Sanusi Barkindo
It is both a pleasure and privilege to
be in the great nation of Angola this morning. Angolan hospitality is
world-renowned, and my team and I have really been reminded why this is
the case during our time here. I would like to sincerely thank our
gracious hosts and, in particular, my good friend His Excellency, Dr.
Diamantino Pedro Azevedo, Minister of Mineral Resources and Petroleum.
Also thank you Excellency, for your kind words of introduction.
Since assuming his position, the
Minister has been a tremendous asset to the OPEC family, diligently
applying his broad experience and knowledge to our ongoing efforts at
OPEC. I thank and commend him most heartily for this. Thank you to Mr.
Carlos Saturnino, CEO of the Sonangol Group and all other colleagues in
the Ministry who have made this visit possible.
I also extend a warm welcome to esteemed
members of Parliament, all Ministers, dignitaries, officials, and other
government ministries, captains of industry, colleagues in the private
sector and other interested parties in attendance for this lecture. I am
very glad to see you all.
I must confess to having a very personal
affinity to this country which extends beyond the bonds of African
fraternity. Angola’s membership of OPEC began on 1 January 2007, but of
course, the negotiations that led to this milestone event took place
throughout 2006, at a time when Nigeria held the Presidency of the OPEC
Conference. During that year, I had the tremendous honour of serving as
Acting Secretary General of the Organization.
Indeed, Angola was formally admitted to the OPEC family in Abuja at the 143rd (Extraordinary) Meeting of the OPEC Conference!
Needless to say, Angola becoming a
Member Country was a tremendous boon for OPEC. A new source of positive
energy and dynamism was injected into the Organization, as we benefitted
from the experience of an extremely important regional player from
central and southern Africa.
Angola’s accession in 2006 was the first
new addition to OPEC since my own country, Nigeria joined in 1971. This
had enormous repercussions, the ramifications of which are still being
felt today. Regional neighbours saw Angola make a success of its
membership and in due course, Gabon and Equatorial Guinea, would enter
the OPEC fold.
Furthermore, Angola’s membership after a
36 year hiatus on expanding the Organization, proved that reaching out
and embracing new partners yields results. This spirit of collegiality
among nations, willingness to try things differently, innovation and
honoring one’s commitments has also been at the core of OPEC’s recent
cooperation with its non-OPEC partners under the umbrella of the
“Declaration of Cooperation.”
Therefore, history will conclude that
Angola joining the OPEC family was a precursor to membership of our
Organization increasing, a strengthening of the African voice in our
decision-making structures and this new era of cooperation among oil
producing countries through the ‘Declaration of Cooperation.’ So, given
this context you can understand my absolute joy at our being with you
today.
The timing of this Mission is also
extremely exciting. At OPEC, we follow with great interest and
admiration the very commendable reform agenda of President João Manuel
Gonçalves Lourenço, particularly as he seeks to modernise the oil
industry, improve transparency and good governance.
Undoubtedly, President Lourenço has
achieved a series of notable successes, which have improved the
industry’s efficiency and effectiveness. We commend the President’s
decision to create a new Agency and separation of conflicting roles of
policy, regulation, and commercial operation, in line with the best
international practices.
OPEC also welcomes Angola’s efforts to
upgrade, and expand its refinery sector and we stand ready to provide
whatever technical advice and expertise that we can, in this regard.
Another area of intense activism on the
part of the President which strongly resonates with the ethos and
philosophy of OPEC is his commitment to international cooperation and
the multilateral process.
It gladdened my heart when President Lourenço told the UN General Assembly in September of this year that Angola supports:
“All efforts to promote cooperation
among the nations of the whole world, consolidate peace and defense for
cooperation, trade and investment relations at the bilateral and
multilateral levels.”
This fits ‘hand-in-glove’ with OPEC’s
raison d’être. As an intergovernmental organization, we strongly share
the view that cooperation among nations remains the most effective
problem-solving mechanism at our disposal.
When you listen to any OPEC official
speak; if you read any of our publications, statements, or press
releases; if you examine our statute; you will see our core objective
repeated over and over again: oil market stability on a sustainable
basis. This goal drives all of our activities, all our actions and
almost all our research.
It is very important that we step back
and ask the deceptively simple question: why? Why does oil market
stability matter? Why does it motivate OPEC in everything it does? Why
does it generate the attention of decision makers and world leaders
across the political spectrum?
Having invested a lot of time reflecting
on this, I think the most concise formulation of why oil stability
matters hails from the great historian of our industry, Professor Dan
Yergin, when he said in his book “The Quest”:
The industrial civilisation that has evolved over the last two and a half centuries rests on a hydrocarbon foundation.
Such is the importance of oil that it
plays an indispensable role in lubricating economic growth, sustainable
development and improving the livelihoods of billions of people around
the globe. Oil market stability begets prosperity; it is an essential
component in fighting poverty. The multiplier effects of oil market
stability are immense for other industries and the global economy.
For example, consider the hard-earned
savings of millions of retirees whose fortunes are tied to pension funds
that invest in our industry. Think of the sheer number of families
dependent on bread-winners employed in our sector and the job
opportunities which result from oil market stability.
