tv OPEC Officials and Hess CEO John Hess Discuss the Global Oil Outlook CSPAN December 13, 2016 8:38pm-10:28pm EST
secretary-general rex tillerson san exxonmobil ceo was an accomplished oil technocrat. he made his remarks at the center for strategic and international studies in washington. this is just under two hours. >> good morning. welcome everybody to the center for strategic and international studies. my name is sarah and i direct the energy and national security program here. the fourth getting the program started please allow me to remind you that we take security very seriously here. on expect any kind of incident or accident but in the event of such an event i am your security captain and i will instruct you on how to exit the building
safely. we are very pleased today to have such a large esteemed audience for the presentation of opec's world of oil outlook. as many of you know the program hosts most of the world's publicly and privately developed energy outlook. we do this to be able to foster an open exchange of views on the changing energy landscape. we are very pleased to be hosting for the first time opec's world oil which is in its tenth year production. opec recently concluding two mating signaling the support of production cuts for opec and non-opec members in support of that rebalancing. there's certainly a lot to talk about today. our program this morning we'll have two parts. the first is a presentation about the outlook and the second is a discussion between his excellency secretary-general of
opec and the ceo of -- corporation. the great pleasure to introduce to you all mohammad the secretary-general of the organization of petroleum exporting countries. secretary-general bartend out has a long history of working in key roles at opec including at teen secretary-general and the oil and gas industry in nigeria is managing director at an acc and active at the unf triple s. and served on sustainable film. he's accompanied by dr. jorge arellano who is the energy specialist of the opec research initiative and he is laughing amid how i'd richard his name is going to present the world's oil outlook. mr. secretary-general welcome to csis. it's a pleasure to have you. [applause]
allow me to begin by thanking the csis chairman, john hamre csis president and ceo as well as my partner, john hess who is also a member of the board of trustees and to talk to an old friend, sarah for facilitating this visit. after my opening remarks i intend to invite mike colleague from our energy strategy department to take us through some of the key findings from our oil outlook which was just released last month at the abu dhabi conference.
let me say we are honored sierra to be here and thank you for fulfilling our pledge when we last met. i think before the vienna meetings you did promise that he would give us this opportunity to come and share with colleagues here. before coming here i had to look at the last month and i was pleased to see that recently you hosted two very prominent members of the opec family. ..
of the board within his country and globally. although he has now retired, but he's not tired as you can see him walking every morning, taking some jogs. guiding the country and organization in the energy cycles he has tirelessly devoted his efforts to promote the stability and growth in the international oil industry. in 1985 when he was the ceo and
have followed and worked with him closely in the years that he served as the administrator. also he was also here recently, since june to discuss the relationship. he's a very able successor and he workeyboard a very large sizf shoes but we are very pleased with the if i make that clear in 2008 in outside london he came
to represent the previous boss who was not able to make it and he decided to send the vice presidents to represent him and he also sent a note to the organizers of the retreat that although he was not able to attend, but somebody he could describe as the best produced. this was in 2008. we are very glad to have him. our presentation here today is part of the weeklong u.s. visit.
yesterday we had to engage in discussions with one of the leading icons of the industry and his colleague as well as the international monetary fund to where we discussed at length. it is a distinct honor to be here and also we look forward to meeting with him and his team in order to continue the dialogue that you encourage us to embark upon and we are grateful for the support. during the week, we will be also meeting with a select leading
hedge fund in wall street and the market makers who are checking with colleagues for the total volume being traded in new york and london. for the month of november i was told by my colleague that if you put both new york and london you arwere talking about 48 million contracts total, and about 48 billion paper ballots being traded. for us, the market players have about 94, 95 million including the title is very.
