Late one to early crude commotion at OPEC

So after having kept analysts and media in the OPEC Secretariat almost till midnight, and then not issuing a final brief, the producers' group has started day two with its planned OPEC and Non-OPEC meeting of ministers. 

The figure of a 500,000 barrels per day (bpd) deepening of the cuts remains on the cards, but whether it is a paper adjustment or a real-term cut remains to be seen. 

Even before proceedings began, Iranian Oil Minister Bijan Zanganeh left the meeting, with there being little sense in his sticking around given Tehran is exempt from the cuts. 

However, he did quip to journalists on his way out that the deal being brokered is indeed a "fresh cut". Inside the meeting hall, Russian Oil Minister Alexander Novak said the OPEC and non-OPEC agreement was working despite doubts expressed by sceptics, and his Saudi counterpart Abdulaziz Bin Salman asked for the "faith and mercy" of analysts and market commentators so that they don't "twist" numbers put out by OPEC+. (Yup, he really did!)

The oil market will have to believe OPEC+, and objective as well as cynical analysts will have to trust them, he added. Felt more like a sermon, and less like a statement, but hey - whatever works. More drama from here later in the day. But that's all for the moment folks! Keep reading, keep it 'crude'! 

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© Gaurav Sharma 2019. Photo: OPEC and Non-OPEC Meeting Room, Vienna, Austria © Gaurav Sharma, December 2019. 

OPEC/Non-OPEC cut at 1.2m bpd; Iran's smiling

In case you haven't heard dear readers, which the Oilholic doubts or you wouldn't be reading an oil market blog - OPEC has calmed the crude market with a 1.2 million barrels per day cut, in concert with 10 non-OPEC producers led by Russia.

Both Brent and WTI are up by over 4% at the time of writing, and Iran is smiling all the way to the bank having secured an "exemption" before US sanctions start biting more meaningfully. 

Will provide some more composed thoughts upon return to London from Vienna, as one has to scoot to the airport. That's all from Vienna folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018.  

Two summits, one 'crude' venue

Holy mackerel! Was there an almighty crush, or was there an almighty crush getting into Helferstorferstrasse 17 this morning. 

So many scribes and analysts, or in the case of yours truly, those who wear both hats, trying to get in before the whole jamboree began. 

Not bad for a place struggling to get this crude world's attention, according to some, to attract so many people. Of course, it’s not a regular occurrence that non-OPEC Russia’s Energy Minister and the Saudi Energy Minister hold a joint press conference after an OPEC ministers’ meeting ends; that's exactly what is on the agenda today. In the morning we’ll have the OPEC ministers’ meeting and then in the afternoon, we will have the OPEC and non-OPEC ministers’ meeting.

So here's to more than 150 of us all trying to get that elusive crude exclusive, including, if the Oilholic may add, quite a few Russian journalists here to cover the 2nd OPEC and non-OPEC ministers meeting after the 172nd OPEC meeting ends. 

And if you were in any doubt whether or not, its a done deal here, Saudi Oil Minister Khalid Al-Falih has said Opec's plan was to "stay steady" and go through the next nine months of oil production cuts. (Here's the full report). 

"The drawdown of inventories has clearly begun. OPEC and non-OPEC producers will work to bring inventories down to 5-year averages," Al-Falih added, saying he looks forward to working with non-OPEC colleagues.

That's all from Vienna, for the moment folks! More shortly! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2017. Photo: Media Scrums at OPEC Secretariat, Vienna, Austria © Gaurav Sharma 2017. 

OPEC just about gets the basics right

On occasion, signs around Austrian bars and shops selling souvenirs humorously tell tourists to get one basic fact right – there are no kangaroos in Austria! In more ways than one, last week’s OPEC meeting in Vienna was also about getting its 12 member nations to recognise some basic truths – not so much about the absence of marsupials around but rather about  surplus oil in the market.

Assessing demand, which is tepid in any case at the moment, comes secondary when there is too much of the crude stuff around in the first place. Of late, OPEC has become just a part player, albeit one with a 30% share, in the oil market’s equivalent of supermarket pricing wars on the high street, as the Oilholic discussed on Tip TV. Faced with such a situation, cutting production at the risk of losing market share would have been counterproductive.