OPEC does not seek stability for
stability’s sake: rather we are acutely conscious of the broader social
and economic benefits for all which come as a result of sustainable oil
market stability.
And when we cast our minds back to the
depths of the last downturn in 2015-16, one can only shutter at how
close the world came to a catastrophe of epoch defining proportions.
If you don’t take my word for it, I’d
like to quote David Kreisman, Senior Vice President at the credit rating
agency Moody’s from September 2016:
“When all the data is in, including 2016
bankruptcies, it may very well turn out that this oil and gas industry
crisis has created a segment-wide bust of historic proportions.”
This situation came about as a result of
the fact that 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
industry average. The OPEC Reference Basket price fell by an
extraordinary 80% between June 2014 and January 2016.
Nearly one trillion dollars in
investments were either frozen or discontinued, and a record number of
companies in our industry filed for bankruptcy. According to the
consulting firm Graves & Co., almost half a million jobs were lost
in the global oil and gas industry.
Several emerging economies were in the
midst of a recession, being battered by the collapse in commodity
prices. As the economic historian Adam Tooze said,
“In 2015-16 the world dodged a third instalment of the global crisis.”
OPEC knew it had to act in the face of
this potential calamity. Throughout 2016, extensive consultations were
undertaken with our non-OPEC partners, aimed at building consensus about
the strategic urgency of rebalancing the global oil market in a
collective manner.
Twenty-four (now twenty–five) oil
producing nations agreed at the first OPEC and non-OPEC Ministerial
Meeting held on the 10th of December 2016 in Vienna, on a concerted
effort to accelerate the stabilization of the global oil market through
voluntary adjustments in total production of around 1.8 million barrels
per day.
What would become clearer in time is
that one of the greatest inherent strengths of the ‘Declaration of
Cooperation’ was its flexibility, grounded on the core principles of
equity, fairness and transparency. Over the last two years, the partners
have been able to modify course depending on conditions in the market.
When the market appeared skewed to oversupply, we have reacted
accordingly, and equally, when consumers expressed concerns regarding
demand outpacing supply, the partners in the DoC have taken appropriate
action.
This was best exemplified by the
decisions of the 174th OPEC Conference, 22 June 2018, and the 4th OPEC
and Non-OPEC Ministerial Meeting, 23 June, where participating countries
decided to strive to adhere to the overall conformity level,
voluntarily adjusted to 100%.
Therefore the DoC should be viewed as an adaptable toolkit to address imbalances in the market.
The most recent iteration of this
ongoing undertaking occurred on 6th and 7th December at the 175th
Meeting of the OPEC conference and the 5th Ministerial Meeting of OPEC
and non-OPEC.
Following extensive analysis and
deliberations on the immediate oil market prospects and, in view of a
growing imbalance between global oil supply and demand in 2019, the
partners decided to adjust the overall production by a combined 1.2
mb/d, effective as of January 2019 for an initial period of six months.
If I was to use a single word to
describe the impact of this cooperation on the oil market, it would be:
transformative. A long-absent element of stability has been
reintroduced. There have been significant changes in industry-wide and
public perceptions of OPEC. The Organization has ably 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
enhanced relations between participating countries now constitute a
fundamental and essential feature of the ‘new world of energy.’
However, most importantly of all, the
multiplier benefits of the ‘Declaration of Cooperation’ have been
immensely significant. This was apparent in the conclusions of the IMF
in a publication entitled “The Global Economic Recovery 10 years after
the Financial Meltdown”:
“After faltering at time over the past
10 years, the global economic recovery experienced a long awaited
synchronized growth upswing 2017-18.”
This global economic upsurge has
occurred at exactly the same time as the ‘Declaration of Cooperation’
has been operational. Oil market balance begets prosperity.
Consider the fact that over the last two
years, the global economy has had the assurance from the ‘Declaration
of Cooperation’ strategic partners that they will take the necessary
measures to contribute to a balance between supply and demand. Can one
quantify how important this guarantee of responsible leadership, this
proactive dependability, has been?
Throughout this entire process, the
partners have solicited and responded to the views and concerns of
producers and consumers. We have championed consumer and producer
dialogue, benefiting from the tremendous partnership with the IEF.
OPEC’s energy dialogues with the EU, Russia, China, India and
independent suppliers have further harnessed information exchange and
fed into our joint strategies.
The partners have been responsible and responsive; proactive and professional; adroit and adaptive.
The OPEC family wants to transmit a very
important message to Angola: we deeply respect and value Angola’s
regional leadership, defense of multilateralism, and support for the
‘Declaration of Cooperation’ process.
Working together, there can be no doubt
that we can navigate any stormy waters to calmer seas. Committed to the
principles of equity, transparency, fairness and respect among nations,
we can close a long, dark chapter for the oil industry and write a new
one, fulfilling the words of the poet Lord Tennyson when he wrote,
“The long day wanes: the slow moon climbs: the deep moans round with many voices.
Come my friends, Tis not too late to seek a newer world.”
Come my friends, Tis not too late to seek a newer world.”
Barkindo, who is the OPEC Secretary General, delivered the lecture in Angola
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