Participants hail EU, OPEC energy dialogue

Energy challenges11 November 2013, Vienna, Austria – The tenth Ministerial-level meeting of the energy dialogue between the European Union, EU, and the Organization of the Petroleum Exporting Countries, OPEC, took place in Vienna today.

Representatives of OPEC included: Dr Abdel Bari Ali Al-Arousi, Alternate President of the OPEC Conference, Minister of Oil and Gas of Libya; Ms Nawal Al-Fezaia, Kuwaiti Governor for OPEC; and Abdalla Salem El-Badri, Secretary General of OPEC.

Representatives of the EU included: Jaroslav Neverovič, President of the EU Energy Council, Minister of Energy, Lithuania; Assimakis Papageorgiou, Incoming Deputy President of the EU Energy Council, Deputy Minister for Environment, Energy and Climate Change, Greece; and Günther Oettinger, Commissioner for Energy, European Commission.

The participants reflected upon the fact that this was the tenth Meeting of the EU-OPEC Energy Dialogue since its establishment in 2005, a considerable achievement to the benefit of both sides. Supported by its roundtables, workshops and studies, the Energy Dialogue has resulted in productive joint activities on a wide range of issues, covering the oil industry, the energy sector generally and associated areas, such as sustainable development and environmental matters. Shared experiences and new insights have enhanced understanding between the two parties, with direct practical implications for their energy sectors.

Both parties welcomed the recent more favourable news on the economic front. The outlook for the oil industry has improved since the previous meeting of the Energy Dialogue in June 2012. Indeed, for the first time in many years, OPEC has raised its long-term reference case projections for world oil demand growth. The more positive economic signals emerging from the EU, particularly the Eurozone, were also underlined. However, there was an air of caution about over-reacting to these positive trends, which were considered to be a gradual process.

Throughout, it was stressed that the Energy Dialogue was well-placed to address the common challenges facing the EU and OPEC. Also there was an underlying recognition of the need for stability, both in the energy sector and in national economies, in the interests of steady, sustained economic growth across the world as a whole.

The market outlook and developments from the short term up to 2035 were examined in the first session of the meeting, together with a review of energy and climate policies.

OPEC gave the opening presentation on recent oil market developments and short-term prospects, highlighting the fragile recovery of the global economy in 2013. After a sluggish first quarter, however, the momentum increased, fuelled mainly by OECD economies, while developing economies largely saw a slowdown in their high growth rates of recent years. Many risks remained, including the ongoing fiscal and monetary uncertainties in the USA, the continuing challenges facing the Euro-zone, Japan’s uncertainty in lowering its debt-to-GDP ratio and an uncertain outlook for China’s financial system. The oil market continued to be well supplied, with sufficient crude production from OPEC Member Countries and a robust increase in non-OPEC supply, mainly from North America. Healthy stock OECD levels and a continued rise in the non-OECD signalled that market needs were fully met. OPEC production capacity would provide an additional cushion for the market.

The EU then outlined its 2030 framework for EU climate and energy policies. On 27 March 2013, the European Commission adopted a Green Paper on “A 2030 framework for climate and energy policies”. The Green Paper stated that developing such a framework is needed to reduce regulatory risk for investors and to mobilize the funding needed to support progress towards a competitive economy and a secure energy system. The Green Paper further emphasized that such a framework is needed to establish the EU’s ambition level for its greenhouse gas emission reductions in view of a new international agreement on climate change foreseen for adoption in 2015. The EU’s 2030 framework will build on the experience learnt from the 2020 framework and will identify where it believes improvements are needed. The framework will aim to ensure progress towards longer-term energy and climate objectives, but at the same time take into account security of supply and competitiveness issues. The Commission stated that it will present its proposals on a 2030 framework for the EU in early 2014.

OPEC provided an assessment of the long-term oil outlook. Its reference case saw energy demand rise by 52 per cent in 2010–35. Fossil fuels would account for 80 per cent of global energy supply by 2035. Oil was expected to remain dominant in meeting the world’s energy needs, with demand reaching 108.5 million barrels a day by 2035, an annual increase of 0.9 mb/d; developing Asia would account for 88 per cent of the increase. Transportation was key to this rise in demand. In satisfying demand growth, there were abundant resources with a wide variety in liquids supply. While tight oil had been a primary driver of recent supply increases, it was suggested that inherent constraints might appear over the longer term. These projections were subject to the effects of uncertainties in such areas as world economic growth, technology and policy-making. The uncertainties underlined the fact that security of demand and supply are two sides of the same coin. OPEC underlined how future climate-change related policies and measures might affect the use of fossil fuels in general, and oil in particular. Downstream, falling utilization rates pointed to the need for refinery closures in the coming years, especially in OECD countries.

The EU then closed the first session with a review of its key external energy policies. At the international level, the EU stated that it is confronted with increasing import dependence in some forms of energy in a world with rising global energy demand. It emphasized the need to engage with all stakeholders to address issues related to security of supply and demand, climate change, environmental protection, improving access to sustainable energy for developing countries, and competitiveness. All these issues have trans-border effects and need to be addressed in an international perspective.

The second session focused on the current status of the EU-OPEC Energy Dialogue and discussed its future activities.

The EU presented a summary of the conclusions of the joint roundtable on the “Safety of the offshore oil and gas industry”, held in Brussels on 30 November 2012. The roundtable, attended by participants from OPEC Member Countries and its Secretariat, the oil industry, associations, regulators, the Commission and EU Member States, shared experiences and best practices in the area of offshore safety. During the roundtable, it was highlighted that, besides efforts in handling accidents, attention must be given to improving preventive safety measures, in particular in drilling. There was broad agreement from all parties on the benefits of continuing the exchange of expertise in this area with a view to promoting global best practices.

The EU reported on the joint study on the ‘Potential manpower bottlenecks in the oil and gas industry’ and the accompanying roundtable held in Brussels on 27 June 2013. The study identified a gap in professionals in oil and gas companies due to the retirement of workers recruited in the 1970s. Moreover, in recent years, the oil and gas industries have lost their attractiveness and not enough people are enrolling in related university programmes. However, energy demand is expected to increase and to be met by increasingly complex technologies, leading to an increased demand for specialised workforces. The lack of such expertise can cause delays in projects and investments. It was suggested that the issue of “manpower bottlenecks” should be included in the consumer-producer dialogue under the auspices of the International Energy Forum.

A joint study on the outlook and challenges for the petrochemical industry would be started, followed by a roundtable. Meanwhile, the deliberations on other joint study — on energy efficiency — were still in progress.

Additionally, joint experts’ meetings were planned for technical exchanges and discussions on the most recent oil outlooks and energy scenarios of both OPEC and the EU.

A report on these activities will be submitted to the 11th Meeting of the Energy Dialogue, which is scheduled to take place in Brussels, Belgium, in 2014.

Finally, the participants expressed satisfaction with the outcome of the meeting and saw it as another important step in the EU-OPEC Energy Dialogue, to which both parties expressed their continuing commitment in the spirit of mutual trust and cooperation.

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