Opening Remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General at the 5th High-level Meeting of the OPEC-Russia Energy Dialogue, 24 October 2016, Vienna, Austria.

Distinguished delegates of the Russian Federation,
Ladies and gentlemen,

It gives me great pleasure to welcome His Excellency Alexander Novak, Minister of Energy of the Russian Federation, and his accompanying delegation to the OPEC Secretariat for this fifth High-level Meeting of the OPEC-Russia Energy Dialogue.

Your Excellency, we appreciate your continued support of this dialogue.  We believe our annual meetings are vital to improving our understanding of each other, through our sharing of viewpoints and outlooks.  I would also like to take this opportunity to thank you for your valuable input to the recent consultations that have been held between OPEC and non-OPEC countries, most recently in Istanbul and only yesterday in Riyadh, as we look to put in place the building blocks that would bring the oil market rebalancing forward.  Your leadership role is not only evident, but widely acknowledged and appreciated.

We are also very honoured to have present here today His Excellency Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry of the State of Qatar, and President of the OPEC Conference.  His Excellency’s support of the work of the OPEC Secretariat over the past year has been exemplary and we very much look forward to his continued leadership in the journey ahead.

At this juncture, I would like to take the opportunity to briefly review the OPEC-Russia Energy Dialogue over the years, and put into some perspective our achievements to date.

OPEC’s relationship with the Russian Federation was initially shaped in the early 1990s.  In 1992, Russia was given observer status to the OPEC Conference, and in subsequent years it participated in many OPEC Ministerial Conferences.  Moreover, during this period there were also technical exchanges and workshops organized and attended by both sides.

The OPEC-Russia Energy Dialogue was then itself formalized in 2005.  This evolved through OPEC’s participation and input to the preparatory process for Russia’s assumption of the G8 Presidency in 2006.  This proved to be a good example of our expanding cooperation.

I remember myself, on the occasion of addressing the International Energy Week in Moscow in October 2006, I met with His Excellency Viktor Khristenko, then Minister of Industry & Energy of the Russian Federation.  In our talks we both restated the importance of strengthening the OPEC-Russia Energy Dialogue, particularly on issues related to the producers’ perspective, such as furthering cooperation in the G8 process and market management in view of the risk of market imbalances.

In 2012, the two Parties brought a more structured framework to the dialogue by initiating annual High-level meetings. Today, is the fifth Meeting of our dialogue and I have no doubt it will build on the successful High-level meetings we have seen in recent years.

The first of these was held at the OPEC Secretariat in September 2012.  This meeting focused on the current state of the world oil market and more long-term perspectives, the oil and gas sectors in the Russian Federation, as well as global environmental and world trade matters.

The Meeting concluded with both Parties underlining their commitment to furthering cooperation, not only at the high-level, but also at a technical level to facilitate more regular information exchange and analysis sharing.

The second High-level Meeting took place in Moscow in October 2013, with both Parties focused on sharing their views on long-term oil market developments.  The Meeting also agreed on the creation of two committees to research tight oil & shale gas development and global refinery developments.

This High-level Meeting was also supported by the first technical meeting of the dialogue, following agreement at the first High-level Meeting to expand the dialogue at the technical level.  The technical meeting saw presentations covering short- to long-term oil market analyses, the prospects for shale oil and gas, as well as discussions on topics such as the global economy, energy efficiency, renewables and changing trade patterns.

This was followed by a second technical meeting that was held in Vienna at the end of March 2014, which focused on the research agreed at the last High-level Meeting, namely tight crude and unconventional NGLs and shale gas developments and global refinery developments.

The third High-Level Meeting was then held in September 2014 in Vienna.  The Meeting summarized the discussions from the last technical meeting and both Parties expressed their support for these technical interactions to allow for a better understanding of viewpoints, underlying assumptions and developments.  The Meeting also outlined themes for the dialogue in 2015, namely the global petrochemical industry outlook and fiscal regime perspectives in the Russian oil sector.

