The theme for the 38th annual CERAWeek, organized by IHS Markit, was entitled “New world of rivalries: Reshaping the energy future.” Following the 2008 financial crash, the annual theme has consistently focused on the element of change.
This year, sponsors included non-petroleum giants Amazon Web Services and Microsoft Azure. The Agora technology sub-conference continued its expansion, now filling a distinct space of its own. Four dozen public sessions on day one alone spoke to market constants that can no longer be taken for granted, regardless of any cyclical swing: a cycle that is now hyperactive since American shale has become the dominant force in global oil-supply growth, a market-oriented strategy for energy security, and demand. Oil and gas are now tools of raw geopolitical power, signalling a fundamental change in the industry’s global attitude and approach.
BP’s CEO Bob Dudley told the dinner crowd “we are operating in a world that is not on a sustainable path.” Executive Director of the International Energy Agency (IEA) Fatih Birol began his press conference Monday morning on geopolitics, a topic “it is rare you hear from us.” The IEA expects the United States to account for 70 percent of the increase in non-OPEC oil supply through 2024.
In his address, Secretary of State Mike Pompeo said, “We’re not just exporting American energy, we’re exporting our commercial value system to our friends and to our partners … Our model matters now, frankly, more than ever in an era of great power rivalry and competition where some nations are using their energy for malign ends, and not to promote prosperity in the way we do here in the West. They don’t have the values of freedom and liberty, of the rule of law that we do, and they’re using their energy to destroy ours.”
CERA founder Daniel Yergin interviewed Vice President at China National Petroleum Corporation Hou Qijun on stage. Asked about China’s oil demand, Mr. Hou framed Chinese oil demand first and foremost in strategic terms, whereas Beijing is concerned about relying on the Middle East, the U.S. Navy, and that its energy supply should weigh very heavily in discussions about the shape and timing of peak oil demand. He also noted that China depends on imports for roughly two thirds of it and went on to say 2018 was a “turning point” for electric vehicles in China and suggested annual oil demand there might peak at around 700 million tonnes, or roughly 14 million barrels a day (the IEA projects it will use 13.5 million barrels a day this year).
Climate change remained a significant topic, with impact on balance sheets and social license to operate. Those most at risk in this environment are OPEC countries, which were less prominent than at last year’s gathering.
The IEA’s supply projection implies OPEC will cede market share for the foreseeable future. OPEC's own forecasts imply demand for its crude oil will drop by about 1 million barrels a day by 2023. As the industry evolves in terms of market constants, OPEC faces the greatest risk of dislocation in global energy as those forces are transformed.