Floweth the Oil

At the end of 2014, there was talk from a number of OPEC Member Countries that it is not in the interest of the Organization to cut production regardless of how low prices may fall. What are your expectations of long-term output for OPEC Members?

There is no doubt that OPEC Member Countries will remain central to the world’s long-term oil supply. Members hold over 80% of the world’s proven crude oil reserves and in our World Oil Outlook (WOO) 2014, total OPEC liquids supply is expected to increase by almost 15 million bpd by 2040, from around 35 million bpd today to just under 50 million bpd. Over the same period, non-OPEC liquids supply is only expected to increase by around 5 million bpd. In addition, OPEC Member Countries are also generally the lowest cost producers, so economically it makes sense to produce this oil.

What role is the UAE currently playing in OPEC’s current policy objectives?

Every OPEC Member Country is important to the Organization. In terms of the UAE, it has of course hosted a number of OPEC Ministerial Conferences, seen its Ministers sit as OPEC Conference President on many occasions, and afforded OPEC a Secretary General in the 1980s. It has also provided staff to the Secretariat and continues to be actively involved in the Organization’s meetings and activities. We respect and appreciate the UAE’s support and input.

The UAE has vowed to continually increase production in the next three years, what is the viability of this given the given the state of the market?

With OPEC expected to supply the majority of the additional liquids in the long term, member countries will obviously need to make investments. I am sure the UAE is analyzing the market, both current and future, and making any investment decisions based upon this. Moreover, with most of the 20 million bpd oil demand increase by 2040 expected in Asia, the UAE is ideally positioned geographically to meet the rising oil demand of this region.

How has the UAE positioned itself through economic diversification to withstand fluctuations in oil prices?

All OPEC members recognize the importance of looking to other sources of income, and of course, economic diversification is vital. The UAE is currently pursuing its 2021 Vision, which aims to place innovation, research, science, and technology at the centre of a knowledge-based competitive economy. It is evident there is a focus on increasing investment, both local and foreign, in industrial and other export-oriented sectors, such satellite and telecommunications, the aviation sector, with the UAE’s two main airlines, Emirates and Etihad, and in clean energy with the Masdar Initiative. Tourism too is playing a major role in the economic diversification of the UAE, with the country now a top tourist destination with many world-class hotels. The UAE is clearly planning for its future through its economic diversification objectives and is well placed to withstand fluctuating oil prices. Although, as with any oil producer, it would obviously prefer to see the oil market in balance, with stable prices that are acceptable to both producers and consumers.

Given the decline in Chinese demand and the increasing diversification of energy supplies, what markets do you expect will be vital to OPEC over the next decade?

There has been some weakness in Chinese demand, although this should be put in some perspective. Chinese oil demand is still expanding YoY, and as I already mentioned, the Asian region will be the main hub for oil demand growth in the years ahead. In terms of energy supplies, in our WOO 2014 we see growth for all energies in the next five to 10 years, and in the years thereafter. Of course, there are varying growth rates for energies, but it is clear that fossil fuels with remain central to the energy mix for the foreseeable future, with oil, gas and coal all expected to have shares in the energy mix of between 25-27% by 2035. So to sum up, oil will remain central to the world’s energy needs and Asia will be the biggest growth market for OPEC’s oil supplies in the coming decades.