Opening Remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 2nd High-Level Meeting of the OPEC-China Energy Dialogue, 12 December 2017, Beijing, People’s Republic of China.


Your Excellency, Nur Bekri, Vice Chairman of China’s National Development and Reform Commission (NDRC) and Administrator of the National Energy Administration (NEA),

Ladies and gentlemen, colleagues, friends,

Good morning.

I would like to thank Your Excellency for the warm words of welcome. To all of our colleagues at the NEA who have organised this meeting, I would like to express my gratitude for your gracious hospitality. You have made the OPEC team feel very welcome.

It is a real pleasure to be here in Beijing today. Few places on earth come close to the extraordinary historical panorama that this city has to offer. For three millennia, Beijing has excelled as a political and cultural hub, so it is a privilege for me to return here.

Your Excellency, Ladies and gentlemen,

Almost exactly 12 years ago, on the 22nd December 2005, the first High-Level Meeting of the OPEC-China Energy Dialogue took place here, in Beijing.  Subsequently there have been two high level technical roundtables, participation by OPEC at the inaugural International Petroleum and Natural Gas Enterprises Conference in Hangzhou and other bilateral contacts, including a high level meeting with a delegation from the NEA headed by Vice Administrator Mr. Zhang Yuqing in 2015.

On a personal note, I recall vividly and fondly the first High-Level OPEC-China Roundtable in April 2006, as I was Acting Secretary General at the time. I developed a warm rapport with Mr. Xu Dingming, one of your predecessors who is now a State Council consultant and Vice Chairman of the National Energy Expert Consulting Committee. I look forward to building similarly strong ties with Your Excellency.

These meetings demonstrated a clear enthusiasm on both sides to enhance relations and explore further possibilities for knowledge exchange.

I am delighted to say that today, the desire to revive the Energy Dialogue has come to fruition.

Today’s meeting is extremely important to OPEC for a number of reasons. Firstly, developing constructive relations with all stakeholders in the energy industry is an utmost priority for our Organization. The course of time has repeatedly shown that no single actor or agency acting alone can resolve all of the issues which the energy industry will face.

It is only through open and transparent dialogue and a spirit of collegiality among all stakeholders that challenges can be overcome and mutually beneficial outcomes reached. As the old Chinese proverb wisely tells us, “a single tree does not make a forest; a single string cannot make music.”

In this regard it is difficult to overstate the importance of China as a partner for OPEC. Our Member Countries have close and expanding ties with your country, reflecting the importance of China not only to the global economy, but also across a broad range of international issues.

The interdependence of OPEC and China can be observed in trade volumes. China’s overall imports from OPEC Member Countries amounted to $93 billion in 2016. This is a staggering $85 billion increase from 2000. In the other direction, OPEC’s total imports from China increased from just under $6 billion in 2000 to over $106 billion in 2016.

In terms of crude oil, China’s total imports have risen from around 1.4 mb/d in 2000 to more than 8.3 mb/d expected for 2017.  And close to 60% of this came from OPEC Member Countries. Currently, China is the world’s second largest consumer of oil and is forecast to take first place sometime around 2035. Both China and OPEC Member Countries invest heavily in each other across the supply chain.

Last month OPEC launched the 2017 edition of its World Oil Outlook to 2040, which underscored China’s importance for the energy industry. In 2016, China accounted for 18% of global GDP. By 2040, this is expected to increase by five percentage points to 23%.

Global energy demand growth is expected to increase by approximately 96 million barrels of oil equivalent per day between 2016 and 2040. Roughly 23% of this increase will come from China.

A similar trend can be observed with regard to oil demand, which is expected to grow by 16 mb/d, from 94.4 mb/d in 2016 to 111.1 in 2040. China will account for a staggering 38% of this growth.

China will also be a leader in the expansion of refining capacity, in both the medium and long term. At the global level, 7.6 mb/d of new distillation capacity is expected between 2017 and 2022. 2.1 mb/d, or approximately 28%, of this will be located in China. Long-term distillation additions follow a similar trend, reaching close to 20 mb/d by 2040 worldwide. 4.2 mb/d of this will be in China, roughly 22% of the global figure.

Greater refinery capacity in the region will necessitate greater quantities of crude. Significantly for OPEC, this will be reflected in trade flows until 2040, as Chinese imports expand and the volume of OPEC exports becomes higher. According to our estimates, crude exports from OPEC Member Countries to China will increase by close to 4 mb/d between 2016 and 2040, rising from 4.4 mb/d in 2016 to more than 8 mb/d in 2040, representing around 20 % of the world’s total crude oil trade between major regions by 2040.

