required for upstream investment, “the investment needs to be made today or even yesterday,” Gould said. olivia@khaleejtimes.com