France’s super-major Total is warning that the world may see a supply deficit of 10 million barrels per day (bpd) between now and 2025, due to continued underinvestment in the industry, the OPEC + pact and cracks in the business model of shale from the USA.
“There is a risk of a supply crisis in the medium term,” Helle Kristoffersen, President of Strategy and Innovation at Total, said in the company’s fourth quarter earnings conference call this week.
“We saw in 2020 how OPEC managed to bring market discipline back. We saw the cracks in the United States shale model and we saw continued underinvestment in the oil industry as a whole,” said Kristoffersen.
The market needs new oil projects, considering the fact that many oil producing fields will experience natural declines in production, the executive said.
“And this is true, even if you have a very cautious view on the recovery of short-term demand and levels of future demand,” added Kristoffersen, noting that “a gap of 10 million barrels per day in supply between now and 2025, it’s a massive supply deficit to cover in just a few short years. “
Last year, coronavirus accelerated a structural decline in investments in upstream oil, as all E&P companies, oil supermajors, U.S. shale producers and domestic oil companies cut capital spending in the wake of falling prices.
Investments in new oil supplies have now fallen to their lowest level in more than a decade.
OPEC + currently has a lot of idle capacity that can go into operation when demand recovers. But sustained investments in oil and gas will be needed to meet global oil consumption, which the world will continue to need, with peak demand or not, warn analysts and meteorologists.
“The world may be heading towards a supply crisis, although after 2021. A recovery in oil demand to over 100 million barrels / day in late 2022 increases the risk of a material supply gap at the end of this decade. , causing a price increase, “says Simon Flowers, Wood Mackenzie’s president and chief analyst.
By Tsvetana Paraskova for Oilprice.com
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