In looking out to 2040, OPEC has determined that in order for the global oil industry to meet future oil demand, it will need a roughly $10 trillion investment.
OPEC Secretary-General Mohammed Barkindo, who spoke at the Oil & Money Conference in London recently, reported that investments had dropped 26% in 2015, were projected to slide another 22% by the end of 2016, and then to further contract in 2017. He also stated that, “If the contraction continues, then the global community—not only the industry—should really take this seriously and join hands in order to ensure the much needed security of supply going forward.”
As oil prices have continued to slump since 2014, it has caused oil discoveries and new oil projects to drop to historic lows. To try to amend this, OPEC has verbally agreed to a production cut of roughly 700,000 barrels per day, which should help the glut to ease (see our OPEC post), and will spur a rise in oil prices. The official agreement will be settled in Vienna on November 30.
Barkindo went on to say, “This correction, this cycle, has really taken too long for most participants and most stakeholders. And therefore it’s time for us at OPEC together with our friends from non-OPEC in a coordinated fashion to take some action.”
Global oil demand gets stronger by the day, and future exploration and discoveries will be a must to meet this demand. It will be interesting to see how it all plays out, and how long it will take to right the balance.