OPEC’s Al-Ghais: Peak oil delay highlights need for inclusive energy transition

DUBAI: Haitham Al-Ghais, the secretary-general of OPEC, stated on Tuesday that the peak of oil demand is expected to be delayed, likely surpassing projections to extend beyond 2045, underscoring the imperative for an “inclusive” energy transition.

Addressing the World Government Summit, the Kuwaiti executive highlighted that peak oil demand is anticipated to escalate, reaching 116 million barrels per day, propelled by burgeoning population growth and rapid urbanization.

“Whether you come on a plane, whether you drive a car, whether you sit here, our dressing, everything we have today is a derivative of oil. For us, in OPEC, we take the approach that all forms of energy will be required. No single source of energy will be able to replace another especially oil,” Al-Ghais said.

“Today, oil represents over 30 percent of the global energy mix … and will continue to be a major component of the energy pie, or the energy mix that continues to grow in the future years after 2045.”

He emphasized the necessity for a pragmatic and realistic strategy, stating that disengaging from the existing energy infrastructure overnight is impractical.

Al-Ghais explained that the gradual phasing out of fossil fuels will persist as a formidable challenge, as many components required for renewable energy infrastructure, such as solar panels, EV batteries, and wind turbines, rely on oil derivatives.

With a projected population surge of 1.5 billion people, primarily in economically disadvantaged regions, coupled with rapid urbanization estimated at 585 million individuals, Al-Ghais asserted that oil will continue to play a pivotal role in this transitional phase.

“We don’t go on the basis of ideological concepts to drive our numbers. We look at third data raw data. We do a bottoms-up approach analysis. We have global access to information and consuming countries producing countries and that’s how we estimate our forecasts,” Al-Ghais stressed, cautious about committing to a specific timeline for peak oil demand.

He added: “India’s economy is going to become the third largest economy in the world, and India has overtaken China in terms of population growth. That’s going to require a lot more energy. And it’s not all going to be oil. It’s going to be all kinds of energy, everything they can get their hands on to help develop and sustain that development.”

Commending the UAE’s recent hosting of COP28, Al-Ghais underscored the importance of inclusive dialogue to ensure an orderly energy transition with positive outcomes.

“Over 650 million people around the world today without access to basic electricity. I've seen villages where people don’t have access to searching on the light. They don’t have access to taking a bike or a car to the nearest village,” Al-Ghais continued.

“We talk about energy security, we talk about energy, affordability, energy availability, but nobody really touches on the word energy poverty. And that’s another critical element to this discussion. That must not be left behind,” he pointed out.

Speaking to Reuters on the sidelines of WGS, Al-Ghais clarified that Saudi Arabia’s decision to postpone oil capacity expansion plans shouldn’t be interpreted as a signal of declining crude demand.

“First of all I want to be clear I cannot comment on a Saudi decision ... but this is in no way to be misconstrued as a view that demand is falling,” he stressed.

On Jan. 30, the Saudi government asked state oil company Aramco to revise its target for maximum sustained production capacity to 12 million barrels per day, a million barrels below the previous goal set in 2020, initially anticipated to be achieved by 2027.