Opening address to the 169th Meeting of the OPEC Conference

No 1/2016
Vienna, Austria
02 Jun 2016

by HE Dr. Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and Industry and President of the OPEC Conference

Excellencies, Ladies and Gentlemen,

Welcome to the beautiful city of Vienna.

On behalf of the Heads of Delegation and the OPEC Secretariat, I extend a warm welcome to you all in this 169th Meeting of the OPEC Conference.

We offer a warm welcome to His Excellency Khalid Al-Falih, the new Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia. His Excellency Al-Falih also assumes the role of Alternate Conference President until the end of this year.

A warm welcome is also extended to His Excellency Wilson Pástor-Morris, Ecuador’s OPEC Governor and its Ambassador to Austria, who is here as Head of Delegation on behalf of His Excellency José Icaza Romero, the new Minister of Hydrocarbons of Ecuador.

To Ecuador we also express our sorrow for those affected by the devastating earthquake that hit Ecuador on April 16.  Our thoughts are with the people of Ecuador in their recovery efforts.

We would also like to take this opportunity to extend our sincere appreciation to their predecessors in office.  For Ecuador, His Excellency Carlos Pareja Yannuzzelli who attended our last meeting in Vienna, and of course, His Excellency Ali Al-Naimi, who began attending meetings of the OPEC Conference as his country’s Head of Delegation, way back in 1995.

Given this longevity, and the role he has played at OPEC over the past two decades, we would like to offer a special thanks to His Excellency Al-Naimi for his dedication, commitment and contribution to the Organization over the years.

A warm welcome is extended to His Excellency Fayadh Hassan Nima, Senior Deputy of Iraq’s Minister of Oil, who is here as his country’s Head of Delegation.

In addition, the same welcome is extended to His Excellency Mossa Elkony, Vice President of The Presidency Council of The Government of National Accord, who is here as Libya’s Head of Delegation.

The Organization has also received a request from Gabon for it to rejoin the Organization.  This will be discussed in our closed session later today.

Excellencies, Ladies and Gentlemen,

Since we last met in Vienna on December 4, 2015, we have seen further volatility in the global oil market.

The OPEC Reference Basket fell from around $38 per barrel in December 2015 to a low of just over $22 per barrel in mid-January 2016, before a steady climb saw the price rise above $40 per barrel by the end of April and then climb further in May.

These recent price developments are welcome; particularly, with one eye on the industry’s future investment requirements.

Global exploration and production spending fell by around 20 per cent last year, and a further 15 per cent drop is anticipated this year.  This is a major concern for an industry that generally sees investments increasing year on year to sustain production.

It is important to keep in mind the link between the marginal cost of production, the oil price and investments.

Today’s meeting will review the developments of the past six months, and analyze the outlook for the remainder of 2016.

With regard to global economic growth, the story remains somewhat patchy.  While the estimated 2016 growth of 3.1 per cent is higher than that of 2015, it has been revised down slightly since our December meeting.

World oil demand this year remains healthy, with growth of over 1.2 million barrels per day.  The majority of this will come from non-OECD countries, but OECD countries are also expected to see some growth in every quarter this year.

From the supply perspective, in the first half of this year, we have seen a further downward revision to the 2016 outlook for non-OPEC supply.  We now anticipate a contraction of 740,000 barrels per day this year.  This is more than 2 million barrels per day lower than the growth of 2015.

This trend stems mainly from reduced cashflows, investment cutbacks and the deferral or cancellation of projects.

It is evident that these developments point to a more balanced market in the second half of this year, with demand for OPEC crude averaging around 32.5 million barrels per day during this period.  The overall demand increase year-on-year for OPEC crude is around 1.8 million barrels per day.

However, we do need to appreciate that stock levels remain high.  The five-year average for OECD commercial stocks is currently at a surplus of around 360 million barrels.  It is important that we take note of this figure on a downward trend.

A more stable and balanced market will be beneficial to all.

Excellencies, Ladies and Gentlemen,

We shall study the OPEC Secretariat’s report made at today’s meeting, as well as, review a number of broader developments. This includes December’s COP-21 agreement in Paris to counter the threat posed by climate change, which all OPEC Member countries were part of.  OPEC welcomes this agreement. We are committed to playing a part in protecting the environment, supporting sustainable development, and developing a realistic energy path in the decades ahead.

The OPEC Secretariat is of course engaged in furthering dialogue and cooperation to address these issues.

Since our last meeting, the Secretariat has held bilateral dialogues with India and the European Union.  Later in September this year, the 15th International Energy Forum Ministerial Meeting will take place in OPEC Member Country, Algeria.

Here, I should also add that we hope the talks that have evolved over the past year or so with non-OPEC producers, will continue.  It is important that we maintain all possible avenues for cooperation and understanding for the benefit of OPEC countries in particular, and the world at large.

Thank you Excellencies, Ladies and Gentlemen, for your kind attention.