it's how do they operate. it's therefore going to focus as i said earlier on our outlook and we estimate that the united states imports about 3.6 million but it is from member countries and this is out of the consumption of about 20 million. this is to all the member countries a very important global leader in this industry therefore you can understand why we called after the meetings in vienna to come to this great country but it is my hope they
will open up a new cycle of ongoing dialogue between the organization and the united states. both parties have nothing to lose but everything to gain with this type of operation and dialogue. over the previous years i've had the opportunity to spend quite a lot of time here in washington. achieving my goals and high education with my professor and i hope that he will join us shortly. today we are here for a different reason and different capacity. this time i come as a representative of this organization which has recently gone through a very severe cyc
cycle. in the last few years, there's been talk that perhaps the organization must no longer relevant and that it had possibly lost the role that played since its founding in september. they are still alive and well. [inaudible] any naysayers proven wrong in the historic decision that is made by us recently and the subsequent meetings we now hold the agreement which was the
decision to implement the new production targets. this is the reduction of about 1.2 million. the goal of this agreement is to accelerate the ongoing drawdown and to expedite the rebalancing of the market that has been out of balance for quite too long. it's the outset of the global financial crisis. it's part of the production management process and it's been prevented due to the
finally the achievement of this agreement is the months of intensive consultations with the member countries and also between the op-ed member countries and the travel visited several of our capitals in order to help build support and the consensus that was required not only in our organization but between us and taking into account the geopolitical challenges taking place. the travel i believe paid off
and was adopted out the 170th meeting here in this city on the 28th of september. this then became known which would now know has been a call for implementation in a part of that began agreement that was agreed upon on the 20th of november and the vietnam. why is this relevant? of the go back to 2014 when the current cycle began. he must share his views of what transpired in 2014 at the outset of the cycle and he would like to also for the record to say in the midst of the oversupplied market, we saw the oil prices
plummet dropping in early 2016. this constitutes the distinguished colleagues and enormous decline of prizes at about 80% in a very short period of time. as well as the secretary is anticipated the grave situation taking place for this long period time. and the expectation from the mainstream industry that this market correction was taken over a period of time to rebalance the market but how we are all going to draw. and it is in this price crushed the field throughout the industry thousands upon
thousands of jobs were lost unfortunately that the projects were frozen or discontinuity and some producers went into bankruptcy and this is all across the industry. global spending on the exploration of production dropped by a whopping 26% in 2015 and is expected to increase by an additional 22% this year. altogether more than 300 billion years. it was with his able colleagues some of the focus reported in very high numbers especially
between 2015 to 2020. recently in new delhi we had figures between 1 trillion to $2 trillion in this period. this trend is not on track to continue that would be unprecedented in the oil industry. we have never had this been in vestments for three consecutive years. it's $10 trillion of oil related investment estimated to require in the period to 2040.
[inaudible] let me emphasize often the member countries remain committed to ensure the long-term supply to the market. they continue to invest in the upstream and downstream despite the cost and this is also despite the reduction in the revenues and the competing compg demands of the social economic development and the member countries and developing countries with huge demands from the rising populations of the national treasury. yet, when i went around the
member countries, there is still a continuing investment in the upstream in order to look at the capacity to develop the capacity to meet this feature demand. according to our recently published book the demand is focused to rise by nearly 17 million by 2040 at which time it will reach around 110 billion. so you can see that the oil producers have their work cut out for them if they intend to meet future energy requirements. but we all need a stable market for the necessary investment in the production as well as the development. one thing is for sure.
it cannot achieve this alone in the collaborative efforts and other open dialogue. it already has an extensive list of bilateral and multilateral and it holds with international stakeholders including the european union, the russian federation, china, india, the world bank, the international monetary fund, bitchy 20 and the international energy. we now hope for united states may join us for a new era so that we can work together towards our mutually beneficial goal of ensuring stability in the energy markets.
these will contribute to the economic growth and prosperity. two things that we'd aspire delet.in the member countries lt week was not only for producers, it was also good for the oil industry as well as the global economy. so, thank you very much for your kind attention and with your permission i would invite my colleagues to take us through the outlook. [applause]
thank you, your excellency. good morning, everyone. it's a good pleasure to be here. [inaudible] is a great achievement for the organization and one of the main authors of the report with a bunch of great expert so, welcome again. i invite you to use the hash tag 2016. let me start by saying it provides a very granular analysis of the many issues however in this presentation i want to focus on three main
questions. the first one is the social economic act of how it will evolve and then we focus on the outlook and how we would evolve in the long-term. we also provide a very granular analysis of the oil market and finally a new piece of analysis in this year's outlook, how could a future policy changes affect the energy outlook. after the agreement there is still a lot of uncertainty on the policies in the future and what would be the implementation of the policies so the outlook provides the detail on how this could affect the energy outlook. this would have implications on the energy demand and finally on the oil demand evolution.
so, before being important sociathe four main importantsocn the world the first one is the population will grow. we are 7.3 billion people up to 2040. we will be 9.1 billion. that is in addition to the 1.8. what i think is more important as most of the growth will be coming from the wealthiest countries. the second important changes that the average growth of the population is starting to decelerate. during the last decade the number is to 600 million people, so important change moving into the future here. the third important demographic changes that overall, the structure of the population is
aging. there is a good example here, age 65 or more currently counts for each% of the world. in 2040 it will account for 14% of the world population. it also the working age population will shrink slightly. final important change if it continues, currently 54% of the people are into urban areas ints into the future 2040 with respect to number would increase to 63%. they are getting larger and the numbers of the cities are more than 10 million people increased from 29 to more than 40 particularly important questions for policymakers in the cities. but there would also be changes from the economic point of view. the take away is the global
economic picture would shuffle. what is even more important is that where this growth is coming from. in fact, three quarters of the additional gdp will come from the developing countries. and here we cannot over emphasize the importance in the new economic picture. together they account for 24% and in 2040 to share combined would be 40%. so 40% would be china and india. also we all want to emphasize the average income levels and the world would increase and this would allow millions of people to accept poverty and join the middle class. but the income gap remains quite important.