Not everyone agreed with the idea of maintaining production quota at 30 million barrels per day (bpd). Some members desperate for a higher oil price were dragged around to the viewpoint kicking and screaming. Ultimately, the Saudis made the correct call in refusing to budge from their position of not wanting a cut in production.

Though ably supported by Kuwait, UAE and Qatar in his stance, Saudi Oil Minister Ali Al-Naimi effectively sealed the outcome of the meeting well ahead of the formal announcement. Had OPEC decided to cut production, its members would have lost out in a buyers’ market. Had it decided on a production cut and the Saudis flouted it, the whole situation would have been farcical.

In any case, what OPEC is producing has remained open to debate since the current level was set in December 2011. The so-called cartel sees members routinely flout set quotas. In the absence of publication of individual members’ quotas, who is producing what is never immediately ascertained.

Let’s not forget that Libya and Iraq don’t have set quotas owing to leeway provided in wake of internal strife. All indications are that OPEC is producing above 30 million bpd, in the region of 600,000 barrels upwards or more. Given the wider dynamic, it's best to take in short term pain, despite reservations expressed by Iran, Venezuela and Nigeria, in order to see what unfolds over the coming months.

After OPEC’s decision, the market response was pretty predictable but a tad exaggerated. In the hours following Secretary General Abdalla Salem El-Badri’s quote that OPEC had maintained production in the interest of “market equilibrium and global wellbeing”, short sellers were all over both oil futures benchmark.

By 21:30 GMT on Friday (the following day), both Brent and WTI had shed in excess of $10 per barrel (see right, click to enlarge). That bearish sentiment prevailed after the decision makes sense, but the market also got a little ahead of itself.

The start of this week has been calmer in part recognition of the latter point. Predictions of $40 per barrel Brent price are slightly exaggerated in the Oilholic’s opinion.

Agreed, emerging markets economic activity remains lacklustre. Even India has of late started to disappoint again after an upshot in economic confidence noted in wake of current Prime Minister Narendra Modi’s emphatic election victory in May. Yet, demand is likely to pick-up gradually. Additionally, a price decline extending over a quarter inevitably triggers exploration and production (E&P) project delays if not cancellations, which in turn trigger forward supply forecast alterations. 

This could kick-in at $60 and provide support to prices. In fact, it could even be at $70 barring, of course, the exception of a severe downturn in which case all bets are off. Much has also been said about OPEC casually declaring it won’t convene again for six months. Part of it fed in to market sentiment last week, but this blogger feels saying anything other than that would have been interpreted as a further sign of panic thereby providing an additional pretext for those going short.

Let’s put it this way - should the oil price fall to $40 there will definitely be another OPEC meeting before June! So why announce one now and create a point of expectation? For the moment, OPEC isn’t suffering alone; many producers are feeling different levels of pain. US independent E&P companies (moderate), Canada (mild), Mexico (moderate) and Russia (severe) - would be this blogger's pain level call for the aforementioned.

The first quarter of 2015 would be critical and one still sees price stabilisation either side of the $70-level. One minor footnote before taking your leave - amidst the OPEC melee last week, a client note from Moody’s arrived into the Oilholic’s inbox saying the agency expects Chinese demand for refined oil products to increase by 3%-5% per annum through 2015. This compares to 5%-10% in 2010-2012.

It also doesn’t expect the benchmark Singapore complex refining margin to weaken substantially below the level of $6 per barrel because lower effective capacity additions and refinery delays will reduce supply, while “the recent easing in oil prices should support product demand.” That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2014. Photo: No Kangaroos in Austria plaque Graph: Weekly closing levels of oil benchmark prices since Oct 3, 2014 to date* © Gaurav Sharma.

Profiling Oman's E&P and its wider market impact

The Oilholic has always been intrigued by Oman's oil & gas industry. The oil storage tanks atop the Al Wattayah cliffs of the Hajar Mountain range (see left) dominate the scenery behind Muscat and Muttrah's natural harbours. They also bear a silent but impactful testament to black gold's importance in this part of the world.

