Reform and economic diversification will be key in helping major oil & gas exporters cope with the changing dynamics of global energy.
A new report from the International Energy Agency – the Outlook for Producer Economies – examines economies in Iraq, Nigeria, Russia, Saudi Arabia, UAE and Venezuela which are the pillars of global energy supply.
The report details that the changing dynamics include rising production from new sources such as shale, uncertainties over the pace of oil demand growth and deployment of new energy technologies.
The report says that the significant peaks and troughs in the oil price has highlighted the structural weaknesses in many of the major exporters. Since 2014, the net income available from oil and gas has fallen by between 40% (for Iraq) and 70% (for Venezuela).
Additionally, the volatility of hydrocarbon revenues presents dilemmas for countries whose budgets depend on them. The extent to which producer countries steer through essential economic transformation can have major implications for energy markets and energy security, according to the report.
Dr Fatih Birol, IEA’s executive director, says: ‘More than at any other point in recent history, fundamental changes to the development model of resource-rich countries look unavoidable.
‘Following through with the announced reform initiatives is essential, as failure to take adequate action would compound future risks for producer economies as well as for global markets.
The countries examined are very diverse, and the report considers a wide range of experiences and prospects. Many of them have pushed forward plans to boost investment and growth in the non-oil sectors of their economies. However, Venezuela provides an example of how badly things can turn out when economic and energy headwinds gather strength.
Birol adds: ‘The reform process should be much wider than energy; but it relies on a well-functioning energy sector. Successful reform programmes can open a broader range of strategic options for producers, as well as new opportunities for engagement on a range of energy issues. There is a lot at stake.’
To read the report in full, click here.