let's zoom in a little bit on the energy up after 2040. if you take away here the energy demand would increase by 40% between 2014 and 2040. you can see on the table 2040 the total primary energy demand was 274. in 2040, we expect the number would be 382 million. that's an average growth of 1.3%. and most of these are coming from the developing countries. now it is 2.1% and in the second graph you can see the average growth for some specific regions you can see india the average growth of energy demand is over 3.5%. in terms of energy demand it was low growth and actually the energy was peaking around
20 billion slightly declining. that's from the regional point of view the message is quite clear from fossil fuels and is expected to continue however fossil fuels will continue to dominate the energy mix accounting for 77% of the mix however the fast growth of the renewables include wind and solar will start to kick in significantly. most will remain the important few and if we focus on the growth we would see that most of the additional demand is goo cod be satisfied by gas but also oil and other renewables.
together oil and gas are estimated to satisfy 53% of the world's energy needs in the future. another trend when we emphasize the outlook is that it is increasingly becoming more energy efficient, and less intensity and downward strength and this is on the back of the policies. also as you can see the use per capita between regions however the average energy use per capita in the developing world is still only one third.
now let me zoom in a little bit more on the oil market. the oil demand is set to increase to reach 109.4 million during this period. but regionally there are important differences. the demand is expected to drop 9 million per day. the demand is expected to increase significantly 25 million barrels per day. another important observation is the growth of the demand is expected to decelerate in the long-term and during the first five years the average demand growth is 1.1 million barrels
per day every year. towards the end it's only 0.3 per year. this is on the back of the lower economic growth but also the tightening of the energy efficiency. in terms of sectors, most of the growth would continue to come from the transportation sector and one third of the additional demand would come from the transportation sector but we also see a strong growth in the petrochemicals. i also want to zoom in a little bit more on the role of transportation every day we hear news and expectations about of e electric vehicles for examples of the outlook provides the analysis on how it will evolve in the future. let me start by saying the number will more than double when we look into the future. we have around 1.1 billion
passenger cars in the world and in the future that number will reach 2.1 billion so a significant decrease. but regionally there are important differences. the number will increase only marginally. most of the growth will come from the developing countries at income levels in those countries but it's important not where they will be located but what type of car in the future. currently accounts for 4% of the
conflict and in 2040 they will account for 22% so quite an important increase. and in the nonconventional is they will be taking the leading role we expect 141 million in 2040. now we move to the supply-side of the market expecting the medium term that it will recover slowly and growth will come from latin america and brazil and also the u.s. and canada. the story is a little bit different gets to remain very flat. and also it is the main source of growth initially to 2025,
2030. then it starts to kick in as the main source of growth. with this in mind, it is expected to increase to 41 million barrels a day and that accounts for 7% and 33% of the supply so in that sense the importance is expect it to increase in the future. i wanted to zoom in a little bit more on the type of prospects and here we show north america the outlook we expect it would recover in the media and turn and reach 6.3 million barrels a day in 2032 then decline to 5.4 million per day but it's also just part of th put up onee story. there's also some additional barrels from outside north america where we expect for the long-term said that in total the
crude output would reach 6.7 million in 2030 and then expect to decline to around 6 million in 2040. if we add these is expected to reach 10 million barrels and then decline to almost 9 billion. a few words from the downstream analysis but capacity is moving to china and the middle east but the additional capacity is expected to drop in the future in the first five or six years and the focus period the numbers will drop as a result of the
oriole demand accelerated the growth but also decreasing supplies. and a few words on trade and grg from around 20 million to close to 30 million per day for the asia-pacific region. this brings me to the last point. how they affect the energy outlook after a lot of uncertainty on how the energy policies will evolve. the outlook provides the analysis to tackle the uncertainty we have developed two different scenarios where we assume the timing of energy efficiency policies that in the
reference case and where we assume the scenario where there is a timely implementation of both conditional and unconditional and i that is also in both cases the global energy demand decline and also there is a shift within the energy mix and in particular it is very much affected and energy reduction policies are kept in this sector. there's also an effective course on the total energy related. in the scenario [inaudible] let me summarize the take away from the outlook is expected to increase by 40% and while reach
382 million per day. it'it continued to be shifting y from the fields to the renewables and the demand we expect growth reaching 109.4 million barrels per day. but growth is expected to accelerate in the long-term. the supply is expected to recover in the medium term and there remains a decline for 2037 demand is expected to increase. the majority of the capacity is moving and that's basically asia-pacifiasiapacific and the d finally if changes in the energy policy and reduces the further shift to the energy mix in the reno.
