Exclusive Interview With Mohammed Sanusi Barkindo, OPEC Secretary General

“OPEC will continue to pursue a balanced, stable and sustainable global oil market.” … Sanusi Barkindo

Ahead of the Nigeria International Petroleum Summit (NIPS) in  2019, The Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Mohammed Sanusi Barkindo in this exclusive interview with Iyanuoluwa Ajayi of FINMAGAZINE speaks on the global demand and Supply of Oil and Gas.

FIN – Considering the increasing appeal of renewables, how do you see the future of oil and gas playing out? 

OPEC Secretary-General In some quarters, we hear stories that suggest renewables are our only energy future.  This is clearly misguided. Renewables are evidently coming of age, with wind and solar, expanding fast, and others such as hydropower and biomass, maintaining their shares in the energy mix out to 2040.  However, even by 2040, OPEC’s World Oil Outlook 2018 (WOO) they are estimated to make up only around 19% of the global energy mix.

Let me stress that many OPEC Member Countries have great sources of solar and wind, and significant investments are being made in these fields. With the share for nuclear expected to be at just over 6% by 2040, it means that the world will need to look elsewhere for around three-quarters of its energy needs by 2040.

In terms of oil and gas, there is no doubt that they will remain central to supplying an expanding global population with the critical energy it needs. In our WOO, oil has an expected share of around 28% in the global energy mix, and gas is at 25%, by 2040. Even in the most optimistic of outlooks I have seen for renewables, I have not observed one predicting that they will come close to surpassing oil and gas in the decades ahead.

Oil will clearly remain a fuel of choice for the foreseeable future. We see oil demand increasing by around 14.5 million barrels a day (mb/d) between now and 2040 to reach close to 112 mb/d.  Moreover, this is the second consecutive year we have raised our oil demand number in the WOO for 2040.

FIN – What are the OPEC plans/projections to ensure that oil maintains its full potential in the world energy market?

OPEC Secretary-General As I have already mentioned, we see oil demand increasing by around 14.5 mb/d between now and 2040 to reach close to 112 mb/d.  I should also point out that we do not envisage a peak in oil demand over the forecast period.

OPEC, and its non-OPEC partners, through the ‘Declaration of Cooperation,’ will continue to pursue a balanced, stable, and sustainable global oil market.  Moreover, this serves the interests of consumers, producers, the industry, and the global economy at large.

This is the best platform from which the industry can invest and expand.  Investments are central to our future. Our industry is very capital-intensive and technology-driven. Complex by nature, it requires significant up-front investments. The return of timely, adequate, and continuous investments, in both short-cycle and long–cycle projects, has been a key focus of the ‘Declaration of Cooperation.

This is brought home by the scale of the investment requirements. Oil-related investments across the upstream, midstream, and downstream are estimated in the WOO 2018 at around $11 trillion in the period to 2040.

Of course, we do recognize the industry is susceptible to a myriad of challenges, both regional and global, such as those related to the environment, technologies, and geopolitical developments.

It is vital we work together as an industry, and with other stakeholders, to meet the challenges before us, and ensure that global energy demand growth is achieved in a sustainable way, balancing the needs of people in relation to their social welfare, economy, and environment.

FIN – One of the main factors that led to the recent decline in prices is shale (in the US). Considering that other countries are now exploring shale, how will that affect OPEC policies on production? How will OPEC Members respond to the market shift?

OPEC Secretary-General From the perspective of US tight oil, it is evident that it will continue to expand in the coming years. In OPEC’s WOO 2018, US tight oil reaches close to 14 mb/d by the mid-to-late-2020s, before declining to around 12 mb/d by 2040.

It means that in the long-term, demand for OPEC crude is projected to increase to around 40 mb/d in 2040, up from 32 mb/d in 2018. The share of OPEC crude in the global oil supply is estimated to increase from 34% in 2017 to 36% in 2040.

Let me also stress that OPEC and US shale producers have engaged in an informal energy dialogue since early 2017, just after the beginning of the ‘Declaration of Cooperation. This important dialogue in the US has also been extended to financial market participants.

Participants in this dialogue have found it both timely and productive, as well as long overdue. It is a means to share thoughts on the market situation, and offer perspectives on the longer-term outlook for our vital global industry.

At OPEC, we truly believe that given the size, scope, and complexity of our industry and the fact that it is perhaps the most strategic growth engine of the world economy, it is vital we have an appreciation and understanding of all stakeholders.  The global and interdependent nature of the industry means that what happens in one place can have implications and repercussions elsewhere.

It is in all of our interests to maintain open channels of communication. We all benefit from a healthy and balanced market, sustainable market stability, and a platform from which we can make the necessary investments that benefit both us as producers, and consumers too.

FIN – In terms of the environmental consideration, oil is facing a lot of condemnation due to its impact, how can OPEC eliminate this challenge? Through sophisticated technology?

