May 28, 2024
We need invest $1.5 trillion during the period 2021-2045
OPEC Secretary General, three major oil ministers, confirm presence at African Energy Week 2021
– By Godswill Odiong

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By HE Mohammad Sanusi Barkindo

It is a distinct honour to address the MSGBC Oil, Gas and Power Conference and we send our warmest greetings to all participants and delegates. We commend the wise leadership of HE Macky Sall, President of Senegal, for holding such a forward-looking and innovative conference at what is a critical juncture for the energy industry, not only in Mauritania, Senegal, The Gambia, Guinea Bissau and Guinea Conakry, but across the African continent and indeed the globe.

I would like to thank HE Aissatou Sophie Gladima, Minister of Petroleum and Energy, for the gracious invitation to address this distinguished gathering and such an illustrious lineup of speakers, participants and attendees. Our congratulations go to the Minister and her team, the event sponsors and organizers, and all involved who have ensured this is a prestigious and historic event.

It is regretful that due to the severity of the COVID-19 pandemic in Europe, where the OPEC Secretariat is located, here in Vienna, Austria, I cannot attend the MSGBC conference in person. However, such is the power of the world-famous Senegalese ‘teranga,’ I feel the warmth of your welcome 3,000 miles away here in Vienna.

Senegal is known as the ‘Land of Teranga,’ and while this is sometimes translated into English as ‘hospitality,’ I know first-hand from my Senegalese friends, it means so much more. Teranga is a way of life, defined by a generosity of spirit, an openness and willingness to make everyone feel welcome, regardless of nationality, colour, creed, or class. It unites people, irrespective of their background, around their shared humanity.

Teranga has made Senegal an example to the rest of the world, a bastion of tolerance, good neighbourliness and shared community. At OPEC, we hope that our current efforts with 10 non-OPEC oil producing countries, under the ‘Declaration of Cooperation’ process, displays similar characteristics of good neighbourliness, respect for diversity and a desire to act as responsible members of the international community.

Signed on 10 December 2016, the ‘Declaration of Cooperation’ between OPEC and 10 non-OPEC Producing Countries is a pioneering framework for multilateral energy cooperation and continues to contribute greatly to the post-pandemic economic recovery as a vital stabilizing force in the global oil industry.

Indeed, the ‘Declaration of Cooperation’ has enabled the oil industry to withstand and recover from both the severe oil market downturn of 2014-2016 and the unprecedented oil market contraction following the outbreak of the COVID-19 pandemic.

The objective of the ‘Declaration of Cooperation’ can be summarized in just four words: sustainable oil market stability. OPEC does not seek stability for stability’s sake: rather we are acutely conscious of the broader social and economic benefits for all which come as a result of sustainable oil market stability. This is particularly the case for a global economy still reeling from the devastating effects of the COVID-19 pandemic.

In this context, OPEC full heartedly supports the spirit of cooperation and fraternity among nations that undergirds this conference. Our statute commits us to multilateralism and cooperation with all stakeholders in the energy industry. We recognize that the challenges of our age, require the international community to lift each other up and support each other.

African countries have historically assumed strong, proactive leadership roles in OPEC. Angola currently holds the Presidency of the OPEC Conference and will be succeeded by Congo next year. In September of this year, we celebrated a monumental milestone, the golden anniversary of Nigeria joining OPEC in 1971.

Recent years have seen an expansion of the African presence in our Organization. Congo became a Member Country in 2018, Equatorial Guinea joined in 2017 and Gabon rejoined in 2016.

This consolidates the incredibly positive, constructive and fruitful roles played by Libya since it joined our Organization in 1962, Algeria since 1969, Nigeria since 1971 and Angola since 2006.

Many of the most significant meetings in the 61 year history of our Organization took place in African cities. From the 9th Meeting of the OPEC Conference in Tripoli in 1965, critical meetings and conferences have been held in Algiers (including our first ever Summit), Oran, Lagos, Abuja, Luanda, and Libreville. We hope this expands in the future.

Indeed, the idea for our Organization was conceived in Africa, specifically Egypt. It was at the Cairo Yacht Club in 1959, that the Gentleman’s Agreement was forged which paved the way for the establishment of OPEC in Baghdad in September 1960.

Aside from the African countries who are OPEC members, two African countries have joined the historic “Declaration of Cooperation,” between OPEC and 10 non-OPEC producing countries, namely Sudan and South Sudan. Chad and Uganda declared their support for the DoC process in November 2017.

The strong bonds between OPEC and Africa reflect the critical role that our great continent will play in the future of the energy industry. This is one of the most dominant themes of OPEC’s World Oil Outlook 2045. Our flagship publication presents OPEC’s medium to long-term projections for the global economy, oil and energy demand and other factors pertaining to the industry.

The first thing to underscore is that Africa has a young and vibrant population. The Middle East and Africa region is currently experiencing a swift rate of population growth. By 2045, it is forecast to be the leading region by overall population, adding 762 million people in the period 2020-2045.

We anticipate a bright future for Africa’s oil industry with substantial opportunities for growth. The continent is home to five of the top 30 oil-producing countries in the world and several top gas-producing nations, including Senegal. The world will continue to rely on Africa’s precious resources in the long term in order to meet the rapidly rising global demand for oil and gas.

In 2019, before the COVID-19 pandemic broke out, Africa produced approximately 8.5 mb/d of oil, which is around 9% of world output. The continent’s proven oil reserves amounted to around 126 billion barrels at the end of 2019.

In terms of the downstream sector, last year’s oil demand shock caused by the COVID-19 pandemic resulted in numerous refinery closures worldwide, and we will see additional closures in the coming years.