[applause] [inaudible conversations] thank you very much for that presentation. i think you hit a record for the really good and quick delivery of an insightful outlook. we have copies for any of you that haven't read it there is a lot of information on a number of topics that we've been talking about over the last several weeks.
but we will take some questions after we have a little bit of a discussion both on the outlook and the wonderful work you all have done. we want to take this opportunity to the dynamism that we are experiencing. before you were here you said to me what happened and give them a pretty good job of delivering on that but you were also fairly clear about the challenge of the agreement indiana and over the weekend. can you characterize for us what you see as the main challenges going forward now that you have reached an agreement?
>> [inaudible] the outcome of the accord and the way forward to november 30 i must say that the conversations were very constructive and helpful for me personally and my colleague to navigate through to november 30. now as you rightly said the issue is how do we move forward from here. we have agreed together with our partners and the member
countries led by the russian federation on this last saturday to jointly readjust our supplies to the market to the tune of nearly 1.8 million barrels a d day. we also agreed with them that this agreement would be for the period of six months beginning in january, 2017. and third, the significant and also historic works with both groups agreed to in this committee.
this committee would work with the office secretary in order to monitor the compliance and this is the first time this has happened between us so the level of commitment that we have seen. it was the commitmenthere was te higher levels of our government and mostly behind the scenes to ensure that we delivered between the op-ed and long op-ed.
for the member countries including the op-ed and also probably for the first time with the significant pass on the economies of the major consumer countries i just told you the conference in vienna came out not only to congratulate us for what we did but also the decision that it was good for japan struggling to come out of the other countries in the economic conditions and the
interest rates are at the low levels and historic levels in the territory so i am confident that what we did was to turn a historic page in global oil by establishing the platform i'm confident that in the course of the new global alliance among the producers supported by consumers that would ensure some level of stability in the markets in the short, medium and long term that would ensure and sustain investments in all of the entire supply chain but particularly in the efp i know
my partner john would share his experience with us. and also it is crucial for us to do everything we can to ensure the investments we've required to ensure the security of the future supply which is in the best interest of the global economy. >> without that perspective in the industry, clearly the secretary spoke about some of the drivers of the decision. what is your perspective on the impact it had on the industry and the outlook going forward?
>> this deal, this agreement and the other countries making this agreement is historic and monumental to have this many countries with different interests come together for a common cause and it's absolutely central for the price stability and security. we need to congratulate. the secretary-general's colleagues.
along with the opec members i think that it bodes well for the future. i also think it needs to be noted having the secretary-general here to the u.s. to be extending on the goodwill and build understanding both from the opec side but also the westside bodes well for the future of the price security as well as the price stability. you say why is this agreement so important. we had an overproduction and even though the demand was increasing a million barrels per day, it remained and while there's been a relief the last few months it wasn't enough to prop up the prices in the investment. what's the deal does is
accelerate the drawdown of the supplies to get the inventories comfortable but not excessive and if this agreement hadn't been done i think the prices would flounder for another year in the 40s, so. what impact does this path and d why is it so important? it has to do with two issues. one is investment and one is the financial deficits, both of producers but also the member countries as well in the opec. in terms of the investment side it was in the presentation just recently there's been a devastating decrease in investment. opec talked about the scum of the global investment in the world has gone from approximately $700,000,000.2 years ago to 550 billion last
year to about $380 billion this year. that is unsustainably below. it actually says you need to come and we agree about $600 billion a year of investment to the global oil and gas production. it's going to be approximate so the world is at an unsustainable position for the gas production. if you look at the public companies in the exploration business in the world after the reduced capital expenditures we talked about with lower investment levels and dividends, the industry is running about 100 billion-dollar a year financial deficits. that was last year and this year
and opec itself is running 500 billion-dollar deficit after the government expenditures. this is not sustainable. the investments today would make the important growt growth growl supply that we are going to need in the future years. another interesting point is not just why the wheel prices are important and the price stability and energy security sy and the economy but it's also important for the stock markets. the conventional wisdom a couple years ago was if you had a low oil prices would be good for the stock market but actually the last 12, there is a high correlation between the prices and the stock market so as a consequence, the take away is good for the strong stock
market. >> the point about how it's good for the investment and what's been happening with the oil markets, one of the things i want to ask about was you mentioned yesterday they analyzed was goin what's going n with the market in terms of the response to the deal. one of the fundamental questions that is still out there is in the low price environment that may stay between 1 52 to $70 rae over the next several years a lot of the opec members as john just mentioned are feeling the pain as much as the industry and having to make some hard adjustments. what is your perspective on how sustaining the cuts in the six-month time frame in light of the kind of difficulty that i'm
