Oil heads for second week of gains on China demand outlook

DAVOS: Oil is “basically irreplaceable” and will be an essential part of the global energy mix for years to come, Haitham Al-Ghais, secretary general of OPEC, has told the World Economic Forum in Davos.

Speaking to Arab News on the sidelines of the WEF, Al-Ghais said that global leaders are beginning to understand the need for hydrocarbon fuels to power economic growth, even as they transition toward cleaner forms of energy, such as renewables.

The WEF has leaned increasingly toward an environmentalist position in recent years.

However, according to Al-Ghais, “globally, there is a better understanding that is being developed of the importance of oil.”

OPEC has “a clear vision and strategy” about the development of renewables, he said.

“But oil is basically irreplaceable, in the future, as far as we can see, for the next couple of decades, at least. The only way is that we have to fuel global economic growth by a diverse energy mix, with renewables taking up more share as the world transitions to protect climate, and hopefully keeps the targets of the 1.5 degrees (of the Paris Agreement). But that does not mean that oil has to be kicked out of the energy equation.

“We are not climate change deniers, but we have a different approach to dealing with this issue,” Al-Ghais added, highlighting the need for dialogue between differing sides of the energy debate.

OPEC’s calculations suggest that oil will still make up more than half the global energy requirement by 2045, even as renewables’ share of the world market increases.

It estimates that the global hydrocarbon industry will require $12.1 trillion of investment by 2045 to maintain supplies sufficient for economic growth.

Some financial institutions have stopped investing in new hydrocarbon resources because of pressure from the environmental activist lobby, but Al-Ghais said there were signs that this was beginning to change, especially in the energy heartlands of the US, including Texas.

“We are hoping that this will change, and we are seeing signs,” he said.

“I would hope that this will change because, again, this brings us back to the issue of dialogue and common understanding, sitting around the table with one common objective, and not to point the finger at each other, as opposed to working with each other.”

But OPEC is also committed to developing cleaner forms of energy, Al-Ghais said.

“We have to be open to adopting new forms of energy, such as renewables. Many of our member countries are already advancing this, and adopting and implementing renewables, including Saudi Arabia, of course, which is leading through the circular carbon economy and has ambitious hydrogen projects, under the leadership of (Saudi Energy Minister) Prince Abdulaziz bin Salman.”

OPEC+, the alliance of producers that includes Russia, is not scheduled to meet again until June, despite stresses in the global energy sector caused by international sanctions over the war in Ukraine.

Al-Ghais said that OPEC+ supply policy will not be affected by geopolitical tensions.

“We always continue to try to keep politics out of our decision making. We are a technical, intergovernmental organization that looks at raw data, supply demand balances, technical things, and with an objective of doing what’s best for our countries, and the wider global community,” he said.