In a regional context, and from a geopolitical standpoint, Oman's 5.5 billion barrels of oil equivalent (boe) in proven reserves are the largest for any non-OPEC country in the Middle East. Admittedly, in this part of the world, there aren't that many non-OPEC players of significance in any case, let alone one with such a proven reserves position.

However, given that Oman does not have as much in terms of reserves relative to its regional oil exporting peers, is precisely why IOCs get better deals when it comes to oil & gas prospection here. The Petroleum Development Oman (PDO) holds around 92% of Oman's oil reserves. Aside from the government's 60% stake in PDO, Shell is the junior partner with 34%. Total (4%) and Partex (2%) make up the rest with minority stakes.

For all of that, it's actually Occidental Petroleum which has the largest operations of any IOC in Oman and is the country's second largest oil-producer! Chinese presence here is the shape of CNPC, while BP, Repsol and KoGas are meaningful industry participants as well.

The country has come a long way from signing its first export consignment of 543,800 barrels of the crude stuff delivered F.O.B Mina-al Fahal for a purchase price of US$1.42 per barrel (to Shell) way back on that historic date of August 8, 1967. PDO archives reveal that momentous invoice which was the harbinger of things to come (see right, click to enlarge).

The journey so far has not been without hiccups. A lot of soul-searching ensued when production, which at one point was above 950,000 barrels of oil equivalent per day (boepd) in the late 1990s, plummeted to an all time low of 714,000 boepd in 2007. However, initial anxieties about a general decline in oil & gas production have been replaced by renewed vigour and pragmatism with output rising steadily if not spectacularly in recent years.

Two key decisions taken by the administration of Sultan Qaboos bin Said Al Said have seen Oman turn a corner. As the Oilholic noted in an earlier blog post, the first move was to diversify Oman's economy away from oil & gas and promote transport, cargo & logistics, regional banking and, of course, tourism sectors. The plan was dubbed "Vision 2020" and initiated in 1998, when the oil price dipped below $10 per barrel.

The second move, kick-started in 2002, saw a strategic increase in petrodollars pumped into boosting oil production via enhanced recovery mechanisms at ageing oilfields. Miscible gas injection, thermal injection and polymer flooding were the techniques which found favour. Of these, thermal has proved most popular being deployed at Mukhaizna, Marmul, Amal-East, Amal-West and Qarn Alam fields. However, the PDO is employing traditional water-flooding at Yibal; the largest oilfield in the country.

The changes are tangible. According to the US EIA, Oman's average production came in at 923,500 boepd in 2012. Updating the figure, a PDO spokesperson told the Oilholic that H1 2013 production was in the region was around 944,200 boepd.

"All said medium term production expectation of over 930,000 boepd based on current investment and undertaking would be a realistic supposition for next few years," he added. The country's Petroleum Investments Directorate at the Ministry of Oil & Gas breaks this up as 900,000 barrels per day (bpd) of the crude stuff and 3.3 bcm of natural gas. The figure is based on 2012 data from seven – mainly onshore – production blocks.

PDO also looks set to pump additional funds, above and beyond what was budgeted in 2002, into improving production even further. Despite the best efforts of yours truly, a reliable figure was not forthcoming. But if one was to take a cumulative average of what local analysts say – we'd be looking at a minimum spend in the region of $6 billion per annum for the next 10 years.

While onshore prospects have historically been Oman's mainstay, as the Oilholic noted an earlier blog from Khasab – Bukha's offshore prospects are noteworthy. Norwegian independent upstart DNO International's 'Block 8' prospection off the Musandam coastline could well and truly shake things up. Some say it already is! The block is yielding 8,000 bpd, but reliable local sources say that once its full potential is realised, we could be looking at 20,000 bpd.

The big question is – could fresh Omani prospection coupled with the ongoing enhanced recovery programme – push production above the psychologically uplifting and headline grabbing figure of 1 million bpd?

Based on empirical and anecdotal evidence, thoughts of market commentators in Muscat and Abu Dhabi and the Oilholic's own calculations – sadly no! However, Omani production will be tantalisingly close to the magic mark as early as Q1 2014, and this blogger would be delighted for the country were he to be proved wrong, however briefly.