sure you saw when you were there yesterday but some of the companies are experiencing, how hard is it going to be to sustain that sort of discipline if the market environment remains low? i think what the other producers in the last two years has been probably the most severe almost all the member countries have high deficit numbers and construction in th and the econs included in the most well off among them and in order in terms of the pain i think what we have
gone through in the last two years cannot by any means be compared with what is required for us to restore the market stability by the actions that we took on the 20th of november and the tenth of december. some of the customers continue to ask but the have new entries which was the main variable in the equation that led to this equilibrium although we have
we were able to work hard for a high-level of compliance. >> another one folks are interested in what have we learned over the last several years and the title going forward. >> the key question is can shale and opec coexist and the answer is absolutely yes. shale is 4.5 million barrels a day of oil production out of 97 million in the world. it is not a swing producer. the only swing producer we know that saudi arabia that can go up or down several hundred thousand barrels a day in short order but shale is a short cycle producer
and this is a new key variable in the supply makes going forward. what the short cycle means is between six to 12 months of the final investment decision where long cycle like the offshore deep cycle is somewhere between three to five years from the final investment decision and first we'll so it is a new variable that we have to contend with. but when you think about that, ibut obviously was because the short cycle the one that felt the biggest front when the prices went down. so, as a consequence, when the prices started to flow into the 40s or even lower into the 20s, what you saw was a devastating decrease from 1900 to about six and also as a consequence the production has
gone down 1 million barrels a day. so the u.s. has already made its cut and i think it's a function of the fact they weighed in on the short cycle more than they did on any other supply source. in response to the low prices and the impact that has had on the industry, there have been a couple of responses and it shows the american ingenuity and innovation at its best. what happened is that the gas industry have really innovated to get our costs down. so it is operating in the efficiencies where as an example our country is a leading producer of 100 barrels a day we are able to take the drilling time in the last two to three years from 30 days to spread a new well to 15 days in the industry has followed a similar
path. in addition we need changes in the techniques and the number of stages and how much profit is used to give more for production or recovery. so rightfully so it said the production in the united states would stay flat and that number now is $50 so while the industry has lost a million barrels a day due to decreases over the last couple of years where we are now is a $50 the shale production is going to stay flat. you are starting to see that in the month-to-month numbers. having said that, while it is flat at that level with $60 into the account under way right now we see six to 12 months from now it's starting to go up in the range of 300,000 barrels a day.
but when i talked about shale and opec coexisting, but production isn't going to be enough to meet worldwide demand growth of a million barrels a day or the production of the decline of two to 3 million barrels a day that occur from the base. so it's going to be needed for sure. it's important to look at the long cycle for the second. it's about $40 billion of investments that have been deferred over the longer term. the outlook shows trillions of dollars will be needed in the investment and in the offshore deep water. right now the worldwide exploration has been decreased in responses to the price from
100 billion to 40 billion about half of that is for the deepwater. we need to prices not just for shale but also long cycle. it's half onshore and have offshore because as you look forward, it isn't going to be enough to make the future demand for oil. we have about half the business iand the vulcan which is the short cycle. it's the largest whale discovery in the last ten years and it is a big resource. its low-cost it's going to offer great return and it should come out in the first phase in 2020
but that is going to be needed and invest in the cycle to make sure we have long cycle will going along with short cycle. it's very important that you think about this. everybody tends to just talk about the shale is becoming the new opec and that isn't the case. opec and the deepwater evil both need for sustainable prices going forward. >> thank you very much. i couldn't agree more. whether we are in conventional or unconventional parts of the industry, the global industry is
one industry. for us, i must share with you that we observe with great admiration the ingenuity and technological innovations and the managerial particularly in the cost-cutting high productivity that has been recorded particularly in the tight oil in the united states. this is very important not only for the united states but the global oil industry. this is what we encourage because it is good for the health of the global oil
industry. we never saw it as a competitor. we saw this as a necessary innovation for the robust grow growth. just think of it for a moment if we had no tight oil, the convention wouldn't have met the rise in the demand that we saw. it's impossible and i think the industry is very proud of the achieved and particularly in the united states and when the plans came we now need as an industry
to share perspectives and experiences and give guidance from each other on how not only maintaining the stability that we need but also, to avoid these types of cycles in the future. we all know that our industry is in a cycle with the last cycle we just imagined it is the worst we have seen. we are offered a dialogue that we should be able to put our thinking caps on and come up with measures from the corporate world and the government as well as the industry as a whole.
