French total Total warns that the world could wake up with a supply shortfall of 10 million barrels per day (bpd) between now and 2025, due to continued underinvestment in industry, the OPEC + pact and cracks in the shale business model USA.
“There is a risk of a medium-term supply crisis,” Helle Kristoffersen, President, Strategy and Innovation at Total, said in Q4’s earnings call this week.
“We saw in 2020 how OPEC managed to restore market discipline. We saw cracks in the US shale model and we saw a continuous underinvestment in the oil industry as a whole,” Kristoffersen said.
The market needs new oil projects, given that many oil producers will see natural declines in production, the executive said.
“And that’s true, even if you have a very cautious view of short-term demand recovery and future demand levels,” Kristoffersen added, noting that “a gap of 10 million barrels per day in supply between now and 2025,” this is a massive supply shortage to cover in just a few years. “
Last year, the coronavirus accelerated a structural decline in upstream oil investment, as all E&P firms, oil supermarkets, US shale producers and national oil companies alike reduced capital expenditures following falling prices.
Investments in new oil supplies have now fallen to a low level of more than a decade.
OPEC + currently has a lot of spare capacity that could go into circulation when demand recovers. But sustained investment in oil and gas will be needed to meet global oil consumption, which the world will still need, maximum demand or not, warn analysts and forecasters.
“The world is likely to be a sleepwalker in a supply crisis, albeit after 2021. A recovery in oil demand back to over 100 million b / day by the end of 2022 increases the risk of a supply gap at the end of this year. decade, triggering a price increase, ”says Simon Flowers, president and chief analyst at Wood Mackenzie.
By Tsvetana Paraskova for Oilprice.com
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