RIYADH: Oil will continue to play a decisive role in future energy pathways, as petroleum products are essential for the functioning of various sectors, OPEC's secretary-general said.
Haitham Al Ghais said member countries of the Oil Producing Alliance have clear national electrification plans, which are important to reduce emissions, according to a statement from the organization.
The comments came after the International Energy Agency predicted that global oil demand would continue to decline due to rapid adoption of electric vehicles.
Earlier this month, OPEC said global oil demand would rise by 2.25 million barrels per day in 2024 and 1.85 million barrels per day in 2025.
“We believe that oil will become an important component of future energy pathways and this is exemplified by the fact that petroleum products are essential for the functioning of other sectors such as electricity,” Al-Ghais said.
He added: “OPEC member countries have clear national electrification plans, which are part of the shared belief that all sources of energy will be necessary to meet future demand growth, reduce emissions, tackle energy poverty and ensure energy security.”
Al-Ghais said that energy resources are not locked in a “zero-sum game” and that oil and petroleum products are important for electricity transmission.
He said it was practically impossible to completely replace oil with electricity.
“Reality tells us that oil does not operate in isolation, cut off from other sectors and industries. Rather, the versatility of petroleum and petroleum-derived products is such that they play an indispensable role in a host of other sectors and industries,” Al-Ghais said.
He added: “It is also important to consider the abundance of petroleum products in electricity transmission, which are used in the construction, maintenance and installation of cables, overhead lines, pylons, transformers, substations and control systems. components and technologies that make up this critical infrastructure.”
According to Al Ghais, the expansion of the electricity grid can only be done with the help of petroleum production.
He said that underground electrical wires require insulation sheaths, which are made of petroleum-derived materials. Meanwhile, transformers – an important device in electricity transmission – also need oil to function.
“For a transformer to operate properly, transformer oil is essential. It insulates the transformers and ensures that they can operate at a constant temperature. These are mainly made from mineral oil – a petroleum distillate,” Al-Ghais said.
He added: “The transport of equipment by road, rail, air and water involves vehicles, often highly specialized, which consume petrol, diesel, aviation and marine fuel. And vehicles, such as cable-laying vessels, and the materials needed to build this critical infrastructure , such as steel, aluminum, copper and concrete, require a host of petroleum products.
The OPEC chief said the expansion of the electricity grid would put pressure on supply chains, which could pose challenges to grid development in the coming years.
“According to the IEA, to achieve national energy and climate goals, 80 million kilometers of overhead power lines and underground cables will need to be added by 2040. That is equivalent to replacing the entire existing global grid, which is equivalent to 100 trips to the moon and back,” he said. said
According to Al-Ghais, the call to stop new investment in oil projects will threaten the smooth operation of the electricity grid and the production of oil products needed for expansion.
In its latest monthly report released in July, OPEC said total world oil demand will reach 104.5 million bpd in 2024, driven by markets such as China, the Middle East, India and Latin America.
The Alliance has indicated that industrial, manufacturing and agricultural activities in non-Alliance countries will drive increased demand for financial assistance and development.
OPEC also noted that petrochemical capacity expansion in non-OECD nations could spur global oil demand growth.
The report warned that growth in global oil demand will also depend on various factors, including future economic developments in major economies.
In June, Al-Ghais noted that demand for oil will increase, spurred by a rebound in the travel industry.
Speaking at the International Economic Forum, he said OPEC is focusing on market fundamentals to ensure supply, stability and resilience.
“It's important to stay focused on the fundamentals. We look at economic growth, we look at supply, we look at demand, and yes, we still believe oil demand is good and resilient,” Al-Ghis said.
He added: “Last year, OPEC's forecast for oil demand was the best, and everyone who criticized OPEC's forecast kept adjusting their numbers throughout the year.”
The OPEC chief stated that more investment is needed in the oil industry to stabilize the market and meet the growing demand, adding that energy resources are necessary for the future and efforts should be made to reduce emissions.
