H.E. Mohammad Sanusi Barkindo, Secretary General of OPEC speaks about how OPEC was helping to stablise the market and promoting productivity
How stable is the oil market at present and what are the prospects for the next year?
Based on OPEC’s Monthly Oil Market Report (MOMR), global economic growth forecasts remain relatively robust for 2018 and 2019, at 3.8 per cent and 3.6 per cent, respectively. While growth levels are intact, a number of potentially offsetting developments – particularly the rising challenges in some emerging and developing economies – are skewing the current global economic growth outlook to the downside. Against this backdrop, world oil demand at present continues at a healthy and above trend level, with the growth forecast at 1.5 million barrels per day (mb/d) in 2018 and 1.4 mb/d in 2019 to reach an annual average level of 100.2 mb/d. However, large uncertainties may cause headwinds ahead, and any significant dampening of global economic growth could have repercussions for global oil demand in 2019 – and could potentially lead to the opening of a gap again between supply and demand.
How successful was the Declaration of Cooperation in combating volatility across the global market?
The landmark Declaration of Cooperation of December 2016, which was agreed to by 24 (now 25) OPEC and non-OPEC oil producing countries was successful on various fronts. Not only did it refl ect OPEC’s steadfast commitment to its mission to strive for market stability by restoring balance to the market, it also made manifest a renewed spirit of broad collaboration and cooperation among various countries. Since then, the Declaration has evolved into a permanent feature of the energy landscape – one that has had a transformative impact on the industry.
In September, production of crude oil was substantially boosted. What was the reasoning behind this move?
As an organisation of 15 oil producing countries which has been collaborating closely with other non-OPEC producers, OPEC has always strived to remain flexible and adaptive to changing market conditions and to be respectful of the varying needs and realities of different producers, both within OPEC and those participating in the Declaration of Cooperation. I think nothing demonstrates this spirit more than the outcome of the last OPEC and non-OPEC Meeting in June, when the decision was made collectively to make sure that conformity levels among participating countries re-focused on the original 100 per cent level in attending to the higher market requirements during the second half of 2018.
Which countries have the greatest capacity to meet any anticipated increase in demand?
Our emphasis has always been on finding ways to work together, collectively, collaboratively, in partnership. Thus, to ask about individual capacities when speaking of our member countries overlooks the very mission of the organisation. Thus, it is more useful to think of OPEC as a ‘family of nations’, with each of our 15 member countries sharing a common understanding of the sovereign use of its natural resources. However, at the same time, each is aware of the critical role the organisation plays in ensuring necessary supply to the world – not only in the interest of consumers but the industry and the global economy as well.
Where do you see any increase in demand coming from, either from nation-states or sectors of industry?
As a research organisation, we are continually considering the many factors that can influence global oil demand levels. Our analytical findings are set out annually in our flagship publication, the World Oil Outlook (WOO). In our most recent edition, oil demand growth is projected to be driven by the Asian region, led by China and India. The combined oil demand growth of both countries will reach nearly 11 mb/d by 2040. At a sectoral level, we expect the road transportation sector to be the largest contributor to oil demand growth in the period through 2040. In 2017, that sector already represented 45 per cent of global demand or 43.6 mb/d. But in the longterm, significant growth is expected, with an additional 4.1 mb/d to reach 47.8 mb/d by 2040. Besides road transportation, our forecast sees a large increase in demand growth from the petrochemical sector, which sees demand increasing by 4.5 mb/d from 2017-2040.
OPEC has forged a number of partnerships in recent years. Are there any plans to add full member status to any other nations, following the inclusion of the Republic of the Congo?
We do not exclude any country from wanting to work together in the interests of consumers and producers everywhere. In fact, we look forward to broader cooperation with all producers. The door is always open. It matters little whether a country represents a modest contribution or a large one. At the end of the day, what counts is the readiness of a country or stakeholder to address market challenges – with the ultimate objective of jointly achieving market stability.
How is digitalisation being taken on board by OPEC Member Countries and what are the anticipated short- and long-term effects of new technology?
Technology and innovation have increasingly played an important role across the oil industry. It is worth noting that technological innovations have not only helped the industry keep up with required supply volumes but have also contributed to improving the environmental credentials of the industry, helping to reduce the ‘carbon footprint’ across the value chain. Nevertheless, while the effects of new technology in the short-term have consistently produced beneficial results, technology is also one of the key drivers of uncertainty in the longer term.
Last year you called for dialogue and cooperation across the industry to increase stability. Has that been forthcoming?
OPEC has long played an important leadership role in supporting and contributing to oil market stability. We have repeatedly made efforts to ensure equity, fairness and stability for the benefit of consumers and producers, as well as the industry and the world at large. Since 2016, this has been extended to our non-OPEC partners in the Declaration of Cooperation. We are now exploring the possibility of establishing a longer term and lasting framework for this close cooperation, in order to ensure the sustainable oil market stability for which we all strive. As long as we are on this common path, we are confident that OPEC and non-OPEC producers will continue to make significant progress in their collective efforts to ensure sustainable market stability for the benefit of all.
How important is ADIPEC to fostering discussions within the industry?
ADIPEC is one of the most important industry gatherings in the world. We are honoured to again be here participating in various sessions. It has proven to be a very effective outreach and networking platform. We look forward to the many discussions that will take place here, and we anticipate valuable contributions and insights from the invited high-level speakers. Allow me to take this opportunity to express our gratitude to the UAE and to H.E. Suhail Mohamed Al Mazrouei, Minister of Energy & Industry, and current President of the OPEC Conference, for the hard work and commitment that has been made to ensure the success of this exhibition and conference.
What do you feel are the most important subjects which should be the focus of debate at ADIPEC this year?
The program of ADIPEC is always rich, extensive and focused. Still, given that our industry is a dynamic one, there are topics on the horizon that merit closer analysis. These include the ongoing shift in the axis of the world economy, rapidly changing technologies and the impacts on the energy mix.