According to the International Energy Agency’s (IEA) Oil 2023 report, inflated prices and security of supply concerns mentioned by the global energy crisis are speeding up the transition towards cleaner energy technologies. The report projects that global oil demand will increase by 6 percent between 2023 and 2028, to attain 105.7 million barrels per day (mb/d). This increase in demand will rely on current government policies and market trends, with support from petrochemical and aviation sectors robust demands.
After 2026, it has been projected that the use of oil for transport fuels will begin to decline with the expansion of electric vehicles, improvement of fuel economy and growth of biofuels all cause reduction of consumption. Executive Director of IEA, Dr. Faith Birol, said that the transition to a clean energy economy is rising rapidly, with a likely global oil demand as electric vehicles, energy efficiency and other technologies gain advancement. Oil producers were advised to pay attention to the change and ensure calibration of their investment decisions for a proper transition.
Saudi Arabia, the UAE and Iraq leads capacity building in OPEC+.
Also, IEA report asserted that there will be domination of medium-term capacity expansion plans by oil producing countries outside the OPEC+ alliance, with a 5.1 million barrels per day (mb/d) supply boost under the lead of the US, Brazil and Guyana. Within OPEC+, capacity building is led by Saudi Arabia, the UAE and Iraq, while African and Asian members struggle with increasing declines, and the production of Russian oil falls as a result of sanctions. The crude export potential of Africa is reduced by 15 percent due to refinery additions and unstable crude production.
Another projection by IEA suggests that oil demand in Africa, the Middle East, Eurasia and Latin America with increase over the forecast period from 2022 to 2028. In 2028, Oil demand in Africa will be 530 kb/d more than in 2022, supported by the increasingly expanding population of the continent, as GDP growth surpasses 3 percent on average over the forecast period. Oil use in Africa is majorly channeled towards gas/oil owing to the wide usage of diesel generators and limited access to stable electricity grids.
OPEC+ alliance contributes 12 percent of the growth.
LPG, a clean cooking fuel, will lead the growth of consumption at 4.7 percent per year, among the refined products. This huge increase of 150 kb/d over the forecast period is fostered by urbanization due to the rising spread of propane and butane in cooking rather than traditional biomass. Contrary to capacity, the outlook for the actual supply growth reveals that the US, Brazil and Guyana will dominate gains, accounting for 80 percent of the rise over the 2022-28 period. All together, 12 percent of the growth is contributed by OPEC+ alliance.
Over the six-year period, African OPEC+ members, except Libya, are likely to suffer significant losses owing to the inability of producers to attract enough investment to stop declines. Nigeria, when output declined to 40-year lows, briefly lost its position as top crude oil producer in Africa, 2022. However, after its recovery and stabilization of major export streams, it has resumed the top spot in ranking. But the IEA believes Nigeria’s top-slot rank to be short-lived due to serious underinvestment and sabotage in capacity and production.
Petroleum Industry Act to spur new investment in Nigeria.
Additionally, other African countries’ recent discoveries offer viable options to investors. Many believe that the future of the Nigerian oil industry depends on the success of the Petroleum Industry Act to lure new investment. This new law has installed regulatory bodies in the upstream and downstream sectors and the NNPC Limited. Investors are also offered improved fiscal terms that are believed by the government to attract substantial new spending, by the law. Despite this, recent signals from international oil companies are not promising.