Ministerial Keynote Speech by OPEC Secretary General at the Oil & Money Conference in London

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 39^th Oil & Money Conference, 11 October 2018, London, England.

Mr. Chairman, Excellencies, ladies & gentlemen,
Good morning.

It is always a pleasure to be back in London; a place I call my second home.  And it is always gratifying to be back at the Oil & Money conference; an annual event that all of us in the industry strive to attend.

I would like to thank the Chair of this session, Herman Franssen, for his generous introduction, as well as the organizers, Energy Intelligence and the New York Times, for the invitation to the 39^th edition of this premier industry conference.

I would also like to take this opportunity to offer my congratulations to this year’s Energy Intelligence Petroleum Executive of the Year Award, Bob Dudley, Chief Executive Officer of BP.

Bob is a true gentleman, but with a steely resolve that has enabled BP to recover from the challenges it faced at the beginning of this decade.  He has led the company’s recovery, rebuilt its reputation and returned it to growth.  He has also been proactive in seeking solution to improve the environmental credentials of oil, and has been a supportive voice in OPEC’s market stability efforts.

There is no-one more deserving of this prestigious award from his industry peers.

Ladies & gentlemen,

When I was speaking at this conference last year we were just over nine months into the historic ‘Declaration of Cooperation’ between OPEC and non-OPEC producers.  It was a time when the market and the industry were starting to emerge out of the shadows of the three-year downturn that had impacted the entire industry.

It has been evident over the past year that we are now seeing a brighter path ahead.  The cooperative efforts of the 25 producers in the ‘Declaration’ have helped accelerate the return of balance to the global oil market, restore much needed stability and confidence to the industry, and it has had a positive effect on the global economy and trade worldwide.

The ‘Declaration’ has had a transformational impact on the global oil industry.  The change we have seen over the past 20 months is like night and day.

However, we are not resting on this success. Our full focus remains on building what has been achieved by sustaining a healthy and stable global oil market, in the interests of both producers and consumers.

Only last week in Moscow at Russia Energy Week, I heard from His Excellency Vladimir Putin, President of the Russian Federation; HE Alexander Novak, Oil Minister of the Russian Federation; and HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources, about the additional oil that has been added to the market since June to maintain the supply and demand balance.

We also heard from HE Al-Falih that Saudi Arabia has not turned down a single customer.

Additionally, we have also seen OECD inventories build over the past two months.

This all emphasizes that the market is well-balanced and well-supplied.

Moreover, through the Joint Ministerial Monitoring Committee (JMMC) and the Joint Technical Committee of the ‘Declaration of Cooperation’ it is also well-monitored.

Nonetheless, we do recognize that there are many non-fundamental factors influencing the market that are beyond the oil industry’s control, such as geopolitics, growing trade disputes, natural disasters and other developments.  They can have compound effects and are a major source of uncertainties.

The goal of sustaining the stability is also a reason why we continue to explore means of institutionalizing the ‘Declaration of Cooperation’, as was discussed most recently in Algiers during the 10^th JMMC meeting.

The importance of this sustainable stability is evident across all timeframes.  It is vital to tackle the challenges we face today, on both the supply and demand side, and it will be vital to the industry’s medium- and long-term future.

This is evident in OPEC’s recently released World Oil Outlook (WOO) 2018, which aims to bridge the linkages between the various timeframes.

The WOO 2018 underscores that the world will need more energy in the decades to come, as economies expand, populations grow, and given the fact today around three billion people lack access to clean fuels and efficient technologies for cooking, and almost one billion are still without access to electricity.

In our Outlook, global energy demand increases by a healthy 33% between 2015 and 2040.

Energy is a central facet that links our daily lives; it is not on call, it cannot take a holiday, it cannot call in sick.  Energy is a 24-hour service.  Thus, it needs to be reliable, consistent and sustainable, and as I have already mentioned, it needs to be accessible to each and every one of us.

Alongside the challenge of meeting growing energy demand is the need to constantly improve the environmental footprint of the energies we use.

In this regard, let me stress that OPEC remains fully engaged and supportive of the UNFCCC and the Paris Agreement, which remains the only viable global framework to address climate change.

This all leads me to ask the question: how can this growth be achieved in a sustainable way, balancing the needs of people in relation to their social welfare, the economy and the environment?

What is emphasized in our Outlook is that the future requires all energies; it is not about choosing one over another.

