Stabilising the global oil market

H.E. Mohammad Sanusi Barkindo. Secretary General of OPEC, speaks exclusively to Pipeline Magazine’s Julian Walker about establishing a sustainable oil market, with reduced volatility, and creating a level playing field as three key objectives of the organisation

Following your re-appointment as Secretary General, what are the most important objectives you hope to achieve in the next three years?

The first is to continue to fulfil OPEC’s overarching objective – to promote sustainable oil market stability in the interests of producers, consuming nations and the world economy. That has been the organisation’s key to success for nearly 60 years.

Over the last three years, we have succeeded in reducing volatility and restoring balance to the oil market through the Declaration of Cooperation between the OPEC Member Countries and 10 other oil-producing nations. A second objective is to continue to strengthen this strategic partnership through a voluntary Charter of Cooperation, which moves beyond the Declaration’s goal of production adjustments. I am proud to say the Charter received the unanimous endorsement of the 24 countries participating in the Declaration of Cooperation on 2 July. Saudi Arabia and the Russian Federation further underscored their commitment to the Charter during President Vladimir Putin’s visit to Riyadh in mid-October. The Charter provides further opportunities for dialogue, improving the understanding of market fundamentals, supporting energy sustainability, and promoting technologies that advance the industry.

My third goal is to ensure that OPEC and the industry at large have a level playing field when it comes to climate and investment policies. To do so, we need to remain fully engaged at the multilateral level. The world needs competitive, successful and innovation-driven oil producers if we are to meet future demand and simultaneously address challenges like energy poverty and climate change.

What would you consider to be the major achievements of OPEC during your tenure in the post?

The Declaration of Cooperation has been a game-changer for OPEC and the industry. The decision by the participating countries to adjust production accelerated the drawdown of the unsustainable stock overhang we had back in 2016, expedited the rebalancing of the market, restored stability to the industry, and enabled investment to return. Acting together, we succeeded in staving off a prolonged disaster and reversing the market turmoil of 2014-2016.

When OPEC started this process with the 10 other oil-producing countries, there were those who said we were destined to fail. Three years later, we continue to prove them wrong. We are delivering on our commitment towards sustainable oil market stability, and this helps producers as well as consuming nations and the world economy at large. We have gone even further than the Declaration of Cooperation by signing the Charter of Cooperation.

How stable is the oil market at present and what are the prospects for the next year?

At the moment, the outlook is clouded by geopolitical and economic challenges. We do not anticipate a global recession, but the market nonetheless faces some visible headwinds. There also is still a risk of non-OPEC supply surpassing oil demand.

Our latest Monthly Oil Market Report revised down world oil demand growth for this year by 0.04 mb/d to 0.98 mb/d, with total oil demand of 99.8 mb/d. We expect the market to grow by 1.08 mb/d next year, based on current economic factors. Looking a little further down the road, I am hopeful that a softening of trade and geopolitical tensions, plus some of the recent stimulus measures taken by governments and central bankers, will have a positive influence on the oil market and the economy at large in 2020.

How important is the extension of the Declaration of Cooperation agreement for nine months towards ensuring stability across the market?

The participating countries agreed in July to extend the production adjustments of 1.2 mb/d by nine months, to the end of March 2020. The message from our last ministerial meeting, which was held here in Abu Dhabi, was quite clear: the Declaration of Cooperation continues to have a stabilising influence on the oil market, and the participating countries remain vigilant in supporting market-balancing measures. In fact, our average conformity of 146 per cent since January 2019 was the highest to date in 2019.

Through the Declaration of Cooperation process, we regularly monitor the market fundamentals and this gives us the leeway to make timely adjustments. Our next full ministerial meeting in December will evaluate what steps, if any, are necessary to keep the market stable and balanced.

How important is co-operation with non-OPEC member countries, in particular Russia, to maintaining a balance in supply and demand?

The results speak for themselves. The 2014-2016 crisis was detrimental to the industry. It caused the loss or postponement of nearly US$1 trillion in investments worldwide and precipitated mass redundancies. Thankfully, the Ministerial decisions under the Declaration of Cooperation turned the tide by restoring stability to the global oil market.

Russia has been an indispensable partner throughout this process and much credit goes to President Vladimir Putin for his unequivocal support, and to the tireless efforts of Alexander Novak, the Minister of Energy. Alexander Novak co-chairs the Joint Ministerial Monitoring Committee, which is headed on the OPEC side by HRH Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy. Saudi Arabia and the Russian Federation further affirmed their commitment to the Charter of Cooperation during President Putin’s visit to Riyadh last month. But it is important to stress that the success of our cooperation stems from the hard work and contributions of all 24 countries and their delegates. They are equally committed to achieving a balanced market and sustainable stability.

Are there any plans to increase the membership of OPEC in the near future?

OPEC started out in 1960 with five Founder Members – the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Today the organisation has 14 members, which collectively account for around 80 per cent of the world’s proven crude oil reserves. Our ADIPEC 2019 host, the United Arab Emirates, joined in 1967, and during my first term as Secretary General, it was a great honour to welcome our newest OPEC members, Equatorial Guinea in 2017 and the Republic of Congo in 2018. Our door is always open to others who share our commitment to dialogue and cooperation to support sustainable oil market stability.

How is the OPEC Fund for International Development helping developing countries?

Since OFID was established at the first Summit of OPEC Heads of State and Government in 1975, it has committed around $25 billion to help finance projects and provide technical expertise in more than 130 countries. What impresses me most about OFID’s work is its focus on capacity-building, so underserved communities can take the lead improving their overall economic and social well-being.

As sister organisations, OFID and OPEC share a commitment to addressing global challenges through a multilateral, consultative and cooperative approach. I am proud that we also share the determination to alleviate energy poverty, a scourge that affects nearly one billion people and severely hampers socio-economic progress.

How important is ADIPEC as a forum for the industry?

ADIPEC is a premium global energy event that offers the opportunity to engage with top industry professionals and to take stock of the latest advances in technology. The timing is also important because it is a chance to take a retrospective look at the current year while positioning ourselves for the coming year.

We owe a huge debt of gratitude to ADIPEC’s organisers, the Ministry of Energy and Industry, the Abu Dhabi National Oil Company, and all the others who have brought together more than 2,200 participating companies, over 50 national and international oil firms, and friends and colleagues from nearly 160 countries.

This interview first appeared in the November issue of Pipeline Magazine