The Executive Director of the International Energy Agency (IEA), Fatih Birol, has called on countries around the world to reduce their reliance on oil and gas.
He made the call on February 14, 2023, during the Oslo Energy Forum in Norway. Reuters reported that Birol’s statement is in line with the IEA’s goal to encourage a transition to cleaner and more sustainable energy sources amid the urgent need to address the challenges of climate change.
According to Birol, countries can no longer be run on oil and gas for specific reasons. He said:
“You cannot anymore run a country whose economy is 90% reliant on oil and gas revenues because oil demand will go down.”
What you should know: His call to reduce oil and gas is despite the fact that the industry generated $4 trillion worth of profit in 2022, a significant increase from the previous annual average of $1.5 trillion.
In its 2023 oil market report released last month, the IEA had projected that global oil demand would rise by 1.9 million barrels per day (mb/d) to 101.7 mb/d this year, an increase from its previous forecast for 1.7 mb/d. It is also projected that supply will increase by 1 mb/d to 101.1 mb/d.
Will oil demand go down? According to the latest monthly oil market report from the Organization of Petroleum Exporting Countries (OPEC), the world oil demand growth forecast for 2023 is by 100,000 barrels per day (bpd) to 2.3 million bpd. The OPEC report also stated that oil demand growth in 2023 will depend on the return of China from its mandated mobility restrictions, but concerns persist about the depth and pace of the country’s economic recovery and the consequent impact on oil demand.
However, the United Arab Emirates Energy Minister, Suhail Al Mazrouei told Bloomberg in a recent interview that although there are enough volumes in the market now, he is worried about crude oil supplies in 2024. According to him, declining oil production in many countries and the potential of insufficient crude supply will be a bigger problem for the oil market to address in 2024.
Declining oil production in Nigeria: Nigeria has placed its expected oil production rate at 1.69 million barrels per day for 2023. However, the country’s production output is currently at 1.25 million barrels per day, according to recent data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). In 2022, the country recorded dwindling revenues from its oil sector mostly due to crude oil theft, vandalism and lack of investments. With this situation, the country’s stakeholders have been asked to focus on increasing investments in the sector and eliminating crude oil theft in its entirety.
In November 2022, Tola Adeyemi, the Regional Senior Partner (Nigeria and West Africa) at KPMG said that outgoing and incoming government administrations in Nigeria, need to tackle crude oil theft and low investments in the sector to achieve the 1.69 million barrels per day crude oil benchmark in the 2023 budget.
For the record: During the just concluded India Energy Week conference, Fatih Birol, the Executive Director of the International Energy Agency (IEA) said that the IEA expects that about half of the growth in global oil demand in 2023 will come from China. He said:
“If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies.”