Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the Africa Oil and Power Conference, 5 September 2018, Cape Town, South Africa.
Excellencies, distinguished delegates, ladies and gentlemen,
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…..it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair…
Of course, we will all recognize the immortal opening of Charles Dickens’ classic novel, “A Tale of Two Cities;” however, I believe that in these words we find an appropriate description of the experience of the international oil industry since late 2014.
Our industry has been on a remarkable journey during this period; it has undertaken profound changes; witnessed sobering lows, followed, thankfully, by dizzying heights. We have seen geopolitical events of immense significance, the development of new technologies and the breathtaking emergence of unexpected actors. And this has had significant repercussions, here in Africa; a continent brimming with promise in terms of economic development and investment opportunities.
This backdrop of ceaseless change means that forums such as this, which offer a platform to exchange views and perspectives, develop analysis and solutions, and facilitate energy investment and policy discussions; are not just to be encouraged: they are indispensable for the future of our industry.
In this regard, I would like to commend Africa Oil and Power (AOP) for organizing such a stellar event. I am also looking forward to exploring the first ever AOP Exhibition and Country Pavilions, which I have no doubt will be a tremendous success.
I would also like to bid my welcome to all of the participants, particularly the Ministers, CEOs and captains of industry assembled here, for their willingness and enthusiasm to participate and drive these outcome-orientated discussions forward. It’s a pleasure to be in your company.
I am also delighted to be in the beautiful nation of South Africa given that 2018 marks 100 years since the birth of Nelson Mandela, our legendary icon. May Madiba’s example continue to inspire all statesmen in their pursuit of public service, as well as leaders of our industry.
African countries have historically assumed strong, proactive leadership roles in OPEC. I am delighted that following a decision at the 174th OPEC Conference on 22 June 2018, the African continent gained an additional voice in our Organization: the Republic of the Congo became the fifteenth Member Country of OPEC. I am very pleased that today I have the opportunity to speak once again with my colleague and friend H.E. Jean Marc Thystere Tchicaya, Minister of Hydrocarbons, Republic of the Congo. Congo’s accession continues the positive trajectory which saw Gabon rejoin OPEC in 2016 and Equatorial Guinea join in 2017, thereby immeasurably enriching our Organization.
This consolidates the incredibly positive, constructive and fruitful roles played by Libya since it joined our Organization in 1962, Algeria since 1969, Nigeria since 1971 and Angola since 2006.
Indeed, the idea for our Organization was conceived in Africa, specifically Egypt. It was at the Cairo Yacht Club in 1959, that the Gentleman’s Agreement was forged which paved the way for the establishment of OPEC in Baghdad in September 1960.
Aside from the African countries who are OPEC members, two African countries have joined the historic “Declaration of Cooperation,” namely Sudan and South Sudan. I am extremely grateful for the dedication of these two countries for their unwavering commitment to global oil market stability.
Additionally, when the Third OPEC and Non OPEC Meeting took place on 30 November 2017, six additional countries issued declaration of support to the decision by participating countries to amend the “Declaration of Cooperation” to take effect for the entirety of 2018. Four of these countries hailed from this continent, namely, Chad, Congo, Egypt and Uganda.
Furthermore, when the 4th OPEC and non-OPEC Ministerial Meeting took place on 23 June 2018, four additional countries were present, all of which were African- Chad, Egypt, Uganda, and South Africa.
These facts show that not only is the African presence in OPEC thriving but also that we have an extremely productive and fruitful relationship with non-OPEC African countries and partners. It also reflects how widely OPEC’s battle-cry of working collaboratively to solve problems is being heeded.
I am delighted that today we are joined by the Secretary Generals of some of our partner international organizations. HE Dr. Sun Xiansheng continues to lead the IEF with immense skill, dedication and gravitas. He represents all the best virtues of our industry, as well as respect among nations. I am honoured to call him my twin brother.
H.E. Mahaman Laouan Gaya, Secretary General of APPO, is the personification of wise leadership and statesmanship. His commitment to the multilateral process and cooperation among international organizations has raised the stature and profile of the prestigious organization which he represents to even greater heights.
H.E. Yury Sentyurin, Secretary General of the GECF, is another titan of our industry and has done tremendous work since he assumed office at the start of this year. I have no doubt that under his sagacious leadership, the GECF will continue to achieve great feats in the noble pursuit of its objectives.
I would like to assure my three comrades that OPEC is determined to intensify cooperation with your Organizations.