i want to use this opportunity to see as partners who belonged tbelong tothe same industry ando tell you whatever we do that is good for opec is good for the industry as a whole and what is good for the industry is good for the united states and what is good for the united states is good for the global economy. so, is all in one vote. so imagine getting out of this cycle we would like to leverage with other institutions between
ourselves and about in tight oil because for us this is the only way to meet the expectations of the growing numbers that we have seen shared with us for the billions coming in this planet and by rights should have access to energy to pursue growth and to develop until aspirations and objectives. >> i know that i speak on behalf of everybody here that we certainly worked very hard and support your effort. it's difficult for the transitions we are experiencing both in the economies that are growing and those that are slowing down but also of resources that we are
discovering so it is an effort if we are happy to be part of. for the world energy outlook it was brought up in your discussion it's the question of the peak demand. it's been fairly pervasive in the industry and board rooms and certainly within the government policymaking. on the peak oil demand, when he was here he made a point of saying they didn't see it until 2040 timeframe which is different than what we have been hearing. i want to get both of your views on how you think about not only othe peak oil demand is a question of when will it be ready to sort of shift that
frame, but how is it factoring into the decision-making within opec member countries and as a whole does that factor into the discussion, and i say because when we have the minister here, it was something he brought up as well so it was on his mind. thank you very much. yes, the issue has been one that has become the current decimal over the years and this has been defied several time. of course models being used both within the iaea. it was continued through the more sophisticated and we are
seeing the convergence of the outcome of the models. but for us we take it in stride. all the member countries have signed on to the paris climate agreement. about five or six i believe have ratified. despite the goals they've made sustainable development particularly the energy poverty and in the developing countries wheone of the key priorities, bt we are not losing sight of the consequences of climate change
on poverty among the populatio populations. you can see they talk about the contingency of how we move from the climate agreement going forward. in my view it turned out to be the most important part of that obligation. therefore while waiting to hear from this most important member of the fcc without its leadership implementing the
paris agreement, the whole agreement they risk being impossible jeopardy in my opinion. a similar situation when the u.s. senate withheld its protocol for 95 to zero against kyoto, and we saw the consequences of the protocol. without the leadership, it would be almost impossible to realize the target. this is not to say that we fully agree with the outcome and the programs. we joined the consensus in paris in order to move the process forward but we also noted with
concern some of the fundamental principles of the process that has been compromised in order to build gradual consensus put at risk by. so why we are focusing on this on the overriding priority for us is to continue to meet this growing demand. it would invest together to meet this demand and to guarantee the security supply but for the future generations. >> we don't see the oil demand
peaking at least the next 25 years. nobody has a crystal ball that can do about that far that we would certainly subscribe to the studies and out outlooks. the other companies as well while it won't peak, the oil demand growth because of efficiency and conservation, the rate of growth slows over the time. how's that there is an impact but it's not enough to help set the demographic impact that we talked about earlier. it's growing from 7 billion people over at a time. go to 2040. and the energy demand is going to grow about 1% a year. while the renewables will certainly speak for the biggest increase in growth on a relative basis from 12% of energy demand to 18% in the period, the oil
and gas will still be about 50% of that energy demand in 2040. so, at the end of the day, we can make the investments today to ensure ten and 20 years from now we have the oil they are to meet the growing demand of that is out there. the gasoline has 60 times more power, 60 times more energy density and battery. that battery. so, while they are important, technology and capability that the offer to today are not enough for that power in the internal combustion engine. there's a group of other
philanthropists to set up this billion dollar fund. it's all with the best of intentions but just to make the economy more efficient and to help in the organization effort. it's about what technology can and can't do today to make decisions about the reality. a little bit of a longer transition. >> state your name and affiliation. we are going to start right here. >> ..
