OPEC faults calls for divestment in hydrocarbon, says oil demand to expand by 28%

The Organisation of Petroleum Exporting Countries (OPEC) has faulted what it termed an ‘unfortunate and unwise’ ongoing effort to encourage divestment in the hydrocarbon industries, stating that oil and gas will continue to be in demand for many decades.

Mohammad Barkindo, the secretary general of the organisation, said this Tuesday at the Oil and Gas Summit in Abuja themed, ‘Funding the Nigerian Energy Mix for Sustainable Economic Growth’.

The secretary general said oil is expected to retain the largest share of the energy mix, accounting for over a 28 percent share in 2045, followed by gas at around 24 percent.

According to Barkindo, this means that “oil and gas together will continue to supply more than half of the world’s energy needs for many decades.”

Barkindo said the policy narrative in the run-up to and during COP26 last year in Glasgow, UK was heavily distorted against hydrocarbons and divorced from the reality of the world’s energy needs.

“Developing countries were urged to turn their backs on their own hydrocarbon assets, even though their right to sovereignty over the use of these natural resources is carved in the Paris Agreement’s principle of equity in the context of sustainable development,” Barkindo said

“Efforts to unwisely encourage divestment in the Hydrocarbon industries are, unfortunately, becoming more pronounced. Last month, UN Secretary-General António Guterres suggested in remarks at a White House-sponsored event that our industry is ignoring its responsibility to address the climate change challenge and is undermining global climate policies.

“Such misleading pronouncements are terribly unfair to many of us in this industry who have dedicated ourselves to working towards inclusive, just and sustainable solutions to the climate challenge. In fact, key stakeholders in the industry are participating in the intergovernmental arrangements and initiatives to develop, deploy and promote cutting-edge technologies to reduce emissions from the production and consumption of energy.”

Barkindo warned that inopportune remarks and efforts to discourage oil exploration and development are bound to sow the seeds of a more pronounced energy crisis, undermining global energy security.

“Moreover, they jeopardize efforts to achieve universal, reliable and affordable energy access for people across the globe, including those in developing countries, ” he said.

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“Both the market and consumers deserve clear and consistent policies which recognise that oil is indispensable to global economic development and the world’s energy mix. Our industry cannot afford to sleepwalk into another crisis. It is of utmost importance that we seize opportunities to encourage world leaders to return to the roots and principles of the Paris Agreement. This means focusing on inclusive, Party-driven negotiations and decision-making based on science and data, not emotions and rhetoric.”

He pointed out that the G7 countries only a few weeks ago called on energy-exporting countries to increase oil production and acknowledged the critical role of OPEC.

“It is imperative that they translate these words into policy actions that affirm the importance of a broad portfolio of energy options, including oil and gas, and support an investment climate that makes this possible,” he urged.

The secretary general expressed optimism that COP27, which will take place in Egypt later this year, will offer a prime opportunity for developing nations, including those producing oil and gas, to make their voices heard.

Barkindo described it as a chance to return to a balanced and holistic process to address critical issues such as adaptation, mitigation and the means of implementation, especially climate finance and technology.

“Furthermore, COP27 provides a platform to reaffirm the importance of multilateralism and mutual respect among nations. These principles are pillars of OPEC’s own success dating back to its founding in 1960 in Baghdad and Iraq.

“We also need more cooperation and financial firepower when it comes to tackling energy poverty. Globally, more than 750 million people lack reliable electricity. A further 2.6 billion do not have safe and clean fuels and technologies for cooking and heating. In Sub-Saharan Africa, OPEC data show that an estimated 47 percent of people have no electricity and approximately 85 percent lack access to clean cooking and heating fuels. Considering the enormous energy resources available on this continent, this is simply hard to accept,” he added.

While acknowledging the global refining squeeze at the moment, he said the construction of Dangote refinery in Lagos, with its capacity of around 650,000 barrels per day, is a huge step in the direction of addressing not only Nigeria’s longer-term demand – but significantly improving the capacity outlook of the global down-stream sector.

Comparing the pre-pandemic year of 2019 to 2021, he revealed that OECD refining capacity fell by a significant 1.5 million barrels per calendar day, or 3.3 percent.

In his speech at the event, Timipre Sylva, minister of state for petroleum resources, noted that globally, oil rich countries are currently having conversations around moving away from fossil fuels to an energy mix dominated by low carbon sources of energy – renewables.

However, he stated that for Nigeria, fossil fuel will always have a share in the energy mix for the foreseeable future, and “we will not at this time abandon our fossil fuels”. He added that Nigeria has adopted its vast gas resources across the country as transition fuel.

“With a proven gas reserve of over 200 trillion cubic feet (TCF), the right policies and regulations to expand the utilisation of her gas resources, Nigeria has huge potential to become an industrialised nation,” he said.

“It is very important to note that this shift to gas underscores President Muhammadu Buhari’s seriousness and
determination in the development of Nigeria’s vast gas resources, not just as a major exporter but also as a major gas consuming nation.”

He further assured that the president will continue to strengthen the gas value chain as it is vital in transforming the economy of Nigeria, saying the initiative will create over 2million jobs per annum, promote skills acquisition, enhance technology transfer in addition to growing the nation’s Gross Domestic Product (GDP).

While stating that 62 percent of Nigerians lack access to electricity and 90 percent lack access to modern cooking fuels, the minister assured that government is working on many initiatives to tackle these challenges, one of which is the gas to power Initiative aimed at minimizing gas flaring and harnessing gas resources to electricity to meet Nigeria’s electricity demands.