Energy company executives gathered in Houston today for a major industry conference are optimistic about the outlook for global oil production and investment in the long term, but are realistic about the negative impact of the current economic crisis.
"The world economy will recover. The future is not canceled," said BP Group Chief Executive Tony Hayward, speaking before about 2,200 attendees at the annual CERAWeek conference hosted by Cambridge Energy Research Associates. Yet, much has changed in the past year in terms of oil prices and the economic climate. "The bubble has burst," Hayward said. "Optimismism has given way to pessimism."
Sharon Epperson talks with Lukoil Deputy VP Andre Gaidamaka in the video at left.
Energy companies will need to invest $26 trillion between now and 2030 to meet demand, Hayward said. Energy producers have to invest $1 trillion annually — a steep price tag in the current economic climate.
The reality is $40 oil is crimping investment and the result could drastically alter the supply and demand balance in the global marketplace. OPEC Secretary General Abdallah Al-Badri said this week member countries will have to postpone 35 of 150 new oil projects and may not reach their goal of increasing capacity 5 million barrels per day by 2012.
OPEC is not alone and the slowdown in investment will have serious consequences, according to industry leaders here. Nobou Tanaka, executive director of the International Energy Agency, tells CNBC: "Definitely this has a very much negative impact for the future. when the demand comes back, we may have a supply crunch."
Still, CEOs from the major oil comapnies are upbeat about future prospects over the long term.
Royal Dutch Shell CEO Jeroen van der Veer says the best way to deal with the recession is to take a four-pronged approach: cut costs, think twice before making investments, be able to finance current projects and communicate how you see the current climate.
See what Royal Dutch Shell CEO Jeroen Van der Veer has to say in the video at left.
Conference organizers hope these industry leaders will help clarify the choices major national and international energy companies will have to make in light of the global recession. There will also be some discussion on renewable fuels and how they develop in a more favorable policy environment, yet very difficult economic setting. Yergin says the hope is CERAWeek can help provide a framework for the decisions about the long-term investment that energy requires.
- Video: Nobuo Tanaka, International Energy Agency, executive director, discusses worldwide oil production and current energy markets