CERAWeek: OPEC Leaders Formally Meet Shale Producers and Investors

March 6, 2018


Despite volatility in oil markets, future growth demand will be strong.

That’s the message from several speakers at the CERAWeek conference so far, but the big story is in the meetings.

At this year’s Houston conference are meetings on economics between members of OPEC and other oil producing nations and American shale drillers to talk about the future of oil and gas markets.

And OPEC’s secretary general has been meeting with representatives of financial markets in what he hopes will lead to closer relationships.

Hedge funds and other players have been influential in keeping some oil producers on their feet during the oil price downturn over the past few years, and OPEC Secretary General Mohammad Barkindo said he wants to learn more about the future impact of economies on the markets.

The oil industry will need investments of up to $20 trillion dollars over the next 25 years, Barkindo is saying, with even “conservative” estimates saying more than 20 million barrels of new capacity will be needed over the next five years for demand to be met.

In fact, to put an alarming point on the meetings, Barkindo told CNBC that OPEC believes $1 trillion in investments were lost because of the oil price downturn in 2015 through 2016 — but now the 100-million-barrel-per-day pumping mark is in sight, indicating how healthy the oil market is right now.

The lack of new investment — or the lagging quantity of it — will hit oil markets down the road, when demand increases outstrip production in a few years.

Barkindo put another alarming point on it, telling interviewers that we’re creating an environment in which there will be another energy crisis.

Of course, Saudi Arabia’s Aramco is also looking to go public in a place and time yet to be announced, which leads to increased interest by Saudi Arabia and OPEC in investment markets.

Saudi Aramco has already said it will invest between $20-and-$30 billion dollars in its Motiva US subsidiary, with $12 billion going for refining capacity upgrades at Motiva’s Port Arthur refinery.

Still, extended OPEC meetings with investors and shale drillers appears to be a first; oil nation leaders met with investors and a few drillers at last year’s CERAWeek, but this year’s list of meetings appears to have expanded and no one we’ve talked to can remember those meetings taking on the importance OPEC leaders have expressed this year.