IEA-OPEC jointly contemplate world energy investment outlook
By OGJ editors
HOUSTON, May 4 -- The volume of world oil investment hinges upon uncertainties associated with future oil demand levels, policy developments, and technological advances, agreed participants of a joint workshop organized by the International Energy Agency and the Organization of Petroleum Exporting Countries.
Delegations representing the IEA and OPEC, oil companies, and the investment community attended that workshop late last month in Paris. It was the second annual workshop examining IEA's World Energy Investment Outlook and OPEC's oil outlook.
IEA comments
"A pivotal area in shaping the flow of investment to oil development is the Middle East," said IEA Executive Director Claude Mandil. "Although the costs of developing the region's vast resources are lower than anywhere else in the world, financing this investment will be determined partially by perceptions of security risk, but even more so by national decisions establishing the pace of resource exploitation."
The amount of net earnings that national oil companies can retain for investment depends upon broader national budget needs, he said.
"Financing new projects could become a problem where the national debt is already high, and national considerations discourage or preclude private or foreign investment," he said. "If the projected amount of investment in the Middle East is not forthcoming and production does not, therefore, increase as rapidly as expected, more capital would need to be spent in other more costly regions."
Regarding Russia, Mandil said "maintaining the momentum of the rebound in Russian production and exports will be difficult." The momentum requires that new production be brought on stream, that oil export pipelines be expanded, and that the government stabilizes legal and tax regimes for investors, he added.
OPEC comments
Adnan Shihab-Eldin, OPEC's director of research, noted that producers and consumers alike face challenges. He said he welcomes a steadily growing sense of collective responsibility within the international oil community.
"The benefits of this can be felt throughout the industry, not only upstream, but also downstream—including transportation and distribution. Indeed, it has become widely acknowledged that the downstream industry should feature prominently in our assessments both now and in the future, so as to avoid it becoming a source of price volatility," Shihab-Eldin said.
He emphasized that OPEC remains committed to its fundamental objective of seeking order and stability within the international oil market through secure supply, reasonable prices, and fair returns for investors.
"OPEC's perspective is not just the immediate time horizon; it also extends well into the future. This is why we attach so much importance to such workshops," as the joint IEA-OPEC workshop on world oil investment prospects, he said.