Oil exporters need market assurance for investment

Oil exporters need to be reassured that they will have sufficient markets for their crude so they can invest in production capacity expansions, according to a former Norwegian oil executive.

Arne Walther, Former Secretary General of the Riyadh-based International Energy Forum (IEF), said wasting massive funds into the development of the hydrocarbon sector by oil producers would make “little sense” in the absence of assurances that there will be enough demand for their products.

But Walther, now Norway’s ambassador in Japan, said oil consumers also need to be reassured that they will get secure and stable crude from producers.

In an interview with the Abu Dhabi-based Emirates Centre for Studies and Strategic Research, Walther said energy security had been the focus of producers and consumers before the 2008 global fiscal distress but added that it has gained momentum following the eruption of the crisis.

“Well, the major shift came a little before the financial crisis because energy security was seen mainly as something for the oil and other energy importing countries who need the resources of others and want them as cheaply and securely as possible,” he said on the sidelines of an oil event last week.

“Therefore they talk about energy security. Now, the energy security coin has two sides – security of supply and security of demand. If countries that produce, especially oil, are to invest the large amounts of money needed to satisfy future demand, they have to be assured of a market. It makes little sense to invest large sums of money without that market.”

Walther said he saw a broader understanding of cooperation at this stage and that the two sides need each other.“The time has passed when one side would go to a short-term advantage at the expense of the other.”