Annual Event of the Spanish Committee of the WEC CEPSA Tower - Madrid, 25 September 2018

Plenary session: Key issues on the global energy agenda

HE Mohammad S. Barkindo OPEC Secretary General

2© 2018 Organization of the Petroleum Exporting Countries 2

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© 2018 Organization of the Petroleum Exporting Countries 3

OPEC landmark decisions in 2016

Algiers Accord170th (Extraordinary) 

Meeting of the Conference      

Vienna Decision171st Meeting of the 

Conference 

Impact and achievements● 25 sovereign producing nations acting in partnership ● Element of oil market stability reintroduced ● A transparent and fully accessible platform, open to all producers● Positive change in perceptions of OPEC ● Commended by producers, consumers and industry stakeholders● Positive impact on the global economy; trade worldwide has increased● Return of confidence to the oil industry, gradual recovery in investments ● Welcomed by financial markets ● Oil export values have significantly increased (34‐37%)

Joint Declaration of Cooperation

OPEC & non‐OPEC

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OPEC WOO – essential and detailed analysis of the prospects for the global oil industry

The WOO is one of OPEC’s flagship publications, combining the expertise of the OPEC Secretariat and professionals in OPEC Member Countries. 

Now in its 12th edition, the WOO is newly available as an APP for Android and iOS. Interactive version available at woo.opec.org

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© 2018 Organization of the Petroleum Exporting Countries 5

● Size of the global economy in 2040 is estimated to be more than 200% that of 2017● Developing countries expected to grow by 4.5% p.a. on average (India 6.5% p.a.)● World population will increase from 7.6 billion in 2017 to 9.2 billion in 2040● Huge potential for socio-economic development in terms of expanding energy access

The ‘energy transition’: a perspective on the future

Distribution of the global economy

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Overall energy demand to increase 33% by 2040

Energy demand by fuel Energy demand by region

● Fossil fuels remain dominant despite the penetration of renewables ● Developing countries see almost 95% of the overall energy demand growth

32% 28%

28%22%

22%

25%5%

6%

2%

3%

10%

10%

1%

6%

0

50

100

150

200

250

300

350

400

2015 2040

mboe/d

Other renewables

Biomass

Hydro

Nuclear

Gas

Coal

Oil40% 30%

52%

63%

8%

7%

0

50

100

150

200

250

300

350

400

2015 2040

mboe/d

Eurasia

Developingcountries

OECD

Source: OPEC

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● OPEC is fully aware of the dual challenge of meeting growing energy demand, while constantly improving the environmental footprint of all the energies used

● Coal is the fuel with lowest growth of just 0.2% p.a. on average

Natural gas expands the most in the long-term, followed by other renewables

‐5

0

5

10

15

20

25

30

35

Oil Coal Gas Nuclear Hydro Biomass Otherrenewables

mboe/d

2030‐20402020‐20302015‐2020

Growth in primary energy demand by fuel type, 2015‐2040 (mboe/d; share of growth)

Source: OPEC

16%

5%

35%

10%

4%

9%

21%

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● Oil demand in Developing countries expected to increase by more than 22 mb/d between 2017 and 2040

● Oil demand increase in Developing countries more than compensates for declines in OECD● This is the second consecutive year that the WOO has raised its global oil demand numbers

for 2040

Long-term oil demand projected to increase by 14.5 mb/d to reach 111.7 mb/d in 2040

Long‐term oil demand in the Reference Case, mb/d

2017 2020 2025 2030 2035 2040 Growth 2017‐2040

OECD 47.3 48.3 46.8 44.2 41.5 38.7 ‐8.7

Developing countries 44.4 47.9 53.1 58.1 62.6 66.6 22.2

Eurasia 5.4 5.8 6.1 6.3 6.4 6.4 1.0

World 97.2 101.9 106.0 108.6 110.5 111.7 14.5Source: OPEC

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● Long-term incremental demand in the transport sector: +8.2 mb/d (road transport: +4.1 mb/d)● Conventional vehicles, including hybrids, still make up 82% of the vehicle fleet by 2040● Industry sector: +5.7 mb/d of which 4.5 mb/d will be in petrochemicals

97.2

111.74.1

4.5

2.7

1.21.7

1.4

90

95

100

105

110

115

Demand in 2017

Growth intransportation

Growth in industry

Growth in other sectors

Demandin 2040

mb/d

Road transportation will continue to be the largest oil demand sector but petrochemicals mark the largest increase

Sectoral demand growth in the Reference Case

Source: OPEC

Aviation

Others

Road

Petrochemicals

Other industryResid/Comm/Agr

Electricity ‐1.1

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0

20

40

60

80

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

OECD Americas OECD Europe OECD Asia‐Pacific Asia Far EastLatin America Middle East Africa EurasiaChina Processing Gains

Non-OPEC supply peaks in late 2020s when US tight oil plateaus

Long‐term non‐OPEC supply growth by regionmb/d

● OECD America sees strongest supply growth, remains largest non-OPEC producing region● Non-OPEC supply peaks at 67 mb/d in 2026/27, then declines to 62.6 mb/d by 2040

US oil supply

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Implied demand for OPEC crude in the Reference Case

30

32

34

36

38

40

42mb/d● Implied demand for OPEC

crude declines from 32.6 mb/d in 2017, to 31.6 mb/d in 2023

● Stays flat for ~10 years until US tight oil peaks; then grows to 40 mb/d by 2040

● The share of OPEC crude in the global oil supply is to increase from 34% in 2017 to 36% in 2040

Demand for OPEC crude rises to 40 mb/d in 2040

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Investment requirements around $11 trillion to 2040

● Global oil related investments across the supply chain are estimated at around $11 trillion in the period to 2040

● Investment has picked up again this year, after the downturn of 2015/2016

● OPEC Member Countries fully committed to investments across the whole industry value chain

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Importance of oil & gas in transforming our economies, societies

● Oil & gas have been, and continue to remain key to driving economicgrowth and prosperity

● It is imperative to address energy poverty that continues to impact billionsof people across the world

● Urgent need for access to reliable, safe and secure modern energyservices at scale

● Continually develop, evolve and adopt cleaner energy technologies● All-inclusive and non-discriminatory energy polices required to meet

future energy demand, in a sustainable manner● International cooperation could enhance actions of countries that aim to

accelerate the energy transition; providing sufficient financial resourcesand advancing technology development

© 2018 Organization of the Petroleum Exporting Countries 14

Power of dialogue and cooperation in attending to common challenges

● Declaration of Cooperation has demonstrated the effectiveness of jointand collaborative actions for sustainable oil market stability

● OPEC has been a prominent voice in many forms of dialogue andcooperation: EU, Russia, China, IEF, IEA, GECF, IMF, G20

● High-level EU-OPEC Energy Dialogue since 2005

● It is vital for all stakeholders to look for shared and realistic solutions

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Moving forward on the ‘energy transition’ path

● All energy sources will be required to meet rising demand

● Oil and gas are expected to still meet over 50% of the world’s energyneeds in 2040

● It is critical to continue improving energy efficiency and develop cleanerenergy technologies

● We need to put our collective efforts to ensure that energy is madeavailable to all of the world’s citizens

www.opec.org

Thank You

Annual Event of the Spanish Committee of the WEC                                       CEPSA Tower ‐Madrid, 25 September 2018