OPEC Secretary-General Let me stress that OPEC remains fully engaged and supportive of the UNFCCC and the Paris Agreement, which remains the only viable global framework to address climate change. OPEC Member Countries were present at the recent COP24 meeting in Katowice, Poland, in December 2018, and I delivered a statement at the meeting on behalf of the Organization. Given that the WOO 2018 outlook underscores that oil and gas are expected to still make up more than 50% of the energy mix by 2040, with many other reputable outlooks showing similar numbers, it is important to state unequivocally that the oil industry must be part of the solution to the climate change challenge. The scale of the challenge means that no single energy source is a panacea; nor can the contribution of an entire industry be overlooked. This is not a race to renewables alone; it is a race to lower greenhouse gas emissions. The oil industry possesses know-how and experience for reducing our environmental footprint: working practices and fuel efficiency standards have improved exponentially over the decades.

Of course, more needs to be done. Nevertheless, the oil and gas industry’s capacity for technological innovation must be harnessed within this process.

In this regard, we need to continually look to develop, evolve and adopt cleaner energy technologies, as well as all-inclusive and non-discriminatory energy policies, that enable us to meet expected future energy demand, in a sustainable and ever more efficient manner.

Moreover, for oil and gas, we need to recognize that the environmental challenge is not oil and gas themselves. It is the emissions that come from burning them. I am a believer that solutions can be found in technologies that reduce and ultimately eliminate these emissions. I welcome coordinated action within the industry and through various research and development platforms, such as the Oil & Gas Climate Initiative, which continues to expand as a group and implement bold actions.

On the policy front, it is important to stress that if our industry is worried about policies that detrimentally impact oil, with talk of stranded assets and declining values of oil; then we have a potentially dangerous scenario, one that could increase volatility significantly. This is not in the interests of either producers or consumers.

FIN – Seeking cooperation with other parties will ensure the stabilization of the oil market. What are the continuous measures OPEC is undertaking to achieve this without internal rancour?

 OPEC Secretary-General At OPEC, we truly believe in the power of cooperation. In fact, I think since I become OPEC Secretary-General in August 2016 I have used the word ‘cooperation’ more times than any other in my speeches and media interviews. It was vital to the Organization when OPEC was set up in 1960, and it remains vital today.  This has manifested itself clearly in the historic ‘Declaration of Cooperation, between OPEC and 10 non-OPEC participants, since the beginning of 2017.

The ‘Declaration of Cooperation has shown what can be achieved through collaboration in challenging times.  It helped turn the tide of the oil market, calmed the waters, and will remain a ballast for any headwinds that may blow our way in the coming months and years.

This cooperative nature, and the importance of consensus, was clearly evident given the unanimous decisions taken at the 175th Meeting of the OPEC Conference and the 5th OPEC and non-OPEC Ministerial Meeting on 6/7 December 2018.

I should also stress that this kind of cooperation needs to be undertaken not only in times of instability but also when the market is stable and balanced. Dialogue is vital at all times.

Over the years OPEC has pushed many forms of energy cooperation, including dialogues with the European Union, Russia China, and India, symposia and workshops with the IEF and the IEA, various initiatives with the G20, and meetings with other industry stakeholders.

Of course, I cannot say we will always find agreement on everything.  We do not live in a perfect world.  But it is important for all stakeholders to look for shared and realistic solutions, where and when appropriate.

From left to Right: Minister of State for Petroleum (Nigeria) Dr. Ibe Kachikwu, President Muhammadu Buhari, and the Secretary-General of OPEC, Sanusi Barkindo.

FIN – Since countries do have incentives to sell beyond assigned quota, how does OPEC go about monitoring quota allocation?

 OPEC Secretary-General – When the ‘Declaration of Cooperation was agreed on 10 December 2016, there was a unanimity that it was vital to monitor conformity to the voluntary production adjustments, to help accelerate the market rebalancing and return sustainable stability to the market.

The organs designed to monitor the implementation of the ‘Declaration of Cooperation, as well as developments in the market, were the Joint Ministerial Monitoring Committee (JMMC) and the Joint Technical Committee (JTC), supported by the OPEC Secretariat.

There is no doubt that these have evolved into ‘jewels in the crown’ of OPEC and non-OPEC cooperation. These are thriving, invigorating, and dynamic forums, producing high-quality market analyses on a monthly basis.

The results of our joint efforts, and the importance of these organs, are evidenced in the numbers.  Conformity levels have been around or above 100% for the most part of 2017 and 2018.

The ‘Declaration of Cooperation and the enhanced relations between its participating countries through the JMMC and the JTC now constitute a fundamental and essential feature of the ‘new in the world of energy.’

FIN – How does OPEC manage its relationship with its Members, especially those faced with sanctions?

OPEC Secretary-General It is important to stress that every Member Country has an equal say in the Organization. This is how the Founders of OPEC correctly set it up back in 1960, and this is how it continues today.

The Organization will listen to, and discuss, the concerns and views of each of its Member Countries. We always address these individually and collectively.

Of course, at times we have differences of opinion. This is natural for any international organization.  But we always look for a consensus and unity; a pathway forward. This was clearly evident at the 175th OPEC Ministerial Conference in early December, with a unanimous decision taken at the end of the meeting.

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