Keynote address by OPEC Secretary General

A keynote address by HE Abdalla Salem El-Badri, OPEC Secretary General, to the workshop on "Energy Poverty in Africa", organized by The OPEC Fund for International Development (OFID), Abuja, Nigeria, 9-10 June 2008. The address was delivered by Dr. Omar Farouk Ibrahim, Head of PR & Information Department at the OPEC Secretariat.

Excellencies, distinguished ladies and gentlemen;

Thank you for inviting me to speak at this gathering which is to discuss Energy poverty in Africa.

Allow me first to commend the OPEC Fund for International Development, OFID, for putting this workshop together. It demonstrates OFID’s abiding commitment to economic and social development in the developing countries, especially in Africa, where four of OPEC’s member countries - Algeria, Angola, Libya and our host country for this event, Nigeria - come from.

This two-day gathering will no doubt offer participants the opportunity to critically examine the issue of lack of access to modern energy services on the African continent and how this impacts on its quest for economic and social development.

Access to modern energy services has for long been looked at from essentially one perspective, namely, the ability to switch on the light, power the air conditioning system, the television and such other house-hold appliances that make life worthwhile. However, lack of access to modern energy services entails more than our not being able to enjoy some of these comforts of life that are taken for granted in developed countries. It is indeed, one of the greatest impediments to social and economic progress.

The United Nations Commission on Sustainable Development has described access to energy as crucial for human activity as well as for economic and social development. It is critical to halting the growing rate of poverty, epitomized in high child mortality rates, poor maternal health care, poor educational and other infrastructure, limited opportunities to realize the fullest potentials of some of the brightest minds, recurrent social instability and underdevelopment, in poor countries. In a very serious way, energy poverty stalls progress on worldwide development programmes including the quest to achieve the United Nations Millennium Development Goals. Energy poverty is a vicious cycle.

The challenge, Excellencies, ladies and gentlemen, is : how can we ensure reliable, sustainable and affordable energy when the price of energy and oil in particular keeps rising, further removing it from the reach of the poor?

Currently, oil is selling for more than 130 USD dollars per barrel, bringing in its wake, calls on OPEC to increase supply. As an Organization of developing countries, OPEC is mindful of the adverse effects of high oil prices on poorer nations. It has therefore, always taken measures to increase supply whenever the need arises.

For now, the shared opinion, based on major data and leading indicators show that while oil prices may be going up, there is no shortage of oil in the market, and that inventories of major consumer regions are at comfortable levels. OECD commercial stocks are standing above the five-year average, while OPEC spare capacity has been on the rise, thus continuing to provide adequate cushion to ease market concerns about possible supply shortfalls.

The existing volatile situation in the market is therefore, a clear indication that oil prices have been vulnerable to factors other than market fundamentals. The sharp increase in crude oil prices over the last ten months has coincided with a continuing decline in the value of the US dollar, which has encouraged asset portfolio substitution as investors seek to hedge against inflation and the decline in value of the dollar by switching directly to commodities or indirectly via index trading.

This has caused crude oil prices to become disconnected from the dynamics of supply and demand fundamentals and the heightened levels of speculation have been a principal driving force behind the volatility as oil, like other commodities, has been turned into a financial asset. This increasing role of speculation is of great concern to all of us.

The continued volatility in the oil market is unsettling for normal day-to-day activities, as well as hampering sound investment planning for the future, and worsening the plight of the poor.

Ladies and gentlemen,

Let me reiterate what we have always said: OPEC has no influence over speculation. Our ability to influence the market is limited to working to ensure balance in supply and demand. To this end, our Member Countries have committed themselves to investing more than $160 billion USD towards crude oil capacity expansion programmes that will add additional 5mb/d by the end of 2012.

OPEC’s reference projection to 2030 reflects the widely held view that energy demand will continue to grow for the foreseeable future and that oil will maintain its leading position in the world energy mix. Average annual growth of 1.4 per cent will see world oil demand reach 118 mb/d by 2030, with OPEC expected to supply 41.5% of that amount.

In all these, it is necessary to consider what provisions, if any, are being made for poorer countries that do not produce oil, and lack the financial power to buy from the market.

Since it was founded nearly half a century ago, OPEC has had three landmark summits through which heads of state of our Member Countries gave directives that have positively shaped the Organization’s focus in carrying out its mandate. The first summit held in Algiers in 1975, produced the OPEC Fund for International Development, OFID, which has been working to alleviate poverty in more than 120 poor countries across Africa, Asia, Europe and Latin America, through the provision of aids and grants. This gathering, ladies and gentlemen, demonstrates that OFID is still living that objective by organizing this workshop to critically examine the issue of energy and poverty in Africa. In addition to OFID, our Member Countries also render assistance to poorer developing countries through various arrangements including bilateral and multilateral aid institutions.

Today, more than a third of the world’s population live with no access to modern energy services; an estimated 2.5 billion people in developing countries rely on biomass for their cooking and heating needs, while about 1.6 billion live with no access to electricity. In sub-Saharan Africa alone, it is estimated that over 130 million people rely on firewood, cow dung and crop residues for their cooking and heating needs. This has enormous health implications for the people and it gives them no escape route from the poverty cycle.

In addition, the impact of indiscriminate felling of trees on the environment is best imagined. OPEC and its Member Countries are concerned about the environment. This is evidenced in the decisions of the 3rd OPEC Summit of Heads of State and Governments that took place last November in Riyadh, the Kingdom of Saudi Arabia, where USD750 million was pledged by some of our Member Countries towards funding research relating to energy, the environment and climate change.

But how can Africa overcome this lack of access to energy services which is threatening to stall the continent’s development efforts and initiatives? How can they provide greater access to energy services to their people? These are the challenges that this workshop should hope to address.

Distinguished ladies and gentlemen, permit me to say that in your search for solutions to Africa’s energy poverty, you should spread your nets far and wide, looking into the various energy mixes which Africa has in great abundance.

I wish you very fruitful deliberations and thank you for your kind attention.