The Secretary General of the International Energy Forum, Dr Sun Xiansheng hosted the President of the King Abdullah Petroleum Studies and Research Center, Mr Adam Sieminski, to present on the World Energy Outlook at the IEF on the 9th of September 2018.
Mr. Sieminski started off by highlighting KAPSARC’s mission to advance the understanding of energy challenges and opportunities, through unbiased, independent, and high-calibre research for the benefit of society. Mr Sieminski emphasized the enduring value of the IEF in providing a unique and neutral platform to strengthen market stability through data-driven dialogue on market, policy, and technology evolutions. The exchange of views on energy security, industry transformations, and reserve mechanisms fosters healthy energy markets for both producers and consumers and the effective achievement of shared goals they pursue together. He looked forward to further strengthen collaboration and bringing the growing capabilities of KAPSARC to bear on the IEF platform.
Mr Sieminski shared his perspective on global energy demand and pathways to its evolution. He observed that world energy demand will continue to expand on account of average annual increases in economic growth to 2040. These are forecasted to amount to 4.1% and 1.7% for the non-OECD and OECD regions respectively by the International Energy Outlook the U.S. Energy Information Administration released this summer. Forecasts show that petroleum, liquids and natural gas dominate growth, alongside renewables that will continue to grow at a steady rate and amount to 17% of global energy consumption by 2040. Coal demand will plateau after 2020 and nuclear shows modest growth comprising 21% and 5% of the global energy mix each in 2040. Electrification of energy demand will account for 40% of growth; a new regional pattern that China and India lead with other non-OECD countries.
Against the background of growing uncertainties reflected in the wide range of oil demand forecast across scenario’s, Mr Sieminski underlined that the need for oil will remain robust for decades. Large scale investment in new conventional production is essential to compensate for natural decline rates and maintain secure supplies also when tight oil plateaus and non-OPEC production slows in the 2020s. Though advances in new vehicle technologies command attention, by 2040 and beyond transportation will still be driven by the internal combustion engine. Oil demand growth in the industry and petrochemicals sector remains steady over the forecast period.
With reference to KAPSARC’s research on inventory assessments, Mr Sieminski noted that energy security concepts have evolved from concerns with physical availability to price volatility. Net flows and inventory levels, including 5-year average measurements are insufficient indicators of market balance. As the function of inventories and idle capacity is changing in the new market environment the velocity of oil will matter more to market stability in future.
Mr Sieminski ended his presentation with a reference to KAPSARC’s work on the positive contribution to the global economy of OPEC’s spare capacity. Published earlier this year in the peer-reviewed Energy Journal, the paper provided an estimate of the $170-$200 billion annual value to the world of OPEC’s willingness (especially in Saudi Arabia) to temper volatility in oil prices by using spare capacity to, occasionally, add or remove oil from markets.