Regardless of the final figures, what does it mean and for whom? Almost 760,000 bpd would be exported by 2014, according to the government. The Far East seems to be the preferred destination for Omani Crude – with China, Japan and South Korea being the buyers. Since 2005, India is also looking towards Oman, more so, since last year, as the availability of Iranian crude remains sanction hit. 

Well, it is nearly time to call it a day here in Muscat. But not before the Oilholic leaves you with a view of His Majesty Sultan Qaboos' Royal Yacht - its one magnificent floater (see above left) ! Additionally, see below, from clockwise from left to right – the Royal Opera House, a very Omani sunset, Muscat's answer to London’s "Boris Bikes" and the Marina Bandar Ar Rawdah. It's been a thoroughly memorable visit to this wonderful country, full of warm, gracious and welcoming people.

One is truly grateful to professionals and commentators from PDO to BankMuscat, from the Oil & Gas Exhibition Centre to local guides who spared their valuable time to discuss various aspects of Oman's oil & gas industry.

However, away from Oman and just before boarding the flight to London Heathrow, one has a bit of reading material to flag-up. First, here's a brilliant column in the FT by Victor Mallet discussing travails of the Indian Rupee, in the current climate of foreign investors wanting to pull their money of emerging markets. The second is a BBC report about Egyptian officials saying they had foiled an attack aimed at disrupting shipping in the busy Suez Canal. This is seriously spooky with on-going problems in Syria, Libya and Egypt itself.

To put things into their proper context, the Suez Canal sees 800,000 barrels of crude and 1.5 million barrels of petroleum distillate products pass each day through its narrow confines between the Red Sea and the Mediterranean Sea. Furthermore, it's not just the canal that should be of concern.

With nefarious characters lurking around, another supply route of concern might be the Suez-Mediterranean pipeline which ferries through 1.7 million bpd. Disruption to either could see the risk premium on Brent be hit for six! That's all from Oman folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2013. Photo 1: Oil storage tanks atop the Al Wattayah cliffs of the Hajar Mountain range, Muscat, Oman. Photo 2: Invoice of the first consignment of Omani oil exports, 1967. Photo 3: Sultan Qaboos’ Royal Yacht, off Muttrah coast, Oman. Photo 4: Clockwise from left to right – Royal Opera House, Sunset in Muscat, the city’s answer to London’s "Boris Bikes" and the Marina Bandar Ar Rawdah , Oman © Gaurav Sharma, August, 2013.

“Stability, stability, stability,” says El-Badri

So the press briefing room has emptied and the OPEC ministers have left the building for first time after failing to cut the cartel’s official output in face of crude price corrections exceeding 10% over a fiscal quarter. Thanks largely to Saudi Arabia, OPEC output stayed right where it was at 30 million bpd. Given the Eurozone crisis and a US, Indian and Chinese slowdown – OPEC members will invariably see Brent trading below US$100 per barrel for extended periods of time over the medium term.

It is doubtful if the Saudis would be too perturbed before the price of Brent slips below US$85 per barrel. As the Oilholic noted last year, studies suggest that is the price they may have budgeted for. Putting things into perspective analysts polled by the Oilholic here in Vienna suggest Iran would need a Brent price of US$110-plus to come anywhere balancing its budget.

However, with all bar the Saudis sweating already, outgoing OPEC Secretary General Abdalla Salem El-Badri, whose successor is yet to be decided, probably provided the signature quote of 161st meeting of ministers. Given the long term nature of the oil & gas business and a need for clarity and predictability, the Secretary General demanded ‘stability, stability, stability’.

“Stability for investments and expansion to flourish; Stability for economies around the world to grow; And stability for producers that allows them a fair return from the exploitation of their exhaustible natural resources,” he said in a speech at the OPEC seminar ahead of the meeting.

Problem is the Saudis have taken the message a little bit too literally; oil minister Ali Al-Naimi likened his country’s high production level and its insistence that OPEC’s official quota stays right where it is to a kind of an economic ‘stimulus’ which the world needs right now.

