Abandoned Investments Threaten Future Oil Sector Demand

Though the price of crude Oil has maintained a steady increase in the last six months, for the members of Organisation of the Petroleum Exporting Countries (OPEC), it is not yet time to celebrate, as the decline of investment in the exploration sector to constitute a major threat to future oil demand.

While $10.5 Trillion global investment is needed in the next 22 years to meet the demand for Oil, Nigeria is in dire need of $100 Billion investment for the development of Liquefied Petroleum Gas and Compressed Natural Gas.

The price of crude Oil tumbled from $120 a barrel in June 2014 due to weak demand, a strong Dollar and booming U.S. Shale production to as low at $30 a barrel. As a result of this decline, Oil and Gas firms worldwide subsequently cut their share in investment given the subdued market prices.

This slash in investment has therefore posed as threat to future Oil demand, despite the steady increase in Oil prices lately. Lamenting lack of new investment in the Oil and Gas sector, OPEC Secretary-General, Mohammed Barkindo said that one of the greatest and most pressing challenges before Oil sector is ensuring that there will be adequate levels of investment in a predictable fashion to meet the world’s future requirements.

According to him, so far in 2018, the pace of investment has gradually picked up, “yet we are still not seeing enough robust investment in long-cycle projects, which are the base load of future supply, and the foundation of this industry’s future,” he said.

He disclosed that in the period to 2040, the required global Oil sector investment is estimated at $10.5 Trillion to meet future world Oil demand that is expected to surpass 111 million barrels a day by 2040. This, he said, represents a staggering increase of 16 million barrels a day. Indeed, the world will attain the 100 million barrels a day level of consumption much sooner than projected,” he added.

Barkindo said that this is a clarion wake-up call that every effort should be made to avoid a potential supply gap that could present a serious challenge to the industry in the medium to long term.

He said: “This will be essential, not only to maintain current production levels under given natural decline with compensation needs at four per cent to five per cent, but also to ensure a steady flow of Oil to meet rapidly growing demand in the long term. It will also be a key foundation for future global economic expansion.

“I am convinced that the only way to meet these current and future challenges is through close cooperation and dialogue with like-minded partners. With the Declaration of Cooperation, we have initiated a new era in international energy collaboration, the likes of which the world has never seen before. What is required is to build upon this model process. We must institutionalize it and expand it even further for a sustainable market stability beyond the short term.”

The Minister of State for Petroleum Resources, Dr Ibe Kachikwu said Nigeria’s Oil sector was in need of $100 Billion investment. He said: “We need to look at investments. What we have done over the last two years has helped. Suddenly we are looking at investment portfolios over the next two to three years of close to $40 billion but $40 billion is not enough to drive this industry”.

“Our estimate is that you need about $100 Billion worth of investment to drive this sector. Those investments will go into gas projects, they will go into pipelines that have been replaced. “They will go into new plants; they will go into the flare policy of the Government; they will go into the development of LPGs and CNGs.

“We need to begin to convert our petrol consumption cars to gas and electricity driven cars so we can avoid some of the embarrassments we have in terms of our supply needs,” he said.



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