Experts do not see oil disappearing from energy mix anytime soon
KUWAIT: Panelists during the ‘Developments in the oil and gas sector’ session at the New Kuwait Summit 2019 discussed issues including the sector’s role in the New Kuwait strategy, the future of the oil and gas sector in Kuwait and updates on the petrochemical industry. Haitham Al-Ghais, OPEC Kuwait Governor and Market Research Manager at Kuwait Petroleum Company, said oil will not be replaced or removed from the energy mix by 2040.
Ghais also spoke about last week’s OPEC meeting. “Oil price is relatively stable between $55 and $65 for the last six months, which put pressure on several OPEC members. It also put pressure on the balances in the market. After deliberations that took three days on a technical level, the numbers we saw were clearly pointing to an imbalance that would be growing in the new year starting immediately in the first quarter, when demand usually drops,” he noted.
“The pressures on the market related to the China-US trade dispute and Brexit all put a negative cloud on demand forecasts. On the other hand from the supply side, we see signals of a slowdown in production from non-OPEC producers. Nevertheless, we still see a huge supply from non-OPEC producers coming to the market next year. Our estimate assumptions are pointing to 2.3 million barrels per day, of which about 1.5 million is from the US, and out of this about one million will be shale oil. So with these two figures there is going to be a surplus in first and second quarters,” he said.
“Many countries are not adhering to production cuts as agreed, which will be unfair to many countries. Kuwait is one of the countries sticking to the agreed cuts, and other countries will take advantage of it. Eventually, we came to decision we would have to cut deeper as there will be growth in balances by around 700,000 barrels per day in Q1, so we came to the consensus that a cut of 500,000 barrels per day is the right number to take forward in Q1. So from January 1, 2020, 500,000 barrels per day of additional cuts will be added on top of the existing 1.2 million bpd that was agreed before,” said Ghais.
“Our outlook for OPEC shows it will exceed 40 million barrels per day by 2040. Also, the internal assumption in KPC shows 39 million barrels per day versus 29 million barrels per day currently. In the long term, OPEC will be able to overcome the challenge of unconventional oil production. In the long term, there is also climate change and environmental concerns, but Kuwait has targets for renewable energy,” he explained. “Oil is not really a source of pollution, and global concerns are over-exaggerated. Oil will still continue to dominate with about 30 percent in 2040, and if we add gas to it, it will be about 55 percent of the energy mix,” concluded Ghais.
Bader Al-Attar, Deputy CEO (Planning and Finance), Kuwait Oil Company, said KOC has over 11,000 employees, 9,000 contracts, and 96,000 contractors. “We are targeting production capacity. In the far future, we have targets including projects in our portfolio. When production goes down, we take advantage to maintain our facilities, and we have plans to be dynamic. We keep spare capacity in case demand hikes,” he added.
Nawaf Al-Sharhan, Manager Corporate Planning Group, Kuwait Integrated Petroleum Industries Company (KIPIC), said “we want to grow but we need funding”. “The private sector will provide a good solution. In 10 to 15 years, we will grow and have good opportunities and more support than in the past. All this needs the support of the private sector – we need the entire governance of the country to support national oil companies in Kuwait,” he noted.
Mansour Aboukhamseen, Founder and Former Chairman, Kuwait Energy, said 2019 was the first year in which coal consumption dropped, and oil and gas most probably will peak by 2025. By 2035, oil consumption will be at about 65-70 percent of what it will be in 2025. “Oil is not going to disappear, but decline. The price of alternative energy is competitive today with the price of oil at $55-60, but the trend is the price of this alternative energy will come down,” he said.
Sheikh Nawaf Al-Sabah, Acting CEO, Kuwait Foreign Petroleum Exploration Company (KUFPEC), said we can’t create jobs for 60,000 graduates entering the workforce every year. “Our sector creates jobs for about 10 percent of them. We don’t want to be representing the largest industry in 10 years – we want to have other industries merge with us,” he pointed out.
By Nawara Fattahova