So it is absolutely clear that for the foreseeable future, China will be one of the most important outlets for OPEC barrels and hence the importance of our discussions today.

Excellency, Ladies and Gentlemen,

Given the trends which I have outlined, it is imperative for China and OPEC Member Countries that the industry has a stable and sustainable oil market, as this is in the interests of producers, consumers, the industry and the global economy alike. This sentiment has underpinned OPEC’s activities aimed at improving market stability over the last year.

In responding to the extraordinary market volatility which saw the OPEC Reference Basket price fall by an extraordinary 80% between June 2014 and January 2016, OPEC’s approach was very much aligned to the views of President Xi Jinping, when he said in Davos at the World Economic Forum in January of this year, “One should not just retreat to the harbour when encountering a storm, for this will never get us to the other side of the ocean.”

Throughout the second half of 2016, our Organization embarked on extensive consultations among Member Countries, and between OPEC and non-OPEC producing nations, to build consensus about the strategic urgency of rebalancing the global oil market in a collective manner.

This culminated in the historic Declaration of Cooperation, whereby 24 oil producing nations agreed at the joint OPEC non-OPEC Ministerial Meeting held on the 10th of December 2016, 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. The second joint OPEC non-OPEC Ministerial Meeting, held on the 25th of May 2017, decided to extend the voluntary production adjustments for another nine months commencing on the 1st of July 2017.

It gives me great pleasure to inform you that just 12 days ago, following the 173rd Meeting of the OPEC Conference and the Third OPEC non-OPEC Ministerial Meeting on the 30th of November, it was decided to amend the Declaration of Cooperation to take effect for the whole of 2018. Furthermore, the solidarity and approval of the international community for this new and amended Declaration of Cooperation was demonstrated by the participation by an additional six non-OPEC countries at our meetings, and their public declarations of support.

Together, 30 oil producing countries - the largest of its kind - reaffirmed their commitment to restoring stability on a sustainable basis to the oil market, in the interests of producers, consumers and the global economy.

I am delighted to say that the consequences of our historic cooperation have exceeded even the most optimistic of expectations. The market rebalancing process is well underway, supported by historically high levels of conformity by participating countries. Commercial oil stocks in the OECD fell further in November and the difference to the latest five-year average has been reduced by around 200 million barrels since the beginning of this year. Investments and confidence are returning to the industry and a spirit of collaboration, equity and transparency infuse OPEC’s relations with its non-OPEC oil producing partners.

Excellency, Ladies and Gentlemen,

I have provided you with this overview because OPEC firmly believes in the fundamental importance of sharing data, information and outlooks. We can explore many of the points I have raised in further detail during our discussions.  We are very keen to obtain more insights on the impact of your country’s energy policies on oil demand. Furthermore, we seek your views on identifying synergies that would enhance our cooperation going forward.

At the World Economic Forum, President Xi also sagaciously said, “Victory is ensured when people pool their strength. Success is secured when people put their heads together.” These wise words should guide the OPEC-China Energy dialogue, as we pool our collective expertise to confront the challenges of the future together.

I wish us fruitful and productive discussions, and may the relationship between China and OPEC grow from strength to strength.

Xie-xie

Thank you for your kind attention.

(r-l) HE Mohammad Sanusi Barkindo, OPEC Secretary General; HE Nur Bekri, Vice Chairman of China’s National Development and Reform Commission and Administrator of the National Energy Administration; and HE Dr. Sun Xiansheng, IEF Secretary General

(r-l) HE Mohammad Sanusi Barkindo, OPEC Secretary General; HE Nur Bekri, Vice Chairman of China’s National Development and Reform Commission and Administrator of the National Energy Administration; and HE Dr. Sun Xiansheng, IEF Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General (r); with Mr. Li Fanrong, Deputy Administrator of the NEA

HE Mohammad Sanusi Barkindo, OPEC Secretary General (r); with Mr. Li Fanrong, Deputy Administrator of the NEA

HE Mohammad Sanusi Barkindo, OPEC Secretary General (r); and Dr. Ayed S. Al-Qahtani, Director of OPEC's Research Division

HE Mohammad Sanusi Barkindo, OPEC Secretary General (r); and Dr. Ayed S. Al-Qahtani, Director of OPEC's Research Division