By Ikenna Omeje
Nigeria is set to benefit as global crude oil demand is set to rise to 104 million barrels per day by 2026, up 4 percent from 2019 levels, according to a report by the International Energy Agency (IEA).
In Oil 2021, the IEA’s latest annual medium-term market report, the global energy watchdog said that the forecast for global oil demand has shifted lower, and demand could peak earlier than previously thought if a rising focus by governments on clean energy turns into stronger policies and behavioural changes induced by the pandemic become deeply rooted.
Crude oil accounts for 90 percent of Nigeria’s foreign exchange earnings and 70 percent of its revenue. A huge rise in global crude demand, will be good for the country and will help it get back on its feet economically from the impact of Covid-19 pandemic.
In March 2020, the Minister of Finance, Budget and National Planning, Zainab Ahmed said the country’s 2020 budget of 10.59 trillion naira ($29.42 billion) would be cut by about 15 percent. She also said the initial assumed oil price of $57 per barrel would be reduced to a worst case scenario of $30 per barrel. The government proposal was as a result of the impact of Covid-19 pandemic, which forced oil prices to plunge to record low.
However, the IEA in a release on Wednesday, said the global World oil markets have rebounded from the massive demand shock triggered by Covid-19 but still face a high degree of uncertainty that is testing the industry as never before.
“The Covid-19 crisis caused a historic decline in global oil demand – but not necessarily a lasting one. Achieving an orderly transition away from oil is essential to meet climate goals, but it will require major policy changes from governments as well as accelerated behavioural changes. Without that, global oil demand is set to increase every year between now and 2026,” the release quoted Executive Director of IEA, Dr Fatih Birol, as saying.
“For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector.”
The report projected the global oil production capacity to increase by 5 mb/d by 2026, adding that at the same time, the historic collapse in demand has resulted in a spare production capacity cushion of a record 9 mb/d that could keep global markets comfortable in the near term.
To meet the growth in oil demand to 2026 in the IEA report’s base case, it said supply needs to rise by 10 mb/d by 2026. The Middle East, led by Saudi Arabia, is expected to provide half that increase, largely from existing shut-in capacity. The region’s expanding market share would mark a dramatic shift from recent years when the United States dominated growth. Based on today’s policy settings, US supply growth is set to resume as investment and activity levels pick up, yet any increase is unlikely to match the lofty levels seen in recent years.
“No oil and gas company will be unaffected by clean energy transitions, so every part of the industry needs to consider how to respond as momentum builds behind the world’s drive for net-zero emissions,” Birol said.
“Minimising emissions from their core operations, notably methane, is an urgent priority. In addition, there are technologies vital to energy transitions that can be a match for oil and gas company capabilities, such as carbon capture, low-carbon hydrogen, biofuels and offshore wind. In many cases, these can help decarbonise sectors where emissions are hardest to tackle. It’s encouraging to see some oil and gas companies scaling up their commitments in these areas, but much more needs to be done.”
