By Hamisu Muhammad
How successful were the 7th OPEC International Seminar and its 174th conference?
We had marathon of meetings, starting from our economic commission board, which is the economic think tank of OPEC that normally meets before our conferences in order to prepare the technical documents and reports that are considered by the conference of ministers, followed by OPEC/Non-OPEC technical meeting, which is one of the building blocks of the framework of the Declaration of Cooperation; and then the seminar where the energy industry stakeholders gathered to discuss the current state of the market and then look into the future of oil.
All these meetings fed the ministerial conferences of OPEC and non-OPEC that took place on Friday and Saturday. So you will agree with me that it was a week of marathon meetings, back to back. One of the busiest we have had and highly productive and successful beyond expectations. All the meetings were held in a very friendly manner, collaborative and result-oriented; we cannot have asked for more.
How soon are we expecting the declaration of cooperation to be institutionalised and, why did OPEC decide to engage in more diplomacy and open up to the whole world?
Times have changed and the organization has come of age. From September 1960 when it was founded in Baghdad to date, it has gone through its evolution in phases and survived several ups and downs like any other organisation. It has also evolved from the five founding members that formed it to the latest member who joined us yesterday, Congo, bringing it to 15 member nations.
When I came here in 2016 we were 13 in number. We saw the return of Gabon that suspended its membership several years ago but decided to join us again and we also welcomed Equatorial Guinea. So you can see the number is growing. For us as a family, it makes it better. But equally important is, for the first time, we have been able to establish an accord of Declaration of Cooperation that brought 24 producing countries together. Today, we are 25 with Congo Republic.
Producers across the world who share responsibilities of the industry which we all belong to and with one market, agreed to take certain actions and jointly implement them to the admiration of the global industry. We were convinced at that time that the best way to go about it was that as OPEC, we are a marginal supplier to the market and this industry is one that has been transform by the forces of globalization; barriers have been broken down, the markets are more integrated. Therefore we reached out to other producers and they welcomed us and joined us. Now we are trying to institutionalise this cooperation.
How true is it that the tweet by US President Donald Trump influenced the decision by OPEC at the meeting?
The impact of geopolitics is visible everywhere in this industry, therefore effort to insulate the organisation from geopolitics has never been more challenging than now. The founding fathers of the organisation designed it in a way that we will keep our operations away from politics and focus on the oil industry as a technical body advising our member nations.
Therefore, the politics is not for us but because of the growing impact of geopolitics, it has sometimes become challenging to insulate our self from these forces and hence the reports you sometimes read in the media that coincide with our meetings.
The oil and gas industry is having bad publicity as it relates to the environment. What are you doing to change this perception?
This issue arose at several sessions during the seminar because of concern by stakeholders on the image of the industry. Fossil fuel, in general oil and gas and coal, have been under severe attacks from civil society particularly in the western industrialised countries over issues on the environment and climate change.
We have also heard at the seminar, from the IOCs and other stakeholders, that the issue at stake is about eliminating emissions. It is not about oil. It is about emissions.
But I must admit that the campaign and advocacy in the West against the industry based on the consideration of climate change has been affecting us very negatively and one of the lessons from the seminar is that the industry is concerned and is trying collectively and individually to address that.
For us in OPEC, all our member-countries are signatories of the Paris Climate Change Agreement. Most of the members have already ratified it, including Nigeria, and you can see that we are embarking at several initiatives back home in addressing climate change because we are also affected in the Sahel Savannah, Niger Delta, the coastal regions and erosions in the eastern part of the country.
So these are the core aspects of the negotiations and debates going on between us and the industrialised countries and going forward collectively as OPEC and other non-OPEC countries in the Declaration of Cooperation and the larger global economy will have to take up this challenge. It is about communicating effectively.
Did you consider shale oil production in your decision as it has high prospects in the oil market?
Shale is a reality. Tight oil from the United States is welcome by the industry, by the market and by OPEC. Why? Because at the time that shale oil came into the market, in particular the US in millions of barrels, the world was facing a severe deficit of supply. If you cast your mind back to 2011 we practically lost the entire production in Libya because of the tension in that country. Libya was producing about 1.7 million barrels a day then. One of our biggest producers, the Islamic Republic of Iran, also lost its exports due to severe sanctions. In Nigeria, we almost lost a million barrels due to the unfortunate circumstance in the producing region. Coupled with that, demand was also robust at that time and without shale oil, the world would have faced one of the worst energy crises.
So we have initiated dialogue with companies in the US and I have met with some of them twice in Houston to break that barrier between us. And to the surprise of many it was a welcome idea by many tight oil producers.
Don’t you see shale as a threat anymore?
I think the future of oil is bright. As I said in one of my remarks at the seminar the future of oil and the future of mankind intermingle. Why? Because oil fuels this current civilisation that you and I were born in and we grew up in. Whatever you see around you is oil based. This civilisation is midwifed and sustained and fuelled by oil. Despite the advocacy against oil due to climate concerns, we have nearly 1.5 trillion proven reserves of oil around the world.
Secondly, our focus, not only OPEC but the International Energy Agency (IEA), the consumer groups continue to show that there is more peak demand in the medium to long term – to 2040 and 2050. Demand continues to grow robustly. Energy in general continues to grow at about 35 percent and oil we are talking about 16 million barrels by 2040.
Now, the challenge is how do we meet our current demand, let alone the future demand of oil! The issue of investments comes in.
In terms of barrels, we can say that we need investment capital that will continue to produce about four to five million barrels a day more. Now that is a huge challenge. According to our world oil outlook, that would require nearly US$10.5 trillion in order to meet the current and future oil demand growth.