Looking ahead, from 2021 to 2026, we expect to see around 6.9 mb/d of new refining capacity come online, mostly in the Middle East, Asia-Pacific and Africa. Africa’s refining capacity is expected to increase by 1.2 mb/d by 2026 from their current levels of 4 mb/d.

Looking longer term to 2045, OPEC forecasts 14 mb/d of capacity additions, mostly in developing countries. In Africa, long-term demand growth will lead to an increase in refinery throughputs of almost 5 mb/d in 2045, up from 2.4 mb/d in 2019.

These overall positive developments in the African downstream will help increase local refined product output while reducing product imports from other regions.

In terms of downstream investment, we estimate a total of roughly $1.5 trillion will be spent during the period 2021-2045. $450 billion of this will be invested in new refinery projects and expansions of existing units. Most of these projects will be located in developing countries, including Africa.

Indeed, the importance of creating an investment-enabling environment is a further key conclusion from the WOO. Cumulative oil-related investment requirements amount to $11.8 trillion in the 2021-2045 period. Of this, 80%, or $9.2 trillion is in the upstream, with another $1.5 and $1.1 trillion needed in the downstream and midstream, respectively. And creating an investment friendly climate through oil market stability has been one of the objectives of the ‘Declaration of Cooperation’ between OPEC and 10 non-OPEC producing countries.

We need to be cognizant of how oil and gas industry investments are being impacted by Environmental Social Governance (ESG) requirements and the climate disclosure drive from the financial community. We are concerned about the ESG footprint and stranded asset risk of the industry. The environmental aspect of ESG is perhaps outweighing the need to address the social and development issues. We need to work with all industry stakeholders to ensure an investment friendly climate, one that is sustainable and works for both producers and consumers.

Access to capital is particularly significant given the twin challenges of sustainable development and climate change, two sides of the same coin. This was a point OPEC raised at the COP26 meeting in Glasgow, Scotland.

The COP26 negotiations were tense at times, but in the end, all Parties reiterated their commitment to the implementation and full operationalization of the Paris Agreement.

This was a positive step, giving the pressing need to reduce global emissions, alleviate energy poverty, counter the impacts of the COVID-19 pandemic and find a sustainable way forward that leaves no one behind.

However, as we all know the public discourse around energy, climate and sustainable development continues to be extremely emotive. This was evident in Glasgow, with some voices all but excluded, including many from our own petroleum industry.

At times, the narrative around the energy transition has been overtaken by emotional outbursts, with rational discussions based on facts, hard data and science, taking a back seat.

The parameters of the public discourse seem reduced to the question: are you for, or against fossil fuels? It is perhaps the ultimate false dichotomy.

It erroneously constrains what options are available. It should not be a question about ‘one or the other’.

The challenges before us are enormous, and we have seen recently that the strains and conflicts related to energy affordability, energy security and the need to reduce emissions require a delicate balancing act, comprehensive and sustainable solutions, and with all voices heard, and listened to.

Focusing on only one of these issues, while ignoring the others, can lead to unintended consequences, such as market distortions, heightened price volatility and energy shortfalls.

As President Sall in his remarks to the 76th Regular Session of the United Nations General Assembly said,

“Our countries cannot achieve an energy transition and abandon the polluting patterns of the industrialised countries without a viable, fair and equitable alternative….. Our countries, which are already shouldering the crushing weight of unequal trade, cannot bear the burden of an unfair energy transition.”

Access to affordable, reliable, sustainable and modern energy, is a right for all, not a privilege of the few, and is enshrined by the UN in Sustainable Development Goal 7.

The unfortunate reality for developing countries is that a staggering 759 million people worldwide did not have access to electricity in 2019, with around 79% of them located in Africa. Moreover, there were roughly 2.6 billion people or 34% of the global population who did not have access to clean cooking fuels and technologies — and this includes a massive 70% of Africans who have no access, exposing them to high levels of household air pollution.

The energy poverty numbers for Africa are stark. And to add in one further number, Africa accounts for only around 3% of global emissions.

OPEC believes that there is no “one size fits all” solution to addressing climate change. Different countries around the world have varying capabilities and diverse needs. Thus, reducing emissions should have multiple paths, as set out by the Intergovernmental Panel on Climate Change (IPCC), and all of them should be regarded as potential options.

As an industry, we must approach these critical issues together through dialogue and cooperation, ensuring that all voices are heard and all viewpoints are considered.

The oil industry can play a role in working towards our common goals. It possesses resources and expertise that should be utilized in developing more efficient technologies, particularly within the sphere of Carbon Capture and Sequestration technologies (CCUS).

As I alluded to earlier, in his remarks to the UN General Assembly, President Sall, made an eloquent address that resonated with OPEC, particularly when he said,

“The promise of a better world for all can bloom in the soil of dialogue and mutual respect…..To this end, we cannot be satisfied with a future of promises. We must work for a future of fulfilled promise.

This future requires us to lay down our arms, to stand in stronger solidarity, to protect our environment, to cultivate our shared values, to accept and respect our differences…. In this way, we will bring forth the world of our dreams, a world of peaceful coexistence, a better world for all.”

Well said, Mr President. OPEC shares and supports this vision for a better world.

Our Organization wants to work and strengthen our relations with energy stakeholders in West Africa and across the MSGBC Basin. We are delighted to participate in this event and look forward to seeing you all in person when it is safe to do so. I wish everyone a successful MSGBC Oil, Gas and Power Conference and Exhibition.

– Being the Keynote address delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the MSGBC Oil, Gas and Power Conference and Exhibition held in Dakar, Senegal, 16 December 2021.

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