France’s major Total warns that the world could face a 10 million barrels per day (bpd) inventory shortage between now and 2025 as a result of continued underinvestment in industry, the OPEC + pact and cracks in the US shale business model. .
“There is a risk of a supply crisis in the medium term,” Helle Kristoffersen, President of Strategy and Innovation at Total, said during the company’s Q4 earnings call this week.
“We have seen in 2020 how OPEC has managed to bring back market discipline. We have seen the cracks in the US shale model and we have seen continued underinvestment in the oil industry as a whole,” Kristoffersen said.
The market is in need of new oil projects given that many producing oil fields will see natural production decline, the executive said.
“And that’s true even if you take a very cautious view of the short-term recovery in demand and future demand levels,” added Kristoffersen, noting that “a gap of 10 million barrels per day in supply is between now and 2025, that’s a huge shortage of supplies in just a few years. “
Last year, the coronavirus accelerated a structural decline in upstream oil investment as all E&P companies, oil superajors, U.S. shale producers and national oil companies drained their capital expenditures in the wake of the price crash.
Investments in new oil supplies have now fallen to a low of more than a decade.
OPEC + currently has a lot of spare capacity that can be put into use when demand recovers. But sustained investment in oil and gas will be needed to meet the global oil consumption that the world will continue to need, whether it peaks in demand or not, analysts and forecasters warn.
“The world could be sleepwalking in a supply crisis, albeit after 2021. A recovery in oil demand to more than 100 million barrels per day by the end of 2022 increases the risk of a material supply opening later this decade, resulting in an upward price hike . ” says Simon Flowers, chairman and chief analyst at Wood Mackenzie.
By Tsvetana Paraskova for Oilprice.com
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