Of course on the macro picture, everyone at OPEC would have nodded in approval when El-Badri noted that fossil fuels – which currently account for 87% of the world's energy supply – will still contribute 82% by 2035.

“Oil will retain the largest share (of the energy supply) for most of the period to 2035, although its overall share falls from 34% to 28%. It will remain central to growth in many areas of the global economy, especially the transportation sector. Coal's share remains similar to today, at around 29%, whereas gas increases from 23% to 25%,” he added.

In terms of non-fossil fuels, renewable energy would grow fast according to OPEC. But as it starts from a low base, its share will still be only 3% by 2035. Hydropower will increase only a little – to 3% by 2035. Nuclear power will also witness some expansion, although prospects have been affected by events in Fukushima. However, it is seen as having only a 6% share in 2035.

For oil, conventional as well as non-conventional resources are ‘sufficient’ for the foreseeable future according to El-Badri. The cartel expects significant increases in conventional oil supply from Brazil, the Caspian, and of course from amongst its own members, as well as steady increases in non-conventional oil and natural gas liquids (e.g. Canada and US).

On the investment front, for the five-year period from 2012 to 2016, OPEC's member countries currently have 116 upstream projects in their portfolio, some of which would be project or equity financed but majority won’t. Quite frankly do some of the Middle Eastern members really need to approach the debt markets after all? Moi thinks not; at best only limited recourse financing maybe sought. If all projects are realised, it could translate into an investment figure of close to US$280 billion at current prices.

“Taking into account all OPEC liquids, the net increase is estimated to be close to 7 million bpd above 2012 levels, although investment decisions and plans will obviously be influenced by various factors, such as the global economic situation, policies and the price of oil,” El-Badri concluded.

That’s all from Austria folks where the Oilholic is surrounded by news from the G20, rising cost of borrow for Spain and Italy, European Commission President Jose Manuel Barroso ranting, Fitch downgrading India’s outlook, an impending US Federal Reserve decision and the Greek elections! Phew!

Since it’s time to say Auf Wiedersehen and check-in for the last Austrian Airlines flight out of this Eurozone oasis of ‘relative’ calm to a soggy London, yours truly leaves you with a sunny view of the Church of St. Charles Borromeo (Karlskirche) near Vienna’s Karlsplatz area (see above right, click to enlarge). It was commissioned by Charles VI – penultimate sovereign of the Habsburg monarchy – in 1713. Johann Bernhard Fischer von Erlach, one of Austro-Hungarian Empire’s most renowned architects, came up with the original design with construction beginning in 1716.

However, following Fischer’s death in 1727, it was left to his son Joseph Emanuel to finish the project adding his own concepts and special touches along the way. This place exudes calmness, one which the markets, the crude world and certainly Mr. Barroso could do well with. Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo 1: Empty OPEC briefing room podium following the end of the 161st meeting of ministers, Vienna, Austria. Photo 2: Church of St. Charles Borromeo (Karlskirche), Vienna, Austria © Gaurav Sharma 2012.

IEA, crude price & Al-Naimi’s strong arm tactics!

The Oilholic arrived in Vienna this morning ahead of the 160th OPEC meeting from sunny Doha via a gale force wind hit London, to hear that the IEA had a new message for the cartel. The agency's latest market report notes that OPEC will need to produce “less” crude over 2012 than previously forecast. Global demand will average 90.3 million barrels per day (bpd) over 2012, which is 200,000 barrels less than the IEA’s November estimate.

This marks the fourth cut in the IEA’s 2012 forecast. Meanwhile, before the OPEC meeting outcome is officially known, the ICE Brent forward month future contract came in at US$109.41 up 2.15 cents or 2% while WTI came in at US$100.00 up 1.17 cents or 1.1 per cent when the Oilholic last checked at 19:00CET. Concurrently, the OPEC basket of crudes price stood at US$107.33 on Monday.

Meanwhile, Saudi oil minister Ali al-Naimi arrived in Vienna with more than the customary aplomb declaring to the World’s press that his country’s output had topped 10 million bpd, the highest it has been in recent memory. If his idea was to get price hawks Algeria, Iran and Venezuela to acknowledge an appreciable rise in Saudi supply, since the shenanigans of the last meeting of the cartel in June, then sources suggest it just might have succeeded.

