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Oil to remain world’s largest energy source over next two decades

Globally a lot of efforts are being made towards minimizing the reliance on hydrocarbons and increasing the quota of renewables in the overall energy mix. Though efforts are going on at good pace and huge capital has been injected in this direction but industry experts feel still there is a long way to go to realize this dream.

It is evident in the latest edition of the OPEC World Oil Outlook that predicted that oil would remain the world’s largest source of energy over the next two decades, despite the increasing importance of renewables.

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Oil to dominate till 2040

Released at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), the latest edition of the World Oil Outlook forecasts that oil will supply just over 27 percent of worldwide energy needs in 2040, while natural gas will see its share at slightly more than 25 percent.

The scenario would see demand grow from 95.4 million barrels per day, in 2016, to reach 111.1 million barrels per day by 2040, with the global economy growing by an average of 3.5 percent per year during that time. Meeting this demand would require an overall investment of around $10.5 trillion across upstream, midstream and downstream operations.

Surge in oil prices

Following the Saudi Arabia’s anti-corruption probe, in the first week of November, oil prices hit a two-year high. Brent hit a high of $64.05 a barrel on Monday and it was the highest level since July 2015.

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However, uncertainty prevails over the markets as developments in Riyadh put more pressure on costs. Industry pundits credit this rise to the ongoing cuts imposed on the production of oil till March 2018.

Maintaining the momentum

Mohammad Barkindo, OPEC Secretary General, stated the 2017 outlook was more positive than last year, partly thanks to oil exporting nations’ efforts to stabilise the market.

“The past year has been an historic one for OPEC and the global oil industry,” Barkindo said.

“Since publication of the World Oil Outlook, in early November last year, the oil market has undergone significant change and transition. It has been a period where the rebalancing of the global oil market has gathered vital momentum, buoyed by a number of important factors,” pointed out Barkindo.

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Renewables to see fastest growth

However, while prospects for the industry are strong, the World Oil Outlook predicts demand for oil will grow more slowly than the overall demand for energy. Renewables will see the fastest rate of annual growth, at 6.8 percent per annum, although their overall share of the energy mix is only expected to reach 5.4 percent by 2040 due to their lower starting base.

“Alongside an ever-expanding global population and the critical importance of reducing energy poverty, these growth rates mean energy demand is expected to increase by close to 100 million barrels of oil equivalent a day between 2015 and 2040,” Barkindo said.

“OPEC is greatly supportive of the ongoing development of renewables and many of our member countries have vast solar and wind resources, with significant investments being made in these areas,” added Barkindo.