An oil rig on the Gaoyu Lake platform in east China’s Jiangsu Province, Friday, Sept. 17, 2021.

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Oil and gas will continue to be the dominant sources of energy for decades to come as the energy transition lags, key industry players said this week at the Asia Energy Conference in the Malaysian capital Kuala Lumpur.

John Hess, chief executive of U.S. oil company Hess, said: “We think the biggest realization that should emerge from this meeting is that … oil and gas will still be needed for decades to come.”

“The energy transition will take longer, it will cost more money, and it will require new technologies that don’t exist today,” he continued.

Hess says the world needs to invest $4 trillion a year in clean energy, and that’s not enough.

according to International Energy AgencyGlobal clean energy investment is expected to grow to $1.7 trillion by 2023.

Demand forecasts (in India) have forced us to build new refineries.

as sani

Executive Director, Indian Oil Corporation

Oil and gas are key to the competitiveness of the world economy and to an affordable and secure energy transition, Hess said.

He predicted a more constructive second half of the year for the oil market, with production reaching 1.2 million bpd in 2027. He noted that the biggest challenge facing the world is underinvestment in the industry.

“The world is facing a structural deficit in energy supply, oil and gas, clean energy,” he said.

Likewise, the OPEC Secretary-General projected in his meeting opening address that global oil demand would increase to 110 million barrels per day by 2045. Haitham Al Ghais said this growth comes against the backdrop of rapid urbanization in the coming years.

Hess CEO John Hess speaks at the Asia Energy Summit in Kuala Lumpur, Malaysia.

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In an email exchange on Tuesday, Exxon Mobil, the largest U.S. oil producer, reiterated the same sentiment.

The company expects oil to remain the largest primary energy source for at least two decades, given its importance in commercial transportation and the chemical industry.

“Liquids are projected to remain the world’s leading energy source through 2050, even with slower demand growth after 2025,” Erin McGrath, senior advisor for public and government affairs at ExxonMobil, told CNBC.

“Overall, liquids demand is expected to increase by around 15 million bpd to 2050. Almost all of the growth will come from emerging markets in Asia, Africa, the Middle East and Latin America.”

main driver?

The same is true for oil, with one of India’s largest oil companies ramping up refining capacity.

“We are probably one of the few companies and countries that will increase refining capacity by 20% in the next three to four years,” Indian Oil Corporation’s AS Sahney said in a separate panel discussion.

“This demonstrates our belief in the continued availability of fuel,” said the executive director, acknowledging that the energy transition will continue.

“But at the same time, demand forecasts in the country are forcing us to build new refineries,” he continued.

According to the International Energy Agency, India is expected to see the largest increase Energy demand in any country – demand is expected to grow by more than 3% by 2025 when the country becomes the most populous country in the world.

Saudi Arabia’s state-owned oil giant Aramco is also pinning its hopes on China and India to drive oil demand growth above 2 million bpd, at least for the rest of the year.

Speaking at the summit, Chief Executive Amin Nasser said the industry’s supply-demand balance is likely to tighten once the global economy as a whole starts to recover.

Oil demand is an ‘old story’

Commodities trader Vitol is less sanguine, predicting that demand for crude oil will peak in 2030 – two years later than the International Energy Agency’s forecast.

“We peak around 2030 and gradually decline by 2040 … Then, with the electric vehicle fleet and the energy transition took over and declined rapidly thereafter.”

While the industry faces sound fundamentals in the coming months, continued oil production in Russia and sluggish growth in the Chinese economy complicate forecasts for price movements.

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“The supply side is a bit overblown, especially Russia, where there are a lot of expectations for production losses as sanctions make it hard to get oil into the market,” Hardy said.

“With the current global economic downturn, China’s recovery has stalled a bit,” he continued, noting that China’s demand for oil is not as strong as expected.

He observed that current demand in Europe and the United States is 1.5 million barrels per day lower than in 2019, as more consumers in Europe and Asia switch to renewable energy.

“So the need is an old story.”

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