EMEA News
EnQuest Joins Saudis in Predicting Global Oil Shortage Due to Lack of Investment
United Kingdom-based exploration and production company EnQuest has sided with the opinion recently expressed by many Middle Eastern Countries that lack of investment may cause significant capacity issues – and, by implication, skyrocketing prices – in the foreseeable future.
Amjad Bseisu, CEO for EnQuest, told CNBC at the World Economic Forum in Davos that although he sees more stability in oil prices and "slightly more upside than downside" in coming months, "The actual capital spending in the industry has declined in this cycle more than any other cycle."
He added, "We've seen, according to the HIS, almost two trillion dollars now and last year we were about a trillion – almost two trillion – over the last ... from 2014 to 2019 five year cycle, and that will have a significant impact on the availability of additional capacity in the future."
This is an argument that has been voiced repeatedly over the past few months by Khalid Al-Falih, energy minister for Saudi Arabia, and he too was on hand in Davos to reiterate his concerns with CNBC.
He said, "I believe if the investment flows that we have seen the last two or three years continue in the next two or three years, we will have a shortage of oil supply by 2020.
"We know, from what we have seen in the last couple of years, that prices around the current level and below are not attracting enough investment… and we know that demand is picking up at 1.2 to 1.5 million barrels a year; so between increase in demand and natural decline, we need millions of barrels every year to be brought to the market, which requires massive investment."
The Saudis have a vested interest in a healthy recovery of oil prices at least for the short term, as they diversify their economy under the Vision 2030 plan and prepare to make an Initial Public Offering of Saudi Aramco (which will reportedly get underway in 2018).
However, when asked what oil price level is necessary to make the Saudi vision possible, Al-Falih replied, "We're not designing our plan around a specific price scenario."
Earlier this month at the Global Energy Forum in Abu Dhabi, Fatih Birol, executive director of the International Energy Agency, warned, "We believe that this year, if there are no major oil projects starting, ... in three to four years' time we may see a significant supply-demand gap, with major consequences.