the producers who may wish to join this partnership in the interest of all producers as well as consumers. you have heard from my partner john the impact of the cycle in the u.s. industry particularly on oil. the u.s. has lost nearly a million barrels of production. for us, going forward we have to have closed -- not only among ourselves but with their friends and then also launch into consultations with the industry. they are there on the front if you would like so it has to be a
comprehensive set of consultations and dialogue which i am glad the csis is leading in facilitating this dialogue by organizing this. >> we'll take one right across here. >> good morning to steve herman from the voice of america following up on the nonsense -- unanswered question that the russian reporter just asked. it looks like from now on it was announced this morning by president-elect trump that there will be two friends, big friends oil in the cabinet secretary of state tillerson if his nomination is good confirmed in rick perry, the governor of texas who is obviously well acquainted with the oil industry so what is your reaction and how do you think the opec nation will react to these two appointments? >> there is no doubt that the
choice of rex tillerson is a very important one. it's not only important for the u.s. but i think it's important for the global community because of what he is an accomplished oil technocrat and a very successful ceo for the listed oil and gas companies. he is an understatement to say rex is more than qualified for this very important office but clearly there is a very thin line between oil, geopolitics
and diplomacy. this i have learned from my professor and i believe rex tillerson i know personally. he is a very accomplished gentleman, very measured, very broad and bringing a wealth of experience into the corporate world and through that experience has built a very credible network across nations, across continents. he would be a great asset to the administration and the united states government and i want to use this form if you would to congratulate this well-deserved appointment and we look forward to continuing to interact with
him on different levels not only as an oil technocrat but now he has become a product for the oil world. c i will bring another day. while i do not know governor perry i know rex tillerson very well. he is an outstanding business executive. he does his homework. he is always prepared and he obviously has a very deep knowledge of global affairs. another perspective i might bring is just a more general one about the trump administration. they have made it very clear that energy is critical. it's fundamental to the future of economic prosperity in the united states and its fundamentals and oil and gas are really the future engine of the economy. you have got to remember that
the shale move that has occurred has been so important in terms of our economy, in terms of jobs whether they are high-paying jobs in terms of investment, where the industry is one of the biggest investors here in the u.s. and in terms of national security. so for those three reasons the trump administration's policy that they have articulated, details to follow, it's fundamental to being pro energy as an engine of the economy going forward. c just in the interest of disclosure rex tillerson is on the board of csis so i want to make sure that's quite clear. i hope while we are sitting here they go pick up any of our other board members. why don't we go back here. c hi it's emily and americas from -- and mr. barkindo i was
hoping you could help us understand your perspective on how quickly the cuts to opec and non-opec will rebalance the market and we know there's initial. back of six months a stumping hard going in the moment do anticipate that will be sufficient or not? >> thank you very much. very important question. in the consultations that led to the agreement we compared not projections met by their ea iowa and regular analysis and projections. we have seen that without the action that we took the rebalancing in the fullness of time will tell us that when will
that happen? some of the projections were showing next year, slipping into q1 or q2 of 2018 but the option we took on november endorsing the implementation of the supply adjustment of 1.2 million but we agreed on september 28 and to give the contributions that we got from the 11 opec countries on saturday december 10 of 558,000 barrels a day, a very impressive number from those countries. taking effect from january 1, we project to see an accelerated --
we are starting to see numbers already, very bullish numbers in terms of withdrawals by the second or third quarter. we will be able to restore this balance. that is why we have given a lot of importance the committee of five countries working with the secretary to ensure very high level compliance. >> i am with resources for the future. over the last 45 years petroleum
as a commodity has had dramatic increases and decreases in its prices just like agricultural commodities in metals. to what extent do you think you can permanently change petroleum from being a traditional commodity? >> the oil business has always been a cyclical business. we obviously have had a lot of price volatility to the point you are making and i actually think we are entering a new chapter now of hopefully better price stability where you will have affordable oil, affordable energy going forward bias better understanding how short cycle shale works and long cycle opec in deep waterwork in the more we can build that understanding and also work with consumers i think we can really enter a new chapter of more affordable more stable and more secure energy going forward. still going to be cyclical and
there'll still be peaks and valleys but hopefully by us better understand each other and that's why the secretary-general's visit here and sharing the opec outlook i think it's really a new era for us in terms of better understanding each other to help make sure the consumers of the world have the oil, the gas and the affordable energy they need and deserve. >> one, we in the back. c i am a business anchor in the al harrop. your excellency do you think that the prices will increase next year and we will see 70 or $80 per barrel per? the second question what would be the mechanism from your side to make all the countries and
agreement the deal to cut the production. thank you so much. c thank you very much. we had opec have abundant price targets. we used to have quarters. we have a bald with a market industry and if you have followed the presentation we had the entire lead-in to this historic meetings while focused mainly on the high-level that have built up in the federal reserve over the years. it's agreed in this industry that the equation to instability
was instructed by this one key variable of stocks and to restore that equation to balance we did want to address that. the action that we are are embarking on with the non-opec. what i can tell you is the price levels are a little bit far from the equilibrium price but the equilibrium price is dictated via the -- of the day. we they will assist the market to bring forward this. sometimes especially in the situation we have found ourselves some level of intervention is obviously required.
it has taken too long for us to build this consensus and it's not an easy task and centering the different countries experiences and different interests. but what we have been able to achieve now is to lay down a solid foundation for a new global platform of opec as well as non-opec that will build a framework of fractured and sustained dialogue and corporation to minimize the effects of cycles of this industry particularly volatility and the levels of an certainty to ensure some level of stability in the interest of the
continued growth and development of the industry. that's why it is a new historic page if you like. going forward we have determined not only to solidify this platform but also to engage countries, to engage both in the conventional as well as nonconventional. we are all one industry and the fastest growing demand country and 2016 turns out to be egypt and china this year in terms of demand growth.
