BAKU, Azerbaijan, Sept.1
By Leman Zeynalova – Trend:
Without the COVID-19 effects, oil would have reached a supply plateau in 2023, and by mid-century, says DNV GL, a Norway-based company, Trend reports.
“We expect that the effects of the COVID-19 pandemic lead to a 13 percent reduction in global oil demand in 2020, mainly due to the impact on the transport sector. Our view of oil demand is that it has already reached a plateau, peaking in 2019 and will not increase further. Should the learning rate of Li-ion batteries be 50 percent higher than our estimate of 19 percent, then a more rapid decline in EV costs will accelerate the share of EVs, and by 2050 oil supply would decline by 7 percent. Should there be an equivalent 50 percent change, but in the opposite direction, then oil supply would be 15 percent above the base case in 2050. By doubling the level of EV subsidies with respect to our base case, oil supply would fall globally by only 7 percent in 2050. Should EV subsidies follow a path corresponding to a 90 percent reduction of our base case, the long-term oil supply will grow by 8 percent.”
The COVID-19 pandemic is adding to uncertainties, and more volatile prices and the realization that returns on investments in development projects are not guaranteed, and nor is a steady flow of dividend income a sure thing – a critical issue for institutional investors, according to the company.
DNV GL notes that understandably, investors are now looking at standard hydrocarbon assets with a greater degree of caution.
“Employment preservation is likely to extend the continuation of pro-extraction policies, but these concerns will probably reduce over time as economies transform, with skill sets and expertise transferred to other industry areas. As oil fields are depleted faster than the demand for oil declines, continued investment in new fields will be required. Investment in the high unconventional share in North America will prevail until the late 2030s, as depletion rates in unconventional fields are higher. The reduction in oil demand will make it less attractive for the industry to expand production into challenging environments, such as deep water and/or Arctic locations. Except for Middle East and North Africa, other regions that are dominated by conventional fields will require very little capacity additions after 2040.”
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