Tor Fjaeran, President of the World Petroleum Council, is sharing ideas about the key energy transformation issues affecting members at the World Petroleum Council.
The Oil&Gas industry has been through an extraordinary transformation. With primary energy consumption predicted to rise by up to 50% in the coming 25 years, we will continue to need all energy sources to supply safe, reliable and affordable energy to meet global energy demand.
Tor Fjaeran, President of the World Petroleum Council, reported that in the nearest future the world economy will double in size, billions of people will move out of poverty as living standards rise, resulting in another 2 billion energy consumers.
“Both IEA and OPEC scenarios still expect most of the world’s energy needs to be met by oil and gas in 2035, reaching about 105 million barrels a day.
However, we are experiencing an energy transition. Renewables will see the most dramatic increase during that period, rising from the current 3.2% globally to around 15% by 2035, presenting a five-times increase”, said Tor Fjaeran.
The WPC President expects that the future demand will be mainly driven by non-OECD countries — especially China and India, which will account for two thirds of the total global demand. The demand outlook will be influenced by several factors, such as new mobility models, digitalisation and other innovative technologies, changing consumption patterns, shifting industry dynamics and environmental regulations. This is expected to slow down growth in oil demand, mainly through energy efficiencies, increase of electric vehicles and battery power, and alternative fuel replacements.
“The future is certainly more electric – a clean and silent source of energy for the end-user. Oil is likely to see a transition from oil for fuel to oil for products. However, gas demand is still rising”, said Tor Fjaeran.
There are still 1.3 billion people around the world without any access to electricity. About 3 billion rely on primitive, unsafe cooking fuels that cause 4 million deaths a year. The challenge we face is getting clean and affordable energy to those who need it most. So, we have to continue to provide the safe, affordable, reliable, and sustainable energy required by the world’s growing population while mitigating its climate impacts:
– Open and competitive markets.
– Natural gas will provide a vital lower carbon energy source.
– Make use of innovations and technologies to make the use of oil and gas cleaner and minimize emissions.
– Policy. There is a growing belief among policy makers and regulators, investment houses, and many others that the oil and gas industry is dirty, and environmentally unfriendly.
Mr. Fjaeran said that Oil&Gas is a cyclical industry responding to oil prices. And it recently went through a massive downturn, which led to everybody having to tighten their belts. Major cost cutting has led to making the industry leaner, now delivering more robust projects. Cost cutting also meant large scale lay-offs – adding to the negative perception of the industry. He mentioned a saying “never waste a good crisis”, meaning that through simplification, standardisation, modernisation and cooperation, material costs have been reduced by 30-50% since the price crash in 2014.
“Following a period of very low investments in new projects and delays or cancellations of many projects, we are facing the challenge to replace reserves quickly to fill the gap. This will require massive investments. Investment in upstream oil and gas fell by 44% between 2014 and 2016 despite major cost cutting efforts. It is estimated that about $1 trillion in investments were lost during the downturn. The shale fracking technology revolution is playing a significant role in balancing out this lack of investments. Not just because of its enormous reserves, but also because of its flexibility and ability to quickly respond to changing markets”, said Tor Fjaeran.
The WPC President thinks that in the Oi&Gas industry, innovations are a game-changer. Digital technology is now helping to use energy more efficiently – maximising production and minimising downtime, and is very high on all companies’ agendas.
The main WPC focus is young people as they are the future of the industry. The majority of baby boomers are about to retire, creating a shortage of experienced technical talent: experience that we still need, while we at the same time have to attract talents with new skills. This means that in many companies more than 50% of the workforce are now under 35 years old.
“Attractiveness to talents is a growing problem for the industry, especially in the OECD part of the world. It is less of an issue in countries like India, China and Russia, but this has high attention in company board rooms and in WPC”, said Tor Fjaeran.
Now we are here in Saint Petersburg at the 6th WPC Youth Forum, where Leadership, Innovations and Sustainability are the three pillars in discussions over the next few days. Attendees are excited to discover how young people see the future of Oil&Gas industry.