Mideast energy needs investments

There is no doubt that investment is key to energy supply ... and any reduction or reluctance to invest may cause untold problems, especially with shortages and their impact on economic growth. This is why future energy balances are viewed with consideration to the level of investment needed to ensure supply.

The International Energy Agency in its World Energy Outlook 2017 discussed the need for investments regionally. Just to recap on my last two columns, between 2016 and 2040, global primary energy demand would grow from about 13.8- to 17.6 billion tonnes of oil equivalent (btoe), gas demand from about 3 to 4.4-btoe and oil from 95.5 to 109 million barrels a day in the New Policies Senario (NPS).

The fall in oil prices during 2014 jolted companies and government investments in projects and the IEA tells us that, “A third straight year in 2017 of low investment in new conventional projects remains a worrying indicator for the future market balance, creating a substantial risk of a shortfall of new supply in the 2020s.”

The IEA may be specifically referring to equally applicable to other sources of energy. To meet the above outlook for energy, the IEA forecasts investments at about $60 trillion (in 2016 dollars) in the NPS.

Given the noticeable shift to the increased share of electricity in final energy consumption from the current 20 per cent to 23 per cent by 2040, investment in that sector would account for “nearly half of total energy supply investment in the New Policies Scenario.”

As for oil and gas, the IEA says that “upstream oil and gas investment remains a major component of a secure energy system, even in the carbon-constrained world of the Sustainable Development Scenario.” Therefore, in the period under consideration, investment in oil and gas development is anticipated at $20.6 trillion, of which $15.4 trillion was in upstream, $1.3 trillion in downstream and $3.9 trillion in mid-stream.

The average annual investment in oil and gas upstream is therefore $640 billion, the equivalent of the revenue of 27 million bpd at today’s prices. It is judged that the industry will never be able to meet this without a gradual increase in oil and gas prices. Therefore, it is not surprising that IEA says that “in the New Policies Scenario, the balance of forces suggests some upward pressure on the oil price, which reaches $83 a barrel by the mid-2020s”.

In the Middle East, investment in oil and gas is forecast at just over $3 trillion or about 15 per cent of the world’s total. This reflects the relatively lower production cost in the region. The investment in upstream would be $2.3 trillion and the rest for mid-stream and downstream.

Middle East electricity investment is forecast at $773 billion. Electricity demand is to grow at close to 3 per cent a year and consumption would almost double by 2040.

Considering other peripheries, Middle East energy investment could be close to $4 trillion or about $167 billion a year, which at today’s oil prices amounts to a revenue of almost 7 million bpd. Planners must do everything possible to reduce this burden, including reforming domestic prices and improving energy efficiency. oil, but this is