The geopolitical pretext of course is that the Saudis wanted to make up for lost Libyan supplies.

© Gaurav Sharma 2011. Photo: OPEC crest © Gaurav Sharma 2011.

Sunset in Doha: Off from WPC to OPEC!

The 20th WPC ended yesterday in Doha and it was an amazing experience. Following the opening ceremony on Dec 4th, it was another four days of intense debates, discussions, meeting and greeting and the Oilholic has been wiser for it.

Everything from peak oil to unconventional projects was under the microscope, a deal announced here and CEO speaking there, one minister throwing-up a policy initiative to another presenting a white paper and so it went. Every oil major – NOC or IOC – offered up some newsy or debatable material and the Oilholic put them across from his perspective without attempting to be everywhere at all times and being all things to all ‘crude’ men as it was near impossible.

This blogger was also truly delighted to have moderated a Baker & McKenzie event at 20th WPC which included a seminar on NOCs, where they should invest, what they should know and where the opportunities lie. Over the course of five days, several representatives from a list of companies and firms too long to list engaged in constructive discussions – some on and some off record. Furthermore, delegates from Milwaukee to the Faroe Islands got to hear about this blog and offer their insight and suggestions which are deeply appreciated.

The Qataris aside, officials from Angola, Algeria, Brazil, Canada, China, India, Kuwait, Nigeria, Netherlands, Norway, USA, Russia, Venezuela and last but not the least the UK spared their invaluable time to discuss crude matters with the Oilholic, however briefly in some cases. One oil minister even joked that if he had time – he’d be a blogger himself!

All good things come to an end and now its time to say goodbye to Doha and head back to London, albeit briefly before the 160th meeting of OPEC ministers at the cartel’s HQ in Vienna on December 14th. There were fireworks last time between the Saudis and Iranians at OPEC HQ; let’s see what happens this time.

Ahead of the OPEC meeting, Secretary General, Abdalla Salem El-Badri took a timely swipe here in Doha at speculators.

On the penultimate day of the congress he told delegates, “Speculative activities remain an issue in the current market. This can be viewed in the respective sizes of the paper and physical markets. Since 2005, there has been a sharp increase in the number of open interest futures and options contracts. At times it has surpassed three million contracts per day, equivalent to 3 billion barrels per day. This is 35 times the size of actual world oil demand.”

El-Badri also noted that between 2009 and 2011, data has shown an almost one-to-one correlation between WTI prices and the speculative activity of the net long positions of money managers. “This is in terms of both volume and value. Let me stress, excessive speculation is detrimental to both producers and consumers and can cause prices to detach from fundamentals. It is essential to avoid distorting the essential price discovery function of the market,” he added.

Meanwhile ahead of the OPEC meeting, ratings agency Moody's has raised its 2012 and 2013 price assumptions for both WTI and Brent benchmarks. It now assumes a price of US$90 per barrel WTI crude in 2012, and US$85 per barrel in 2013, dropping to US$80 per barrel in the medium term, which falls beyond 2013. The ratings agency had previously assumed a price of US$80 per barrel for WTI in 2012 and beyond.

On Brent crude, Moody's assumes a price of US$95 in 2012, US$90 in 2013 and US$80 in the medium term - higher than the previous assumption of US$90 in 2012 and US$80 thereafter. Moody's continues to use US$60 per barrel as a stress case price for both WTI and Brent.

The move reflects the rating agency's expectations that oil prices will remain robust over the next two years, while natural gas will remain significantly oversupplied. Price assumptions represent baseline approximations – not forecasts – that Moody's uses to evaluate risk when analysing credit conditions within the oil and gas industry. And on that note, its goodbye from Doha; keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo: Outside the QNCC at the 20th Petroleum Congress, Doha © Gaurav Sharma 2011.

Messrs Voser, Brafau & Tillerson in town

Three heads of IOCs were all under one roof here at the 20th WPC today and all had a fair bit to say. Starting with Tillerson, the chairman and chief executive officer of ExxonMobil told delegates the future growth in world energy demand is a cause for optimism because it will signal economic recovery and progress.