i had from the prime minister the word of congratulations for what we have done. why? because we share this vision of stability. what they are adjusted in his stability of the markets, stability of prices is a consuming country with 1.3 billion people, one of the fastest population growth you have seen from the slides of jorge in this growth in demographics. we have come from the developing world but clearly these two countries. so i think on the whole we are really in some historic moment and working together in the industry with governments
particularly some of the key players that are coming on board in the new administration in the united states gives us hope. and confidence. c we have time for two more. i'm making my way back up front. megan. c thank you. i megan o'sullivan from harvard university and thank you very much for this great conversation and opportunity. i'm really struck by your hopes for a global platform that adds they want to ask you about something related to the outlook i've noticed in both opec's alternative scenarios the first one has an aggressive policy implementation for climate goals in the second one is the timely implementation. so can we assume that your reference case assumes something less than paris so it assumes paris is not fully implemented and does that mean if it's
implemented as a center to suggest that global demand for energy goes down as a departure from your reference scenario? and now that sounds technical but the bottom line is, is your demand scenario contingent on paris? >> the paris climate agreement is key in the medium to long-term projections for energy generally. the two scenarios we have seen hinge their projections on implementation of the paris agreement. a creative and comprehensive orientation of this agreement graduating into the mdc's. the other scenario is less
aggressive. maybe with a longer timeframe but both scenarios as we have seen will impact on demand projections. but what is coming into play now after what i saw in bera cash i have had discussions with the u.s. delegation with the eu delegation. the war is waiting anxiously to hear from washington. on the faith of the paris agreement. if the multilateral process has global consensus in this global consensus was made unprecedented by the united states. i was in copenhagen, the summit
in copenhagen and i saw the consequences of our failure to get this consensus in copenhagen president obama worked very hard to ensure paris didn't turn out to be another copenhagen. now more important is how do you operationalize the tactics for paris? how do you graduate the iadc to in d.c. within what timeframe and in facilitating public consensus in paris but the festivities of the spirit of copenhagen some principles of a convention are -- the key
principle of differentiated responsibilities and opportunities. the overriding principle of poverty is watered down. the complication between the annexed in the non-and -- non-annex parties in the developing parties were all compromised in order to ensure they were able going forward. in our opinion all of our member countries have signed. many have ratified their process we believe in this multilateral process. we insist on having a seat at
the negotiating table for the abuse of the oil and gas sector oil industry and for developing countries must be taken into account in the operation was of plants but all this depends on what we get next year from washington. c when we had jonathan pershing the current special envoy for climate change here last week to give us a readout for marrakech and talk a little bit about what expectations are for the next its leadership in the warm it's interesting to see how money folks from the oil and gas committee and the nomadic community are encouraged. the u.s. maintains its active role in the discussion even if it's a differentiated
participatory role in that discussion is truly important. i think you'll be the last person we time -- have time for here today. thank you for being so generous with her time. >> my question is for the secretary and general ben mr. hess. you mentioned you are taking counter-cyclical measures to address volatility. will you be pushing opec members to be able to take hedging to hedge the oil production risks? i think libya starting to look at it. we'll be helping put those opec members on exchange trading in chicago which is quite expensive to the taxpayers of oil-producing countries? thank you. >> thank you very much. the decision for member
countries or national oil companies to embark on hedging programs of member countries. i think it's instructive from washington i'm heading to new york. i'm sure we'll i will be meeting with you and your colleagues on wall street. i was sharing yesterday that back in 1986 i did an apprenticeship in chicago as a young trainee and i look forward to returning to wall street. the numbers are staggering. the evolution of that sector of the market and industry has been very impressive. the impact of your activities
has also been -- as i said earlier i was asking my colleagues here could you remind me -- this november 27 million contracts, correct? 27 million contracts. altogether it's a million contracts in november. physical oil, 94, 95 million. so we have a vested interest in knowing your business, and working with you, in getting you
on board this global platform that we are now building between producers and consumers. it's been producers and operators and companies. i think the platform would be incomplete without your work. >> i take another perspective to complement what the secretary-general is saying. perhaps our strategy and business focus is to find develop and produce oil and gas to help meet the world's future demand for energy. it is not to hedge or trade with other companies to help them hedge themselves. we have our hands full sending our own production which is our activity level goes up to ensure that we have the cash flow on a year-to-year basis is something we will give serious consideration to predators want to use this opportunity again to thank the secretary-general for being here in the united states. this is historic.
the opec agreement was historic but his presence here is historic and it helps us in the united states better understand opec but it also helps opec better understand the united states. it also helps opec producers to better understand show producers and shale producers better understand opec producers and it sets a new foundation or a new chapter for greater price stability, affordability of oil and also security of supply as we look out at the next 10 to 20 years. when we give the secretary-general a warm round of applause. [applause] [inaudible conversations]