OPEC feels threatened by biofuels

A few years ago, energy experts and OPEC members alike would have laughed away the prospect for biofuels to replace oil. Today, they are becoming increasingly worried about their position as investments in the renewable and clean fuels continue on an unprecedented, global scale. In two different interviews ahead of the G8 summit, OPEC secretary-general Abdalla El-Badri contradicts himself: in the first, he says biofuels threaten oil investments and may cause petroleum prices to go "through the roof", whereas in the other, he says the cartel does not feel threatened by climate change measures aimed at reducing carbon dioxide emissions, of which biofuels are an important part.

Biofuels becoming a 'threat'
Ahead of the G8 Summit in Heiligendamm, Germany, where industrialised nations gather to discuss environmental issues including biofuels which are central to the attempts of many G8 countries to cut their carbon emissions, the chief of the OPEC oil cartel warns that these global investments could push oil prices "through the roof". OPEC secretary-general Abdalla El-Badri said moves to use biofuels would make his members consider cutting investment in new oil production.

Both he EU and the US, as well as several rapidly growing developing countries have set ambitious targets for the bio-based fuels. The US will cut petrol use by 20% in 10 years, partly through increased use of renewable green fuels, whereas the EU has set a target of 10% biofuels by 2020.

OPEC members control about 40% of the world's oil production. Mr El-Badri said that while OPEC members had so far maintained their investment plans, he added: "If we are unable to see a security of demand... we may revisit investment in the long term."

Opec has previously expressed scepticism about alternative energy but Mr El-Badri’s comments mark the first clear threat that the cartel might act to safeguard its interests in the face of a shift towards biofuels:
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"They are really concerned" says Julian Lee of the Centre for Global Energy Studies in London. "Opec will continue investing, but with biofuels on the horizon, they may not invest enough."

"It is a difficult situation for Opec. On one hand they are asked to produce more, on the other one, Washington and Brussels are telling the cartel 'we are betting on biofuels and we don’t want to rely on you [Opec]'."

Climate change no worry
However, in another interview, the same secretary-general says climate change measures will not hurt big oil exporting countries, which instead will cash in on rising energy demand. al-Badri spoke ahead of the G8 summit, where climate change too is high on the agenda.

German Chancellor Angela Merkel has pressed the G8 nations to back a halving of greenhouse gas emissions by mid-century and has succeeded in securing a first-ever U.S. commitment to discuss a global, emissions-cutting goal.

The prospect of such policies left OPEC unworried about the impact on demand for its oil.

"We're not feeling threatened at all. We don't see it as a threat to consumption," Badri said on Tuesday at the Reuters Global Energy Summit.

"The demand for oil will rise steadily," he added. "There's no magic alternative to oil. Fossil fuels will be the dominant energy for the forseeable future, for more than decades."

Burning fossil fuels like coal and oil to produce energy is the biggest source of man-made carbon dioxide, which is the main cause of global warming, scientists say.

"The situation is very serious," Badri said, regarding the global warming threat. "The environment is a concern, we're living on the same planet."

'Clean oil'
He advocated burying carbon dioxide emissions from burning oil and gas, using a so far unproven technology that is being tested on so-called "clean coal" power plants.

The onus was on developed countries, which had historically contributed most to global warming, to develop the technology, he added.

"Our member countries didn't contribute to this. Why not have improved technology? We should look at clean oil, if we're looking at clean coal." The world's energy needs will rise 50 percent between now and 2030, and the world will invest US$8 trillion in oil and gas production to keep up, he estimated. The demand for oil would rise annually by 1.3 million to 1.5 million barrels per day, to 118 million barrels per day by 2030, he added.