In some quarters, we hear stories that suggest renewables are our only energy future.  This is clearly misguided.

Renewables are evidently coming of age, with wind and solar, expanding fast, and others such as hydropower and biomass, maintaining their shares in the energy mix out to 2040.  However, even by 2040, they are estimated to make up only around 19% of the global energy mix.

Let me stress that many OPEC Member Countries have great sources of solar and wind, and significant investments are being made in these fields.

With the share for nuclear expected to be at just over 6% by 2040, it means that the world will need to look elsewhere for around three-quarters of its energy needs by 2040.

In terms of oil and gas, there is no doubt that they will remain central to supplying an expanding global population with the critical energy it needs.

In our Outlook, oil has an expected share of around 28% in the global energy mix, and gas is at 25%, by 2040.

Even in the most optimistic of outlooks I have seen for renewables, I have not observed one predicting that they will come close to surpassing oil and gas in the decades ahead.

Oil will remain a fuel of choice for the foreseeable future.

We see oil demand increasing by around 14.5 million barrels a day (mb/d) between now and 2040 to reach close to 112 mb/d.  Moreover, this is the second consecutive year we have raised our oil demand number for 2040.

There are a number of voices who see oil demand being significantly impacted by the electrification of the road transportation sector.

There is no doubt that electric vehicles are making inroads into the sector, but not to the extent that some would have us believe.

This is clear in the numbers.  Electric vehicles made up well below 1% of the total vehicle fleet in 2017.  While their expansion is impressive in the years ahead, reaching a level of around 13% in 2040, supported by falling battery costs and policy support, it is conventional vehicles, including hybrids, that are still expected to make up 82% of the vehicle fleet by 2040.

There are possible upsides for electric vehicles, and other alternative fuel vehicles, which we highlight in the Outlook.

However, we should also emphasize that there are possibilities to improve the efficiencies of conventional engines and the fuels they use.  In fact, it should be noted that fuel efficiency improvements are expected to result in a far greater reduction in oil demand, than the increasing penetration of alternative fuel vehicles in the period to 2040.

The clear message is that conventional vehicles will remain the mainstay of the road transportation sector.

Given our Outlook, as well as many others carrying similar forecasts, it is also important to broach the issues of policies and technologies.

In this regard, we need to continually look to develop, evolve and adopt cleaner energy technologies, as well as all-inclusive and non-discriminatory energy policies, that enable us to meet expected future energy demand, in a sustainable and ever more efficient manner.

As my friend Bob Dudley aptly said at this conference last year: “This shouldn’t be about a race to renewables alone; it’s about a race to lower greenhouse gas emissions.”

For oil and gas, we need to recognize that the environmental challenge is not oil and gas themselves.  It is the emissions that come from burning them.

I am a believer that solutions can be found in technologies that reduce and ultimately eliminate these emissions.

I welcome coordinated action within the industry and through various research and development platforms, such as the Oil & Gas Climate Initiative, which continues to expand as a group and implement bold actions.

On the policy front, it is important to stress that if our industry is worried about policies that detrimentally impact oil, with talk of stranded assets and declining values of oil; then we have a potentially dangerous scenario, one that could increase volatility significantly.

This is not in the interests of either producers or consumers.

This is brought home by the scale of the investment requirements.  Oil-related investments across the upstream, midstream and downstream are estimated at around $11 trillion in the period to 2040.

The basic foundation for investment and growth can only come through balance and stability in the market.

In this regard, OPEC Member Countries remain fully committed to investments across the whole industry value chain, and the issue of returning global investments is a core focus of the ‘Declaration of Cooperation’.

Ladies & gentlemen,

My final point and one that links everything I have said today relates to ‘cooperation’.

As OPEC, as the countries in the ‘Declaration’, and as an industry, we need to tell our story over and over again.

We need to work together to bring reasoned thinking, and realistic ambitions to our global energy future.

Over the years OPEC has pushed many forms of energy cooperation, including both producers and consumers, and we stand willing and ready to dialogue with all industry stakeholders.

We always look to build bridges, not walls.

It was the legendary Englishman Charles Darwin, who said: “In the long history of humankind those who learned to collaborate and improvise most effectively have prevailed.”

While the times we live in often appear turbulent and challenges daunting, experience has repeatedly shown us that the enduring principle of cooperation and the bravery to try something new, such as the ‘Declaration of Cooperation’, can bring about great success.

Thank you.