India will contribute the most to the rise in global oil demand in the next two decades, according to OPEC, even as the world’s fastest-growing nation looks to reduce its dependence on fossil fuels.
“The world oil demand is expected to increase by 14.5 million barrels a day, from 97.2 mbd in 2017 to 111.7 mbd in 2040. India will account for a growth of 5.8 mbd, which represents an astonishing 40 percent of the overall increase,” Mohammed Sanusi Barkindo, secretary general, Organisation of Petroleum Exporting Countries, said at the India Energy Forum in New Delhi today. Citing the World Oil Outlook, he said India is projected to see the largest additional oil demand, growing at the fastest pace of 3.7 percent a year, by 2040.
That comes when Asia’s third-largest economy is pushing the use of natural gas and wind and solar farms to lower imports of crude, the largest contributor to the nation’s trade deficit, besides meeting emission targets under the Paris agreement. Still, that is unlikely to be enough to meet its growing energy demand.
OPEC forecasts that the primary energy demand globally is expected to increase 33 percent, or 91 million barrels of oil equivalent a day, between 2015 and 2040. About 24 percent of this anticipated increase will be from India, said Barkindo.
“This impressive growth reflects the remarkable transformation of the Indian economy during the forecast period,” he said. “We estimate that India will grow at an average annual rate of 6.5 percent for the period 2017-2040. Real GDP is expected to surpass OECD Europe by 2035, and OECD America by 2040.”
To meet the future needs of both India and the world by 2040, he said the oil sector would require estimated investments worth $11 trillion.
Citing the last downturn for the industry from 2014 to 2016 when oil supply outpaced demand, Barkindo said a long-absent element of stability has been reintroduced. “The rate of inventory drawdowns has been reversed and industry optimism and confidence abound.”
OPEC Cuts Demand Forecast
To be sure, OPEC cut demand forecast for 2019 citing the trade war between the U.S. and China and emerging market risks. A downward revision for global economic growth has serious repercussions for global oil demand, Barkindo said. According its October report, oil demand is projected to increase by 1.54 mbd in 2018, a downward revision of 80,000 barrels a day from the previous month’s report. In 2019, world oil demand is anticipated to grow by 1.36 mbd to average 100.15 mbd, a downward revision of 50,000 barrels a day from last month’s report.
The International Energy Agency also lowered its forecast for oil demand but expects the prices to remain high. Brent crude is trading near its four-year high, helped by OPEC’s production cuts.
Barkindo said the oil market is adequately supplied but this situation is fragile. “Our current view is that the market is currently adequately supplied and well balanced. For 2019, there is the potential for an imbalance, due to larger growth in supply. Naturally, this prognosis is subject to the critical uncertainties,” he added.