Our most recent Meeting took place in July 2015 in Moscow, where we shared our thoughts on short- and long-term market outlooks, as well as analysis on the two themes agreed upon at the previous meeting.  Given the volatile oil market environment at the time of the Meeting, both Parties also stressed that price volatility and the general oversupply were not conducive for market stability, a prerequisite for the continuity of timely and adequate investments.

In fact, Your Excellency, you have been actively present in all of these High-level meetings, and in looking back over the history of our cooperation I was drawn to a comment you made about the importance of this dialogue in 2012. You stated that the “OPEC-Russia Energy Dialogue is meant to help both sides to assess future trends in the oil sector, as well as make necessary decisions and to find joint solutions to concrete difficult situations on the world oil markets”. This is a timeless statement and further underscores the value of our ongoing dialogue and cooperation.

What has been evident at all the meetings, both High-level and technical, since the current series of High-level meetings began in 2012, is the fact that both of us are committed to stable and predictable markets:  for the continued health of the industry and investments, for the benefit of both producers and consumers, and for the well-being of the global economy on a sustainable basis.

We can all appreciate that market stability and balanced fundamentals remain critical issues today.  Thus, today’s fifth Meeting is very timely and I look forward to hearing all the viewpoints on current market developments, as well as long-term prospects.

While there are signs that the rebalancing of the fundamentals is underway, with overall non-OPEC supply contracting this year and demand at healthy levels, the large stock overhang continues to be a major concern.

In this regard, we have responded to the recent market conditions with intensive talks and relentless efforts to help bring forward the realignment in global oil supply and demand. This bore fruit at the 170th (Extraordinary) Meeting of the OPEC Conference in Algeria in September 2016, with the landmark ‘Algiers Accord’.  The consensus decision among OPEC countries has been effective in arresting any further deterioration in prices and it has helped reduce volatility.

In addition, it has also improved overall market sentiment and strengthened the case for burden sharing and broader cooperation.  We believe it is essential that producers, both OPEC and non-OPEC, look to address the issue of the stock high inventories.  This is now central to the return of a balanced market and to establish sustainability.

The importance of this cannot be overemphasized.  We need sustainable market stability to fund investment in new exploration and production, to arrest decline rates in existing fields, to expand midstream and downstream capacity and to hire, train and support the people that will continue to drive this industry forward in the years ahead.

Of course, there are also many other ongoing and related challenges for oil markets, such as: the uncertain prospects for the global economy; excessive speculation and the role of financial markets; the impact of geopolitics; advances in technology and the benefits that could spill-over into other areas of the energy value chain; environmental and climate change policies; and sustainable development concerns.

A number of these issues are on our agenda today, with specific presentations on the uncertainties associated with climate policies, and technological developments and their possible implications for oil and energy markets.

Excellencies, distinguished delegates,

It is evident that the short-term picture is the one on all of our minds.  But we need to appreciate the fact that all timeframes are interlinked.  What happens today will have a bearing on what happens in the future, particularly given that this industry is very much a medium- to long-term business.

In this regard, the OPEC-Russia Energy Dialogue has become an established platform, among others, to discuss the variety of challenges that we face, as well as the opportunities that our industry continues to offer.  Over the years, our bilateral cooperation has flourished, and we value the direct and open channels of communication that have evolved.  The leadership role of the Russian Federation is crucial in combatting the current energy challenges that are often intertwined and complex in nature.

In closing, allow me to say that I very much look forward to today’s deliberations.  I am sure that this meeting will be enriched and informed by the insights and experiences of everyone here as we look to further build this dialogue, and explore ways and means to work collectively to bring about the sustainable market stability we all desire.

Thank you.

HE Barkindo delivers his opening remarks

HE Barkindo delivers his opening remarks

HE Barkindo with HE Novak during the meeting

HE Barkindo with HE Novak during the meeting

OPEC and Russia representatives at the OPEC Secretariat

OPEC and Russia representatives at the OPEC Secretariat