According to a new report by IEA, major oil and gas exporters have experienced many disruptions recently, but a new commitment to reform and economic diversification will be crucial to deal with with the changing dynamics of global energy.
The new dynamics include increased production from new sources such as shale, uncertainties over the pace of oil demand growth and deployment of new energy technologies.
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The ups and downs in oil prices over the last decade has relieved the structural weaknesses in many of the major exporters. Since 2014, the net income available from oil and gas has fallen by between 40% and 70% (in the case of Venezuela), with various consequences for economic performance.
The uncertainties of hydrocarbon revenues presents dilemmas for countries whose budgets depend on them. The extent to which producer countries steer through essential economic transformation can impact energy markets, global environmental goals, and energy security.
In addition, some of the world’s largest producers experience strong pressures from rising numbers of young people entering the workforce. More than 50% of the population living across the Middle East is under the age of 30, while the same proportion is more than 70% in Nigeria. In many major producers, income from oil and gas will not be large enough to provide for these growing populations.
Nevertheless, despite all the problems, the energy sector has an important part to play in the reform agenda. Namely, the report focuses on six key responses:
- Capturing more domestic value from hydrocarbons;
- Using natural gas as a means to support diversified growth;
- Harnessing the large but under-utilised potential for renewable energy, especially solar;
- Phasing out subsidies that encourage wasteful consumption;
- Ensuring sufficient investment in the upstream;
- Playing a role in deploying new energy technologies, such as carbon capture, utilisation and storage.
See more information on IEA’s ‘Outlook for Producer Economies’.