ExxonMobil is forecasting the global economy to more than double in size between 2010 and 2040, and during that time energy demand will grow by more than 30%.

“So the energy and economic challenges the world will face in the decades to come require a business and policy climate that enables investment, innovation and international cooperation. Sound policies and government leadership are critical. When governments perform their roles effectively, the results are extraordinary – bringing enormous benefits in terms of investment enterprise, economic growth and job creation,” Tillerson said.

“By understanding our strengths and proper roles in economic expansion, we can clarify our policy choices, fulfill our core responsibilities and open up economic opportunities for decades to come,” he continued.

Tillerson opined that citizens and consumers need to understand the importance of energy, the vital role it plays in economic and social development, and how sound policy supports responsible energy development and use. “The debates and discussions in society at large need to be informed by the facts and fundamental realities of the challenges before us,’’ he added.

Turning to his hosts, Tillerson said the state of Qatar is a leading example of what can be done when policies are in place to enable investment and innovation. He also feels the current economic challenges will not last forever.

“There is reason for optimism but it is more important than ever that we swiftly take on these challenges with a sound and principled response,” he said. “History proves that energy policies that are efficient and market-based are the best path to economic growth and technological progress,” he concluded.

In his keynote address to the Congress, Peter Voser, CEO, Royal Dutch Shell (pictured left) said a number of interesting things but for the Oilholic, his take on diversity of supply stood out. “Diversity of supply will play a role. Our scenarios team believes that renewable energy sources could supply up to 30% of global energy by 2050, compared with just over 10% today (for the most part traditional biofuel and hydro-electricity). That would be a massive achievement, given the enormous financial and technical hurdles facing new energy sources. But it will also mean that fossil fuels and nuclear will still account for around two-thirds of the world’s energy in 2050,” he told delegates.

Shell sees supply growth coming mostly come from OPEC countries, growing at an average of 2% out to 2030, with an important role for Iraq. “However, we don’t yet know whether the recent developments in the some countries in the Middle East and North Africa region will impact the longer-term picture for OPEC supplies,” Voser said.

Non-OPEC conventional crude supply has been relatively flat over the past years and is projected to remain so. “We will also need to unlock significant additional non-OPEC conventional resources. This could come from offshore Brazil, further growth in Africa, and places like Kazakhstan,” he continued.

Further resources could come from unconventional plays such as the Canadian Heavy oil deposits, light tight oil in North America and, of course, the Arctic offshore, whether in Alaska, Greenland, Norway, or Russia. Much of this will take many decades and huge investments to unlock according to Voser.

Satisfying rising demand will be expensive – the world must invest US$38 trillion on supply infrastructure in energy projects over the period of 2010-2035, according to the most recent IEA’s World Energy Outlook.

“This is significantly higher than past spend trends. That said, although large in absolute terms, this investment is relatively modest to the size of the world’s economy, amounting to about 2.5% of global GDP on average over the next 25 years,” the Shell CEO concluded.

Repsol YPF Chairman Antonio Brufau nailed his colours to the mast declaring his company was certain that there are abundant resources waiting to be discovered and incorporated into production, always with the most demanding environmental and safety standards.

“But we cannot allow that to make us complacent: we must not settle for just that. As I have said, it is imperative to move toward an energy model with a lower carbon intensity. The stability of the planet's climate is at stake, and it is our obligation to be part of the solution,” he added.

“That is part of a further-reaching change in mentality. We are in a global situation in which hundreds of millions of people make up the middle classes in "developing" countries (by the way, we should start changing the terminology, as I would say that, in general, they are already well developed), Brufau continued.

New energy means new ideas and new attitudes according to Brufau. The types of energy used up to now, such as fossil fuels, will need to coexist with the new forms energy, in a complementary balance that the Repsol Chairman said he had no doubt will evolve very quickly.

“I think that in this new situation it is best to put aside unshakable axioms and replace them with imagination and a capacity for innovation,” Brufau concluded. More later; keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo: Peter Voser, CEO, Royal Dutch Shell speaks at the 20th Petroleum Congress © Weber Shandwick, Dec 2011.