Further underscoring the importance of this event is the judicious selection of the theme for the Conference, “energy coalitions.” Given the multitude of changes in our sector, the need for international cooperation is greater than ever.
As an intergovernmental organization, faith in multilateralism is integral to OPEC’s DNA. Our experience over the last two years has demonstrated the enduring capacity of collaboration among nations to surmount the greatest of challenges.
And when we look at recent history, we know our industry endured a challenge of titanic proportions during the last downturn. From 2014 to 2016, world oil supply growth outpaced that of oil demand, with world oil supply growing by 5.8 mb/d, while world oil demand increased by 4.3 mb/d.
By July 2016, OECD commercial stock overhang reached a record high of about 403 mb over the five-year average. The OPEC Reference Basket price fell by an extraordinary 80% between June 2014 and January 2016.
Ominously, investments were choked-off, with exploration and production spending falling by an enormous 25% in both 2015 and 2016. Additionally, nearly one trillion dollars in investments were frozen or discontinued, and many thousands of high quality jobs were lost. A record number of companies in our industry filed for bankruptcy.
The magnitude of this situation led OPEC Member Countries and 10 non-OPEC producing countries to embark on a concerted effort to accelerate the stabilization of the global oil market. With the landmark “Declaration of Cooperation,” twenty-four (now twenty-five) oil producing nations agreed at the first OPEC non-OPEC Ministerial Meeting held on the 10thof December 2016 in Vienna, on voluntary production adjustments of around 1.8 mb/d. The Declaration has been subsequently amended to take effect until the end of 2018.
The “Declaration of Cooperation” has had a transformational impact on the global oil industry:
- It has caused a significant change in industry-wide and public perceptions of OPEC. The Organization has repeatedly demonstrated its credentials as a body committed to international cooperation, working with other producers, honouring its commitments and promoting mutual respect among all nations.
- Bringing together 25 sovereign producing nations is unparalleled in the history of the oil industry. The “Declaration of Cooperation” strategic partnership constitutes a fundamental and essential component of the ‘new world of energy.’
- The “Declaration of Cooperation” has evolved from a noble vision to a transformative force-for-good, a permanent feature of the energy landscape – one that has had a profoundly positive impact on the global oil industry.
- A long-absent element of stability has been reintroduced to the market – industry optimism and confidence abounds.
- The importance of the Declaration has also received backing from other producers, as well as from consumers.
The OECD commercial stock overhang above the five-year-average has been reduced by more than 370 mb since the “Declaration of Cooperation” came into force, and switched to a deficit of around 41 mb in July 2018.
Going forward, the priority for the “Declaration of Cooperation” strategic partners is on ensuring stability is sustainable in nature, spreading confidence in the industry and encouraging an environment conducive to the return of investment. For this reason, we continue to explore means of further institutionalizing our cooperation.
Such an approach is necessary given trends expected in future world oil demand. In the period to 2040, the required global oil sector investment is estimated at $10.5 trillion to meet future world oil demand that is expected to surpass 111 mb/d by 2040. This represents a staggering increase of 16 mb/d. Indeed, the world will attain the 100 mb/d level of consumption in 4Q18, much sooner than projected. Therefore, stabilizing forces which create conditions conducive to attracting investment are essential.
Excellencies, Ladies and Gentlemen,
It often may appear that our industry is subject to forces beyond our control. Geopolitical events, natural catastrophes, technological breakthroughs or other critical uncertainties: we are all aware of the impact they can have.
However, there is another force alive and well in our industry. This force exists in the desire of producers, consumers and investors, ordinary women and men throughout the world, to have sustainable stability in the oil market. This force thrives in the hearts and minds of decision makers who know that cooperation, collaboration and team-work remain the most effective problem-solving techniques this industry or indeed any industry knows. This force underpins the “Declaration of Cooperation” and encourages other stakeholders, many of whom are in this room, to lend their support to this noble cause.
This force can lead us out of any darkness and into the light. It is based on the principles oftransparency, fairness, equity and respect among nations. It can be encapsulated in a simple phrase: cooperation for sustainable, oil market stability.
I have no doubt that this force will lead our industry into a new glorious future, with the interests of consumers and producers, firmly at its heart.
If we can channel the positive energy in this room towards this great endeavor, the possibilities are endless. Should our cooperation continue to evolve into a dynamic force-for-good; looking back years from now, we will be able to recall the closing words of Dickens in “A Tale of Two Cities,”
It is a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to than I have ever known.